Invest in Rental Property

What Should Matt Do With His Rental Property

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Table of Contents  
  1. The American Dream
  2. Putting Yourself Out There
  3. Show Notes

The right rental property is a great investment and a great form of passive income. But the wrong rental property, like the one Matt bought, is neither of those things. What should Matt do with his rental property?

The American Dream

Most of us were brought up with the idea of the American dream, and homeownership has been sold to us as a fundamental part of that dream. But what’s so wonderful about owning a home?

Is it a great investment? No, it isn’t, not if you’re planning to live in it yourself. An investment is something that makes you money. A house does not make you money, not even after you’ve paid off your mortgage because you still have to pay for things like repairs, maintenance, and property taxes.

Ideally, your home does make money once you sell it, but there is no guarantee of that as we’ll see when we look at Matt’s numbers.

Owning a home certainly doesn’t make your life easier either. If something in your apartment needs to be fixed or replaced, what do you do? You call the landlord, and he or she takes care of it (a good landlord, we know there are bad ones out there). If something needs to be fixed or replaced in your house, it’s your problem and your expense.


And owning a home can be limiting. If you get a job offer in a different area, you have to do something with the house. You can sell it but that can take a lot of time, and you might lose money. You can rent it out but what if it sits empty for a year as Matt’s did?

We’re not saying there aren’t valid reasons to buy a home, and sometimes we do things for reasons that have nothing to do with money. That’s okay, money isn’t everything, but much like the American dream itself, when it comes to the wisdom of buying a home, we’ve been sold a bill of goods.

The Jersey Devil

Matt bought a condo in 2008, one of the worst times in history to buy a home. He paid $175,106. Now, ELEVEN years later, it’s worth $147,391. Okay, I think most of us understood that flipping houses was a bad real estate investment but we probably thought that after owning a home for ELEVEN years was a good investment, within that amount of time, the value would go up.

Jersey Devil

Well read it and weep. The place is worth $27,717 LESS, ELEVEN years later. I’m not a big proponent of home ownership for a variety of reasons, not least of them financial, but I’ll admit to being shocked that not only did the condo not increase in value more than a decade later but it was actually worth nearly $30,000 less.

The Accidental Landlord

Years ago, Matt hit the skids financially. He moved in with his brother to save money and rented out the condo. While rental property is a better investment than a home you live in, it has to be the right rental property with a good property manager or management company who finds good tenants and keeps the house continuously occupied.

Matt’s rental property experience hasn’t always been smooth sailing. He’s typically had to find a new tenant every year, and there was a full year during which the property sat empty. The property costs about $3,500 a year to own, and he’s lost about $200 a month even when the place was rented.

Shaking the Devil Off

Matt moved to Boulder, Colorado a couple of years ago and turned the responsibility of dealing with the condo to a property manager. But that didn’t alleviate the stress. He knows buying the condo was a mistake and it still weighs on him.


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What can he do? He could sell the condo through Roofstock. Roofstock is a turnkey rental property company. They do everything from finding a property to putting a tenant in place, to the day to day management. This option is appealing because he just wants to be rid of this thing and the constant reminder of the mistake it was. But if he does that, he’s going to take a significant loss.

money making ideas roofstock

$30,000 is a big price to pay for a mistake.

Instead, he needs to put layers between himself and this property. He has a property manager, but the two of them have a lot of contact. Matt also has a VA who has dealt with rental properties in the past. From now on, all communication from the property manager should go to the VA. If there is an issue he or she (I don’t know which it is) can’t deal with, then it goes to Matt.

The next layer deals with the money aspect of running the property. Rather than seeing money coming in (or not) and out from his day to day checking account which he has to look at often, he should set up a dedicated account to deal with the property. Stick $10,000 in there, hand it off to the VA, and only hear about it when it needs to be topped up.

Now the rental property and its issues aren’t staring him in the face every day.

Overprescribing Value

The title of this article is “What should Matt do with his rental property?” but there is a second question. Can Matt buy a house in Boulder? Because that’s what he wants to do.

Why though? Why do so many people want to buy a house? We already saw that a home is not an investment, that it’s a lot of responsibility and it ties you down.

The reason so many people want to buy a house even when doing so would torpedo their finances is something called overprescribing value. Homeownership represents so many things, and not all of them are necessarily true.

Buying a home means you have money, that you’re an adult, that you’re responsible, that you’re successful. It can mean those things, but you can buy a house without actually meeting any of those criteria.

Remember When Matt Was Broke? Andrew Remembers

Matt is in a really good place financially right now. He has a huge emergency fund; he has investments, he owns or is a part of a few successful businesses. He’s come so far from when he and Andrew first met.

And now he wants to buy a house. In Boulder. The fifth most expensive housing market in the country.

“Boulder is historically incredibly popular and in high demand,” she said. “So it appears the affordability issue is starting to kick in.”

The sky-high prices in Boulder make the city a seller’s market, Moye said.

The Jersey Devil, which he bought at the top of the market, where Boulder is now, is perhaps Matt’s biggest regret and more than a decade later, the continued bane of his existence. And now he wants to give it a twin!

The thing is, he could do it. He has the money for a downpayment. But it would wipe him out cash wise. And what if a meteor hit the Boulder house? Now he has two mortgages and no place to live. No!

The Jersey place can sit empty for another year when it is rented; Matt can still afford to make $100 less per month in rent than his mortgage payment. He can patronize any of Boulder’s many breweries and make it rain.

Unless he buys a house.

Be a Hero

It’s not that Matt can never buy a home in Boulder. He loves it there; he was friends there, he’s not tied to any location for his job because he works from home. But he has to wait for the right situation.

The right situation to buy a home in Boulder or anywhere else is to swoop into a situation that needs a hero.

One day there will be a seller who needs to unload their house in Boulder, like yesterday. Maybe they’re about to buy that house now, at the top of the market. And guess what? According to Ray Dalio, a recession is coming and soon.

The owner gets laid off in the recession, and the mortgage eats up their emergency fund in a couple of months. The house has got to go. The owner is going to lose money, a lot of it but there’s no other choice.

Matt has been waiting for an opportunity just like this. He swoops in and rescues the owner from being foreclosed on which has all kinds of negative consequences and gets an excellent deal.

Will Matt’s Condo Ever Make Money?

Yes, eventually but he just has to be patient. He could refinance for a better interest rate, and that would save him potentially thousands of dollars over the life of the mortgage. Inflation is going to help out too.

Inflation is a bad thing when it comes to our money. Each year, inflation means our money is worth a little less, about 3% a year. The cost of goods and services goes up, but our money doesn’t keep pace because of inflation.

But inflation is a good thing when it comes to our debt because each year, inflation means our debt is worth a little less too. So the rent Matt can charge for the condo will go up while the debt he owes on it will go down. So he’s got that going for him.

Putting Yourself Out There

Money is one of the most taboo subjects, and it’s hard to put your financial affairs out there for anyone listening or reading to consume and pick apart. Both Andrew and Matt do it. The difference is, Andrew is pretty much the perfect financial specimen while Matt has had his ups and downs.

But he’s 100% honest. He shares his mistakes and almost mistakes so people can learn from them and not make the same mistakes themselves. So if Matt sharing his stories has prevented you from making a mistake, that’s why he did it.

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Show Notes

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Candice Elliott - Senior Editor
Candice Elliott is a substantial contributor to Listen Money Matters. She has been a personal finance writer since 2013 and has written extensively on student loan debt, investing, and credit. She has successfully navigated these areas in her own life and knows how to help others do the same. Candice has answered thousands of questions from the LMM community and spent countless hours doing research for hundreds of personal finance articles. She happily calls New Orleans, Louisiana home-the most fun city in the world.
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