It became clear that it was going to be a lot of work. Are you the kind of person who wants to spend your weekends selecting and installing light fixtures? How about screening tenants? Yes, you can outsource those things, but then it is expensive and eats into your margins.
SIS
This is very accurate in my experience. I
knew it would be a lot of work going in...as I spoke to my dad and other friends who did it...and I did not underplay what they told me.
IMO the heavy part of the work is in the initial business formation phase. I opened an LLC, and the number of hours was
enormous. Filing for an LLC was $400 and hours reading about the various legal structure options. Then I had to write Articles of Incorporation and file them with the state. I wrote a mission statement for the company, and bylaws. I had to create a filing system at home...the business doubled my paperwork. I got business cards, which I spent hours designing. I studied my options on phone lines (ended up getting "distinctive ring"). I opened a mailbox (not a PO box, they have disadvantages) at a UPS center. I opened a business banking account, filed for an EIN number with the IRS, ordered checks for the business, and obtained business credit cards. Every one of these things took a few hours of research to make the right choice. I attended landlord association meetings, read a few books, paid for lunches with friends who had rentals. I studied property tax statements to learn how to read them, spent time at the local assessors office to understand how property taxes were affected by landlording. The list goes on and on.
Many people don't do it formally as I have...but I was educated as an Engineer...what do you expect.
I set up the LLC 5 years ago...but there was zero activity until about 18 months ago. We now have two houses. My eventual goal is somewhere between 4 and 6 single family residences. At that time, I'll rehire...leaving my FT MegaCorp job, and do the rental thing hopefully about 20 hours/week. If it's more than 20, I'll sell a property to get to 20. The money is less important than the time at that point.
I should also point out that for me, the other heavy work load is rehabbing. My buying strategy is to get places where the work requiring experts is minimal (good foundations, good roof, good plumbing, etc.), but where they need a ton of TLC that I can do myself. I like to see floors that need tiled, cabinets that need sanded/refinished, trim work that needs replaced, drywall holes, rusty HVAC vents I can sand and repaint, doors that stick, where I can remove them, sand the edge, and restain, simple wiring such as adding an outlet or replacing a light fixture, adding closet shelving, etc. That's the fun stuff, and I can do it all.
When I buy one, I take 5 sets of work clothes over there. After my 8-5 job, I get in my car and drive to the rental, picking up a sandwich on the way. I change into work clothes, and work until 10-11 pm...every day. On weekends I'll do 10-12 hour days. I hire help from local teens for busy work. The first property took me 9 weeks to rehab this way. The second property was more involved...took me 13 weeks. But when my tenants move out, the work should be significantly less...as much of what I did is now hidden and cannot be easily damaged. I've not had a tenant move out yet...and I know there can be horror stories. However, I'm thinking a few cabinet repairs, some drywall holes to fix, a broken faucet or light fixture, some caulking, and a full paint job.
The "big" jobs are done, on both houses. Fully updated electrical, fully updated plumbing, ceramic tile and hardwood floors in most areas, inexpensive wood trim I can make myself in my woodshop, new roofs, solid foundations, cabinets and doors that are "tight" and solid, and furnaces both less than 4 years old. New subfloor in both bathrooms, no rotted floor joists, etc.
Yes, over time, even furnaces and roofs will need replaced. I am saving for those things now. It helps that I paid cash for the first house, as all the rent from year 1 allowed me to pay for rehabbing on unit #2. We are paying the loan on unit #2 off in 5 years or less....we can do this because of both my MegaCorp job as well as the fact that DW works FT and makes a good living.
I'm sure surprises will come up, and I'll have some setbacks. Nothing different than life in general...plan the best you can, and deal with the problems as they arise. So far, so good.
