I have 2 rental properties. The first rental property was being an accidental landlord. At the time I owed a townhouse and needed to move away for 2 years before returning. My wife and I moved and rented the townhouse.
I used a real estate agent to find a tenant. He happened to be renting one of the other townhouses in the neighborhood and so I figured (wrongly) that he must know what he’s doing. He wasn’t very good. He was bad about letting me know about showings and I would have people show up unannounced and he suggested we price the monthly rent about $100-$200 too high.
Took 4 months to get it rented to an acceptable tenant. I price dropped the rent myself $100 during that period. When it was listed too high, I was lucky to get 2 people looking at it a week. House was in great condition, great location within a block of metro, but was the nicer part of an okay area. Agent tried to convince me to take a 6 month lease at one point from someone who needed a pit stop between selling & buying a home. Obviously a bad deal I refused as agent takes 1 month’s rent as his fee and I’d be soon looking for another tenant with such a short term lease.
Finally got a great tenant. Screening is key! He stayed two years and got me my next tenant who took his place and the next guy is working fine. I ended up not returning to that house and continued to rent it. I probably lost 3 months rent at the initial leaseup from choosing a poor real estate agent but otherwise it’s working fine. I could float the mortgage during the 4 months because we were staying with family at that time.
Staying home and saving money is a great accelerator and I suggest you continue to do so as long as you can. Not only to build your down payment but also for reserves (repair & maintenance, capital purchases, vacancy, lease up costs, etc) in case you do get issues.
The rent I get is about 30% higher than mortgage/interest/property tax/insurance. It’s more of a B/B- area, so cash flow won’t be as great as it could be in a lower grade area. I put away the extra money knowing that I’ll need it eventually for the house. My gain is probably principle pay down and appreciation of property value.
A couple of years later I decided to buy another rental in a C/C- neighborhood. Thought the property was in pretty good shape, but dated. Estimated repairs at 30-35k with 2-3 months to do. Probably cost me closer to 45k and 6 months. Used a tenant placement guy and it took 4 months to lease up. But that was more about me being picky based upon my strategy. I turned down maybe a dozen applicants who were ready to sign the lease (pets, bad credit, uncertain employment, lied on application, etc). This new guy was very diligent and was actually more picky than I was in picking tenants, which is a sign of someone who cares more about how good a job he is doing versus just looking for the quick commission. Almost a year into this second rental and it’s been going okay. Tenant pays on time and seems reasonable, with a few sharp elbows here and there. I’m satisfied enough to be willing to sign a 2 year lease with her on lease renewal. It’s a Section 8 tenant, so government pays about 95% of the rent. Extra hassle and cost because it’s a government program, but nice to have reliable rents. Net cash flow for this investment as compared to investment cost is much greater than the first rental, but I don’t expect much if any appreciation on the property.
Gearing up now to look for another rental.
Good luck on your plan.