Should I buy a rental house? (1 year later)

So I wanted to post an update on my rental house saga. I see a lot of posts on this board asking a similar question, so I thought I’d share my experience.

When I initially posted last January asking if I should buy a rental property (that I could live in during the off season), I got a very interesting mix of responses ranging from “you’re going to go bankrupt and die” and “you’ll probably be a billionaire by 30, do it” (slight exaggeration on both ends). I then posted in April after I closed on the home, which mostly resulted in people telling me that I was committing mortgage fraud (?) which I am not, or alternatively telling me about getting commercial insurance (which I have, liability + loss of use).

First some stats:

I closed on the house last March for 362.5k. It is 4 bedrooms, 3 bath, 1200 sq ft with an additional 800 non contiguous, 7th row back from the beach with a pool. At the time I was making 60k a year, though I have since gotten a raise to 83k. I had a full 20% down payment (which represented the sum total of my life savings). The purchase was risky, I will readily admit that. On paper I was (and still am) house poor. I got a “2nd home loan” for 30 years @ 4.5% interest which was funny because I don’t have a first home, LOL!

I was fully booked all summer! It was great! Tons of work, with something to fix pretty much every Saturday, but the money was good. In total, the house grossed just over 38k. I didn’t end up quite in the green; after doing a 6k air conditioner repair & upgrade, I made it until December paying out of the business account. I had to make the last mortgage payment of the year from my personal account. But other than that, the mortgage + utilities + cleaning + pool care + everything else was paid for by the house.

Then the absolute worst case scenario happened. You probably saw it on the news. It was called Florence, and she bulldozed my small beach town. We recorded the highest rainfall total of anywhere during the storm: over 40 inches. The flooding was biblical. 80% of homes on the island were damaged badly enough to need professional work. Over six months later, I’d estimate about a quarter of homes still have tarps on the roof as they wait for repairs.

My house came through without a scratch, somehow. My less lucky family, friends, and neighbors all ended up staying in my house with me for the week or so before the power came back on. (My parents’ primary house and both their rentals were uninhabitable due to water bringing down the ceilings.)

We all got through it. I learned a LOT about how to deal with insurance as I worked to help out my parents. First lesson: NEVER take their first offer. You can negotiate, and they WILL low-ball you.

I’m currently getting the house ready for upcoming season. I already have ~40k booked, and lots of spring / fall weeks still available. I would not be surprised to get to 50k. Which is great, because I am putting about 15k into the house this month, removing popcorn ceilings and doing a kitchen cabinet upgrade. Lesson two: have a hefty emergency fund, because you never know when something will happen (like you find out the previous owners DIYed the kitchen cabinets and didn’t use the right kind of cabinets and they start falling off the walls).

Lesson three: do the jobs you can do yourself to save some cash, but don’t ever feel bad about throwing in the towel and hiring somebody to do it right if you don’t have the skills. For example, I’ve been painting the exterior of the house myself, in bits and snatches on nights and weekends, which has been totally worth it versus a quote of 4k. But I wouldn’t try to put up shitty cabinets in the kitchen, I’d hire professionals to put up nice ones that won’t fall off the walls (can you tell I’m salty about the cabinet thing).

I’ve been quite lucky, because the real estate market has been strong despite the storm, and the home is now worth upwards of 415k, which means I have a nice chunk of equity despite only paying on the mortgage a year.

So far the purchase was definitely the right choice for me. Happy to answer any questions with my (very) limited landlord knowledge.

tldr: became a homeowner, apocalypse happened, managed to survive it, have a great rental season coming up and lots of work to do before then. Don’t buy a rental house for a “passive” income stream, because it is damn active. Not bankrupt, not dead, also not a billionaire (yet)

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