I purchased my first rental property at 26 and I’ve now been a landlord for half of my life. My parents owned five rental properties when I was growing up and both of my brothers are “buy-and-hold” residential real estate investors too.
We’re a family that believes real estate investing is a good way to build wealth.
The rental properties my husband and I own have given us a steady side income for years. We’ve built up equity as our tenants paid off our mortgages over decades. Property appreciation is another plus we enjoy as it comes time to sell some of our rentals.
But we also made plenty of mistakes over the years and did a lot of “learning as we went” too.
While you can get more information than ever by doing a quick online search on “how to invest in real estate” – just keep in mind that every house, market, tenant, and management company are different. And your feelings about being a landlord will likely change over time too.
Our Time to Change
We’re downsizing our properties now that we’re living a retired (snowbird) lifestyle. We just sold an 8-unit commercial apartment complex this month and we’re holding the mortgage to diversify our income streams even more.
For those of you are thinking about buying your first rental property, I thought I’d give you a “case study” example of a property we still own but are trying to sell.
This property has some interesting possibilities and I think it would be a good one to learn from as you start to “run numbers” and not just read examples on the internet.
If you already own rental properties and are willing to help others who are just getting started, feel free to comment with questions you would ask and the pros & cons of owning this type of property. Feel free to share any strategies you use to find properties too.
My Rental Property
I’m not going to give away the actual address property in this post. But I will give you plenty of information to help you do calculations and ask questions.
We bought this house because I took a job teaching at the college in this town and it was too far to commute. I stayed there two nights a week during the semester and shared the house with the current tenants.
I only worked there for two years before taking a different job, but we kept the house and the tenants stayed.
We haven’t had a single month of vacancy since we bought it. The long-term renters (7+ years) pay $900/month. There is room for at least a 10-20% increase in rent, possibly more.
The tenants pay on-time every month and have only called twice. Once when we needed to have the furnace serviced and again when the refrigerator stopped working (which we replaced).
Here is more information:
- Purchased for $82,000 in 2012
- Southern-tier region of New York
- 2 story home built in 1894
- Currently zoned as a single-family home
- Primary residence of a family for more than 50 years prior to us purchasing it
- 2116 square feet with 4 bedrooms and 3 bathrooms
- No garage but has a storage shed
- Back yard big enough for patio, garden area (about 30 ft x 40 ft)
- Has two basements, two electric services, and two furnaces
- Two kitchen areas, two living & dining rooms
- Class B- (?) neighborhood/home (using Coach Chad Carson’s investment property descriptions) a relatively safe area, mix of rentals/owner-occupied homes, older home that will need some work (roof/paint/some windows/flooring – but very solid built)
- We replaced one of the two hot water heaters in 2018, new refrigerator in 2016
- 2 blocks (5-minute walk) to a college campus
- .7 miles (15 min walk) from a 250+ bed hospital
- Off-street parking for two cars (one on each side of the house)
- $2943 Total Annual Taxes (school, county, city)
- $180 Utilities (water & sewer/year) (Tenants pay electric/gas)
- Tenants are responsible for snow/lawn maintenance
- City trash collection included in taxes
- We currently pay $513/year landlord insurance for this property
- We manage this property but property management is available
A comparable home listing one block away is for 90K. It is 2900 s.f. and has 6 bedrooms and 2 bathrooms.
Curious about two basements, kitchens, living rooms, and electric services? The house actually has two addresses and was originally built as a side-by-side duplex. The comparable house is a duplex too.
Our house is currently zoned as a single-family but a potential owner could find out about having it rezoned. The existing house on one side of our rental is a single-family and the other side is a multi-family residence.
If you could convert back our property to a duplex, it would be 2 bed/1 bath on one side and 2 bed/1.5 bath on the other (a door would need to be moved taking away a shower on the first floor). Apartments this size in this neighborhood rent for about $700-900/month.
Would You Buy?
Our rental is “listed” for $65,000 “as is” based on some of the repairs/maintenance that will be needed over the next few years.
- If you are thinking about buying a rental property, what other information would you want to know about the house?
- Does it meet your real estate investing strategy or “rules of thumb” you’ve learned? Or would you pass on it just based on the numbers?
Final Thoughts On Buying A Rental Property
Some experienced real estate investors know exactly what returns they are looking for and can run numbers in their heads.
If you are looking at your first deal, make sure you get as much information as you can because situations like the “other considerations” listed above may really change your mind about a property.
Post by Vicki, from Women Who Money. Vicki is an educator, real estate investor, and entrepreneur. She shares Amy’s passion for health and fitness, and when she’s not exercising or blogging, you’ll find her reading, learning from an online course, or plotting her next travel adventure.