Tale of Two Rentals

First Rental: Backstory

(Two weeks ago)  I’m sitting on the floor of our old house.  I’m surrounded by four trash bags, a blender, and a pizza pan.

If I stood up, I’d be surrounded by a lot of kitchen stuff piled on the counters, but I just ate a bunch of Mexican food so I won’t be standing up for a few more minutes.  I stare at the tile floors beneath me and remember the day our parents helped us lay this floor five years ago.  I also never thought this house would become our first rental house.  I never thought we would have a rental house at all.

(Today)  I’ve heard a lot of scary things about being a landlord.  1.  Renters will tear up your house.  2.  Renters won’t pay their rent.  3.  Renters will become zombies and try to eat the neighbors.

Basically, anyone I’ve ever talked to about rental properties has told me, “it’s a terrible idea.”  Even though most of these people have never owned a rental property, I appreciate what they mean–“it’s risky!”  And, I AGREE!  I’m terrified.  I’m terrified of failing.  Also, I’m terrified of snakes, spiders, plane crashes, and I really dislike Jello.  But, I still get on planes, and I still go to the grocery store.  Why? It’s good for me to travel, it’s good for me to buy groceries, and I think it will be good for us to have a second source of income.

First Rental: Practical Info

We are managing this rental ourselves with the help of a lawyer and this book from Bigger Pockets.  If you want to know anything about how to set up a rental property, I HIGHLY recommend this book.  It walks you step by step through the rental process.  Here’s what we did (there’s way more detail in the book if you’re interested):

  1.  I read the rental property book and did exactly what it said.
  2. I advertised the house.  I didn’t have to do much advertising because we got 20 calls after we put a sign in the yard.
  3. We took applications, ran background checks, and chose a renter.

Rent.

$700 a month

Expenses.  Luckily, we don’t have a mortgage on our first rental because we paid it off a couple years ago.  Unfortunately, we still have to pay for a few things.

  1.  Insurance: $600 a year
  2. Taxes: $600 a year
  3. Lawyer fees: $350 so far…
  4. Repairs: ???
  5. Vacancies: ???

So far, this rental has been smooth sailing.  Our tenant moved in on the 1st, and we haven’t heard a peep.

Second Rental: Backstory

Our second rental is the house we flipped last year.  Unfortunately, we couldn’t get it to sell for what we wanted, so we decided to rent it.  Instead of us managing this one, we are using a property manager.  All property managers work differently, but typically they find tenants and take care of rental properties for a small percentage of the rent.  For this property, our manager gets paid half of the first months rent and 10% of every month after that.
Rent:
$795 a month.
Expenses.  Unfortunately, we do have a loan on this property.
1.  Insurance: $600 a year
2.  Taxes $600 a year
3.  Loan payment $1,200 a year (interest only loan payment)
4.  Property Management:  $1,360
5.  Repairs: At least $500
6.  Vacancies: ???
So far, this one has NOT been smooth sailing.  On the day our tenants were supposed to move in the air condition stopped working.  Next, we had a plumbing issue.  We haven’t got the final bills, but it’s looking like we’re not going to make money on this house for a while.  Awesome.

What now?

Well, nothing fun.  I would love to say that we are using the rental income to plan a vacation to Aruba.  Or Jamaica.  But, it’s way more dull than that.  We’re going to use the money for the foreseeable future (and if the air conditioners keep going out, we will never make it to the Caribbean) to pay off the loan on the second rental house.  As you can see, the loan we have only requires an interest only payment.  So, if we aren’t proactive in paying it off, it’s going to hang around forever.
Through this process, I’ve learned one thing.  Building a business takes FOREVER!  I thought I was supposed to be rolling in the greenery by now!  But, I guess it’s going to take a little (lot) more time.
On a completely different note.  Our baby turned one last month!  Currently, she is thinking about walking, she loves her blanket, and she is babbling in full paragraphs.  She recently had watermelon for the first time, and that is the only food she wants to eat.  So, she’s basically a real-life humming bird.
 1st Birthday1 copy (1)
We are totally in love.  She is the reason we’ve worked so hard to get these houses up and going.  Hopefully some day she won’t scream bloody murder as we work on them.  :/
Anything going on with you lately?  Ever thought about getting a rental property?