It can often be hard to know what something is really like in life until you try it. Real estate investing was always something that Mrs. Money and I had been interested in but we didn’t really know what it was like until we gave it a shot. We’ve been real estate investors (or aspiring real estate moguls as we call ourselves lol) for 4 years now. We got our start a few years ago with a primary residence turned into a rental and did that for 2.5 years…and then sold that for tax purposes and then took that money and bought 1.5 rental houses – a new rental house and a tiny house lot. We’ve yet to build on the tiny house lot but we do have the rental up and running!

I covered a bit of a day in the life last year here is my post on searching for a property and here is the post on searching for tenants. Our first tenant moved out in June and we got the house rented again in September, so we’re just back into being a landlord for tenant #2. I thought I’d share a bit on some real life landlording and also a few tips I wish I had known myself before I got into this!

Good tenants make or break

In what is probably an obvious statement; good tenants can make or break your experience as a landlord. It can be a variety of tenant issues but a bad tenant can really make your life tough. I imagine that for many of us being a landlord is a side hustle and it’s tough to have a lot of stress in something that’s outside of our 9 to 5. Tenants might not pay rent and you may have to go through the eviction process. This happened to a buddy of mine and he said it took like 8 months to get them out. That’s 8 months of no rent plus all the legal fees and potentially damage that the tenants might leave, which could be near impossible to collect for. Or perhaps you have a difficult tenant that doesn’t take good care of the property i.e. not cutting the grass, putting too many holes in the wall, not properly cleaning or changing filters. Or perhaps they are needy tenants who reach out too often with things that is not actually your responsibility.

Finding tenants can be tough too – it’s a tough world out there with poor credit scores, negative bank balances, or even applicants making up employment or fudging their ability to pay rent each month.

My advice is to have standards and screen tenants to them. For us it’s a fair credit score, 2.5x income to rent and no prior history of eviction or criminal records (aside from minor traffic stuff which I don’t have an issue with). I always like to show the house and meet the people in person; I feel like if I can meet them and show them that I’m a real person and not some faceless corporation that it helps improve our odds of having a good business relationship.

Thankfully we’ve had GREAT tenants so far. I recognize that this is always subject to change and comes with the role of being a landlord as you can’t know for sure what type of tenant you’re getting and even that people may change once they’re in the house. We’ve definitely had plenty of things go wrong and have had plenty of headaches to deal with but these were the exceptions, not the norm. There was one year early on that we got super lucky and had virtually 0 issues and made 0 trips over to the property.

Develop a business system

Some of the best advice I got early on was to run your property just like a business. This has proven helpful advice for several reasons. Firstly, it allows you to keep things business, not personal. My heart really goes out to those applicants that had poor credit and were just looking for someone to take a chance on them, but we’re running a business here and it could really negatively affect my family and I if they don’t pay their rent each month. Also, treating this like a business means we operate with business hours, i.e. don’t call me at 10pm letting me know a lightbulb is out. If there is a true emergency, call the cops or the fire department. If there is a concern but it’s not an emergency, we’re happy to address it in a reasonable amount of time, not right away.

Also it’s super important to keep good records – I use a simple spreadsheet but I record all our income, expenses, mileage and time spent. I keep the receipts and take pictures of them. I have a folder on my computer where I stay organized to keep all of this stuff. It makes it much easier come tax time!

It won’t always be rented

When I was getting into real estate (slash still am) I read about all sorts of projections and in most of them it included a caveat for not having the house rented for at least 1 month a year. I naively thought I wouldn’t experience that and assumed in my projections a full yearlong rental every year! For our first rental we got pretty lucky and had it rented within 2 weeks or so and the tenants stayed there for 2.5 years. It was great. Then with our current house, we bought it in early May and it took us probably 4 weeks to get everything up and ready with repairs and updates, and then it took us about 1 week to get it rented and then the rent didn’t start until end of June. The tenants only ended up staying 1 year and moved out in June. We got lucky and the house was a) super clean and b) didn’t require any updates or maintenance. However, we couldn’t get it rented for a few weeks and then were going on vacation for 2 weeks and our realtor was gracious enough to try to get it rented for us. The cost would have been $500 but she offered to comp that for us.

The house then sat vacant for about 5 weeks and we finally agreed to take it back over and see if we could get it rented. I’m not sure what it was – the house didn’t really change and the advertising was all the same. I suppose perhaps there was some stigma associated with going through a realtor but thankfully it didn’t take us long and we got the house rented pretty quickly.

It ended up sitting vacant about 10 weeks – so that is 2.5 months of the mortgage we had to pay out of pocket. Definitely not ideal but thankfully we’d built up a surplus in our rental account and were able to pay it using that money. Also we ended up dropping the price $400 from what we rented it last year. Neither of these were things that I was expecting!

I’ve always said that it’s important in real estate to build in a buffer. Although there are plenty of real estate investors that take on leverage (i.e. debt) and don’t have as much of a buffer, and plenty of them do plenty well, Mrs. Money and I have been more fiscally conservative and I’m thankful we are. It became much easier to watch the house sit empty for 10 weeks knowing that we had money in the bank to pay the mortgage. It was also easier (although not much easier) knowing that we could drop the rent and still be ok with the spread between rent and the mortgage payment.

Real estate like any other investment can and will be a bit unpredictable and it was not always move along as smoothly as I had hoped! There will be hiccups – rent drops, vacancy, repairs etc that come up! Keep a buffer handy!

There’s a lot of work…then hopefully less

I wouldn’t necessarily describe being a landlord as a lot of work – but at times there can be a lot to do. The busy times I’ve noticed especially occur during a tenant change over. Once the previous tenant leaves; you need to get in there and make sure the house is clean and there are likely projects needing to be done. Perhaps it’s repairs, things that broke, or things that you were looking to do but wanted to wait until the house was empty.

Then it’s a fair amount of work trying to get it re-rented, perhaps new pictures are needed, you have to list the property online and if you are managing it yourself, you will need to show the house – potentially to a lot of prospective tenants. Then there’s the move in process of exchanging the keys and doing the walk through, and then it’s to be expected that the new tenant will have a punch list. You’re not full time living in the house so it’s hard to know all that might not be working or little things that could be better and so you’ll likely be spending some time fixing things yourself or coordinating with vendors to repair / treat.

Even if you have a property management company, there will likely still be things that you as the property owner need to do / oversee / manage.

Then, once the new tenant has settled in, hopefully things calm down a bit aside from the occasional repair that will pop up. Just like things break in your personal residence, things will likely break in your rental property!

Know what to pay for vs. what to DIY

The age-old question as a landlord is time vs. money – and what do you have more of? Mrs. Money and I have learned (from trial and error) what’s worth paying someone to do vs. what’s worth our time to fix. There are plenty of YouTube videos out there as well as truly helpful advice at your local hardware store and some things are certainly things you can do. For example we had a leaky sink recently and Mrs. Money was able to a) YouTube it b) get some advice at the hardware store and c) do the repair herself – all for $2.65. It probably took 1 hour total of her time – definitely something that was worth us DIY vs. paying someone. We also cut the grass all summer long which took probably 2 hours start to finish once every other week.

On the other hand there are plenty of pest control and HVAC issues (both things we’ve had recently) that will come up and are probably worth paying someone to fix! Their knowledge and experience is worthy of paying with your dollars vs. your time.

TLDR

Any investment or side hustle comes with it’s own set of headaches. I think the secret to a successful investment is finding out what type of headaches doesn’t bother you as much! For us Mrs. Money and I have complimentary skills when it comes to real estate and so being a landlord is definitely work, sometimes more work than other times but all in all it’s a task we don’t hate doing and so it’s proven to be a good investment for us!