276 | Buying Our First Rental Property

We’re trying a different investing strategy than the one we’ve used for the previous decade.

It’s been an interesting experience so far, and I’m learning a lot.

In this episode, let’s talk about my husband’s and my first rental property and how we’re funding the purchase.

• • why we didn’t get into real estate before now
  • why now is a good time for us to get into real estate
  • how we’re funding our first rental property
  • why we chose this property
  • the strategy we plan to use for the property
  • the value of working with a realtor who invests in real estate

Hey, friend. Welcome back.

I am excited to talk to you today about real estate, specifically about my husband’s and my first rental property.

So I’ve mentioned on a few episodes that we’re getting into real estate. It’s more my thing than my husband’s. I’m very excited about it. He is supportive and just kind of along for the ride. But, I have always been interested in looking at homes on Zillow, and going to open houses, and looking at interior design videos and all of that kind of stuff.

And I remember hearing about real estate when we first started our money journey. So when I first started researching how to manage your money better, how to get out of debt, how to build wealth, the idea of investing in real estate came up back then, but at the time I was a junior associate at a Biglaw firm. I had very young children. My husband was a resident at the time, and so it just wasn’t the right time in our lives to do something like that.

And so we decided to invest in the stock market, which is a bit more hands off, right? It’s a bit more passive, if you will, but now we’re in a different season of life. I own my own business. My kids are older. They’re school age, so they’re a lot less dependent on me. My husband is an attending now, so his job is a little bit less demanding than it was when he was a resident. And so we are in that space where maybe we can look at this.

It was not necessarily something that I wanted to do back then, but it has become more appealing as I think about my interest in real estate from watching real estate shows and scrolling Zillow. I scroll Zillow like Instagram, like how people are on Instagram. I’ll be on Zillow, like, oh, I wonder what’s new? What’s listed now?

And so I’m in this space where I’m able to explore this interest, and I’m really excited about it.

I was having a conversation with a friend recently, and she shared that she and her husband are also interested in getting into real estate, and she asked about how my husband and I are funding this purchase. And so I thought that that might be helpful information for you if it’s something that you’re interested in as well.

So my husband and I decided to take out a HELOC on our primary residence. We have been in this house about 9 years now, and so we’ve built up quite a bit of equity both from the home value just appreciating and then also from paying down the mortgage. And so we took out a HELOC for about half of that equity.

I think you could get a HELOC up to something like 80% or 90% of the equity, but we decided to stick around that 50% mark because that just felt good for us. And we will use that HELOC to make the down payment on our property.

Then we also are doing a conventional mortgage that we’ve already been approved for, so that will help us to pay for the balance. And then our plan is to use the money that we are bringing in, like the income that we’re making that is not being spent out to expenses, we’re going to use that to pay ourselves back with that HELOC. And then we also plan to use the cash flow from the property as we get it rented out to pay back that HELOC, as well.

I think I said this in the beginning, but if I didn’t, we are under contract on our first property. Super excited about it. And the property itself is a condo, and I really liked that for us because it allows us to kind of get in there, but we have a little bit less that we are responsible for.

So the HOA will handle all of the exterior maintenance, and the landscaping, keeping the grass cut, all of that kind of stuff. And so we are only responsible for our particular unit and what’s going on inside it.

I’m planning to do the midterm rental strategy which is when you are renting to people for at least a month, typically it’s more like 3 to 6 months. And it’s people like travel nurses or visiting professors or interns, stuff like that. So you do a furnished rental and you’re able to provide that housing on a shorter term basis.

And the reason that the midterm rental strategy appealed to me was I didn’t like the constant turnover of Airbnb, like the short-term strategy where every couple of days you’ve got new tenants and all of that.

But with the long-term strategy, typically you’re not doing the furnishing and being able to decorate the unit, and that kind of stuff. And so midterm just felt like a really good middle ground for me.

And you also are able to get a little bit more of a premium than the long term because people are paying for that flexibility of being able to have a three-month lease or a six-month lease versus your typical 12-month lease. So I think that that’s going to be a really good strategy.

I’m excited for where our condo is. It’s in a good area near universities and hospitals. And it’s near some walkable areas as well, near a park, all of that kind of stuff, like those amenities that I think are going to be attractive to people who are coming to the area for that short-time basis.

I will let you know how it goes. We are under contract. We have not closed just yet and of course I haven’t started marketing it and all of that kind of stuff. But I’m excited for the journey.

It’s interesting to be in this position of trying something new because I haven’t really tried anything new since I started my business. I guess that’s not 100% true. Of course I’ve tried new things, but this feels like a big thing where there is more of a learning curve than other things that I’ve done.

So I am getting into it. I’ve been doing my research for months, and I have been working with a great realtor who is an investor himself, and so he’s been able to guide me on different things.

And as we’ve gone through the due diligence process, he’s got vendors that he has connected me with to help me to vet the property and all that kind of stuff. So the value of having someone who knows what they’re doing and who’s connected is immense. It’s wonderful.

So I highly recommend if you’re interested in getting into real estate that you work with someone who is also in that area and knows what they’re doing, Someone who invests in property themselves because the resources that are going to be available to you is probably so much more than if you’re working with someone who does not invest in real estate and doesn’t know the things to look for for a rental property versus an owner occupied property.

So that is a little bit about our rental property journey, the things that we’re doing, how we’re doing it, all of that.

If you have any questions, please feel free to reach out to me. And I hope that it’s helpful for you if you happen to be on the same journey.

Alright, so that is it for this week’s episode. Please take a second, share this with a friend. If you know someone who’s getting into real estate, maybe the things that I’ve done so far will be helpful for them. That is also the best way to share this show with other people. And as always, I appreciate your support.

As we close out friend, I pray that you take the information you learn here, apply it in your life, and open up to the realization that wealth is available to you. As you do that consistently, week after week, you’ll continue to take steps to take back control of your time, build wealth, and live the life of freedom and choice you deserve.

Talk to you later.