This guest post from Jolyn is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success — or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. You can read more about Jolyn’s financial adventures at Budgets are the New Black.

My husband and I bought our first home in Las Vegas, Nevada, when he was stationed there with the Air Force. This was right after 9/11 when the economy was stagnant and the real-estate market uncertain. In the spirit of our new hometown, we took the gamble and plunged into home ownership, banking on the economy recovering before it was time for us to move again in a few years.

Fast-forward to 2004: The market was on fire! Houses were selling mere hours after being listed! Our house had appreciated by $120,000! It was also time for us to move again — and time for us to take the money and run, right? Wrong!

It seems hard to imagine now, but we really thought it would be a good idea to hold onto the house a little while longer. We were (literally) buying into the investment mentality that many have in the military who buy a house at every assignment with the intention of renting it out when it’s time to move, slowly accumulating wealth through appreciation. We weren’t really interested in keeping the house for the long haul, but we did count ourselves fortunate to have already gained so much equity.

Besides, we were moving overseas. What if we tried to sell the house and something fell through before we could close on it? My husband had an inflexible report date. We had small children, and I was pregnant. It wouldn’t be easy to deal with any problems selling a house while trying to settle into a new one in another country at the same time. We decided it would be easier to wait a couple of years, when we didn’t have so many things going on at the same time. Maybe the house would even be worth more by then.

Now fast-forward to today.

Are you laughing yet? Because we all know what happened! By the end of 2006, the real-estate market was going south. Las Vegas was — and still is — at the top of the list of cities hardest hit by the bust. Today, not only has our house lost all of the appreciation it gained in the short time we lived in it, it also wouldn’t sell for what we bought it for in 2001! Our ship came in, and we passed it by.

On Being Landlords
We’ve had five renters in the last six years. Las Vegas is a transient city! Most tenants have been fine. Some, well, they’ve been not so fine. At least one trashed the place. Three bailed out early, one in the middle of the night. Two had serious personal crises that required them to leave the area rather quickly. The latest was involved in a domestic dispute and actually felt bad about breaking her lease after only two months. She even did her best to clean the place up before turning in the key. In the past, we’ve had to clean the place up and replace the locks.

The house has stood empty this entire summer since that last tenant left. At one point some vandals broke in through a window and stole the washing machine. It looked like they tried to take the dryer, too, before they were interrupted. They haven’t been caught. Vandalism in Vegas is becoming a rampant business: so many empty, foreclosed homes, waiting for the banks to process them. It’s going to take a while for the market to bounce back — but the recovery will probably look more like a waddle.

The Cost
When we have tenants, the rent check does cover our ownership expenses, which are plentiful. In addition to the mortgage, we also pay:

  • Two association fees
  • One bi-annual assessment
  • The sewer and trash
  • The water bill (which, interestingly enough, runs way less in the desert than it has anywhere else we have lived)

It’s the weeks and months between tenants that cost us dearly: eighteen months total so far. The bills above are due even when the house is empty, and there are always fees involved to prepare the house for new renters: clean-up, extermination, painting, and so on. We also pay to keep the power on in our name when the house is vacant. It gets hot in Vegas! No one wants to rent a sauna.

We do have a property manager who takes an 8% cut from the rent check (when there’s a tenant). That’s an improvement over our first manager who took 10%, which is actually more typical. We changed managers because we were looking for a better business relationship, though, not because we thought we were paying too much. Land-lording long-distance is not for the faint of heart, and we started out at the bottom of a steep learning curve.

Now, I’d be lying if I told you that I wouldn’t like to bang my head on a brick wall now and then when I think of the financial gain that we let slip away. But it’s not all doom and gloom: I sincerely believe that these experiences happen to shape our character and our future choices, and that sometimes gains aren’t always monetary. What on earth do we not have? My family is strong and healthy, our income is secure, and our future is just as certain as the next person’s.

In fact, my husband just got a promotion (and a raise). And we just secured a new tenant. (Let’s hope he stays for his whole lease!) What on earth do we have to complain about? We may have missed our ship when it came in, but we’re still standing on the dock on our own two feet. And if worse comes to worse, we can always swim.

That’s not the case for everyone in Las Vegas, particularly for other members of the military. Many of them got caught buying houses during the hype and then receiving orders to move right after the market tanked. They turned around and found themselves upwards of $100,000 upside down in a house they had to leave, with no prospect of renting it out for enough to pay the bills. Fortunately, depending on when they purchased their home, there’s federal assistance for some of these owners. But often they’re required to short-sell, which still affects their credit, which will affect their housing options for the next place(s) they live.

Should We Just Walk Away?
We’ve been asked on occasion, “Have you ever thought about just walking away?” And to be honest, no, we haven’t. It’s not just a matter of not wanting to ruin our credit. We made the decision to buy the home, and we took out a mortgage for it with every intention of paying it back. Washing our hands of it because it’s painful — which it is — simply wouldn’t be the right thing to do.

Now, if we couldn’t make the mortgage payment, that’d be another thing. Obviously, if something happened that caused my husband to lose his income or to take a severe cut in pay (I don’t want to think about how that would happen since he’s in the military), keeping a roof over our own heads and food on our table would take precedence over making a mortgage payment on a house we don’t live in.

We’re in It for the Long Haul
Or until the market recovers enough for us to sell. Or until we pay off enough of the mortgage snowball-style to meet the current market value. Whichever comes first. For now, at least, we’ll continue to make payments on a house that is currently worth less than what we owe on it. And we will bide our time.

Since our time in Vegas, we’ve moved twice and are now back in the States. And we bought the home we live in here in Ohio! At the time, we were expecting to stay here (at least) four years. Alas, the military has other plans, and now we’re trying to sell this home in anticipation of moving to California. Where we have no plans to buy a house! We’re looking forward to living on base, assuming a house is available, or renting “on the economy” if one is not. Additional home ownership is on hold for the foreseeable future.

We Won’t Be Buying a House Again Anytime Soon
Not only has my husband’s career path changed, now making it less likely that we will settle down anytime soon, but our perspectives on debt and credit have completely turned a corner as well. We discovered Dave Ramsey a little over a year ago, and since then we have eradicated all of our consumer debt (almost $20,000) and are striving to never use credit again.

Except, possibly, for a house. Someday. But only for what little amount we aren’t able to pay for with cash.

Homeownership is a lovely thing. Owning rental property can be a wonderful investment! Just please don’t go about it like we did, with our eyes wide shut. Understand what you are getting yourself into, the financial risks that are involved, and prepare accordingly — preferably, with cash. No great opportunity is worth the burden of a financial responsibility you aren’t prepared to have. You can take my word on that.

Reminder: This is a story from one of your fellow readers. Please be nice. After more than a decade of blogging, I have a thick skin, but it can be scary to put your story out in public for the first time. Remember that this guest author isn’t a professional writer, and is just learning about money like you are. Henceforth, unduly nasty comments on readers stories will be removed or edited.