5 Tips on Renting Out Your First Property

Here’s a quick update 5 months after I purchased this rental. The biggest difference (visually) is painting this kitchen and adding all the new appliances. I ended up renting this place within 2 days of listing it on Zillow while I am in Iceland on vacation. It was definitely a rollercoaster ride of 5 months but totally worth it. Here are 5 lessons I learned from having this first investment property. 

1. Painting kitchen cabinets & adding knobs

TL;DR: would totally do it again.

I debated on painting the kitchen cabinets. On the one hand, the motto I go by for rentals to prevent myself from overspending is “if it ain’t broken, don’t fix it,” but on the other hand, this kitchen looked very dingy with the old brown cabinets, brown colored linoleum floor, and brown walls. By painting the cabinets a lighter color, the photos popped so much more. Most people I showed the before/after photos thought I also painted the walls. I didn’t. It just brings in so much more light to the kitchen which people spend a lot of times in. Some tips about painting kitchen cabinets which I either found from watching youtube videos or from this experience:

  • Use painters tape and number the cabinet doors when you take them off so you can put that exact door back on.
  • I had leftover wall paint which has “eggshell” finish. You really want “high gloss” finish for kitchen cabinets for ease of cleaning. So I bought a pint (very small!) of high gloss white color to go on top.
  • White color: white dove Benjamin Moore (see other popular white comparison here) – you can match color and get a cheaper paint with Lowe’s / Home Depot brand.
  • Green color: Tranquility Benjamin Moore (see example here by Younghouselove)
  • Do you need to spray the cabinets to not have hand-painted streaklines? Depending on the market and the type of the house. For this base-line 3 bedroom 2 bath starter rental, I’d say no. I painted them by hand and the streakline looks kind of cool if I may say so myself.
  • Use an oil based primer to cover existing colors on the cabinets. I used Kilz
  • Use a separate brush for the primer, keep it in the fridge wrapped in a dog poop bag to keep it moist, work fast, and throw this brush away because washing this brush was SO ANNOYING.
  • I bought the kitchen handles from Amazon (small & large).

I think having the kitchen refreshed with a coat of paint really helped me renting out this house very quickly and helped me get the rental income I wanted to be. 

2. Get to know your neighbors, yes, around the rental

TL;DR: would totally do it again.

I learned this from Building Wealth One House at a Time by John Schaud I read in 2020 (see my notes here). I find getting to know my neighbors are really helpful when you need to borrow tools, ask them to keep an eye on the property when you are on vacation, in case your dog runs away, etc. Overall, it gives an inclusive feeling for you and the neighbors you are in it together to protect your neighborhood. If your tenant turn out to be someone sketchy, they will be the first to let you know!

3. Why I decided to hire a management company

TL;DR: would totally do it again.

I am usually very hands-on with my projects. After we bought this house, we lived in it for two months while renting out our main house in the summer on Airbnb. During this time, I realized I really hate dealing with tenants, especially entitled adults with young children. Balancing pros & cons, I decided to find a management company to handle everything for this long-term rental. This is totally a personal decision, and depending on your personality and your time commitment, it might be better for you to self-manage. I thought I was going to self-manage just to save the 10% management fees, but it’s not really worth the headache for me. So I outsourced it and now I can free up my time to find better deals or just enjoy my quiet time!

With the management company, I don’t have to do maintenance and a lot of the small repairs. I can also get quite a good price on it because the management company has a low-cost handyman that goes around all their properties and takes care of the small repairs. It would cost me a lot more time and headache to do it myself. 

I also don’t have to worry about the tenant’s background checks, changing air filters, collecting rent, or possibly evictions. For someone as frugal as me, I am very surprised that I truly enjoy having a management company taking care of everything. 

4. Do a little cosmetic repair that doesn’t cost much

TL;DR: would totally do it again.

The last owner left me some blinds for the window in the garage. One day I was sitting in front of the window working and the sun was blazing on me, and it became so hot, I finally decided to install the blinds. It only took about 15 – 20 minutes to figure out how to put them up, but they made a huge difference for the room to look less basic.

5. Rented out my own house on Airbnb while renovating this rental

TL;DR: would probably not do it again.

My original thought process was for the couple of months this rental is not rented, I could live in it but rent out my own house on Airbnb which would bring me income to offset the couple of months of no rental income. I don’t think I would replicate this in the future.

Don’t get me wrong, I planned everything out. Financially it made sense, but emotionally and logistically, it was a little hell-ish. I had to travel back and forth between my rental (where I live) and my airbnb (my main house). There would be days where I drive between houses and Walmart multiple times cleaning, trying to get supplies, forgotten things, etc. At the end of the day I am just beat. 

I made a small amount of money after all the furnishing. Overall, the profit did not outway the trouble + time + expenses. I would not want to replicate this in the next deal. But for some people, this could be an option, and possibly hire an Airbnb property manager (they usually charge a lot higher than long-term rentals, about 25%-35% which you will have to consider when calculating your profit).

Overall, it was a great win for 2021. It was a great experience finding my first rental and successfully renting it out. Share in the comments your lessons learned from your investment properties!

How I Bought My First Real Estate Investment Property

Photo by Scott Webb on Unsplash

I bought a house yesterday.

If you want the TLDR, you can just jump down to the reflection part at the end.

I’ve been looking at houses for a while. I listen to real estate investing podcasts like BiggerPockets, The Tom Ferry Podcast, ChooseFI, etc. I go through phases of loving them and getting frustrated with them, and loving them again.

I read a couple of books on real estate:

  • Cheap Houses by The Homestead Craftsman – This really opened my mind to how to buy houses. There is no one way of buying houses and you don’t always need an agent.
  • The Millionaire Real Estate Agent by Gary Keller – there are some good points in this book but I don’t love it.
  • Building Wealth One House at a Time by John Schaub – When I first read this book, I wasn’t super impressed. But looking back, this guy had a lot of great points and it’s probably the most rounded book I’ve read.

My criteria for the first investment:

  1. 3 bedroom 2 baths (at least 2 bathrooms for resale value)
  2. In a decent upcoming neighborhood
  3. In the 150k – 250k range
  4. In Bentonville, AR

Some preferred qualities: 1) no major renovations, 2) have more expensive houses surrounding it, 3) fenced-in yard.

Bentonville’s real estate market has been crazy since the Pandemic started in March 2020, and it gradually became crazier and crazier. Currently, the houses in the 150k-250k range sell within the day it lists on MLS. Multiple offers would come in, and people fight over houses going 50K above asking and appraisal prices. Listening to Tom Ferry’s podcast, I realize that the entire U.S. real estate market is like that.

I have seen so many houses coming onto the market that I thought “this could work,” and in the blink of an eye it’s under contract, off the market, no longer available. So when my friend Hills&Higher told me this listing from Nextdoor, I picked up the phone and called that seller number right away, but I wasn’t hopeful at all. It was Easter Sunday and I asked if I could see the house today or tomorrow (Monday). He said, how about Monday at 4 pm. I thought maybe he was delaying the appointment because he already had enough interest from the property and wasn’t keen on meeting up.

Regardless, I checked out the neighborhood on google maps and also saw the 4 only photos he uploaded to Zillow. It is not an exciting house, which is exactly what I am looking for. I realized after the fact that most of the time, deals are inside the not-so-exciting listings, the mediocre mundane ones. 

The house fits ALL the criteria I was looking for:

  • It was 3 bedroom 2 baths
  • It was listed under 200k
  • It was in a very nice neighborhood where surrounding houses are twice as expensive
  • It was in Bentonville
  • Has a fenced-in yard
  • Does not have a pool

I knew if I didn’t present an offer to the seller that Monday afternoon, I would definitely lose this house. I know the house is priced under market value. Based on the comparable homes I ran, the appraisal would most likely be around $173k. I called my loan officer and asked for two different pre-qualification letters for the two scenarios in my head. One is that there is moderate interest in the house, I would offer 185k, and one is this is my BEST offer 200k if there are a LOT of interests. I also tried to draft a contract before going to this showing (which I would recommend people do, a generic one if you can, and just leave the amount blank). I wasn’t able to figure out the contract in time, but I printed out my pre-qualification and drove to the showing.

The seller was super friendly. We got to talking about life, work, dating in Arkansas, swapped ridiculous stories about work. It felt like that he trusted me enough and I asked how much he wanted to sell the house for. He said, well, there’s moderate interest in the house, and people offered more than the asking price for it. Knowing the market, I know he wasn’t lying. So without saying a number, I asked him, what would be the number that would seal the deal today. I was shocked by my own boldness. I don’t really know why I wasn’t more nervous. I just knew at that point if I asked, the worst I would get is a counter-question (like maybe he’d say, well how much can you offer?). And to my surprise, he just gave me a straight answer, 180k. I said DEAL. 

We continue to have some more conversations about what it is like living here, the neighbors, and he told me his favorite spot of the house is this one-bedroom and kitchen because the sunlight hit that part of the house first in the morning. I realized I was lucky because unknown to myself at the time, I just achieved the winning bit of getting a deal, to get the seller to like me.

Summary and reflection on buying my first real estate investment:

  1. Clearly define the search criteria: this may take some time to refine and tweak, but it will come more clearly the more house you see.
  2. Be brave enough to pull the trigger: Put an offer on houses that fit those criteria. Don’t be afraid. If you’ve done the homework, worked out the financial part, you need to trust your gut, trust the system you’ve built on the due diligence you’ve done. You NEED to pull the trigger. 
  3. Know how much you want to offer BEFORE you walk in: You know what the house looks like (sort of, or ballpark it). You know the location. You know the market. Therefore, there is no reason to go in without having a number in your head. 
  4. Let the seller say the price first: Don’t offer up the price you are willing to pay. If I had offered up 185k from the start to see if it was ok, then I would have overpaid.
  5. Play fair: I think this was a hard one for me. The Chinese side of me will always want to haggle. But from living here for so long, I realized that there are prices that don’t matter in the big scheme of things. Could I have bargained him down from 180k? Maybe. But I am taking a big risk in this seller’s market. I need to keep the seller feeling like he’s in control, and that it is his way. Plus, I know 180k is a fair number from the comparable homes sold around there. Ultimately, you don’t want to be known as the shark. The goal of the negotiation is to get your way and have the seller walking away with respect for you that they want to do business with you again and again. 

#2 is probably the hardest one for me. I keep dancing around the pool but never want to jump in. I was too afraid to commit to it. I think you will have to see enough houses and miss the deals you really wanted to have to understand how to pull the trigger next time. I have missed a unique yellow A-frame in Bentonville, a nice rental property 2 minutes away from my house, and 2 other houses walking distance from me so far. But without them, I wouldn’t have those data points to understand what is a good deal and what criteria are my must-haves.

Overall, it was such a flurry of events that happened too quickly. I made the oral offer with the seller 5 minutes after walking through the house. I sent him the contract about 2 hours after seeing the house, after figuring out how to write a contract with the help of my real estate superhero.  The seller signed it that evening.  

We have since closed on the house and are preparing to move in next week!

 

#5: How I Built a Wooden Ladder to the Loft

We are in a little holding pattern right now on our barn renovation as we wait for our contractor to come back and finish the drywall. We finished the insulation in July and decided to build the ladder to the loft ourselves. It turned out to be very easy!

Here’s the video I followed to build the ladder. Shout out to this random very handy guy on YouTube that broke down the steps for making a ladder. 

I wrote out the materials I bought. I was able to get all of them from Lowe’s.

  • Speed Square $10(to make the ladder 75 degrees from the floor)
  • Timberlok screws $30 (I bought a box of 50 with the bits)
  • Power Tools $179 I have Makita and I absolutely love them
  • Lumber: 2x6x16 ~$25

One of my biggest hangups is that I don’t yet have a table saw (or any kind of wood cutting tools) and I rely heavily on Home Depot/Lowes to cut the wood for me. Here’s a step-by-step guide I followed to ensure I had a successful trip out of it.

So I asked the lovely associate working there to cut 4 blocks of 20 inches out of each 16 ft lumber, and I took the rest (about 9.5 ft) in my tiny car (sticking it out of the sunroof!) back to the barn. *Pro-tip: when cutting these steps, they don’t have to be exactly 20 inches, but they do need to be exactly the same length with each other. Once you cut the first piece, use this piece as a guideline for all other pieces that will help you build the ladder straight!

The hardest part is probably trying to screw all of the steps together which I followed the youtube guy’s suggestion but it’s a lot harder than it looks. In the end, I was able to get them semi-aligned with each other so that the steps are visually leveled. Next time, I think I’ll buy clamps like this to help align the steps before drilling and attaching the screws.

Alas, I climbed up this ladder and it didn’t collapse underneath me!

If you’d like to read more about my tiny barn building process, here are all the other articles. Happy building!