Ever wondered how it’s possible to be a small-time landlord, in addition to holding a day job?
What is it like to personally manage a handful of real estate rentals and get your fingernails dirty? It’s easier than you might think.
Today, we’ll dive into a little “landlord for dummies” DIY property management to clarify what a landlord is responsible for.
For those not familiar with some past posts on this topic, it’s our rental properties that gave us the juice to enter into FIRE orbit. I like to tell others how passive long-term rentals have been for us.
But “passive” shouldn’t imply that you never have to lift a finger!
Be a Landlord on the Side and Make It Pay
I’ve been a landlord for six years now. Being a landlord means I manage the entire show: from finding new tenants to adjusting leases, fixing busted drains, clearing out gutters, and fighting property tax increases.
If I had to hire out all that stuff, it’d cost us between 8%-12% of the monthly rent. Say you’ve got four rentals, with a base rent of $1,400 per month… Welp, that’s um, lessee here… (tap tap tap) $560 per month gone POOF! Annually, you’d lose almost 7,000 bucks.
Granted, your fine accountant would note that as a business expense, but still. Why trust your property to a third party, when most of this stuff is well within your wheelhouse?
Let’s look at it another way. Most of my leases are two-year deals. That means I might have to find one, possibly two new tenants in a given year, assuming no renewals. The amount of time do I need to relist the property on Craigslist, perform background checks, coordinate viewings, and complete lease signing? 8 hours.
If the house needs some deep cleaning and nick-knack maintenance between tenants? That’s a day of hard work when it happens. Typically I’ve had no problem turning over a house straight from one tenant to the next with a few handshakes and “good luck”. But let’s assume the prior tenants were total slobs and the turnover is an absolute pit: 12 more hours.
How about that “day in the life” stuff we’ll get to next? Each house gets a fall and spring inspection. Those trips, which include light maintenance and gutter cleaning consume about 6 hours in total every six months. So, 12 more hours.
The amount of time does it takes to forward the utility bills to tenants and transfer rent collections from Venmo to the business checking account each month? About 10 minutes, or 2 hours per year.
Adding it all up, the time invested in these four houses, year over year, is about 34 hours (assuming one bad turnover). If you’ve ever wanted to be a sole-proprietor property manager, you’d now have an idea of your hourly wage… 34 hours for $7,000 is what, $206 per hour?
Not too shabby! This is why I self-manage our four rentals and I don’t get hung up on the handful of necessary landlord responsibilities that come with the gig. I enjoy getting my hands dirty from time to time.
A Day In the Life of a Small Time Landlord
This past Saturday was Spring Inspection Saturday. Yes!!! I loaded up my trusty Honda Fit with my toolbox, another case with a caulk gun, hedge clippers, and a power drill. I planned to complete four inspections between 9 AM and 1 PM. Four hours. Easy.
The first stop was a 6-mile, 10-minute drive away. This house is set in a modest, old neighborhood of the city with a lot of neat small businesses. Live here, and you’re within a few blocks of the Metro light rail system. Downtown and the Mall of America are within easy reach – no car required.
Anyhow, I love this particular rental, affectionately called “Rental D”. It’s a one-bedroom classic built in the late 20s. Stucco is as strong as Captain America’s shield. New roof (loving THAT), unfinished but clean and painted basement, new mechanicals, and above all else? Awesome tenants.
I was in and out within 15 minutes. My tenant had already turned on the water to the outside (in Minnesota we shut it off in the fall to avoid frozen pipes). They’d swapped the furnace filter too (so important for a furnace’s longevity). Heck, this is easy! No minor maintenance needs and the house was spic and span. See, it’s tenants like this that make a landlord grin from ear to ear.
Next up? Good old’ Rental C. This is the house we’ve put the most coin into over the past five years. Decent bones, but a bit neglected in several ways before we got a hold of it. The very first thing I tackled was the front screen door. Not on my list of things to do that day, but you must plan for the unexpected.
The screen door simply wasn’t catching the latch to stay shut. So when the wind picked up, the thing would flap in the breeze and slam into the entry rail. Twenty minutes and a handy scrap piece of wood later, the door was latching securely once again. Here’s the star of the show — the tool that I’ve come to love more than any other in my arsenal:
Next up, wrap insulation around the central air coil. Easy enough, but first I had to saw away an old tree stump that’d grown fused to the line. Now that’s a good workout, especially when you’re trying to avoid sawing through copper lines carrying Freon. The tubing was six bucks, and the job took another 20 minutes. No big deal…
Finally, I had to deal with wooden fencing from hell. I’m always sure to carry a sh*tload of deck screws because inevitably a handful of nailed-in planks have come loose since my last visit. I have a love-hate relationship with this fence. On the one hand, it allows me to rent out to dog owners. On the other, the fence is a pain to maintain.
About 20 more minutes and I wrapped that chore up too. Rental C took an hour, all told. Not bad.
Now I’m getting hungry and I have to pee. But there’s no rest for the weary landlord. It’s already 11:30 and I’ve invested more than two hours to get to the halfway mark. Fortunately, Rental A doesn’t have any repairs needed. Just a bunch of weed trees to clip away.
I turned on the outside water, checked the furnace filter, cleared out the lint from the outside dryer vent, and called it good. All told, 20 minutes invested. (And thankfully, this rental has a utilitarian extra bathroom in the basement. Whew!)
Landlord Maintenance Rabbit Holes
This last segment of the post on landlord responsibilities is reserved for Rental B. This particular rental has a special place in my heart. It’s the unit we bought only six months after Rental A.
See, it wasn’t enough that we were already in debt by using our home equity line of credit for Rental A’s down payment. Nope. This guy had the nerve to take out a second stack of bills from his 401K for a down-payment on yet another rental. Now, I wouldn’t recommend that to everyone. I saw a low-risk, high-return opportunity, and went for it.
Rental B was purchased in 2013, right around the time the local housing market was showing signs of emerging recovery. No more short sales or foreclosures to be had. Just lower-priced houses.
The best part? We closed on this one right when the twins were born. Papa Cubert was spending lots of hours getting this place ready for tenants during a crazy hectic exciting time at home. Thank goodness for grandparents! And looking back, I have no regrets. These rentals effectively paid all of our substantial nanny costs these past four-plus years, dollar for dollar.
Let’s get back to cap off this chapter of Landlord for Dummies…
Rental B had a leaking utility tub drain assembly. Everything else about the house was hunky-dory. Easy-peasy. Ship-shape I tell ya. Then, THIS:
I miscalculated the toil involved with replacing this old 1920’s drain and p-trap assembly. Certifiably NOT the project you’d want to tackle an hour before a new episode of Game of Thrones airs. But this was the middle of the day on a Saturday.
The one thing I was missing was time with my family. This rental took my time when the twins were born, and now it was taking some precious hours yet again. See, it ain’t always roses with real estate rentals.
I had to make three separate trips to get all the parts. The only specialty plumbing supply shop in town was going to close for the day, just ten minutes after I showed up. I need to recognize the spots of good luck amidst an otherwise bad luck situation, no?
That third trip was to go back to a general hardware store to get the right-sized bolts to fit into the new replacement flange (rusty part shown above). I should mention how much a pain in the a$$ it was to get this piece of ancient wreckage dislodged from the underside of an old concrete utility sink.
I had to hammer the rust off, and slowly crank each nut off those rusted bolts. Wee…
All told, this project took 2 hours. The super rare ancient replacement part (the bugle / flared adapter piece) cost me $50, but that sink ain’t leakin’ no more. DIY plumbing skills are a MUST for managing rental properties.
DIY Property Management Supports Lucrative Rentals
Even though I stumbled into a complicated maintenance project at the end of the day, the problem was ultimately solved. And bonus, I found a new plumbing supply shop in town that’s open on Saturday. I expected to invest 4 hours and wound up at 5.5. Not a big deal.
The short-term rentals continue to perform well as an investment, yielding about $500 in cash flow month over month. The tenants are reliable and take good care of the dwellings.
Now you know the basics of how to be a property manager as a side gig. It does not suck, even though sometimes, you run into plumbing projects from HELL. I’m outta here. Well, after I clean the gutters…
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Andrew @ Wealthy Nickel says
Love the detailed “day in the life”! We also self-manage our 7 rentals but I am in no way handy, so we hire that out. I need to do a better job of doing regular inspections.
I will say having quality tenants is the MOST important thing. One bad tenant can drain many hours of my time and dollars from my pocket.
Hi Andrew! Glad you dug it! Seven rentals is pretty impressive. You’d probably have to dedicate a full day for those seasonal inspections. In complete transparency, there certainly are jobs I hire out too. Rental C has a fence corner that’s collapsed and I simply don’t have the time and patience to deal with repairing it. My handyman might charge me $200 – $300, but at least I’ll have confidence that fence will hold up longer than had I mashed it up.
Ben Zabulis says
A very well-balance insight into the joys of being a landlord Cubert, warts n’ all ! I shall direct any prospective landlords to this page before they take the plunge !
Thank you, Ben! The waters get better the longer one swims in this particular pond. One thing I didn’t mention – rentals can keep you tied down to an area when you opt to manage them yourself. In order to leave the state or bop around in a foreign country, we’d have to either sell or hire out a property manager. That might still be in the cards, we’ll see!
Angela @ Tread Lightly Retire Early says
Two years versus one is SUCH a big deal for cost and time. Do you have them sign two year leases or is that just your average?
It truly is! I’ll take the hit on rent to entice longer term tenants. Turnover and risk of vacancy are good trade offs.
I offer both one and two year options, with the 2 year being $20 less per month.
Man, I always get the “yeah let’s do this” feeling when I read such posts of yours.
Keep shooting this type of content towards us. 😉
That’s really cool to read, HCF! If nothing else I hope to show that this stuff is within reach. It isn’t easy, but it’s entirely possible for many.
Financial Pilgrimage says
As an aspiring landlord, this was a great read. We actually had a rental under contract using home equity a few years ago and backed out. There were several surprises on the inspection report and using home equity made me uncomfortable. We decided instead to go all in to pay off our home mortgage and are building up the nest egg to try again in a year or two.
I’m glad you dug it, FP!
I’ve done a handful of inspection-based back-outs too. No regrets. That’s why inspection contingencies are so important. Keep an eye out on rates and trends — a bubble may be around the corner, an opportunity to strike!