The ins and outs of owning rentals

On Instagram I recently did a few Before & After photos of one of our rentals then put the question out there about doing a post on the adventure of being landlords. (You can see the photos and answers to the questions here, in my profile under Rental Property in the Highlights)

Mostly people are interested in the nuts and bolts, the numbers, of it. It’s hard to say everything in stories so here’s a bit more.

First! Hi šŸ™‚ I am not a financial advisor. I am not a licensed real estate agent. I am not your guru. There is no quick fix, get rich quick solution. There’s hard work and a lot of it. What I might be saying here is likely the culmination of years of saving and planning. We have made major mistakes in the Real Estate world and we’ve also used Real Estate to get out of tough situations. We own one single family rental and a duplex, all three units are occupied with 12 mo+ leases as of now.

You can interchange “Real Estate” with any form of savings or investing you do … and you should. Real Estate is not the answer for everyone, and essentially it’s just a different way to plan for the future, make passive income or save your money.

A few years ago I did a post on Budgeting and this past winter we did a No-Spend month (NO-vember) in which I talk a bit about money, budgets and finances. We screamed our DEBT FREE scream on Dave Ramsey’s radio show in 2012 and before that were die-hard Financial Peace University evangelists.

Since the budgeting post in 2016 we have paid off our mortgage, Aaron sold one of his businesses, we bought and sold another home (We were going to renovate and live there but the numbers dictated that instead we fix it up and sell. We lost money on that deal) and started buying rental properties.

SO.

How? How does one buy a rental property?

Why? Why real estate?

And, inevitably, what do you do when …

I mentioned this is my Stories, but none of the properties we’ve bought for rentals have been listed with the MLS, yet. Years ago we started telling our neighbors that if they were ever interested in selling their homes, we would be interested in buying them. A handful of our neighbors have come to us since then (five, actually) and out of those five – we’ve purchased one.

We are always looking, as well, but good deals happen between handshakes and off-market properties. Patience is the biggest asset to buying rentals. And having your ducks in order for the transactional side of things helps as well.

If you need to borrow money to purchase a home you should start the process with a bank now. Even if you don’t find something for months, maybe even years. Having the relationship with a bank will be your secret weapon to making deals happen and knowing what you can afford; what the bank is wiling to loan you – and where the rates are – are all very important factors when figuring out if a property will cash-flow.

Ways to afford the down payment:

You have the cash on hand, easy.

You have equity in your primary residence, get access to it. (HELOC or Home Equity Line Of Credit)

You have investors who trust you. We’ve never had investors or worked with other property managers (yet, who knows what we’ll do in the future) so I can’t speak to this, but I know of plenty of people who use investment from outside sources to build their portfolio. Speak to someone you know or trust who works like this, people who are already doing what you want to be doing are the best source of knowledge. Ask.

And then, you wait. We work with a Realtor we love and trust. I did, at one time, have my real estate license, and even knowing what I did (or do) … I still always want to work with a Realtor. Until recently – all real estate transactions have been super emotional for me. I get attached. Which is the worst thing you can do when it comes to rentals. You’re not buying into a home or story – you’re buying into your future. Having a Realtor between me and the transaction is the best safeguard I’ve ever implemented. It’s a ton of work, and some people can do all of that and are comfortable with the legal task of buying properties from owners or without representation. To you, I say, well done. That’s amazing. I’m just not interested in the added stress or detail work.

Why? Why real estate?

If we haven’t met or maybe this is the first time you’re reading anything I’ve written you will likely not know how obsessed I am with real estate. Homes, really. But commercial buildings? Vacant land? Multi-family units? I’ll take any of it. All of it. Every damn day. I. Love. Real estate. Period.

I am comfortable with real estate, our area, and the market. I know it well, I’ve been in it for almost 20 years. I understand location and value and fixer uppers.

I know nothing about the stock market. However, I know a thing or two about real estate. So … this is why. This is where I’m comfortable with risk.

And, inevitably, what do you do when …

… you buy a property that needs work?

Hopefully we’re already aware of what we’re getting into before we sign anything. When we do a walk-through we make mental notes about the big three: structure and systems (roof, furnace, settling), cosmetics (paint & flooring), and the plumb-houses (kitchens and bathrooms). Prices are always changing, but we feel comfortable enough with those items and have done enough renovations and projects to outline a small understanding of what might be needed. We just add that number to the down payment cost so we know what our investment will look like.

… you’re trying to get tenants?

Our first rental was vacant for a couple months while we did the work needed to meet the codes of our city, get inspections and obtain the rental certificate before we could advertise it was for rent. We bought the home as a 2 bedroom and, because of code, were only able to offer it for rent as a one bedroom, with a max of 2 person occupancy. This was a big disappointment. But, we changed our strategy for advertising and had to answer a TON of inquiries that always ended in “I’m looking for a place for me and my kids or me and 2 brothers, etc etc thanks anyway.”

We put a sign in the yard with one of our phone numbers on it that says “For Rent”, we put an ad on craigslist as well as Facebook Marketplace and we use cozy.co as our property management software – so when we input things on that end, it pulls the information to larger sites like houses.com or rentals.com and even zillow.

You answer a ton of questions. Just keep track of who you’re talking to, who makes appointments (and you need to remind them), who shows up, who applies, etc etc. It’s definitely a full-time job for a few weeks to get it occupied.

Know your answers – and if you’re unsure – be honest. The best thing you can do is say “I’ll have to check into that, when can I get back to you with an answer?”

Are you willing to work with Section 8? What are your benchmarks for applicants? (minimum credit score, income to debt ratio, background check, job history, references)

Phew. We made it! There’s still so much we’re learning about this. I will link to some helpful resources we’ve been using at the end of this post, but my biggest piece of advice would be to talk to someone (buy them a drink or ask them over for dinner) who is already doing what you want to be doing. Conversation within relationship is invaluable to learning new things, getting help or advice, and moving towards what you want.

In general, I’m not a fan of the way Real Estate Investors talk. Not everything is AWESOME, MAN! and not everyone is SUPER BLESSED TO BE ALIVE! Those are amazing attitudes, but they’re working too hard for me to believe them. If you get excited solely based on the millions you’re being promised, look elsewhere. This ship is not setting sail with a destination of Reality. You’re going for a wild ride, high on emotional value. Do you want to be a millionaire? Cool. That can be a goal you have and there’s nothing wrong with that. But WHY? Why do you need a million dollars? Or any amount?

Our reason for owning rental properties has everything to do with wanting to retire someday and knowing that, as entrepreneurs, we will need to either save a large amount of money or create passive income for our future. I’m not interested in owning 45 rentals. I think maybe 5-8 will be more than enough. But we’ll see what happens in the future, like I said, we’re new to this venture and still (always) learning.

Resources, books, podcasts:

Rich Dad, Poor Dad

Cashflow Quadrant

The Book on Managing Rental Properties

Bigger Pockets Podcast

Article: MY SEVEN STEP PROCESS FOR BUYING A RENTAL PROPERTY

Use your resources – the people you know already doing the things you want to be doing.

Ask your city officials a lot of questions about the rules for rentals. They have so much information to share and to offer. Listen.

And last but not least, you guys, use google. But, for real. Google leases, move in check lists, ROI calculators, how to rent a house, how to buy a house, how to change a light fixture, DIY backsplash and more.

Welcome to my home

Kitchen After

I’ve shown you around a bit over the years. We bought our house in 2012 (April 21, actually: HBD house!) and this past fall we completed our last over haul of a space inside. First we finished our basement and added a functional bathroom down there. Next we lived in the basement while the main floor was brought to the studs and rebuilt (save for the kitchen), lastly … we finished the kitchen and added a mudroom (which was originally a 3 season porch).

This is what I saw the first time I walked into our house when it was listed:
first showing

I loved it. There was counter space and for the age of the home – there was a lot of space. Sure there was carpet in what was supposed to be the dining room, and paneling every where. We had cedar shingles in. our. kitchen. And a hole in the roof that was once a skylight. And carpet on the walls, and no shower upstairs and, later we discovered that our master bedroom was the previous owners laundry room at one point … it had it’s quirks.

This is that same view from above.
Kitchen After
Kitchen After

It still has it’s quirks. We have plywood floors and an exposed beam in the middle of our house.

Kitchen After

Anyway – here’s some of the before and after shots of our main floor. Specifically our kitchen/living/dining area.

BEFORE: Entrance off the 3 season porch, built-in hutch, breakfast nook, this is what was supposed to be a dining room (we think) under the light fixture.

progress shots of house May 2012

AFTER: Entrance off the (now) mudroom, behind those hanging doors (painted with chalk paint) is our pantry and hidden toaster oven, our island with storage. We removed a large wall in the middle of this big room where our tiny little fridge was built in, otherwise it was closet space … makes the whole space feel more open.

Kitchen After

BEFORE: Looking in FROM the entrance off the 3 season porch into the living room. A fireplace, skylight, lots of paneling and carpet and a wall dividing spaces.

progress shots of house May 2012

AFTER: Looking in FROM the entrance off the (now) mudroom into the living room. We replaced the fireplace with french doors leading out to a new deck off the house. Wall is gone, more open concept space. No more hole in the ceiling!

Kitchen After

BEFORE: Looking into the kitchen you can see the breakfast nook, our fridge built into the wall and a hallway with lots of openings – looking towards our front door and the front room.

progress shots of house May 2012

AFTER: Looking into the kitchen, wall is gone and fridge is now next to the stove (we swapped the stove and dishwasher when we remodeled), no more little corridors as a hallway. We reconfigured the bathroom in size and a bit in location to make room for a closet in our master bedroom. We also exposed the chimney and made a doorway off of the “front room” (now office) to our bedroom. By doing this we eliminated wasted square footage that was just a labyrinth of walls and doors and passage ways.

Kitchen After

BEFORE: Looking into what WAS a second bedroom on the main floor in the original blueprints of the house (previous owners did an addition on the home and eliminated this bedroom as a part of that … it’s now part of our bathroom and part of our dining area) you see built-ins! So many, you guys. More doors and little hallways, and that wall we removed. Also, all the carpet.

progress shots of house May 2012

AFTER: Our dining area with a wine cabinet built-in with some shelves, no more wall! And less little doorways and hallways.

Kitchen After

Small pivot, same room:
Kitchen After

Different angle:
Kitchen After

And looking opposite into the space: You can see the french doors here.
Kitchen After

BEFORE: Looking into the wall that we removed.

Main floor living room

AFTER: Looking into the rest of the house once the wall was removed.

Kitchen After

BEFORE: Here’s a fun shot of after we painted the original cabinets and took the cedar shingles off the bulkhead. Baby-steps towards our finale. Looking from all those little doorway/hallways into the kitchen/would-be dining space and breakfast nook. Built-ins and all the carpet.

Kitchen

AFTER: Looking into the kitchen, hidden pantry behind chalkboard barn doors, and the island.

Kitchen After

This side of the island is exposed for cookbook and glassware/platter storage. I store props for photography here now but they double as usable items in my kitchen. This entire island is a constant work in progress as a storage solution.
Kitchen After

I think we covered all the major views of the kitchen, here’s a few detail shots and different angles of the space. We love it, I mean it’s a house and a kitchen but we live life around the table in community with each other and others so this space is our most used. It feels good to come home, just like it felt good to have one four years ago. I’m constantly thankful for the way this turned out. For the patience it took, for the planning and waiting.

Kitchen After
Kitchen After
Kitchen After
Kitchen After
Kitchen After
Kitchen After
Kitchen After
Kitchen After
Kitchen After

A place to call my own, a place called home.

It’s been more than three years now that we’ve lived in our house, almost completely transformed from the house we bought. I saw through all the rotted wood, chipping paint, and overgrown landscaping and I could imagine serenity. I could see twinkly lights and flowers and I envisioned a sense of welcome, of light, I wanted to feel embraced by this place.

I was smitten with this little pigeon loft in the backyard daydreaming of owning chickens and watching more babies learn to walk while we made a life, wild in love and careful in purpose.

BeforeAfterTinyHouse

Before and After, on the left is the pigeon loft as it sat on the property when we bought the home. On the right is the aftermath of our dreaming, scheming, sweating, painting, planting and going for it.

TinyHouse

TinyHouse

TinyHouse

TinyHouse

TinyHouse

TinyHouse

TinyHouse

TinyHouse

TinyHouse

TinyHouse

This is what I do. I create spaces for souls to unwind. I haven’t always known how to say that out-loud. That *this* is what I do. I tell stories and I love houses and when those two things collide? It’s the storytelling of the life we live, where we live it. And I’m honored to share this with you, to do this for you.

xox
Jodi

Let’s go! Another house …

Hey guys,

I wasn’t going to let you in on this until it was a sure thing. Which would happen when we potentially close on this little house in a few weeks. But I was listening to something this morning and it just dawned on me that maybe I need to let you in right now, while things are still huge question marks and we don’t have any answers. I can’t be sure what was more motivating to keep this a secret – the fact that we’re doing this and we’re scared and excited or that this ties very closely to this ember of a dream I’ve let out and saying this out-loud is fanning it to a flame and, that, honestly, scares me more.

Any way we slice it, it looks and feels like fear.

house

This little house is ours if we follow through with the purchase. Our bid was accepted, we’re ready to go. The entire process to get this house has been an easy, door opening, experience – and yet leaves us constantly gut-checking and learning how to trust the process, the bigger picture, and each other more and more with each small hurdle.

You see, we were interested in a different house, ready to pull the trigger and DO THIS THING when I called to arrange a showing and was told that the house we were interested in was under contract. I was already sitting in the driveway, sure of the opportunity. A little crushed but not defeated, this part of the process has happened so often in the last year it’s second nature at this point. I’ve learned not to get my hopes up, not to get attached, or become overly emotional or sold on a house until we know that we know that we know that we know and the bank says yes.

house

I started driving around some side streets and saw this house. I couldn’t find information on Trulia (the app I keep handy on my phone while out driving and noticing For Sale signs) so I took note of the street and just kept going. Something about this house wouldn’t leave me alone. I pulled over and looked in earnest to find out more about it. A quick call to the agent, then to Terry, and 20 minutes later I was inside.

house

24 hours after I went through this house we submitted a bid, which was rejected, which we resubmitted for $893 more dollars and 24 hours after that … it was accepted.

house

Get excited right? I mean!!! Wow. Yes. All of those things and then crushing fear because now this idea had a heartbeat and here we go. I was able to meet our contractor at the house to assess some of the issues we knew we’d run into – we’ll be gutting the home, but there were some substantial foundation issues as well. His suggestion is that we replace the foundation entirely. Eating up half of our budget for the entire scope of the remodel.

house

Which, understandable. We’re still game but this changes how we go into the purchase. It changes the timeline of the finished product, it changes our math as we figure out how to make a return on this investment. It changes our plans.

house

The idea for this house is two-fold. As mentioned on the About Me page, I have a desire to own additional properties to rent out via airbnb.com for destination type vacationers. This space would serve dual purpose as being our first OZ event space to hold workshops, small events, and mini conferences as well as being a vacation rental.

This space would live and breathe, it would cradle those it held, it would feed those who came and were hungry. It would, hopefully, help put it’s town on the map. It would be something to come back to, it would also be a home for our family to enjoy in addition to our main residence.

Is that asking too much out of 1,000 square feet that looks like broken limbs and tired eyes, but has the soul of a gentle healer?

I 100% humanized this house. It’s a person. They all are, to me. And like our home and the story to finding her … it’s not that we save homes, it’s that they keep saving us.

As we sit today we’re still on the fence. Do we do this? With what seems to be so many unknowns, do we take this on? We can’t have all the answers and being outside of the comfort zone is exactly where we flourish.

So is this step one?

** UPDATE 3/23/15 **

So we got our answer, this isn’t the house for us. We are not going to be purchasing this home, but we know the right one is out there somewhere. Incredibly, we feel really at peace with this decision which is just confirmation that it’s the right one and have learned that this process isn’t always what you think it will be, but that’s ok too. We’re excited to keep looking, we will keep dreaming. Until the next one!

It’s about time!

The last update on the 34th St Project home was almost 2 months ago. You guys are patient. There was a while there where not much was happening – which is how it always goes. Longer than you anticipated (and then add 4 more weeks to that estimate). Definitely a practice in patience but we’re getting there. And the house continues to look more and more like a home, not a construction zone.

bonus room

If you’re new to this story – here’s the beginning. Soon after the dream was released we started demo. From there I kept the progress updated as much as I could. Things happened so fast in the beginning – and from what we planned to what we are actually able to execute – we’ve been trying to keep you up to date on how that organically happens with list updates as well.

Now, it’s been a while since we tackled this in writing so we have a lot to catch up on. The next time I’ll write about this home it’ll be the full monty reveal. It’s getting so close, but if you’re desperate for an update: check instagram and facebook periodically as I tend to give snip-it’s more often on those platforms.

The house already is more progressed from these update photos with paint, trim, and beautiful refinished floors but let’s dive in.

Progress

Above is the 4th bedroom we opened up into the living area on the main floor. We gutted the closet and under the stairs, we exposed the chimney and plugged the doorway from the hall. A couple weeks ago, thick in the drywall stage – this is the same wall below …

34th St Project Update

The main floor bathroom wasn’t in the original plan to touch at all but I plead my case for the floors and a wall treatment with an updated vanity and it’s taking shape … here’s the bathroom before.

34th St home

and after new tile flooring was put in, along with the beginnings of the board and batten wall treatment. The vanity, new light fixtures and mirror are just waiting to be installed.

34th St Project Update

34th St Project Update

34th St Project Update

I handed in a list of colors to the painters – the upstairs is finished (Bonus room and 2 bedrooms plus hallways and stairway.) There’s a main color for most of the first floor to flow easily with the newly opened space, the master bedroom and master bath have a coordinating grey, and the main bath (above) has the board and batten in the trim color (Decorator white) with a coordinating color to the vanity above that and the ceiling will be a tinted white to lift the room because there’s no natural light in that space.

This bathroom, the mudroom and the laundry room are my favorites in the whole house. OK, and the bonus room. Inexpensive and small touches up the drama of the room without spending too much. The bathroom board and batten as well as the bonus room trim detail are all done with trim pieces and paint. The mudroom boot box with the crown molding was much less expensive than having actual lockers built in that space.

34th St Project Update

Forgot to share the detail of the boot box crown molding. We'll hang hooks for the locker look. Coming together :) (had a dream this week that the house was painted pink and I cried and cried and hated it, so glad it was just a dream) #34thstproject

The master bedroom wasn’t connected to the 2nd bathroom (originally the laundry was) but we closed the doorway from the laundry room and made a doorway from the bedroom to the bathroom for a Master Suite.

34th St home

To this: 34th St Project Update

And a peak at the first coat of paint in the master …

Master bedroom has one coat of paint! #34thStProject

It’s happening! The drama of the space with little details and the integrity this home already possessed is all coming together. When the home is completed we’ll be listing it at $159,900.

For that you get a 3 bedroom, 2 bath home in a great neighborhood with updated electrical, all new windows, main floor completely renovated, a brand new kitchen, fresh paint, updated lighting and new fixtures throughout. You get original hardwood floors throughout the entire home freshly refinished. New carpet in the Master Suite and on the stairs, new flooring in the laundry room. A full unfinished basement with room to grow (I see another bathroom and an office or additional bedroom in the basement plus a rec room for the family). You get added storage, an updated mudroom with boot box and hooks. A clean slate for landscaping, new grass, newly paved driveway to street and an amazing lot in the Maplewood area of Holland. Plus a renovated bonus room on the second floor with new electrical run.

The home is on well water, tested and cleared by inspection. Gutters for the home, and new front door šŸ™‚ Because a little jewelry to her dress is just the thing she needs to sparkle.

It’s been a dream come true, a labor of love, a learning experience, and a pleasure to work on this home and take you along for the ride. I can’t wait to show you the finished home full of soul.

You won’t be the first to ask about her, but maybe you’ll be the one to keep her. Give Terry Brinks a call (616-836-1258) or email and as always, you can leave a comment here or email me for more information or to set up a private viewing of the home.

It’ll be like unwrapping the best kind of present when the home finds her new owners and we get to hand the keys over. I hope it’s one of you.