Transcription
What were some of the biggest challenges, either physically or mentally, that you had to overcome in order for you to be able to invest in rental properties?
I would say the biggest challenge was managing them myself. I didn't have a team, and I didn't understand that real estate really is a team effort. And so I thought I was focused on the cost. I was tripping over dollars to pick up the pennies, and I thought, well, I can just manage it myself and I'll save myself the 10% property management fee.
And so then I thought, well, wait a minute, there might be a safety thing involved, like if I'm meeting people at night to show my rental house, and what if they're a bad person? So then I talked a friend into investing in rental real estate with me, and we paired up. We wouldn't go to meet a prospective tenant by ourselves; we'd always have two people, and she had a great W-2 job. She showed me her tax return once, and I was gobsmacked at how much money she paid to the federal government. It was over $15,000, and her only deduction was her 401k contribution.
And I immediately thought, "Oh my gosh, I have never paid that much, you know, and I had a not-as-good-a job as she did, but a pretty good job." And so I said, "You really need to invest in rental real estate." So we went to the edge of town where they were developing new homes. And we bought directly from the builder. I mean, we weren't very sophisticated at all. So we had a mortgage. We had $100 a month positive cash flow. And this friend of mine just was like, "$100 a month, that's nothing. You know, I'm not going to get rich doing this. $100 a month."
And I tried to explain to her about the depreciation deduction. She just didn't get it. And I said, "Well, just wait. Just wait. Give it time." And then all of a sudden, she did her taxes, and for the first time in her life, she got a $4,500 tax refund. She had never gotten one before. And so then she called me up and said, "Okay, Leslie, now I get it. Now I see how we can make money through real estate."