A few weeks ago, I asked about your side hustle. What do you do to earn money on the side? I received some really great responses, and in a few cases, I wanted to learn much more about the idea. Today’s post is the first in a periodic series that spotlights specific side hustles. Many thanks to Mrs. PoP for taking the time to share her story with us. If you have a side hustle you would like to write about, contact me.
Mrs. PoP (along with her better half Mr. PoP!) blogs about money, happiness, and kittens at www.PlantingOurPennies.com.
Side hustle. Side. Hustle. Hustle is such a weird word, don’t you think? It brings to mind images of someone running around like Speedy Gonzalez from one task to the next without getting a chance to breathe much less relax. Our side hustle, though, is a bit different. Most of the time it’s a lazy man’s side hustle because it takes so little time and effort most months. And yet, the checks keep coming in.
So what’s our side hustle? We own rental real estate.
Investment Or Hustle?
“Now wait a minute. Real estate is an investment, not a hustle. That’s cheating!”
If we were paying someone to manage the property I might agree with that sentiment. But instead of paying someone else to do every little thing on the duplex and being completely hands off, we pay ourselves. And since someone’s got to do the work, and we pay ourselves, we do the work ourselves, too! We are pretty ridiculously hands-on with this property.
The Story On Our Rental Property
Our rental property is a duplex in a blue collar neighborhood not too far from the local university. It’s the neighborhood that Mr. PoP and I rented in before we got married and bought our own home, so we felt we knew the area pretty well. We knew about how much rents were, which streets were safer than others, and we had even been moonlighting providing property management assistance to Mr. PoP’s parents who owned a duplex in a different part of the same neighborhood. So even before we bought we had a pretty good inkling that we could make it work. But buying it was a story and a half.
How we bought our duplex for $50K is way beyond the scope of this post. In fact, it took us 4 posts to write about our duplex purchase. But it was highly entertaining, with knives and holes in the walls, toilets in the bathtubs, and even a one-eared impossible-to-remove tenant named Billy. In hindsight it feels like a love story that works out in the end, but right up until that moment you really start to wonder how the star-crossed lovers are ever going to end up together. At the time though, foreclosure hunting was like a second job for us.
Construction and Renovations
Once we closed on the duplex purchase, though, the real work began. All those cosmetic issues that were a turn-off for buyers needed to be addressed if we wanted to be able to get cream of the crop renters. What did we do? Installed crown moulding (renters LOVE it!), painted (walls, ceilings, patios), removed wallpaper, ripped out sheet vinyl flooring and installed tile on one side, bought and installed used appliances, tried to repair said used appliances, cleaned and often repainted fixtures, replaced electrical outlets installing GFIs as needed, and scrubbed the entire place until fingers looked like pale prunes.
We both worked full-time jobs throughout all of this, so most weekends were spent hard at work at the duplex.
Being A Landlord
The single biggest issue in being a landlord is finding the right tenants that suit your unit and your style. Mr. PoP had a pretty good idea of the type of tenants that we wanted to see in our units – younger versions of ourselves – and I wholeheartedly agreed.
We wanted to rent to college students. Not the crazy party-throwing college students, but the college students that want to get away from the dorms and the regulations like “no candles, even unlit” or appropriate for our current bunch of renters, “no playing musical instruments past 10pm”. (We could make a string quartet with the college orchestra members we’ve currently got renting both halves of our duplex.)
The college students we like the best are the ones that are old enough to know they don’t want to live in a pig sty, but young enough that the Bank of Mom & Dad usually cosigns on the lease. They’re old enough to know the importance of paying rent on time, but young enough not to realize that there are ways to work the system and that you can actually save money by (immorally) being a giant PITA for your landlord. It’s a balance.
The best part about renting to college students is that they flock together. College students want to live near their friends, so they tend to provide the best referrals. For which we pay them a cash bonus… but not one big enough that it’d be worth it to live next to someone they found truly revolting. =)
Step 3: Profit
Time – Ongoing labor is minimal. It tends to average out to about 1 weekend or so of work per year (2 people * 16 hours = 32 man-hours), though Mr. PoP does stop by and mow the lawn every couple of weeks as well, so that’s probably another 30ish hours that he puts in. (What a guy, right?) Altogether we’re in the neighborhood where on an ongoing basis it takes about 60 man (& woman) hours of work.
After Tax Profit – For the 2013 tax year, even after having to buy a brand new AC unit, and spending time and money to DIY the linoleum floors, we should clear about $6.5K after taxes, interest, repairs, and maintenance. If we assume that we’re getting a 7% dividend return on our $50K investment capital ($3,500), that leaves $3,000 in profit that we’re “paying ourselves” for property management.
$3K / 60 man hours = $50/hr
Not a bad hourly rate, but it does vary quite a bit. 2014 will likely be a little lower since we’re planning on having a new roof installed to the tune of ~$5K-$6K. And if Mr. PoP weren’t making so much money in his day job these days he’d revert back to his college summer hustle where he actually ran his own roofing business… but then after that, our profits (and implied hourly side hustle wage) should be even higher going forward since most of the big things (2 AC units and the roof) will all be less than 3 years old.
Would We Do It Again?
Absolutely… if we could find another duplex for $50K. At the moment, property values have bounced back and places like ours are listing for around $120K+, which changes the economics of the deal pretty significantly. But by staying involved with the management of the property and knowing the neighborhood, we continue to scour around for deals hoping that one slips through the cracks horribly mis-priced. =)
So that’s our lazy-man’s side hustle. Except for that 1 weekend/year of tough manual labor. That weekend is anything but lazy.
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This was really neat, thanks! My landlord arrived in the U.S. with very little money and worked his way up from manual labor jobs to owning at least three apartments that I know of. I keep meaning to take him out to lunch and pick his brain about how he finds rentals and if he’s still buying in our neighborhood. From what I see, most of the properties here now sell for too high a price to make renting profitable.
Meg recently posted…Around the Neighborhood
Definitely pick your landlord’s brain! We had a couple of great landlords before we were younger that we learned a lot from and try to emulate them.
That’s actually a big part of why Mr. PoP does the mowing – we’re emulating my old landlord who came by every Saturday morning for a couple of hours to the little 10-unit building he owned to do basic maintenance and upkeep. It was always so convenient because you always knew when you could find him to tell him a problem face to face!
Mrs. Pop @ Planting Our Pennies recently posted…Pimp The PoP’s Garage – Part 1 – Planning
Mowing the lawn is a great way to keep an eye on the property, without it looking like you are checking up on them. Another thing to do is change smoke alarm batteries (making an appointment with the tenants ahead of time) and you can get a peek inside, too.
I always like hearing about your duplex. I’d love to buy a rental property in the future. I think it was neat you looked for younger versions of yourselves; I’d probably do the same. I think buying near a college/university is a good idea because there will always be students who want to live off campus! The tricky part is finding the calmer bunch as you said. The referral bonus is also a great idea.
E.M. recently posted…Do You Brown Bag It To Work?
Not kidding… we posted more flyers in the laundry rooms near the honors dorms than in any other area on the college campus. Now, the good kids are mostly self-replicating due to referrals. =)
I think this is the single most important thing, like you said, Mrs. PoP. The right tenant is worth their weight in gold. The wrong one can cost you so much money…
“…we posted more flyers in the laundry rooms near the honors dorms than in any other area on the college campus”
This is such a completely awesome idea, love it!
Mr. 1500 recently posted…Side Hustle Spotlight: Profiting on Property with Planting Our Pennies
Hustle also reminds a lot of folks of the world’s oldest profession (or is it second oldest to hunters?). I love how hustle has been turned into a slang term for someone who works really hard, usually in addition to another job. Etymology of “hustle” aside, really loved this post! I’m strongly considering investing in some property to rent out until I can move to the city I’d like to live in next. It’s great hearing from people with real experience having a rental property. Not sure I could be as hands on as the two of you, which also is another factor to consider.
Broke Millennial recently posted…Don’t Waste Money on Engagement Rings
Being hands-on definitely makes a big difference in our opinions. A lawn-mowing service costs $25/mow, so that’d be at least another $750 out of our pockets. If a property manager takes another 8% of the gross, that’d be $1500… and then they’d hire out mini jobs that take Mr. PoP 10 minutes or so (he’s really fast at fixing a running toilet these days!), so our expenses would go way up, too.
Mrs. Pop @ Planting Our Pennies recently posted…Pimp The PoP’s Garage – Part 1 – Planning
Call it whatever you want to its making you guys money!! Anything that is making you money outside your job can be a hustle/investment etc. I am still looking to get my first property but its really hard finding anything for less than 100k here where I am. A duplex would be great if I could get it without needing any work. I like what DC did which was buy a property that had a rental unit below that could be rented.
Thomas | Your Daily Finance recently posted…How to Curb Impulse Buying Habits
Thanks for sharing that story and the insight into your side hustle. We’re trying to follow in your footsteps a bit, and based on an earlier comment you left we’re re-considering the Phoenix area. Managing from a far will be more expensive in a lot of ways, even if we can find cheaper properties…
Done by Forty recently posted…Budget Porn
I cannot help but sing Do The Hustle every time I see that word which is weird because that song is well before my time.
No Waste recently posted…The Problem With Inherited Wealth
haha, I feel the same way! I have this image of John Travolta dancing to it, and I don’t know if that actually came from a movie or I’m just inventing it…
Mrs. Pop @ Planting Our Pennies recently posted…Pimp The PoP’s Garage – Part 1 – Planning
Thank you for cementing that song in my head.
We’re really interested in buying a rental property, so I always love reading posts from the PoPs 🙂 We couldn’t afford to buy something here (starting prices in the 400’s for a 2 bed), but we’d like to buy in Maine by my folks so my dad could do the lawn mowing and whatnot. He’s pretty handy and will be retiring in a few years. We’d like to hire him to be an informal maintenance person and he’s on board because he loves to work with his hands.
KK @ Student Debt Survivor recently posted…Lazy Girl’s Dinner – Easy, Nutritious & Cheap
I love the idea of having a rental property. Although I think at the moment I should focus on getting myself a house first, lol. At that point, I should know the area I live in well enough to figure out where would be a good spot to look for rentals to buy.
Micro recently posted…What to do when receiving advice.
I have a friend who owns a $50,000 house with a completely separate apartment upstairs. He rents the apartment upstairs for $350-$400/month and the main floor house is much larger. He’s currently in financial trouble and will likely be selling the house.
I’m contemplating buying it from him. The thought of a $50,000 house that you could rent to two separate tenants is appealing to me. I think I could bring in at least the same profit that you and your husband are on that duplex.
Thanks for sharing info on your experience with this.
Kraig – Young Cheap Living recently posted…Are You Saving for a House, Car or Vacation or Are You Saving for More?
This is a great story about how regular people can patiently build wealth. Do this a few times and you’ll have a retirement plan that will withstand turbulent economies and inflation.
Bill Joyce recently posted…Buying a home is not like buying a TV
I generally like catching wind of your duplex. I’d love to purchase a rentable house later on. I think it was perfect you searched for more youthful renditions of yourselves; I’d likely do likewise. I think purchasing close to a school/college is a smart thought on the grounds that there will dependably be understudies who need to live off grounds! The precarious part is discovering the more settled group as you said. The referral reward is additionally an incredible thought.
It’s nice that you had an experience which made you willing to experiment again. Your decision to rent to a younger version of yourself is, likely, not an isolated one.