Everywhere I go, I read about how real estate is the fastest path to wealth. Drawn in by this promise of easy money, I’ve read a lot about this subject. I read books, listened to podcasts and audiobooks, analyzed properties, worked with local real estate and banks to get pre-qualified — but in the end, I decided I didn’t want to be a landlord. Here’s a recap of what I learned, and why I decided not to pursue this “obvious” source of wealth.
My Landlord Experience
As mentioned in my My Reaction to the 2008 Recession post, my mom passed away back in 2005. At which time, I inherited her house — a huge 3/2 house with a 2/1 apartment out back. Throughout my childhood, she had rented out this apartment, and this rental income was one of the ways we stayed alive. In the ~20 years of renting it out, some of the tenants were extremely sketchy. I remember one mother/son pair that was evicted in the 90s due to not paying. When teenage Adam was cleaning out their apartment I found loads of razor blades and mirror – an obvious sign of drug abuse.
When she passed, I inherited my own tenant who had lived there for the past year. I already knew this tenant was often late on payments, and I wasn’t looking forward to dealing with them. They immediately completely stopped paying rent, leaving me on the hook for my apartment in Orlando, and my moms mortgage without the added help of the apartment. What was worse, is that I never was able to find the lease agreement, a legal document proving they had to pay to live there.
Evicting Two Tenants
After 3 or 4 months of not paying, I threatened them with eviction. In retrospect, I should have done that from the first missed payment. They cleared out all on their own after this threat, but a friend of theirs decided to move in without my approval or a lease agreement.
What followed was me trying to salvage a bad situation and collect rent from this new “tenant”. I was naive and didn’t know how badly I was being taken advantage of. Eventually, I called the police and asked for advice on the situation. They made it clear that these were squatters, and I could call the police and have them removed at any time — without needing to go through the eviction process.
I let them know this and gave them a date to move out by. At this time there was a couple living there, and another guy in his 20s. They even decided to have a bonfire in my backyard which ended up going 20ft high and burning the roof. Luckily before they could do any more damage I came by one weekend after the move out date and changed the locks. The next weekend I went back and cleared everything that was still there out and left it on the curb.
What I Learned
Boy was I naive about being a landlord. I had never heard the term “lease agreement” or “property manager”. I didn’t even think about verifying income to make sure the new tenants had the ability to pay, or the credit score to prove they were financially stable. Even more, I didn’t have other people or places to go that I knew could give great advice on this. At the time, this wasn’t even the biggest issue in my life – since I was still resolving my mom’s estate, which meant that I hadn’t yet been able to withdraw a cent from it.
What I would do differently now is ask for help! Find people in my life and just ask. Also finding a property manager and just asking them to solve this. Honestly, at the time any price they would have charged would have been well worth the lower stress.
I also learned how important it is to have legal footing to strong arm in these situations. If you don’t know what’s legal anything you say is going to be an empty threat.
My Homeownership Experience
I purchased my home in August 2007 (yeah, I know), for $293,000 with 20% down. We have since lived very happily in it. For the most part, I like having a home. Staying here year after year has been relaxing for the most part, aside from the occasional pipe bursting or roof leaking. The biggest drawback to me is the lack of ability to plan for expenses. Having a mortgage, insurance, and taxes is one thing, but there are soooo many other expenses that come up. A common statistic I see is to assume at least 1% of the house value will be spent in maintenance each year — which seems very close to our experience.
The time commitment of being a homeowner exceeded my expectations as well. Cleaning a large house (1,700 sq ft in my case), yard work and general maintenance are no joke. Mrs. Minafi and I have already started thinking about renting for our next location.
Update! In December of 2017, we sold the house and moved to Salt Lake City. A few months before we moved out, we were hit by the biggest hurricane Orlando had seen in a decade. That ended up swamping our bedroom in water and breaking a pipe in the yard.
It took us a few months to fix everything up, repaint a few rooms and relandscape the front yard. The price tag for these renovations and fixes was somewhere around $4,000 – a decent payout but it could have been much much worse.
We put the house up on the market in November 2017, just a month before we were set to move out of Orlando. In the first week, we received multiple offers and eventually sold it to a nice couple who work at the parks for $225,000. Since we paid $293,000 for it, we ended up losing $68,000 over 10 years (!). We put $60,000 down on the house when we bought it, so the sale price was pretty much the amount the initial mortgage was for.
What I didn’t know when I bought this house was that money is made you buy a house not when you sell a house. That is, if you buy for too much, nothing else matters – you’re going to lose money.
Revisiting the Landlording Idea
After about 2011 when things in my life started calming down and being a lot more stable, I started to think more about the idea of investing in real estate. Maybe I could take what I’d learned and put it to good use? I devoured days of the Bigger Pockets Podcast, read books about being a First Time Landlord or on Landlording in general. I started frequenting real estate message boards, started practicing breaking down investment properties (example 1, example 2, example 3). I daydreamed about owning 10 properties and what kind of cash flow that would bring. But when it was time to make the decision to purchase or not, I made a hard decision and said no.
Love the Research, Hate the Problems
What I learned from this entire experience was that I loved the research phase of landlording, but when I thought about a future where I was an actual landlord I was filled with nothing but dread. Even with a property manager taking care of the heavy lifting, being a landlord isn’t something I’d want to occupy my time. Being a homeowner has proven this – where basic problems in the house have gone unfixed for long periods of time – something that wouldn’t be possible as a landlord.
I thought about what my life would be like as a landlord. Spending time fixing other peoples home problems, and constantly worrying about things that could go wrong was not worth the benefit for me. I did the calculations and the tradeoff of cash for that additional worry wasn’t worth it for me.
What it all came down to was the question: How do you value your time? I couldn’t see a path forward with being a landlord and having it pay off with the amount of time needed that could be spent programming, learning something else, or spending time with my family and friends. The difference for others is being able to find a way to enjoy real estate and landlording – something I wasn’t able to do. I started to wonder – can a minimalist be a landlord? I see no reason why not, but only if it’s something you love that brings value and joy into your life. For me, it wasn’t.
I’m not ruling this out down the line though! I could see a situation making sense where buying a duplex/triplex and living in one unit while renting out the other one making a lot of financial sense, while not multiplying the work needed in the same way owning a standalone property would.
What about you? Do you invest in real estate? Why or why not? Would you want to be a landlord?