Landlording & Rental Properties

30-Something Earns 6x His Former Salary With Just a Few Rentals

Expertise: Landlording & Rental Properties, Real Estate Investing Basics
19 Articles Written
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If you are like me, financial freedom—or at least, the very real ability to leave your day job and live life on your own terms—is a thought that's always foremost in my mind. For many, it is the key attraction to real estate investing.

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It started for me back in 2009. I had just received the keys to my new house! It wasn’t actually “mine” though; I was renting it with five of my friends. I had just graduated college and landed my first banking job as a teller making $12.61 per hour.

I couldn’t have possibly been more excited about my life! The six of us were each paying $475 for a private bedroom and shared rights to the rest of the house (bathrooms, kitchen, living room, etc.). We had an absolute blast. Those were some of the best years of my life.

But one day I had a thought. While this house was great, a real quality piece of real estate, it wasn’t anything special. It was in decent shape and most likely worth around $150,000. I did some quick calculations online and figured out the debt service on the property was something like $1,200 per month, including taxes and insurance.

How to Become a Millionaire

Hold on. This landlord guy who comes over to mow the lawn once every three weeks is making $2,850 gross per month and only paying out $1,200 for the mortgage, taxes, and insurance? That is $1,650 per month in his pocket for doing nothing! At $12.61 an hour, I would have to work 131 hours to make that!

Little did I know at the time, there are always expenses at properties to budget for (expenditures and the like). However, this was when the light bulb went off.

We continued to enjoy our time renting that house until 2012, when we all finally decided it was time to move on. About half of us were set to leave the town; the other half were going to stay but rent something different.

I realized this was the perfect time to strike. It would be an excellent opportunity to jump into the real estate rental game and rent a property out with my friends as the tenants.

A short while later, my friends and I were out looking at properties that we might like to live in and I might like to buy. All of the ones I liked, my friends disliked. So, I ended up caving and agreed to buy a property that they liked. Personally, I thought it was a little pricey at $140,000.

By that time I was at a new job, raking in $30,000 per year. Yes, I was feeling rich, and yes, I was approved to buy the house via FHA financing. As they say, the rest is history.

The property was a duplex with six total bedrooms. Just as my previous landlord had done, I rented out individual bedrooms at $475. My mortgage, including taxes and insurance, was $1,200. And, most importantly, I was living for free!

Unfortunately, I ended up buying a Mustang, three trucks, and an Audi with my savings—but hey, I felt cool.

millennial-investing

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Fast forward a few years later, and I owned four properties. Two triplexes, the duplex, and a single family. I rented every single bedroom out for right around $525, utilities not included. Across all four properties, there were 29 bedrooms. At $525 per bedroom, my gross monthly income was about $15,225.

Now, let’s back up a second. How does renting by the room even work? Is that not strictly for college students? There’s no way you can stick strangers together and expect that to work, right?

No, it is not just for college students, and yes, strangers are perfectly fine living amongst people they had not known previously. The way it works is, you simply lease out individual bedrooms to people who are looking for a nice, clean, and affordable space for themselves. They receive a private bedroom that has a lock and key, and then they are welcome to share the rest of the unit with the other occupants.

This is somewhat of a niche space that does take some finesse to operate. Finesse meaning, if possible, it is best to pair people with similar interests and personalities in order have the best possible chance at having their behaviors and living habits be a good fit. Furthermore, each tenant is only responsible for their share of the rent as described in the lease. There are many ways to structure this, but I like my tenants to take comfort in the fact that, if John Doe down the hall doesn’t pay, it has no effect on anyone else.

Here is another beautiful piece to this puzzle. In my estimation, you will be collecting an additional 30 to 50 percent over normal per-unit rental rates using this strategy. For example, any of my three-bedroom units is worth probably $1,000 per month in rent, at most. I am receiving $1,575 for the unit when I utilize this strategy. That is nearly a 60 percent increase over the standard market rent for a single occupant in that unit. Point is, you can reinvest some of that margin back into the tenant experience.

Utilizing this strategy means I can afford to take extra good care of my tenants. Reinvesting means that they enjoy and are comfortable in their space. The tenant experience is paramount in real estate investing. Every single person who rents from you should have an experience worthy of sharing with friends and family. Luckily, you can afford to make that happen with this strategy. Sure, you could aim to have the same thing with per-unit rentals, but your margins are smaller and would ultimately have less capital to devote to such a cause.

Either way, if you are sick of earning only a few hundred dollars per month on each of your properties, take a look at this strategy. Is $15,000 per month enough to quit your job? It depends on your lifestyle. One thing I am sure of though is that this a way to catapult yourself much closer to financial freedom.

Disclaimer: Be sure to check with your local ordinances for regulations. Most towns and cities have language regarding these arrangements but normally allow it up to a certain number of occupants per unit.

Ryan Deasy, of Deasy Property Group and RentReddy, is a long-distance landlord currently residing in Houston, T...
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    John S Lewis from Jackson, NJ
    Replied about 1 year ago
    Hi @Ryan Deasy - love this story. Not sure how to find out the town laws in NJ. Who do I call? How do you advertise and match up the roommates?
    Larry Russell Rental Property Investor from Whitsett, NC
    Replied about 1 year ago
    I love the creativity, a modern day boarding house. Sounds like a great way to increase your cashflow without worrying too much about unit vacancies.
    Phillip Flores Investor from Midland TX, 79707
    Replied about 1 year ago
    Really great post Ryan! This has been something I’ve heard people are having great success with in high rent areas (Midland, TX for me). How do you handle damages and other challenges that may pop up in shared areas?
    Taylor Lorei from Los Angeles County, CA
    Replied about 1 year ago
    Fantastic article! Would love to hear more about the structure you have for these types of properties, and the unique challenges they create. I've lived in multiple shared living situations, I can see why it would be lucrative, but can also be challenging! Do you manage them and find tenants yourself?
    Dave Rav from Summerville, SC
    Replied about 1 year ago
    Amazing! I need to start applying this strategy to my rentals.
    Andrew Brewer Rental Property Investor from San Jose, CA
    Replied about 1 year ago
    what's your take home after mortgage, property taxes, insurance, repairs, etc?
    Brent Markham from Fort Lauderdale, FL
    Replied about 1 year ago
    I also would like to know the strategy of finding these tenants and how the security deposit works if the house is damaged and no one confesses to doing it?
    Blake Lessard from Raleigh, NC
    Replied about 1 year ago
    Great read! I share interest with some of the other follow ups. How do you go about the timing of the leases? Do you advertise it as a boarding house or do you encourage them meeting each other ahead of time? Common area damage?
    Brandon Moore from Central Arkanas
    Replied about 1 year ago
    Great read! You've provide me with a new perspective on ways to increase rental cash flow. Thanks!
    Tara Brothers Investor from Jacksonville, FL
    Replied about 1 year ago
    Great lesson from a great read. Thank you very much!
    Zach Cooper from Salisbury, MO
    Replied about 1 year ago
    Very nice! I've been considering a strategy like this one on my first rental. I too am interested in how to handle common area issues that arise and how you have advertised your rental space.
    Shea Spinelli Rental Property Investor from Tyler, TX
    Replied about 1 year ago
    This is great Ryan, I was just looking at a house with 3 bed/2.5 bath thinking if I make it 3 bath, I can rent it exactly as you stated! I may be jumping in at this. Thank you for sharing!
    Gerald Pitts Rental Property Investor from Nashville, TN
    Replied about 1 year ago
    Great read, thanks!
    Christopher I Bowen
    Replied about 1 year ago
    Thank you so much for this post. This was really an eye opener especially to a newbie, looking to get my feet wet. If you don't mind me asking what city are you operating in?
    Bryan Clifford
    Replied about 1 year ago
    Great stuff Ryan! I have a property like this and would like to improve my tenants experience. You mentioned reinvesting to help tenants better enjoy the space and feel more comfortable. Could you share examples of your favorite ways to do that?
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied about 1 year ago
    Thank you everyone! Feel free to reach out to me in my inbox with any questions you have. That may be easier for me to answer you with extra clarity. To answer some of your questions: -What i have done is check town ordinances for regulations on this matter. The town that i invest in has an extensive document detailing all of the town ordinances. You will want to search under building codes or the building department to find out what regulations they have. Or, just call the building department and ask what the rules are. -As far as marketing the properties, i use craigslist and apartments.com. Zillow also seems to be a good platform. Please be clear that the space is "shared". -For issues in shared areas, more often than not, one of the tenants will come forward. I also have it in the lease that damages that are not owned up by someone will be split among all tenants. To be honest, this has happened one time and the tenant came forward. This one time was an accident also. I have never had a tenant intentionally damage a common area. (knock on wood) -I actually manage these properties long distance. Be sure to look out for an article on that! -As far as net profits, my rule of thumb is that i cut my gross dollars in half. I am rehabbing these properties pretty extensively so i do not run into many capital intensive type issues. -For the other advertising question, i advertise as a shared space. The tenants do not meet each other prior. -This property is in Hartford County in Connecticut. - For reinvesting to help the tenants better enjoy, i pay for biweekly or monthly cleaning of the units and i will comply with most reasonable requests for modification on the rooms. I have upgraded closets, built out new closets, pay tenants for the smallest of tasks, pay tenants for any slight inconveniences they have had, etc. My point was i aim to provide a comfortable and enjoyable living space for them. More often than not, they do praise me for that and that is really an incredible feeling for me.
    Dmytro Konovalenko Investor
    Replied about 1 year ago
    Awesome article, just one question, who pays all the utilities. does it mean each tenant can run ac and lights and stove 24/7 and you pay for it?
    Clinton Davis Rental Property Investor from Memphis area
    Replied about 1 year ago
    very nice strategy. Question, how do you determine who cleans the common areas of living (kitchen, bathrooms etc.) It's kind of like making a sfh into a multi unit. Very interesting.
    Gail W. Rental Property Investor from Running the Earth, watching the sky
    Replied about 1 year ago
    I did that for 3 years in So Cal...but it was called a Sober Living Home. My friend rented my house to run his SLH there VERY successfully. (We made a good chunk of change, but now we're selling and leaving the state) Taking our earnings and movin on!
    Jeffrey Bower
    Replied about 1 year ago
    Great post and congrats also on being successful with your ventures!
    Jose A Silva Investor from Denver, Colorado
    Replied about 1 year ago
    Great Idea, I've been thinking of doing that, can you share a blank contract that you use for that specific rental? just to have an idea on how to structure our own contracts. Thanks, Jose
    Matthew McCombs from Ridgeville, South Carolina
    Replied about 1 year ago
    Great article we currently do this same thing just less units. How do you have the utilities split between the tenants? I see they aren’t included. I ask because we have one we’re pay the utilities on and it’s a expensive we would like to get rid of.
    Michael Rogers Investor from Humble, Texas
    Replied about 1 year ago
    Ryan, Fantastic article! I live Houston as well. Have you not tried to do this in Houston? Please elaborate. Thank you!
    Shelly Gish
    Replied about 1 year ago
    That is a great idea! Only downfall for us is that we live in a small city, I wonder if this strategy could work? One good thing is that the average income here is only Arnd 40k per household. But this would only work for single ppl and not really for the family unit. How could you do something like this for married couples needing a cheaper place to live vs living in higher priced apartments?
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied about 1 year ago
    Thanks for all of the questions! I am really glad you all are getting value from it. Here are some more answers: For the majority of my real estate career, i had tenant-paid utility properties only. The last property i acquired i made the switch to having utilities paid by me. it was very time consuming taking the utility bills and breaking them up, prorating if necessary and then contacting each tenant to let them know what they owed. I have built in the majority of the utility cost into the rent but realize i will pick up some of the expense and i am okay with that. i will also install some measures to ensure i am not gouged too badly over the winter. For example, i will be installing controlled thermostats so that there is a min and a max for which the tenant can move the temperature. For cleaning, i pay for a cleaning service to clean the common areas every month. That is something of value i like to pay for on behalf of the tenants. Please send me a message to discuss leases. Happy to explain as thoroughly as i can. I have not tried this in Houston yet. I believe it would work just fine though. As much as i love Texas, the small area that i do invest in right now in CT is really excellent as far as price, cash flow, returns, rental demand, etc. I would be curious to talk about opportunities in Texas though... This strategy is often best, i think, in less affluent areas like you may be describing. Believe it or not, i get a TON of couples (married and not married) that want to live in my properties. I have had quite a few couples over the years. I will say it is not as ideal as a single person but it is doable. Bottom line is that people that want to rent rooms just want a safe, inexpensive place to live to maybe save up for something for just themselves down the road. I would not discount renting to couples just because you or I might not do it. again, i have had a ton of inquiries from couples and have rented to quite a few. please feel free to send me a message so that we may talk more if you would like.
    Brad Cottrell
    Replied about 1 year ago
    As far as Houston goes, I know there are places doing this around the med center. I assume the main draw are nurses and doctors that will only be around for a limited time, and possibly patient families that are there for extended treatments.
    Cheryl Vargas Rental Property Investor from Rohnert Park, CA
    Replied about 1 year ago
    Great concept, Ryan! How do you work out the property management from long distance?
    Deanna Opgenort Rental Property Investor from San Diego, CA
    Replied about 1 year ago
    I've lived in a multi-roommate household for almost 20 years (I am the only one on the lease). We screen VERY carefully, & have discovered a number of things that really, really help; 3 fridges for 6 people -- just trust me on this one. Makes all the difference in the world. Common area housekeeping included in the rent, BUT anyone who wants to earn it back can clean. Most chose not to. Few rules, but clear & we stick to them - ie our biggie is "no overnight guests". Everything else pretty much gets covered by basic good manners (clean up after you cook, etc).
    Ryan Deasy Rental Property Investor from New Britain, CT
    Replied about 1 year ago
    Cheryl - watch out for a new blog article on this. It comes down to finding a trusted team. I also write about how long distance investing is really a blessing, at least for me. It forced me to remove myself which i never would have done otherwise. Either way, you have to put together a team you can count on. i found most of my contacts via craigslist! i did a lot of vetting but it worked out!
    Arya Jackson from San Francisco, Bay Area
    Replied about 1 year ago
    Love this article!