It has officially been 1 year since we rented out our first rental house! I can’t decide if we’ve just been lucky by not having any issues *knock on wood* or if my diligent screening process has really paid off.
For the entire year, these tenants were never late with the rent check and only called me once. Zero 2am toilet calls. I’m not just going to assume this is how it will be forever because something is bound to go wrong in a house that’s 60+ years old.
5 months ago, we increased our rental portfolio buy purchasing a duplex. One unit was vacant and we inherited the tenant in the other unit. The rent was definitely below market value but I didn’t want to upset the tenant and risk her leaving by raising it. She keeps the place in pristine condition and pays like clockwork. I think it’s fine that I’m forgoing a bit of extra money to not have to risk finding another high quality tenant.
Okay, now what you’ve been waiting for: The numbers!
I won’t go into much detail here because I think the graph speaks for itself. As for our return on investment for the first year, here’s how that played out.
Net Operating Income – $7,168.05
Cash Invested – $49,688.11
I think this is a great number, considering the duplex hasn’t even had a full year of income yet.
In order to produce the same income stream by using the stock market (assuming the 4% rule), I would have needed a cash amount of $179,201. Nearly 3.6 times more than I invested in these rental units.
Of course, you need to factor in your risk tolerance. Using the 4% rule likely has little risk while leveraged real estate could be considered much higher risk. I look at the risk level as, everyone needs a place to live and I know I could at least rent everything for what the mortgage payment is.