Real Life Planning Podcast Ep 45: Are You Emotionally Attached to Your Rental Property?
In Episode 45, Vekevia Tillman-Jones explores the emotional and financial dynamics of rental property ownership. Whether you’re managing your first rental, upgrading a property, or deciding whether to sell, Vekevia provides actionable insights to help you assess if your rental property is still a good fit for you.
"So being emotionally attached to a property is very common. It’s not something that we need to feel bad about, but we do want to be aware of it and then ask ourselves the right questions." - Vekevia Tillman-Jones
This week on Real Life Planning Podcast:
| 💡 | How can sentimental value affect rental property decisions? [00:00:32] |
| 💡 | Why do some landlords dismiss neighborhood changes? [00:02:14] |
| 💡 | How does inheriting a property deepen emotional ties? [00:04:26] |
| 💡 | Can appreciation create a false sense of security? [00:05:43] |
| 💡 | Why do property owners hold on to properties without running numbers? [00:07:47] |
Takeaway Quotes:
" …to really know if you're getting the biggest bang for your buck, you need to be comparing apples to have apples and looking at all of your rental properties from the same perspective. ” - Vekevia Tillman-Jones
" … we don't necessarily want to stay attached to the property simply because it's appreciating.” - Vekevia Tillman-Jones
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About the Real Life Planning Podcast
Hosts Cynthia Meyer and Vekevia Tillman-Jones explore practical steps for real estate investors to build financial freedom and make working for someone else optional.
TRANSCRIPT FOR EPISODE 45
[00:00:11] Are you emotionally attached to your rental property? Let's talk about it. I've seen the situations where people were attached to the home that they're in. They're looking to rent out the house. They want to rent it out. It's a deep desire but then when it comes time to actually do so, they're just a bit stressed out about it. And there are a number of reasons why they might feel that way.
[00:00:32] Sometimes it's because it's a property that was their first home. Now, I can understand that. You've worked hard. You've done what you need to do to actually purchase that home. Maybe you've lived in it for a long time. You've made upgrades to that property; painted it the perfect pink and to you, those colors might've been great, or maybe you're very colorful and you painted every room or every wall, maybe a different color. And there are all these types of things. You did an ocean theme in your living room and this is your baby. That might not be something that renters would like. And sometimes just a mere fact of changing the color. Maybe you did have a neutral color, but it was dark blue. That could be neutral, right? And that might not be the best color to attract the most types of renters. And so even when it comes down to making subtle changes like that, sometimes people have a very hard time.
[00:01:19] Or maybe there's some upgrades that need to happen to that first property, and it's very challenging to make upgrades to the property that are the most economical when you think about the type of renter, how much rent you might get and those kind of things. Because not necessarily the type of upgrades that you would choose for yourself, and this was for you to live in is exactly the same type of thing that you might get for a renter.
[00:01:41] Okay. I've also seen some people not even want to make any upgrades because they're like, "I've been living in this house and it's been perfectly fine for me. I'm sure any renter would be happy to have it." And, while we can trust our judgment on that, sometimes maybe there is room for someone else to come in and maybe help maybe like a property manager- just to give a different perspective. Sometimes the realtor would do that, as well. But to give a different perspective on what renters might be looking for, especially in particular, the type of renters that would be going for the neighborhood and the type of home that you are trying to rent out.
[00:02:14] I've also seen people get really attached to just the neighborhood that they're in. And there are a number of ways to combat that, perhaps you might just consider where else might you purchase if your desire is to purchase something else? Or where else might you go and maybe you'll rent or live that maybe has a similar type of neighborhood? Or maybe there's a neighborhood that might even be better. Maybe that your neighborhood was great, but maybe there's an opportunity for something even greater. You can also look at it and say, you know what I'm giving someone- whoever's going to rent this property out, whatever family, whatever person, whatever people are going to be able to rent this out, I'm giving them the opportunity to experience a wonderful neighborhood that I've experienced for the last X amount of time.
[00:02:54] Take a look at it that way as well.
[00:02:56] I've also seen people somewhat from more of a financial perspective, look at it, and it's challenging to let it go because maybe the amount of the mortgage that they're paying on that particular property, they're not sure that they might be able to get another place for them to stay that still meets that goal. So we might have to discuss just different options of how could you potentially be strategic to move into something else that's just as affordable. So there are conversations around that, whether they go into house hacking, or they decide to rent for a little while, or move in with a family or friend for a little while and save, or maybe they save while at their current home, or maybe they move and they're able to charge a certain level of rent that would allow them to cover a bit of the new home that they purchased as well as all of the needs for that rental property. So that can be something that can be very strategic. Even though that can be a lot more involved of a process to have to think through, it's still something that can be figured out and a financial planner such as myself can really help you with something like that.
[00:03:58] Another option for people who may be saying, "I just don't know if I have the funds needed to get another property and rent this property out." They might even look into purchasing maybe like a multi unit property where people live in the other units and essentially allow them to, they live in one unit as well and allow them to live without paying much, if anything, every month towards their own bills. So there are different things that we could work out and a financial planner would be able to help with that as well.
[00:04:26] Another thing that people might feel is like if they've inherited a property, they might become emotionally attached to that property, especially, think about it, maybe your grandparents or your parents has left you this property and now you have this. It's great that you were able to get the property, but sometimes people feel a little bit overwhelmed or burn it with the idea that they need to also allow this property to exist and live out and do exactly what their loved one would have wanted and that can be challenging.
[00:04:53] So maybe that's been spelled out, but maybe it hasn't. So sometimes people are tied to the property. I feel like I can't let it go because I don't want to disappoint them. So then it might, be a tougher conversation to really say how else could I honor them with this property? Is it a matter of one family member who could really, you know be blessed by having that property and you figure out a way to be able to give it to that family member or could it be that multiple family members are trying to figure out what to do with it.
[00:05:19] Maybe only one or two of you are like, you know what? Let us purchase this property and we will rent it out or repurpose the property. Or maybe it's an opportunity for us to move from this one property to another property where we could still allow the values and desires of our loved one to still be lived out.
[00:05:36] Many different options. But I have seen that be one of the reasons that people might get a bit more emotionally attached to a property.
[00:05:43] Sometimes, people are stuck to the property because perhaps it's just appreciating. They see the value of the property going higher and higher year after year and they think of course, this is a great property. And that could very well be true. But sometimes, the amount of income that you can get for a particular property, there's a range and if you're already at the higher end of that range, and the properties continue to appreciate, perhaps you're not getting the same return on what you put into that asset. The value is going up higher, but you're getting a smaller return on that every year because your rent is only at a certain range and you've already reached the higher threshold of that. So some people, if the numbers make sense, sometimes some people still decide for whatever reason, that still might be a good property for them. But we don't necessarily want to s tay attached to the property simply because it's appreciating. There are a number of different properties that someone might be able to go and find and still experience great appreciation, but also in an area where there's the ability to increase the rent and actually find renters who are willing and able to pay that level of rent for that particular type of property.
[00:06:46] People could also be attached to a rental property just because it's been a rental property for a while and it's working. Why would I make any changes? And I would encourage you each year really should really run the numbers again on that particular property. Sometimes some of the things might come out this dependent on how old the home is.
[00:07:03] Do you have an older home? And perhaps there are a lot of different expenses that are about to come up or you need to redo, maybe a sewer or a roof or just any type of work. Maybe the cabinets in the home just are not going to hold up and they really need to be redone or the kitchen bathroom types of things where you might see a lot of age or wear and tear over time. And so if those things are about to come up, then you have to think about how much is it going to cost me perhaps to be able to do to cover those expenses? And then can I get that back in the income that I'm going to receive?
[00:07:33] Or how long does it take me to, or will it take me to recoup the cost of those additional expenses that I'm going to have? There are a number of different things to consider: Would you fix it and then sell it? Or would you fix it and exchange it? And we could always help with those kinds of things.
[00:07:47] But sometimes people are just attached because they've been renting it and they just want to keep doing what they've been doing. But re running those numbers is just a very important part of the process, in particular, when you're a real estate investor, because to really know if you're getting the biggest bang for your buck, you need to be comparing apples to have apples and looking at all of your rental properties from the same land thread with the same perspective.
[00:08:11] Oftentimes, it's very helpful to go through the process with your financial planner to really evaluate the properties because you have an unbiased party, right? You might be attached to the property, but your planner is not attached to that property. They are looking at things from a lens of your overall investments in financial stability. So, it helps to be able to get a different perspective to say, is this property still serving you and your goals? And if it's not, what types of adjustments might you make? What is your exit strategy? Is it to keep? Is it to exchange? Is it to sell? Is to increase the rent that you're charging? Do you need to make some minor improvements so that you can attract better renters? Or whatever the case may be.
[00:08:53] Another thing that you could consider is it time to get to perhaps stop directly managing the property if you are and allow someone else to come in and do that. Property managers again will be another unbiased opinion or they could at least help you make sure you're charging the right rent. Make sure that your renters are abiding by what they need. Make sure that your property remains attractive to the potential renters and those kind of things. So being emotionally attached to a property is very common.
[00:09:20] It's not something that we need to feel bad about, but we do want to be aware of it and then ask ourselves the right questions and reevaluate our position of financial planner, such as myself or here at Real Life Planning. Those are things that we help with, and we would be happy to help you on your journey.
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