Reykjavik in the evenings

Rental Property Disasters

No investment is safe. Even storing physical cash is not without risk (from both inflation, theft, fire etc.). Buying property and renting it out is also not risk free. The most obvious thing people think about when they hear the words rental property disasters are poor tenants.

Poor tenants

Poor tenants come in a varying grade of bad. The most benign bad tenant does pay his or her rent every month but handles the property very roughly. The worst kind of tenant is on the other side of the poor spectrum, both not paying rent and damaging the property.

We have been very fortunate with our tenants. They always pay on time and treat the properties well. We’ve decided to foster a positive and rewarding atmosphere. For Christmas we gave our tenants a 10% discount on the rent (a significant sum here in Reykjavik) and we always try to respond promptly and sometimes preemptively to complaints or repair requests. In this way we hope to minimize risk. The risk being resentment and the damage that can potentially cause.

Unexpected maintenance

There are other types of rental property disasters when owning and that has to do with the property itself. I’m talking about maintenance and in some cases, the lack of maintenance that causes major repairs to be necessary down the line.

Unfortunately we have been hit with the second type of rental property problems. Like almost all houses in Iceland, the rental property we bought is a 100% rebar reinforced concrete building. They do last a very long time but not indefinitely as water and the constant thawing and freezing conditions in Reykjavik can slowly corrode away the concrete and strike at the very core of the outer walls. When we bought the apartment we were aware that there was going to be some maintenance work necessary for the outside of the house and we even got an inspector to inspect this for us. However, the damage turned out to be more extensive than anticipated (not just surface damage).

Our situation

The house association spoke about starting repairs early last year. Nothing happened last year so we decided to take matters into our own hands and contacted a specialist in this field who, offhandedly quoted $150,000. Of course we don’t have to pay all that money ourselves. Our apartment is only 16% of the whole house so our share would be $24,000. It’s manageable but my main worry now is that I need to convince the other owners (who own a larger share of the whole house) that this needs to happen right now. I’ve asked for a meeting next week where I am going to try to convince everyone that if this does not taken care of right away, they may be looking at irrecoverable damage and that they will be sitting on a worthless property. In any case I am worried that it might be too late already.

The next thing we will have to do after everybody (or at least the majority) is on board is to secure a loan on behalf of the house association while at the same time we need to have the property inspected thoroughly for this particular kind of repairs and collect quotes. Then when everything is ready we should have the repairs started as soon as possible, even next month if at all possible.

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