Something I learned from Robert Kiyosaki of “Rich Dad, Poor Dad” fame is that his secret to getting rich was very much like a game of Monopoly. Buy a rental house to increase income, save and then buy another house to increase income more, than another, and on and on. Once you own enough houses, you can trade up to a hotel (aka apartment complex) and continue the cycle to grow indefinitely. This was the direction I had been working toward and was finally taking another step in the process, but now with one huge difference. I was no longer fixated on building a portfolio of long term rentals and becoming a wealthy real estate tycoon. Now, I simply wanted to retire with a comfortable amount of money and spend more time with my family while having the freedom to do what I wanted. We’ve all heard the saying; mo money, mo problems.

As the closing date of September 2017 approached on our new flip, we were excited to get to work, while also being nervous about the prospect of owning 3 homes. We were planning to sell our long term rental in early 2018 to the current tenants since our HELOC was coming due to refinance and we frankly just wanted out at this point. While we didn’t expect any capital gains since there had been no huge rebound in the market, we were happy to move on without those gains, having made a few hundred dollars per month over the past 9 years. The long distance had kept us from checking in as much as we should have, which would come back to bite us, but that story is for another chapter!

As we expected to sell our rental in early 2018, we also hoped the new flip would wrap up about the same time. Between selling those two houses and continuing to contribute 10% of my salary to my 401k, 2018 had the promise of being a banner year for us financially. We closed on the new house in September 2017 as planned, and immediately got to work by ordering new flooring, gutting the kitchen, and ordering new cabinets for the modified kitchen layout. In the back of my mind I had another idea, but I knew it would take some convincing of my family.

The house we had lived in for 9 years now had been great for us. The mortgage was relatively small at $900 (plus taxes), most of the interior had been beautifully renovated, the open floor plan was great for entertaining, and we had an in-ground pool with a huge deck and sunroom for outdoor parties. The main things missing were a master suite, some separation from our kids’ bedrooms (our bedroom was sandwiched between their rooms), and we could do without the mortgage. The pool was also becoming more of a pain over the years. The landscaping was also agonizing since the property was built on a hillside with a 30-degree slope. Thinking more about it, the neighborhood lacked sidewalks and had a lot of through-traffic, especially during rush-hour. Okay, we’ll say there were a lot of positives, but also some annoying negatives that were starting to tarnish the love affair.

So in the back of my mind, I soon began considering that maybe we could move into the new flip and sell the house we had been living in for nearly a decade. Although I knew my wife wasn’t at all interested (something she made abundantly clear the first time I brought it up), I realized it would be a great financial move for us. The purchase price was about ½ that of our current house, plus we had paid for the new flip with existing cash and credit, which would easily be paid off and replenished if/when we sold our current home. We could have NO MORTGAGE! Ah, the holy grail was within reach! Although my wife wasn’t on board even when considering the positives (maybe she missed the part about NO MORTGAGE 😉 ), the kids were soon on board with my idea once they realized their life-long friends that they had literally known since birth lived directly across the street from the new flip. I remember the first time they all saw each other and asked our kids why they were here and our two replied excitedly “we just bought this house!” From there, you can imagine what happened next!

By early October, the plan changed from flipping the new house ASAP to getting the new flip ready enough to move into while paying contractors to complete renovations on our existing house so we could get maximum dollar. The interior was already in pretty good condition, but we felt like it needed a fresh coat of paint, a new carpet in the family room, and to finally add the downstairs bathroom shower that had been roughed in a couple years prior. On the other hand, the exterior needed a LOT of love including a new roof and siding, a retaining wall rebuilt, some landscaping, finishing the fence that was about 50% complete, and the air conditioning condenser replaced. For an extra $2000, we also decided to upgrade the 25-year old oil-burning furnace with a modern gas furnace while the condenser was being replaced.

The first step was to hire a roofing and siding contractor, and by the end of October, that work had been done. In November, we got a heating and air conditioning contractor on-board to replace the entire system, and that was completed in December, including installing the new natural gas service. While we were able to get the retaining wall rebuilt in December, the other exterior work would have to wait for Spring. We also planned for the remaining interior work to be done in Spring, after we moved out.

While playing General Contractor to get our house in condition for a maximum dollar sale, I was still working full-time as a consulting engineer, and spending most evenings doing renovations at the flip with my wife while dropping the kids off at their grandparents’ house on the way to and from the flip on most of those days. Over the next few weeks at the flip, we refinished the kitchen walls and floor, rebuilt the bulkhead over the kitchen cabinets, hired a contractor to add new vents upstairs, and got to work installing cabinets. Initially we hoped to move in December before the holidays, but soon realized the schedule was too tight. By then, we had most of the kitchen done but had just started working on the new laminate flooring throughout the house. It was hectic, but also very exciting and rewarding to breathe new life into a nearly 70-year old home.

At this point, it’s not like we needed more chaos, but we were about to get it anyway. With all the work underway on our current and future homes, we had just about forgotten that we had a rental. When we had last spoken to the tenants in October, I had told them we’d be looking to sell in January and they said they wanted to buy it, so I put them in touch with a mortgage broker my wife worked with. Between our crazy schedules and the holidays approaching, I didn’t realize until almost two weeks into December that our tenant had never paid the December rent. Not only that, but they had also stopped payment on the check they deposited in November!

Rather than call them in a total rage, I gave it a few hours and then called them in a partial rage! “Why haven’t you paid the rent?? Why did you knowingly deposit a check and then stop payment?!” Long story, short – they realized they didn’t have money for a down-payment on a mortgage and couldn’t get it without skipping rent. On top of that, they realized we wanted more money for the house than they could afford, so rather than discuss options, they decided to buy a different house! Another WTF moment! For 9 years they had lived in this house as a rental, and now decided to move on while f***ing us on the way out the door. I was pissed they were skipping out on two months rent, but also relieved they had arranged a closing date and would be out by the end of December. At this point, I realized without a lawsuit I would be out the two months rent, and just wanted to get them out as quickly as possible to hopefully prevent any damage from them on the way out the door.

While our original plan and hope was to sell the rental in January 2018 and have the flip ready to sell by March 2018, we were now facing something much different. In January, we’d have an empty rental with an unknown amount of renovation needed and an adjustable mortgage (HELOC) that was about to jump to $2400 per month plus taxes and insurance. On top of that, I was the general contractor for the renovation / flip of our long term home by various contractors that was now projecting to run through Spring or Summer of 2018, plus my wife and I were personally renovating our future home to move into by Spring! Did I mention that I still had a full-time consulting gig??!

Financially, there was some worry, but despite all the turmoil, we were still in a good position. We may not have had any more rental income, but still had my income as a full-time engineering consultant and my wife’s income as a Realtor. We also had a lot of available funds including a nest egg of cash from the rental income, plenty of credit cards, a HELOC on our primary home, plus I could get a loan against my 401k if things got really tight. In the months to come, we were about to stretch those resources thinner than we’d ever imagined!