If you're in the military, and you buy a house, there is a good chance that you might someday find yourself needing to rent out that house. Learning to be a landlord is hard work, especially if you don't have an interest in real estate, or you are feeling cranky because you don't want to be renting. After hearing so many people talk about the hard parts of owning a rental property, Navy spouse Elizabeth Colegrove decided to share her knowledge and started a website called The Reluctant Landlord. As a property owner myself, I wanted to learn what information Elizabeth could share with us! Hi, Elizabeth! Your website, The Reluctant Landlord, provides information to people who are landlords, or are thinking about becoming landlords. How did you get into this business? Moving with the military can take you to some interesting places, and sometimes you realize that you really don't want to live there forever. A tour in a less-than-great place helped me realize that I wanted financial independence, so we could live anywhere we wanted when my husband retired. I had always loved real estate, and I was working in commercial/multi-family real estate. While I loved my job, I knew it was not something I could do long term, and when we start a family. I wanted to start something I could manage anywhere. I had always wanted to start a business, but never had any specific ideas. Our house was a foreclosure that was a fixer-upper and bought for a great price. We then started to invest my income into investment properties. Soon, I found us building a business in rentals with the goal of producing an income to allow early retirement (with a Navy pension). I got into the website business accidentally. I am a HUGE believer in paying it forward and taking care of each other. Listening to people say that it was impossible to have good results in real estate made me realize that I had useful information to share with others. I decided to go public with our real estate experiences so that people could see a positive side of owning rental real estate. Therefore, my deployment project has been putting together a resource for those of us who are hobby investors. Those of us who are accidental landlords, just want to dabble, or who want to eventually live off the cash flow, but not now. Basically for everyone who wanted to turn houses with low "margins" into success! Every day people turning real estate into a real means to succeed! Question Two: How much time do you spend managing your properties? Do you have to travel? I manage 11 properties as my hobby. I will say the management is less than an hour a month! It normally consist of checking to see if the rent is paid. It took me longer to participate in this interview than I spend on the management of my houses on average! Installing tenants take about 10 hours, and acquiring houses are even more work. When there are repairs to made, they take a few minutes but usually no more than 15-30 minutes to arrange the entire repair. Once you put the effort into establishing great systems (something I teach for free on The Reluctant Landlord), the management is easy! Don't get me wrong: landlording has moments! We have had tenants break leases during the middle of a PCS move, the day after I said good-bye to my husband on our first deployment, and the day before I started a very intensive new job. We have had another give us 10 days notice and then leave the house a mess! That being said, it has been no more than stress. We have never lost a day of rent or had a damages exceed a security deposit. We came close but they still got $7 back. I hired a lawyer once to write a strong letter, after which my tenant was back behaving and no longer wanted to violate the lease. I have only traveled once in the last 2 years. I have friends help do the key exchange and review of the move out. Everything else I do myself. Once I quit work and start our family, I plan on traveling more to our houses as I want to be there for tenant turnover. Being available for tenant turnover helps improve your income, as you are better able to take things out of the security deposit that need to be charged to the tenant. I think it is good to put eyes on your houses once a year, or at least every couple of years. This way you know the condition, and refresh your memory about the house. This is important whether working with a property manager or self-managing. No one cares about your house more than you do! Question Three: What are the main issues that someone needs to consider if they aren't sure whether they should become a landlord? Are you willing to the weather the bad moments? Houses are like stocks or any other investments can drop in value. They don't always increase. The key is to be in a long-term position with an exit plan. Our long-term position with all of our houses is being able to rent them. Question Four: What special concerns to military families need to think about? You need to be willing to handle the house when you leave the area. Can you handle the house yourself? If you aren't, are you willing to work with a manager? While they can be great, they are another "layer" in between you and the tenant. This can be amazing and it can also be awful. As a control freak, I would not be okay with that! Question Five: What is the single most important piece of advice you would give someone who is just starting to rent out property? If you will not treat this like a business, do not go into landlording. You need to charge fair rent, you need money to go into your oh-shoot account, you need to be profitable. You need to be willing to tell your tenants "no" when they are asking for the moon. Remember this is a rental, not their home. They are welcome to improve it, if appropriate (adding fans, etc), but not at your expense. To be succesful you have to treat this like a business. I treat others like I want to be treated but it is a business, and no one will take care of you if you don't. As military family members, we are STRONG. Anyone who can hold the fort down, hold our friends' hands as we watch bad news on CBS, and manage everything we do to support our families, can do this! I started The Reluctant Landlord to help other families find the resources they need to be successful landlords. Many thanks to Elizabeth for a fascinating interview. She shared a ton more knowledge with me, but there is only so much that I could fit in this post. As you may know, I don't recommend intentional real estate investing for most military families. Elizabeth and her husband have been successful, but it isn't a good idea for anyone who doesn't have significant cash reserves and a passion for property management. However, lots of us fall into landlording by accident, and good resources are hard to come by. The Reluctant Landlord can help you make landlording easier with lot of useful information. Let me know what you think!
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