We’ve been landlords since June 2004 when we bought our first (and last) rental units. There are two houses, split into seven units total: three units in one house, four in the other. Buying the rentals was all part of a scheme to start a different kind of life. We started another life alright, just not the one we imagined. This is our story.

If you’ve been following my blog, you know that Greg has always worked long hours and traveled extensively for his jobs. We wanted to leave this sort of life and begin a simpler one. By simple, I don’t mean the kind with paper umbrellas and sunsets, but rather, the kind that wasn’t so devoid of togetherness. We were always apart and working hard. Why not work hard together? We’ve never been afraid of hard work, but the stress of Greg’s traveling while I managed alone a bunch of babies and toddlers was a recipe for tension.

I often pick up the local real estate ad books whenever we travel. It’s my passion, and I like to oogle over how cheap the rest of the world lives in comparison to us in Florida. I was on this “let’s do rentals” bandwagon after a string of disappointments we encountered when trying to buy local businesses for our livelihood. [That is another story, but the short version is this: everyone lies so bad on their taxes.] In 2004, while traveling through Bristol, Virginia, we noticed that a person could actually make these downtown homes cashflow. Cashflow is the way you say that you won’t be upside down after expenses every month. Rentals do not cashflow in Florida after counting in taxes and insurance, unless you happened to buy the house in 1950. This is hard to do when you weren’t alive back then.

We spent our vacation staying up until 2 a.m. every morning fiddling with Excel spreadsheets. In June of 2004, we took the plunge and bought the two houses. It was to be the beginning. We looked at a dozen of so on the market and we chose the ones with the least structural problems. (Big joke coming later on about this.) This is the part where you might think we’re rich, but here is the part that I will tell you how we did it. We try to spend the most we can on appreciating assets, while getting by with the least possible that’s reasonable on depreciating assets. Your mileage may vary. Our two cars at the time wouldn’t fetch $1,000 bucks at an auction. Instead, we preferred to put our money into appreciating assets instead of depreciating ones. (That tidbit will make another great joke later on when it bites us hard, so remember it.) We paid $35,000 for the first house. It was about 2200 square feet and solid. This was almost half of the asking price and so ridiculous that the realtor and my husband were profoundly embarrassed to make the offer. I wasn’t. You can always ask. Some people pay this much for a vehicle, but I can tell you that their vehicle doesn’t make them money. Quite the opposite.

The plan was to continue buying rentals and move up there to manage them and rehab houses to sell. I have all these great ideas. Every day that Greg would get home from work, I’d say, “What do you think about this…?” It’s gotten so bad that my eldest son, to this day, answers for Greg with, “Oh brother. Here we go again.”

I’m getting ahead of myself here. The story is pretty funny now that time has passed, and if you are interested, I will tell you all about it as I have time. But with this entry comes my first tip for anyone looking at buying rentals as an investment: Don’t.

I actually think rentals are a great source of income. I’m not trying to contradict myself here. The thing is, a regular Joe isn’t able to make rentals cashflow without a ton of experience and know-how. Problem was, we were regular Joes, and the business wasn’t going to let us learn the ins and outs without some very hard knocks.

Turning a profit takes shrewd (as in clever, not dirty) business skills and some knowledge about the law. We had an attorney look over a settlement agreement that Greg wrote last week. He told Greg that it was well-written and asked him if he had a legal background or some formal education on the subject. “No,” he replied, “Just a lot of experience.”