Lessons Rental Investors Can Learn from a Housekeeper (and Mother of a MoveZen Staff Member)

Real estate investing is often seen as a domain for the highly experienced or those with deep pockets, but valuable lessons can be drawn from unexpected sources. This article delves into the inspiring journey of a housekeeper-turned-successful rental investor—the mother of a MoveZen leader. Her story is not just about the transformation from a primary residence to a profitable rental property but also about strategic updates, disciplined financial management, and maintaining high resident satisfaction.

Starting Small and Smart

Our story begins with a simple but transformative decision: a housekeeper decides to rent out her primary residence instead of selling it. This move, often overlooked by many as a means to enter the real estate market, underscores the power of leveraging existing assets. The choice to become a landlord was facilitated by a series of strategic updates to the property that enhanced its appeal and functionality without incurring massive costs.

Strategic Property Updates

The updates were meticulously targeted:

The only cost we chose to forgo because it was substantial was a privacy fence. A lot of owners do that and it certainly made sense to start. It also made sense during a scorching housing market to keep recycling her income to buy more rental homes, so that’s what she did. However now that interest rates are high and buying more rentals is on hold for her, let alone other risky investments, we plan to add a fence to this home as soon as the 3 year + resident moves. (see Why Satisfied Renters Are a Goldmine in Modern Rental Investing)

It’s surprisingly rare to see an owner add a fence to a rental. Most fenced homes come to the market after the owner put them in directly or as a builder add on. As noted the cost is substantial but that shouldn’t be a major factor in considering this project if you are making other risky investments. Aside from perhaps on the coast (hurricane risk can still be mitigated with techniques such as air flow gaps) adding a fence to a rental property is almost always one of the best, and lowest risk investments one can make in today’s high interest rate environment. They typically come with almost no risk, last decades (and pay off for decades), and return your entire investment within 5 years for most homes and often 2-3. These days without leverage those kinds of returns, especially risk free, are almost unheard of.

These enhancements were critical in transforming the property into one that could command a higher rent, thereby doubling the income potential from her initial monthly mortgage payment.

The final touch to maximize this homes rental value is a privacy fence. Our next set of photos will be improved dramatically (lights always on). We’ve only had 4 residents in 10 years so they aren’t updated as often as most.

Financial Discipline and the Path to Expansion

The financial discipline exercised during the initial home purchase set a solid foundation for what would become a fruitful investment journey. By securing a low monthly payment of $600, the property was able to generate a significant positive cash flow right from the first lease, which was set at $1200 per month. This positive cash flow was the catalyst that allowed for further growth and expansion in the real estate portfolio.

Growth Through Reinvestment

The profits generated from the rental were judiciously reinvested into acquiring additional properties, expanding her portfolio to three rental homes and a buildable lot. While the acquisition of a lot was contrary to typical cash flow-focused advice, it represents a strategic diversification of assets, demonstrating a balance between immediate cash flow and long-term property appreciation potential.

Tax Benefits and Sustainable Wealth Creation

One of the most compelling aspects of her journey is the double benefit experienced during tax season. After her first full year of filing taxes as a landlord, she reported higher income than ever before but paid less tax, showcasing one of the key advantages of real estate investing—tax efficiency. Rental property ownership offers various deductions and depreciation benefits, which can significantly lower tax liabilities while boosting income.

Navigating Challenges with a Focus on Resident Satisfaction

In recent times, inflation, economic strain on renters, and rising fraud levels have posed new challenges to landlords across the industry. Despite these hurdles, the decision to prioritize resident satisfaction and accept below-market rents has proven beneficial. This approach has fostered long-term tenancies and minimized tenant turnover, which are critical factors in maintaining steady rental income and reducing operational stress.

The Benefits of Long-Term Tenant Retention

By focusing on exceptional care for proven high-quality residents and accepting slightly lower rents, she has been able to enjoy low stress, reduced tax burdens, and sustainable profitability. This strategy emphasizes the importance of quality over quantity and demonstrates that a focus on tenant satisfaction can lead to substantial long-term benefits.

Example: At the time of this writing one of these 3 homes has been occupied since the moment it was first built which is going on 2 years now. It was a very high price at the time of move in, and is now about market rate. One has been occupied for just under 4 years and is a couple hundred below market rate or $200 X 12 = $2400. That is about half of the average turnover for landlords who’ve had tenants in place for 4 years. It was at market rent for two of those years and the largest maintenance cost in that time has been patching the roof after Hurricane Florence. The third house has a resident in place for the first 4 years, but has since had a turnover about every 2 years. It’s currently occupied with a resident who just finished their second year. Since 2020 these 3 homes have experienced a combined vacancy of about 2.5 months. To demonstrate the benefits of focusing on keeping happy residents in place as long as possible, at the end of November 2024 we compared the cash flow statement for these 3 properties to another owner famous for digging in on unrealistic rates and the comparison would probably be eye-opening for most rental investors. The housekeeper had income of $65k on 3 entry-level homes in a smaller city, while the owner focused on rental rates had just $20K more on 6 similar homes in a major city. The homes with frequent turnover due to having peak rates also had 100% more repair cost so that the net difference between a 3-home portfolio and a 6-home portfolio was about $15K. DO NOT focus on rate or you will pay the price. This comparison was only for 2024 but we just outlined that these homes have been occupied almost non-stop from the beginning of service. Over time these three homes will crush the performance of the 6 home portfolio. Sometimes it’s shocking in our industry how much money landlords can lose and never realize the mistakes they have made. If you’re doing it right and not having terrible luck you should be making a ton of money. That’s the power of a resident satisfaction profit model.

Key Takeaways for Rental Investors

Conclusion

The journey of a housekeeper to a successful rental property investor encapsulates the essence of smart, strategic real estate investing. It highlights how anyone, regardless of their starting point, can build a profitable and sustainable rental property portfolio. By focusing on strategic property updates, disciplined financial management, and a resident-centric approach, rental investors can navigate the complexities of the market and achieve long-term success and wealth creation.