For the first time since buying last December, the fourplex is rented! It was lots of work and stress, but what a nice feeling to have that final lease signed.
The property has two buildings, each with two apartments. One of the buildings needed a some renovation with new flooring, electrical, paint, and light fixtures upstairs and a complete remodel with new construction downstairs. After two and a half months of work, we now have four, two bedroom apartments.
We had hoped to get $3050 in rent between all four units, and we’re pretty close at $2975 per month. We have one holdover tenant who was there before we bought the place, and we should be able to raise the rent $100 or so per month once he moves out.
Our other rental house is currently leased for $780/month. The total of our rental expenses are around $2000 a month, so that means $1755 in profit. We also have our commercial rental that barely breaks even every month, but it will be paid off in four and a half years and should net another $3000 a month when that happens. Of course, we’re going to have bad months and rental vacancies, but having multiple properties gives us some cushion if one or two are empty at any given time. Right now, we are enjoying having them all full!
How Do You Pay For Rental Property?
For those strongly opposed to any sort of debt, our rental strategy wouldn’t be ideal. Including the house we live in, there are four mortgage loans attached to our names at this moment in time. We also used a home equity line of credit to do the renovations on the new property. We don’t plan to ever go into credit card debt or use a loan for any sort of depreciating asset, but in this case, low interest debt is being used to buy income producing property that builds wealth for our future. It might not be everyone’s cup of tea, but it works for us.
To be able to buy rental property, there are some steps that I believe all potential landlords should follow.
- Get out of consumer debt
- Save up enough money for a down payment plus extra to cover emergencies.
- Look for property that is undervalued or has been on the market for a long time.
- Find a good network of people to help including real estate agents, contractors, and loan officers.
- Be able to ride the ups and downs. Most investments involve an element of risk.
I’ve seen potential landlords fail because they either stretched
themselves too thin and had to use credit or withdraw retirement money to pay the bills. I also believe you should plan to be in it for the long haul. While it’s not terribly hard to find a cash flowing property, it does take a while to make back your down payment and closing costs, plus you can lose your hat in taxes if you buy and sell too quickly. Our plan is to keep these properties indefinitely and let them fund our monthly expenses when we’re done working. Having rental property certainly doesn’t guarantee early retirement, but I think it puts us that much closer.