Master of the House

Patrick Bigsby is an alumnus, former employee, and lifelong wrestling fan of the University of Iowa. Sometimes, he tweets.

Grad students have a long tradition of hustling for cash. If the pages of GradHacker are any indication, we’ve been trying to supplement our income with all means imaginable: freelancing, side gigs, investment, and even chasing a corner office at GradHacker HQ. Sure, all of this extra work also counts as professional development and might even lead to a new career but, if you’re like me, money talks.

However, one income opportunity has remained unexplored, and it just so happens to involve a commodity ubiquitous to the neighborhoods surrounding universities nationwide: rental property. Nearly every student has put in a stint as a tenant at some point in their academic careers but, despite the potential profits, few switch to the other signature block on the lease and become landlords.

To learn more about whether grad students should consider moonlighting as landlords, I spoke with Katie, who will graduate in December with her M.S. in business analytics from the University of Iowa. In addition to being a full-time student and teaching assistant, Katie is a landlord. I was surprised to learn how well these two sets of responsibilities cohere and why Katie thinks more grad students should consider real estate as a potential source of income. Below are the highlights of our conversation.

P: How did you get started in the landlord business?

K: I’ve been a landlord since 2014, but I’ve been trying to be a landlord since much longer than that. When you get to your mid-to-late 20s and you’re working, you get to that point where you either have kids or you get some major hobbies, because you get kind of bored. You don’t have the school year and things are just getting a little monotonous. At some point I became interested in finances and I decided that was my hobby. At the time I made decent money and didn’t have very big expenses but somehow I managed to get a little bit of credit card debt. It wasn’t much but it was just that I wasn’t paying it off. I thought ‘I’m a smart person, I shouldn’t have this debt, it’s ridiculous. I’m going to fix this.’

P: But why real estate?

K: I started reading a book called Rich Dad, Poor Dad, which a lot of people might know, and started to learn about how to take care of your finances. It began with getting a handle on spending and figuring that out and within a matter of months I had that taken care of and it felt really good. I thought, ‘that author has all kinds of books he’s endorsing, so let’s see what’s out there.’ I started reading all of his stuff, which led me to start looking into real estate. He pushed that as a way to make a lot of passive income - you don’t have to ‘go to work’ like a job. You have to put in effort or you won’t get anything back but, with real estate, after you put in the effort to get it, you could theoretically just pay someone to watch it and collect the money. And that was a nice thought. I did a lot of research to figure out how to know what’s a good property, what to look out for, how do you be a good landlord. It took quite a while and I took my time with it, but eventually I bought the property I have now in 2014.

P: And the whole time you were looking, you had the idea of renting to someone in mind?

K: Everything I was looking for was with that in mind. I was very determined to start and I really wanted to get a property going. The big thing is knowing what’s a good deal and it took a while to feel confident in my analysis. I think the market is still pretty hot for properties, but I got kind of lucky when I was screening the listings. I really can’t afford a major property; a fourplex or something like that would be out of my range. So I was really mostly looking into duplexes because you can have two separate units, but still only have one roof, one yard, etc. to take care of. Also, the tax structure in the area for triplexes and larger properties means the taxes are nearly double. So it’s a little easier to make money on duplexes, especially right away.

P: I imagine it would be tricky to find the right property for that reason.

K: There aren’t that many duplexes in town and not that many I could afford. Some of them are pretty expensive and they sell quickly because other people have the same idea that I do. The place that I have is technically a single-family house that someone converted to a duplex, with a door between the units that we just keep locked on both sides. The way it was listed, you couldn’t tell that easily. When I first saw the listing, I was looking through the pictures and thought it might be set up exactly the way I wanted but it just wasn’t clear. So I wanted to go look at it before anyone else figured that out or before they changed the listing. I spent maybe 5-10 minutes just rushing through to eyeball it and making sure it looked like what I thought it looked like and had the potential I thought it had, and then I offered right away.

P: I get the impression you would recommend being a landlord.

K: I would recommend it, but only if you prepare! I think a lot of people are scared and think its really risky to invest in real estate. I would say that, yes, it can be risky but you can minimize that risk just by knowing your stuff.

P: What is the ideal way to get started?

K: The ideal starting point would be reading up on everything you can about real estate investing, the benefits, the drawbacks, what makes a good landlord, what you need to look out for. One of the big things they talk about is the challenge of screening people, and that’s a huge thing. You’re going to hear all kinds of sob stories and you’re going to want to help that person but sometimes that’s not in everyone’s best interest - not even theirs. Probably the most important thing I learned is that if someone doesn’t have a deposit right away and they ask if they can give it to you in a month or two, the answer is no. If they don’t have it now, they’re going to struggle to have it in two months. You’re not setting them up well especially if you end up having to kick them out because they can’t pay.

P: How has becoming a full-time grad student affected your landlord responsibilities?

K: You know, not really at all. It’s nice that I had it established because it took a lot of money up front to fix up the property; wanting a good deal meant I had to be willing to solve some problems. The bottom unit was terrible and I spent nearly $20,000 on the property in the first few years. I was living in it at the time so it was really pretty stressful and I wouldn’t recommend doing that part while you’re in school. If anything, though, school made being a landlord easier because it meant I could be there at random times in the middle of the day. Before, working at a full-time job where I didn’t get much time off, it was harder for me to be around to take care of that stuff.

P: So school and real estate haven’t conflicted?

K: It’ll be interesting because I’m going to be leaving for two and a half months for an internship so that will be a little challenging. Thankfully, I have my renters locked in for next year. Otherwise it would have been really bad so I had to talk to them early about it. If they weren’t going to stay, I’d have to find someone before I left and often it can take months of showing the place. People can be flaky - they think they’re interested but they’re not. So I’m lucky in that respect. I purposefully did not raise the rent because I really wanted them to stay to make that easier.

P: How do you find the ideal tenant?

K: Well, I’m always looking for a nice grad student or maybe a young couple just out of school. I mostly try not to have crazy college kids. It might just be my experience, but grad students tend to be quieter. I also screen them through an online background/credit check company.

P: Would you ever rent to any of your classmates?

K: I would consider it, but I’m hesitant to rent to anyone that I know because you don’t want it to affect your relationship outside of renting. I don’t know that it would, but if someone thinks they’re going to get special treatment or something like that, I wouldn’t want to mix those relationships. But some of my classmates do know I am a landlord. I don’t try to hide it.

P: You’re making this sound a lot better than most of the jobs I had while in school.

K: It takes a lot more time to have a regular job. If I’m a waitress, for example, I have to really hustle for it. Now that I have the house in place, I don’t have to put in that much effort for the payoff every month. If something breaks, I have to put in some unexpected effort but it’s not that bad. Most months I do nothing other than take care of the property, mowing the lawn and things like that. But even that can be hired out and I still get a decent payout in rent. Since I live in half of it, the upkeep also goes toward my living expenses, just with someone else helping to pay for those expenses.

P: Do you see yourself continuing as a landlord after graduation?

K: Yes! Actually, I’m only going back to school to enjoy my job while I’m in the process of becoming a real estate mogul. Business analytics is a side hustle, but the real estate stuff is my end goal.

Thanks to Katie for talking with me! Have you considered becoming a landlord as means to supplement your income while in school? Any success stories, tips, or advice to share? Let us know in the comments or @GradHacker!

[Image by Flickr user Rich Bruchal and used under a Creative Commons license.]