The reality of being a landlord is that most people cannot become one. It may be a tough pill to swallow, but it is something we must take seriously.
Only about 7% of the population collects rent from someone else. I learned that in my macroeconomic class last year.
Today, I want to discuss why being a landlord is so challenging, but why it is absolutely necessary for your wealth-building journey. Let’s begin.
Why I Became an Income Investor
The reality of being a landlord. Being a landlord sucks every day except payday. How does it suck? Let me count the ways.
You must prepare yourself to receive a phone call that will, 100% of the time, cost you money. This is the hardest part of the gig.
Imagine that you have $5,000 to invest at the beginning of the month. You get a call from your property manager or tenant saying that you need to spend $3,000 to fix a termite problem. That’s your reality.
I have been a landlord for over 15 years. I have taken calls about a variety of services, including air conditioners, refrigerators, termites, garage doors, lawn care, water wells, sinks, toilets, and cement. The list goes on from there.
The moral of the story is that you must prepare yourself (and your finances) for this phone call. The best way to counter this phone call is by having an emergency fund just for your properties.
A High-Value Person Earns $100,000 Annually
The reality of maintaining rental properties. Homes grow old; we should all realize that. Rental properties tend to age faster because of harsher wear and tear.
Not only must you prepare for emergencies, but you must also prepare for routine maintenance and upkeep. You may need to rely on a property manager if you live far away from the home.
I have a decent property manager for my home in Arizona. However, there is one thing you must know about property managers.
Imagine someone who doesn’t care about you, your property, or your money; that’s your property manager. With that mindset, you can have a good relationship with your PM.
If you are keeping count, there is a considerable cost to keeping properties. Along with the financial toll, it can take a mental toll as well.
Most people lack the willpower to manage a rental property, including dealing with tenants and property managers.
It’s also difficult for most people to raise the rent on their tenants. They would rather take a loss than have an uncomfortable discussion about rent prices.
Why you should become a landlord. Being a landlord sounds like a massive chore—and it is. Why would I recommend being a landlord, then?
Owning real estate is the best way for most people to create generational wealth, passive income, and retirement security.
Use Dividends as Your Safety Net
Generational wealth is the ability to pass down life-changing assets and knowledge to your heirs. The keyword being “knowledge.”
That’s right. How can you teach your child to be a landlord if you were never one? The tips and tricks you learn along this journey are crucial for your heir to maintain their generational wealth.
Passive income comes from assets. The best form of passive income comes from rental properties because of the tax benefits.
Passive income is your key to retiring early and living your best life. However, nothing is truly 100% passive; you’ll need to manage your properties (or manage your manager).
Retirement security comes from not having a mortgage on your primary residence. The best way to pay down your mortgage is with rental income from other properties.
Imagine retiring with no mortgage on your primary residence. You also have $4,000 in rental income, along with social security, 401K, and dividends. It’s nice to be a capitalist.
Transfer of Wealth in the Metaverse
What is the genesis of this article? I am writing this article because I know too many smart people who refuse to purchase a second property.
Of course, this is none of my frigging business. However, they are hyper concerned about their kids going to college and getting a high-paying job.
So what’s more important? Buying a home for your kids early in their lives or paying for their college tuition.
This is a personal question that you must answer for yourself. I am firmly on the side of purchasing a home for your kid.
In fact, my wife and I just bought our fifth home (in cash). We told our son we will give it to him as soon as he gets married (he is currently 18).
Where do you fall in college versus property? Your answer to this question will determine whether you need to become a landlord.
Create an Online Course for Passive Income
If your goal is to pay for your kid’s college and hope they make $200,000 a year, so they can eventually afford a home, then you have a lot of savings to do.
On the other hand, you can purchase a home for your child and rent it out for 10-15 years. You can have someone else pay for the house while your child grows up.
Then one day, you can pass this fantastic gift to your kids. Imagine giving your kid a home with a $1,300/month mortgage.
Our second home currently has this amount as its mortgage, and it would be a privilege to give it to my son.
My son could move in and rent the master bedroom for $1,000 per month. That means he would only need to cover $300/month toward the mortgage.
How to Start Dividend Investing 105
Think things through for your kids. If I didn’t have kids, I wouldn’t have any reason to be a landlord. I would simply own one home, along with my wife.
As we become parents, it’s our duty to think things through for our kids. What is the most expensive thing in today’s society? Housing.
How can we help our kids avoid paying thousands a month in rent to another capitalist landlord? We purchase a property.
Conclusion. Does it suck to be a landlord? Yes. Is it 1000% worth it? Yes. I am doing this landlord gig for my kid’s future.
In that context, it’s really not that bad. I get a couple of bad phone calls a year. Other than that, I receive a nice monthly check from each of my properties.
The best way to frame this conversation is in terms of the future. What do you want for your kid’s future?
Do you want them to be lifelong renters as they chase their corporate managers and landlords? Or do you want them to settle down early and have your grandkids?
I know what I want, and I am working hard as a landlord toward that future. I never lose any sleep about my landlord duties because they make sense.
The more work I do today, the less stress for my kids tomorrow. With that statement in mind, I love being a landlord. Good Luck!
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