The latest round of texts from my tenant at Rental A, a single mother of three, prompted this post. The hidden benefits of being a landlord are many.
I frankly didn’t expect I’d become a more patient and compassionate person by becoming a landlord. But when you get a letter from the natural gas utility of impending disconnection of service, you get to flex a bit of your empathy muscles. I hope she pays that damn bill, or I’ll go ballistic.
When I started out renting single family homes, a little over five years ago, I had no idea how it would go. All I had was a spreadsheet that seemed to show a promising return on investment, and a good friend and established landlord to mentor me.
The beginning was rough. I had to put a lot of work into spiffing the place up. Especially after the previous owners left the place coated in a virtual sheet of grime.
Let me tell you, it’s hard to find interested tenants during January in Minnesota, when the house is completely empty of furniture, and the new landlord is dicking-around with light fixtures and patching holes in the wall. I think a few college students even passed.
But eventually you sign-on a tenant. And even though I ate a month of vacancy in the beginning, that fine little house has produced consistent, not-stop monthly rent checks ever since.
Yes, owning rental real estate is a good thing. Especially when you come into it prepared, willing to learn, and with a clear vision. I knew I would have to pick up a few skills to avoid costly handyman and repairman bills.
I knew I’d have to apply some marketing elbow grease. But most importantly, I knew I would have to find houses I, myself would be willing to live in.
The Hidden Benefits of Being a Landlord
For starters, you have no choice but to become more patient and compassionate. As we touched on, you get to meet and interact with all sorts of people from different walks of life. My current tenant at Rental A is a wonderful person, and boy, does she have her hands full. Three girls, one of whom was an infant when she moved in.
If the rent checks keep rolling in, sure, it’s pretty easy to stay level-headed, even with the most “needy” of tenants. And I’ve had my share of head-scratchers with Rental A to put this notion to the test. For instance, there was the time she had her ex punch a hole in the drywall. A hole large enough to extract a small child, who’d managed to lock herself into the bathroom.
Another time I had to replace the dryer because a pair of skimpy undies got trapped in the drum somehow. Talk about getting your panties in a bunch. That was an interesting discovery…
The point is, part of becoming a successful business owner is treating customers with respect, and walking a minute in their shoes. You’ll find that as a landlord, even the most challenging tenants will often (though not always) meet you half-way.
You learn how a house works, and you pick up new DIY skills
This comes in quite handy for maintaining your own home. You get to be really efficient at cleaning out gutters with five houses to deal with each fall and spring. Another sweet benefit of being a landlord I’ll tuck in here: You get to use the tools you purchase for rental work (tax-deductible no less) on your own house.
I honed my tiling skills putting up a back-splash. Kitchen faucet and plumbing replacement? I’ve spent enough frustrating hours to become a master of that craft as well. Thank God for Advil too – cuz lying on your back and trying to maneuver in that tiny space under the sink is a royal PAIN.
I’ve ripped out carpet and laid down new laminate flooring. That skill sure came in handy with the Airbnb flooring project this past fall. Mending fences, as in, for real fences? Been there, done that.
The key thing I’ve learned (and applied) to our own home is hydrology, i.e., drainage. Almost every single rental at time of purchase had a wet basement. Not standing water mind you, but the nuisance of random puddles or mildew growing on cinder block walls. You can imagine, in a small house especially, how that odor can overtake a dwelling.
The solution? 99% of the time, it’s as easy as extending the downspouts to route rain water at least 6 to 10 feet from the foundation. Some of our newly acquired rentals had the cheap plastic coil stuff emptying right into a flower bed, right at the base of the foundation. D’oh!
You learn how the tax code works
Ahh, the many tax benefits of rental real estate! The biggest surprise for me was learning all about how depreciation on your rentals can put a serious dent in your tax bill every year. And as an early retiree in progress, I’ve opted to accelerate depreciation on two of our rentals. Why? Well, to offset our tax burden during these higher income earning years, of course!
Later on, when the depreciation schedule runs out, we’ll be in early retirement mode with much lower incomes. At that point, depreciation won’t help as much come tax time. Call my accountant. He’ll explain it. 🙂
(Or better yet, I’ll send you to Bigger Pockets, were you can get the full scoop on depreciation. Long story short, depreciation is like a tax free loan. You will have to pay 25% of the total accumulated depreciation back to the IRS as a “recapture tax” if and when you sell.)
As I mentioned already, you can claim just about any legit business expense as a tax write-off on your return. This is very helpful when you need to buy a new appliance, or replace a furnace. It lessens the sting when a write-off sheds 33% off the sticker price. Owning a business does have its benefits.
Other “hidden benefits”? Your mileage, home office, and cell service are legit write-offs as well. At least the portions of those services used for the business. There are entire topics dedicated to the tax code aspects of rentals. I’m just scratching the surface here. It is all good, by and large.
You build a Rolodex of trusted contractors
These are the guys who become effectively part of your “team.” You figure out quick who’s good and who’s scamming you. It helps to have an Angie’s List subscription (also a write-off) but even more so, a friend in the business with an established network of electricians, plumbers, tree trimmers, handymen, exterminators, garage door servicemen, roofers, etc. etc. etc.
You get to know these guys well when you have multiple properties to manage. If you’re a repeat customer, they tend to prioritize you a bit higher, so you’re not left flapping in the breeze when shit needs to get done.
This isn’t to say it’s been all roses for yours truly. I had a plumber a while back who was a complete asshole. The asshole part I could live with, but when he tried to convince me I needed to replace all the drainage pipes at rental A, I knew he had to go. I’d rather pay Roto-Rooter $100 every four or five years to snake the galvanized lines, until those pipes started to fail.
Dropping $2,000 prematurely was not going to happen. The funny part was how “asshole” chose to up and leave the drain clearing job without a word, after I turned down the replacement option over the phone. My tenant was there to witness his profanity-laced discontent with my decision. Good times.
So yeah, when you make friends with decent contractors, it’s like gold. You can learn from them too – if you’re willing and able to take the time to watch them do their work. I highly recommend it, so you can become a little more self-sufficient and save $$$.
You gain confidence as a business owner
This was perhaps the most hidden, yet most effective aspect of being a landlord for me. I know for certain that by simply taking on a rental business, I’ve been that much more confident and assertive at my day job. Why? I think you start to internalize being a true business person.
Another aspect? Consider this: You’ve taken on tenants, and that’s a pretty big responsibility. You have customers living under your roof. Are they in a safe living environment? Are their needs being met? It’s not unlike becoming a (responsible) parent, or caregiver. You bring that newfound discipline with you to the office.
Since I’ve taken on rental properties over five years ago, my work performance has improved in parallel. It’s sort of a paradox. Your first impression might be that this major side hustle is a huge distraction from work. But likely, it’s as simple as having no other choice than to get your shit together, and learn to juggle and prioritize like a maestro.
At any rate, you’re the boss of your rental empire, and you definitely bring some of that swagger to the office. You quickly learn how to plan, prioritize, and juggle many tasks. Especially as your portfolio grows.
That’s all, folks!
Oh, one last one: You position yourself for different, but related opportunities, such as Airbnb vacation rentals. Of course, we’ll have to see how that experiment shakes out, before I pimp it as a hidden benefit we can lean on. Stay tuned – and follow the right nav-bar for near real-time updates.
Do you have any hidden benefits of being a landlord that you’d like to share? Let us know in the comments!