We wanted to become many things when we were young. But unless we were Donald Trump, most of us didn’t dream of becoming landlords. Maybe a doctor, or a Princess-Astronaut. If we knew enough about housing, we might have wanted to be engineers, architects or even interior designers. But not landlords. I know I certainly didn’t think I’d be interested. Landlords are not always portrayed in the most favorable light. It’s either a faceless management company or a chain smoking slumlord who provides few services and is always waiting outside your door to collect rent. As a result, acquiring my first tenant was more of an emotional decision than a rational business one.
After many years of saving and sacrificing, I was able to purchase my first home. That property meant a lot to me. It was a nice spacious townhouse with great amenities conveniently located near a major city with great access to public transportation. Initially, that property was my second choice. The house that I really wanted, a small single family in a different town did not pass inspection. As a result, I “settled” for this one. That back up choice turned out to be a great option. After we got married, I struggled with the idea of giving up my first home. It was a symbol of what I was able to accomplished for myself as a single woman of modest background. I was not comfortable giving it up. However, I guess I was meant to go into real estate investment.
When it came time to get pre-approved for a mortgage. To both mine and my husband’s surprise, the bank approved us to purchase in the price range we desired even though I had the mortgage on my record. However, they approved us with the expectation that we would be able to rent the property since we certainly could not afford to carry both mortgages. We went ahead with an offer on a property my husband fell in love with, and as soon as we were under agreement, I began aggressively advertising the property for rent. A few things about the unit made it an ideal rental. It was small enough for the average tenant demographic (young families/couples, roommates, YUPPIE who earns enough to not need a roommate) but spacious enough to be comfortable. Also, living in snowy New England, having a dedicated parking spot with an attached garage and included snow removal are extremely valuable. Having a desirable property gave me the opportunity to be selective and move in a qualified tenant who I assessed as someone who would not be too problematic and have the means of paying the rent. When I set the rental price, I took a shot in the dark, but it worked. I ended up with rental income that was several hundred dollars above all of my expenses.
Not long after the tenant moved in, I saw how effortless it was to collect rent. It’s not that being a landlord involves zero work. It was that I had to sprint in the beginning but once I had a signed lease with a quality tenant, I was in cruise control. All the bills for the property are paid online, some are automatic. I send quarterly bank statements for the escrow deposit along with rent receipts by mail, I answer occasional emails about the property (sending out the plumber, reminding them to clear out the AC condensation hose every summer, etc.) and I do an annual inspection to make sure everything is in good working order before I draft up a new lease. While I am always available, I managed to select a tenant who just would not need me. So most of my work as a landlord involves collecting the rent, paying the bills, and sending out invoices. All of this work is primarily concentrated in the first few days of the month. For all that heavy lifting, I’m rewarded with thousands of dollars monthly and even more money annually in the form tax deductible depreciation. I saw the light that brightened the path of financial freedom: real estate.
A few months into doing that, I was bit by the real estate bug as I saw the true potential of for financial freedom in being a good property manager. I nagged my husband relentlessly about getting a 3rd property which would be the first one we would buy with the intent of not residing in it. We got lucky and snapped up a beat up foreclosure that we spent a pretty penny restoring. Now, we have 2 tenants, each bringing us healthy margins of profit. As soon as we catch our breath and create some room on our credit report, we will be ready to buy property #3. Although there is a point where we will have to chose between managing our properties and keeping our full-time jobs, we aren’t there yet. In the mean time, we are saving as much as we can, paying down our debts and enjoying the fruits of our labor.