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 🙂 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.

Thoughts from the polar vortex of 2019

There’ve been a number of different themes floating around my head/heart lately. Boundaries, Permanence, Patience. They’ve been poking around like those little sucker fish that hitch a ride on larger species, just kind of there. Waiting, often annoying me or nagging me or sucking me dry of my limited resources while other times I can go entire days without knowing they’re still there.

But, it’s the sixth snow-day in a row for my kids and I found myself silently saying “just wait til next week.” I have honed my ability to lower my expectations over the years to a bit of a science of Jodi. I know what it feels like to build, build, build until the only thing left is to watch something fall or, maybe, how it feels to latch on to something someone said (leading) and start to think in absolutes about a situation, event, or idea only to feel completely gutted and like I got the wind knocked out of me when things don’t go the way I had imagined.

When our last school-week ended with a snow-day and the weather looked ominous, I started preparing for the whole week home. I figured if they went back to school at any time, that would be a bonus, but mostly I was just ready to hunker down, go very slow, and shovel a ton of snow. Guess how this week turned out?

Home every day, all day. I yelled more than I wanted to, there was way more screen time than I thought I would allow, but there were still playdates, I cleaned and organized my entire kitchen, I watched some fun shows, we played games and as it started to feel less like the apocalypse we started venturing out of the house. To the store, the library, to see the water.

Polar Vortex 2019

I stayed off my phone as much as possible, misery loves company and I was trying so hard to not go down there. I’ve had years where snow-days threw everything off and instead of just slowing down and taking it as it came, I fretted over the things I wasn’t able to do or the places I wasn’t able to go. I didn’t know how to recalibrate. I think I’m still learning, but I also didn’t engage in the practice of complaining.

And those little sucker fish; Boundaries, Permanence, and Patience kept pace with me as I slowed down. I wasn’t gracious about it, like I said, I yelled more than I wanted to – but I also apologized more than I used to and took more deep breaths. I don’t want my kids to remember their days home with me as being an inconvenience for me.

I had to cancel plans I had made, I had to reprioritize my days according to my kids’ needs and wants, every night before I went to bed I had to decide if I was going to get up tomorrow and try again, and not disappear, as is also my M.O. There were a few mid-day cocktails. But there was also a lot of laughter. My kids (and I) finally got bored enough to get curious again.

Last night we watched ‘Patch Adams’ as a family and after the credits rolled we googled Hunter Patch Adams and found his blog and a recent post with a video of Patch talking about books.

He’s in the same league as Bob Goff, for me. When people lead with their passions as publicly and unapologetically as they seem to, I can’t help but be a fan. I am a serious fan-girl of seeing other people’s fires lit and glowing white hot. And I think I like to believe that people are mostly good and that we’re all working something out and that laughter is often the boat that outlasts the storm.

And I went ahead and ordered David Abram’s, ‘The Spell of Sensuous’, from the library that Patch recommends in his video. As well as checked out a small army of books for garden planning and landscaping ideas, because along with my little suckers of Boundaries, Permanence, and Patience … I’ve grown wildly in my ability to rest in Hope.

Update on our No-vember. (A month without spending anything extra)

You can catch up on the how and why here but just in case you’re walking into this post wondering where this is coming from …

What exactly is a no-spend month?

To be overly simple, it’s a month with no extra spending. Keeping the lights on and food in our bellies isn’t part of the “No-November” for us. If we have a bill, we pay it. If we need groceries, we pick them up. If there was a pre-planned event, we attend. It’s not saying no to having fun or being social, it’s just taking a month to recalibrate and evaluate where the funds are going by stopping the flow of all the extra’s.

No coffee’s from Starbucks, no lunch dates or dinners out, no last minute “I’m bored” spending on the weekends. Just, not this month.

And it’s officially over! The last 11 days were more difficult than the first 19. We had a school break in there, a holiday, a snow day. A lot of down time, is what I’m getting at, and while we stuck to our no-spend month … it’s true you can’t buy happiness, but you can delay sadness.

I had guessed we’d be “over” in our grocery budget but we ended the month within $100 of our usual burn rate at the grocery store – and without any eating out, this felt like a feat. But clearly a doable one.

We borrowed puzzles, drank a lot of hot chocolate at home, had friends over, hung out with family, went for walks, and the kids played with the chickens, it was all very lovely in hindsight.

We went a little stir crazy (Aaron and I more than the kids) BUT it was honestly eye-opening to do this and I’m so glad we tried it, for a few reasons:

We spent less than half what we normally would.

Which definitely made the month of no spending worth it, in my book. I’m the numbers person in our family, so it is very interesting to me to see what we went without and how that affects the bottom line. We can get comfortable and stop practicing discernment or patience in our spending, especially this time of year.

We appreciated what we already have.

Games, subscriptions, the library, relationships, natural resources. We definitely made the most of what we had, even though there were days we were tired of being creative or trying to think a different way.

This was more of a mindset change, and one we struggled with as a whole family, than anything else. Which is the true nugget of this month, I think.

One evening my daughter led a workshop for our family on how to make ornaments out of paper. We already had the paper and the string, even though she wanted to go get additional items like stickers or prettier paper or glitter, we all had to think outside the box at different times to just use what we had. And now our house is colorful, and it means something to all of us.

I actually made money.

We had a few things lying around that didn’t work for us any more, either furniture we no longer had a use for or nice items the kids grew out of – and I sold them. I also took a temporary job for part of November and booked multiple photoshoots this month. Which is not something I had planned on or even thought of as a bonus to a month without spending.

What wasn’t included.

You get to make up your own rules and no one is keeping score 😉

For our family – this is what we spent money on this month:
My medications and all the B.S. that goes with being diabetic
Groceries (food and drinks, people. We didn’t eat ramen all month)
Our monthly bills (gas, electric, mortgage, investments, water, trash)
Gas for our cars
And we did use a gift certificate for free pizza one evening

We also had already purchased tickets before November for a few events and even a girls getaway weekend for me and we happily attended.

Now, for the nitty-gritty:

We spent $71.15 that technically we weren’t supposed to which included Aaron’s coffee on the weekends (read more about that here), my oopsie lunch at the beginning of the month, and 2 “breaks” on different weekends for coffee out as a family.

All in all, a good reminder of how much we already have & how little we really need, but most of all, what matters most.

And I would totally do it again! Maybe once a year, but not during the summer 😉

Saturday morning

😍

The wild one

And just like that, we’re half way through summer.

A rejuvenating few days in the city: who would have thought I'd take away deep rest? But I did, and clarity, too.

We’ve been back to Windmill Island a number of times, as recent as just yesterday. It is my favorite place in Holland and right now, this week, is the best of the flowers in bloom. It’s wild, in the best way.

Some home improvement projects are underway (as I type our front door is being replaced, hallelujah!) and we are excited to work on the curb appeal of our little secret house. It’s been 5 years and we still get comments like “I had no idea your house looked like this” once people step in. Our street-side appearance is misleading, but in a good way. A simple, don’t think too much about it, way. She looks untouched from the front and when you step inside, she’s all the old wisdom with none of the baggage.

This room is discovering purpose. #inprogress

A little Sunday prep for the week ahead.

My kids have had a blast at sleep away camps and we took an eventful family trip out East over the 4th of July holiday. I had a job in Chicago in June that we stole away, just Aaron and I, to work and explore together.

Home is where ever she is. 💜

"Danger: KEEP OFF ROCKS" 👌 #challengeaccepted #lakeontario #hamlinbeach

A small bit or respite, a little bit of quiet.

We’ve had plenty of lazy days at a friends pool, the beach, day trip adventures and family visiting from out of town.

Lolo's!

I love this summer.

That summer time vibe ☀️⛱

Epic adventures with Oliver today.

Fogging for mosquitos, saving kittens, chasing cousins, karaoke in the rain, passing out extra dessert to neighbors, bonfires, and alllllllllll the laughter. 💙

And, as always, we’ve been busy in the kitchen with little delights.

Just making mini hand pies today. Delicious endeavors.

Michigan blueberries 💙

There’s a feeling to this summer: Settled. We are growing and dreaming and living and we’re safe. We are so excited for what’s next.

Dreams and apple trees.

I’ll leave you with something I posted on Facebook yesterday, it just rings true, and I want you to have it, too.

“I’ve had a moment of simple reminders today, where the fire deep inside is ablaze with unadulterated passion for living the life before me. Not the one prescribed to me by outside sources, or the one presented to me, on a platter, as if this next choice will cement the rest of all the choices. But the one I can’t stop dreaming about. The wild one. The exploration one. The one where I’m not afraid of making mistakes or seeing the world all over again. The one where I decide to try again. And again. And again.

The one where I stop making excuses for why I’m not living it yet and start saying yes instead of “later.” I AM ON FIRE.

We all are.

Can you see my smoke signals? They’re everywhere. This way! Over here!

Let go, Let’s go.”

Remind me of this when I forget, which might be often. Or just every January.

I want you to be ridiculous. I want you to say YES to the weird stuff. You’re not having any fun? Change that. We can absolutely be sojourners on this ride, and we can be missionaries to our neighbors – or we can pack up everything and move across the pond. Let’s do it all. Let’s not wait another day to start living. Your bank account might never be wide enough for the dreams you can dream but may your heart always be strong enough for the weight it will carry.

You can’t afford a trip to Europe? Do you know someone who’s been? Invite them over to tell their stories and ask to see their photographs. Make food you might taste over there and drink the drinks you envision yourself having. Sit outside in a garden. Call the visitors bureau and ask them about the city. If you can’t call: research, here I’ve done some for you … Travel ideas for Italy. Pinterest is a thing: use it.

Streets of Madrid

Go there, do it. Even if you can’t literally go any where. Enlist help from someone who loves hosting, ask them to show you or help you, invite friends (new and old) to enjoy a night on the canals.

You don’t have to own a boat, rent one; it doesn’t even have to have a motor. Or you can ask a friend or family member who owns one. Buy the hat for the captain, sit down, play the music, and watch the landscape pass-by as if you’re in Italy. DO IT. Why not?

Fathers Day 2015

When you feel ridiculous you should always have weird looks and stares from those around you who can’t see the beauty of dreaming just yet. They will soon, keep going. When they ask “why” your answer is always at the ready … “why not?!”

Dreaming isn’t an idea that you never realize. Dreaming is the opposite of fantasy, it’s your reality waiting to happen.

It won’t give you permission and the first step into Ridiculous is chilly. You might feel foolish and childish. You might fain mocking from the crowds but here’s a secret: they all wish they could wade into this water too. So keep going. Start swimming.

Lakeshore, showing them the beach

They will know who I am by your love for each other. (Paraphrased from John 13:35) Love is so many, many things. Mowing someone’s lawn, visiting the sick in your hospitals, making meals for young mothers, lending your hands, giving to causes with time, money or talent. But love isn’t a chore. Love is also being first in line at the roller coaster with your wide-eyed 9 year old for the first coaster ride of their life. It’s the sheer volume of happiness they eek out as you ascend and then rip down the rafters. Love is showing up to the dance recitals and hosting the sleepovers, it’s making the pancakes or warming up leftovers. Love is beneath the sheets, but also in the backyard. It’s touching your loved ones gently and ushering them closer for an embrace. It’s always an offering, never an obligation.

You guys!!!!!!!!!!!!!!!! Love is the high five and the posters on the sidelines when your people run the race they never thought they could finish. It’s the Holiday dinners and traditions for some of us, it’s the stockings and wrapping paper for others. It can be too much and not enough all at once. Love is overwhelming, like standing in a field of wild poppies for the first time and noticing that if you had never taken the wrong turn you would have gone the rest of your life not knowing that this existed. And it would continue to exist, without your permission or need for interference whatsoever. It’s there because the seed was planted and the clouds broke open and sang them into the air, a duet with the sun. It’s there, we just have to see it.

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Love is so contagious. Be ridiculous. And then pass it on.