Successful Landlords

Buying rental property continues to be one of the few vehicles or investment opportunities where an average individual can get started with nothing and build significant wealth. The following short stories are real life examples of how a few successful landlords in different parts of the country got started with nothing.

You will see that the beginning of the story is most often not very glamorous, which offers hope for anyone (if you are able to hang in there, keep at it and keep learning). Be sure to read “between the lines” because there are a few words of advice sprinkled in from these varied experiences that can be helpful to others looking also to get started and build wealth with rental property. Below are their stories.

SID (Montana)

Like many small timers, I bootstrapped up from nothing. I was wide-eyed and knew almost nothing other than the old trope of ‘borrow money and let the tenants pay it off for you is how to become a bazillionaire landlord.” But wait…there’s more!

How about those nights and weekends fixing everything from toilets and floors to cleaning fridges? Painting, shoveling, hauling, trimming, mowing, etc. I worked like a DOG those first several years, and then gradually started hiring out more, not because I was making piles more money, but because I was taking so long and working so inefficiently, I was losing tons of rent to VACANCY! Ugh!

The bottom line is there was no bottom line. At the end of the day, what was I getting? Equity? Sure, that’s nice if you get to access it before you die or your marriage ends because your spouse never sees you. Ask the guys who got divorced where that “equity” went! 50/50, am I right? (wink)

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Anyway, my wife is a sweetie, but she and I were both getting sick of the bootstrapping, so I started hiring out more and more. And I got more profitable. We expanded, and I worked less, and I made more! It was surreal. How can I pay more people to do my work and still make more money? Well, I did.

Keep in mind these were all Class C rentals, purchased from 2005 thru 2012 – the real estate bubble. I wasn’t getting much equity apart from amortization, and rents were largely stagnant.

KEN (New York):

I graduated college and realized my degree was not going to make enough money so I moved home and worked for my dad for six months on his houses. I wanted in so he told me to find a house we could flip so I did and he found the money to buy it. I fixed it up with my dad teaching me plumbing, etc., two half days a week. 

I just kept going from there and figured out I didn’t like working on the houses so I got better at finding deals and that is what I liked. I kept some for rentals and as I never was properly funded back then, I had to learn every way possible to get into a deal with as little cash as possible. 10 years or more of 70-plus hours a week. 

ROY (Alabama)

If anyone who has a day job or is retired from a day job could imagine what it would be like to start investing in rental houses without any day job or even a spouse with a six-figure income, then that is where my bootstrap story begins.

I have been self-employed most of my entire adult life. What I learned about running a profitable business came long before I ever became a landlord in 2006. What I know about the legal system in how to evict someone came 20 years before I even became a landlord. Back then, I had to sue some clients who refused to pay me what they owed me and I won every case I filed too. That is all past history now.

Long story short here, in 2006 I had $175,000 to my name. This included a $125K house which I owned free and clear and $50K in a worthless IRA-SEP account. I liquidated both of these assets and started buying Class C & D rental houses for pennies on the dollar. Usually, I would pay cash for the house so no one could foreclose on me and then borrow the money for rehab. In the first 8-10 years, I did most of the rehab myself and hired out whatever required a licensed pro to do. Now, I hire out 90% of all rehab work and spend the other 10% managing the people I hire. I still do a lot of babysitting with many of the people I hire but since I enjoy the business I am in, babysitting does not bother me. It actually pays dividends in ways you can’t imagine.

RICHARD (Michigan)

I grew up poor and went into the service after high school. I got out of service with a partial college education at 21 in 1971 and took a year off to travel the country. Then, I decided to work my way through the rest of college and started a handyman company in California. Soon, I had many students working and made way more money than college would have paid for the courses I was taking.  I dropped out of college and built the company from 1973-1975.

I got divorced and lost half of everything in the divorce and sold the company at 25 and retired in 1975. I took the half that was left and another year off. After the money/party ran out, I started another construction company at 28 in 1977.

Moved to Phoenix in 1977 and helped build the endless tracts of Phoenix, Tempe, Mesa, Sun City, Ahwatukee and more. While doing this, I found that California was paying 70 percent more to do the same thing, so I moved back to California at the end of 1978.

By 1985, I had amassed enough spare cash to start buying houses in California to use as rentals. (Waited way too long – I should have started in 1971, but I was a kid and was not paying that much attention). At that point, in 1985, I put the company on autopilot and let the workers do the work while I bought rentals and flips. Did this until 1989 and then sold out and retired again at 39. Moved to the Florida Keys, drank rum and partied from 1990-1996. Got bored and started building and buying houses there. After a while, moved to Wisconsin with my family at the end of 1996 to be near my wife’s family (her idea). Lived the retirement life (boring) for a bit. Did some flips. Got divorced yet again in 2007 as things crashed in the recession of 2007-2008 (some people are gluttons for punishment). Lost more than half of everything again and then moved to northern lower Michigan.

I started buying rentals again during the crash of 2008-2012. Now, I’ve been retired for 33 years, since 1989. I’ll be buying plenty more when the next crash happens and will be putting everything into trusts. I’ll have them managed after I’m gone with part of the cash flow to go to charity and the rest to buy more rentals wherever the buying is good indefinitely. With the way things are going in this country at this time, that may well be overseas. Who knows? Only time will tell.  Advice I have to give:

  1. Start early.
  2. Learn how to use other people’s money and skills. You can’t do it all and don’t have the time anyway.
  3. Don’t work yourself to death. Use knowledge, not backbreaking work.
  4. Don’t work so much you neglect your wife. She will get bored and find someone else.
  5. Choose a partner/wife carefully. Very carefully.
  6. Protect your assets or plan on losing most of them.
  7. Put problems behind you. Don’t let them make you a miserable old person.
  8. Have fun.

MIKE (Texas)

Back in the old days, farm kids in junior high and high school put together crews to bring in bales of hay during the summers. It paid well and allowed me to buy my first unit with cash at a fire sale price during the hyper-inflation in 1982. I rented it for about three years and sold it when I graduated college for two and a half times what I paid, which wasn’t uncommon during the hyper inflationary years.

I then moved three states away and started a family. We made the decision that my wife would stay home when we had kids so, for three years, we took every penny my wife had made and paid off our own small house and then bought the first rental – 80% financed. It was a “Junker” but I took vo-tech building trades in high school so I jumped in and remodeled it in about two months. Every penny coming in went to coming up with the next 20% down. 

I did everything at first: repairs, remodels, bookkeeping, and I must have read 50 books on the subject of real estate investing. It wasn’t until I hit 10 rentals that my time became a major issue juggling between a day job, family, and the rentals. I read somewhere (either a book or on this forum) about lost income from vacancies and it knocked me cold. That caused me to start hiring out more of the work. I still did some of it and I used the rentals to teach my kids about a fair day’s labor for a fair day’s wage. 

We spent many a Saturday on those lessons. As the kids went off to college, my day job was getting more demanding time wise. I slowed down buying more properties and went back to hiring most of the work out. A few years ago, I retired in my mid-50s, the snowball effect had paid off all of my rentals and put my kids through college. The income from rentals was generating more than I made from my day job so losing it was no big deal. Now I do the work I enjoy doing and hire everything else out. I’m just starting to sell off a few to my son and I expect to completely divest from tenant centric rentals over the next 7-8 years.

At this stage in life, my time only goes to those things I enjoy like traveling, family, church, and hanging with friends. I still occasionally enjoy remodeling a house, mostly the kick out of turning something ugly into something special, but that is more of a hobby now than a business decision. 

LANA (Indiana)

I was kicked out of my Daddy’s house when I graduated from high school. He did not believe in a college education, especially for a girl. He got me a full-time job as a clerk in the factory where he was a foreman and when I told him I was going to college … OUT! 

It took me seven years to get my undergraduate college degrees. When I got accepted into medical school, my parents finally understood, but not enough to help. By then, I was a whiz at getting financial aid, so I made it without them. Seven years later, I started a private practice as a family doctor. I was big on investing and did well managing my own investments. I got real interested in real estate and bought a whole shelf in my library on making money from real estate. I could not leap though because I felt contractors would eat my profits.

In 1999, I went to stay in the Florida Keys in a good friend’s house with a really big telescope for the opposition of Jupiter and Saturn. I was 44 and never married, but quite happy with my life. On the third day, I met my husband and we both knew instantly it was the real deal. He moved north to stay with me and on our first anniversary, we married. He was a carpenter and when he moved, he had no connections and could not find a good job.

So, one day I said, “I have always wanted to invest in real estate but never had the hands- on knowledge, so let’s go for it.” We immediately bought eight houses and over the next several years, flipped three more. I had all the software for the paperwork and accounting and was ready to go. I had a business plan drawn up as well. The hubby also became a real estate agent and off we went. Total novices.

When he died 11 years later, he was making about half of my pay but it was well into six figures. Now, I had two full-time jobs, a farm, and a mother losing to dementia. I dropped my hours and finally retired at 62 to live off real estate.

This year, I am fixing up units as they empty and selling them. I do not want to be managing rentals in my 70s and the eviction moratorium really upset me. The two tenants who stopped paying both had full time jobs. I will never find a better time to sell as well. It was definitely worth it and I may start flipping again as I have a lot of fun planning and implementing a full remodel, and I have learned a lot about building materials. My major job in retirement is now gardening. 

Zero (Indiana)

My mother-in-law moved back from California – stayed with us a few months and then moved to an awful rental. I would go over and fix things because the landlord would not.

I had a background in building houses where I worked with other trades and learned things as well. I had a W2 job, a spouse and two little ones.

I talked to the wife about buying a place and renting it to her mom. She was hesitant but agreed. I figured the mother-in-law could pay us what she paid the other landlord so I pulled equity from our private residence and got started.

We bought a really bad repo house. I worked on the first floor, made it habitable and moved her in and continued working on the second floor and the outside. After that was done, I bought another one. It was already filled so I left it and bought a third one – moved her in there and rehabbed it. By the fourth one, I decided that I was tired of moving her, so she has stayed there since we moved her in.

I started out in 2001 and lost my W2 job in 2012. I decided to keep doing this instead of looking for another job. We’re still a mom-and-pop operation, but we have 23 units now.

Chris (Connecticut)

I started sweeping floors at 16 in my uncle’s construction business and learned the business from the ground floor up, so to speak. I started in rentals in a class D area doing turnover for my uncle.  It was terrible, which is why, to this day, all of my rentals are class A, the higher end the better.

Now I’m growing to the point where I’m not a small company anymore, more of a medium sized rental provider. It’s been a fun ride.

 

The tips in this column are shared by regular contributors to the popular MrLandlord.com Q&A forum, by real estate authors and by Jeffrey Taylor, [email protected]. To receive a free sample of the Mr. Landlord newsletter, call 1-800-950-2250 or visit their informative Q&A Forum at LandlordingAdvice.com, where you can ask landlording questions and seek advice of other landlords 24 hours a day.