It was one year ago, in May of 2017, when we bought our first investment property. I went into the experience nervous, afraid, and cautious, because buying an investment property can feel like a huge financial and lifestyle risk. But I was extremely curious and eager to get started to see if I could make it work for me. Here’s my property:
he numbers looked awesome at the beginning: My first investment property was going to cash flow me $600 per month, and it was going to pay off $200+ on the monthly mortgage. Going into it, I was hoping I was going to profit a minimum $800 per month on a $53,000 investment. That’s a 20% return on my investment, which is a lot better than the 7% average return of the stock market. So the numbers looked great on paper.
The only question I had was even though this looks good on paper, would I be able to make it work in real life? Would I enjoy owning a second property? Would I succeed at being a landlord? Would I be able to find good tenants and rent it out quickly? Would I actually be able to make money while I was sleeping on my investment? Or would this entire experience turn into a rental-property nightmare story that you hear about on TV, and make me wish I would have kept my $53,000 down-payment in an unexciting, drama-free index fund?
BUT I BELIEVED THIS INSIGHT ON WEALTH BUILDING WAS TRUE: You will never know what you are capable of until you jump off the cliff of the unknown and see if you can fly. If you remain afraid of risk, and huddled in safe places for your entire life, you’ll only get normal, safe results. When you take risks, you won’t win in glorious fashion every time, but you only have to be right once when you take a big risk for your entire outlook, fortune, and future to change.
In this scenario, I think taking the risk to try real-estate investing changed me, and my future, for the better. The first month was hard as we renovated the property ourselves. But after that was done, and the new tenants moved in, I learned I like being a real-estate investor. I’m naturally good at it. The best part is, I’m also learning how to make a lot of easy money at it. Here are a few things I have learned along the way:
#1 Tip on How to Be a Dynamite Real-Estate Investor and Landlord:
Buy properties that you like and want to own. Desirable properties make your job being a landlord A LOT easier.
What makes a desirable property? Location, location, location. The first investment property I bought was in a top 5 school district; conveniently located off of major freeways; and is in a quiet neighborhood that backs against a nature preserve.
Getting this property didn’t happen by accident. My wife and I looked hard for it, and we thought deeply about it before we decided to buy it. When the property was offered for sale, I looked at all the positive things about the property, and I immediately knew that people would WANT to live there. And my bet on it was right: On the first day I listed it for rent on Zillow and Craigslist, I got 10+ email requests for showings in the first day. The requests for showings kept coming, and I received around 100 requests to see it in the first week. Because it was a desirable property, I got it rented within 6 days of owning it.
Buying a desirable property, that people wanted to live in, made my job as a landlord so much easier because I was just servicing incoming leads, rather than having to go out and sell and promote and hustle to get people interested in my property. My sales business has taught me this: Helping clients who are coming to you with needs, is WAY easier than having to prospect to find clients with needs. The same is true with finding good renters. My advice is to find a property that will make renters call you, instead of forcing you to call them.
#2 Tip on How to Be a Dynamite Real-Estate Investor and Landlord:
Choose renters that are looking for a solution to their problem that you can provide them, so that you both feel happy in the situation.
I don’t write detailed stories about my current tenants just in case they happen to find this blog. I respect their privacy. But I can share this general piece of advice with you: My current tenants were looking for a safe, comfortable, and reliable home to rent. They were happy to not have to do the regular maintenance projects, and pay all the unexpected bills that owning real-estate naturally brings.
I, on the other hand, was looking for long-term tenants who would treat the house like their own, pay their bills on time, not cause me any headaches, and not do any damage beyond the normal wear and tear of living there.
So in this case, we were able to solve each other’s problem: My current tenants got a nice property to live in that is well-maintained, and I got good tenants who won’t damage the house or cause me any unnecessary headaches. My relationship with my tenants has been a win-win for both of us, and those are the best deals to be a part of.
My advice: Whenever you can find a win, win scenario in life, try to keep the deal going as long as you can because that’s the easiest money to make on this earth. In fact, I already signed a new lease with my tenants for the next 13 months until June 1 2019. As long as no crazy surprises come up in the next year, that should be some of the #easiestmoney I’ll ever make. If any shocking surprises do come up, I have my emergency fund strategy to help me escape this lease, and gracefully transition to my next tenants and try again.
#3 Tip on How to Be a Dynamite Real-Estate Investor and Landlord: Cash Flow is King.
I’ve learned that for me, CASH-FLOW IS KING every time I think about investing in another real estate deal. What is Cash flow? Cash flow is the profit you make from rent, after debt and additional costs are paid, IN CASH every month.
I think $cash$ is awesome, because cash is the only substance in the world that you can turn into any experience, product, or service at any time. Want to fly to another country and go on an adventure? Cash can get you there. Want to buy a loved one a special gift? Cash can get it on their doorstep tomorrow. Want to cross something off your bucket list? Cash can help you create the opportunities to do it.
That’s why cash-flow is king for me. The awesome cash flow opportunities in real-estate is also why I choose to invest in it. Do the comparison: My $53,000 down-payment in my investment property cash flows me $620 per month. ($1595 rent – $975 mortgage payment = $620 leftover cash flow) In comparison, my $10,000 investment in index funds only cash-flow me $17 per month in dividends. It would take around $360,000 worth of index funds to pay me around the same $620 per month in dividends. (Cash) And I got all that cash-flow coming from a $53,000 investment into real-estate!
Trust me, when things go wrong, or you get a big repair bill, you’re going to feel a lot better knowing you have hundreds or thousands of dollars in CASH-FLOW coming in each month from your investment to fill you expense account back up. Cash flow helps fix a lot of the headaches that arise with real-estate. My advice is to make sure any property is cash flowing positively for you before you buy it. It’ll make the headaches you will experience that much smoother, easier, and less dramatic.
It’s these awesome cash-flow opportunities that get me excited to buy more real-estate as I become more financially successful in the future.
#4 Tip on How to Be a Dynamite Real-Estate Investor and Landlord: Have some Tough Guts.
I wrote this to let you know if you’re going to invest in real-estate, and manage it yourself, having tough guts will definitely help you from time to time. You’re going to be tired. You’re going to be frustrated. So being tough, will help you through these moments of self-doubt so you can get back to enjoying the cash-flow river again.
If you’re renters are late on their payments, you’re going to have to evict them. Even if you like them, and they have kids, and they have all the excuses in the world on why they can’t pay their rent this month, you’re going to have to tell your soft heart to shut up and evict them. Why?
Because in situations like this, I remind myself of this: Either they are going to lose their house because they can’t pay their bills, or I am going to lose MY house because they can’t pay their bills, and I am not going to be the one losing MY house, EVER.
So to be a good/successful landlord, it definitely helps to have some tough guts that can help keep your priorities straight. If you have a soft heart, but still want to invest in real estate, then I recommend hiring a property manager to have the tough guts for you. That way you can still invest, and enjoy the cash-flow river real-estate can create, while having someone else do all the dirty work for you.
In our situation, I am probably going to self-manage ours for a few more years. But as I get more financially successful, my long-term goal is to hire a property manager so they can do all the day to day work, so I can free my time up to do what’s most important to me: Achieve my purpose in life.
In conclusion, my first year of being a landlord has gone great, and I consider it one of the best decisions I’ve ever made in life. I would have never felt that way if I wouldn’t have taken the risk to try it.
And if you read the rest of this blog, you’ll know my success wasn’t on accident: Before I took on such a huge risk, I researched like crazy, and then I prepared like crazy, and then once I leaped off the cliff of the unknown, I worked like crazy to learn how to fly. This is how you build wealth in life: Research, prepare, and then work like crazy. Do this over and over again, and you’ll be amazed by how far and high you can fly toward your dreams.
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