Investing in rental properties is one of the best ways to grow your wealth. Many people have retired with rental income and/or become rich from their investments. However, being a landlord is a lot of work. Even the easiest rental condo can take up some time especially when there is a turn over.
In 2010, we purchased a one bedroom condo in the building next door and this unit has been the easiest rental property I’ve own so far. We pay an HOA fee and the property manager maintain the common area. I only have to worry about the interior of the condo. It’s a small place so there aren’t too many things that can go wrong. Our latest tenant stayed here for 3 years and they have been mostly trouble free. They are doing better financially so they decided to buy a brand new house in the suburb and moved out last weekend. They cleaned the condo pretty well, but there is still plenty of work left for me to do.
Being a landlord isn’t completely passive
Here is my maintenance list so far.
- The garbage disposal was not working. I found and removed a small pebble from inside the garbage disposal. It’s working now.
- There are sticky tapes on the wall. They used double sided tapes instead of nails to hang things up. It took me a lot of time to get these off the wall. Honestly, these sticky tapes took much more work to remove than patching nail holes. I’ll have to add a sticky tape clean up fee clause to the lease for our next tenant.
- The carpet is in pretty good shape, but there were some stains and the edges next to the walls were dirty. I decided to call in the carpet cleaning guy and he did a nice job. This cost $200.
- The bifold closet door fell off the track. I got new hardware and fixed it.
- The kitchen range hood filters were full of grease and needed to be replaced. I ordered some new filters from Amazon and will install them once they arrived.
- The smoke alarms were over 10 years old so I replaced them with new smoke alarms that you can’t open. Tenants like to mess around with the smoke alarms so it’s best to take that option away. These new smoke alarms should last for 10 years and the batteries don’t need to be replaced.
- Replace 2 halogen light fixtures. I hate these because the halogen bulbs are so expensive. They use a lot of electricity and they run hot. One of the fixtures looked burnt out and the switch didn’t work consistently. I replaced the old light fixtures with new LED fixtures and replaced the light switch as well. The LED fixtures should last many years so I never have to deal with bulb replacement for a long time. It’s the tenant’s responsibility to replace the bulbs, but they always have a hard time figuring out how to do it.
- The walls are in pretty good shape, but there are some scuff marks. I need to retouch the paint a bit.
- The bathroom needs a lot of work. This building was built in the 60s and the bathroom doesn’t have a ventilation fan. I just found out the tenants kept the door close after they took a shower because the steam set off the fire alarm. That’s really bad because there was too much humidity. As the result, there are some molds on the wall and ceiling, the paint is cracked and peeling, and the towel bar is rusted out. I’m going get some help to clean this up and repaint the bathroom. It’ll probably cost around $250 and I’ll charge some of this to the tenant.
Whew, it’s been a long week and I’m almost done with these. What comes next is the really difficult part.
Finding a new tenant
Fixing up the condo is a lot of work, but finding a good tenant is even more difficult. Once the condo is ready, I’ll post an ad on Craigslist and start screening tenants. Here is what I’m looking for.
- Good credit score: 700+
- Steady income: Rent should be less than 25% of income. The condo will rent for $1,350 per month so a new tenant should make at least $65,000 per year. More would be preferable.
- Recent bank statement: I like to see at least 3 months of rent in their bank account.
- Good renting record: I’ll call the previous landlord to see if the tenant has a lot of issues.
- Meet the tenant and see if I get a good feeling. I’ve been lucky with my tenants so far so I guess I should trust my gut on this one.
- No pets
My rent is pretty reasonable so I shouldn’t have too much trouble finding a new tenant.
Rental condo finance
Unfortunately, I’m not making much income from this property. The rent is barely enough to pay the mortgage, property tax, and HOA. However, the appreciation is pretty good on this rental condo. We purchased it for $140,000 and probably can sell it for around $250,000 now. We put 25% down, $35,000 in 2010. Once we sell the condo, we should see a tidy profit.
Overall, this condo has been pretty easy to manage. It is just a one bedroom apartment so there aren’t too many things to deal with. I’m thinking about getting out of the landlord business altogether, though. The property price has increased quite a bit, but there are a ton of new condos and apartments being built. I have a feeling the appreciation won’t be as good in the future. If the appreciation is slow, then there is no point to owning this condo since I can’t charge enough rent to generate good income. I’m seriously considering selling it and invest more with RealtyShares when Mrs. RB40 retires. That way, we’d have more passive income. Having a rental that doesn’t generate income only works when you already have a good job.
Alright, I still have a few more things to fix at the rental. Everything should be done by Sunday, though. It’ll be nice to get this condo rented again. Do you invest in rental properties?
Related: See how we’re generating passive income this year.