Tag: real estate

Don’t Buy a Cute Condo: Do This Instead to Create Wealth.
Have you ever dreamed about owning a cute condo in a bustling city?

You know, the type of place where you can have your friends over and everyone gushes over how great your condo is?

If so, you’re not alone.

Many young professionals follow a traditional path in hopes of buying that cute condo as a “starter home.”

First, they spend a lot of money for an education to get a good job.

Then, after a few years of working that good job, they think about buying a starter home instead of continuing to rent.

These young professionals go into the home-buying process knowing that the home they may purchase will only be a temporary fit.

Even though it may be years down the road, they tell themselves they can simply upgrade if a significant other or children enter the picture.

For professionals living in cities, the search for a starter home typically leads them to condo buildings.

This makes sense. Condo buildings are attractive for a number of reasons.

I get the temptation to buy a cute condo.

Condo buildings are usually in locations ideal for young professionals.

Condo buildings oftentimes come with enticing amenities.

Plus, condo buildings typically offer one or two bedroom units, the perfect size for an individual.

Because of these features, condo buildings tend to attract other young professionals, making the building even more attractive.

While I never owned a condo in Chicago, I happily rented directly from owners in condo buildings for 10 years before buying my first rental property. So, I certainly appreciate the allure of living in a condo.

All this being said, I highly encourage you to think twice before buying a condo, or any other “starter home” for that matter.

That’s because owning a unit in a condo building comes with two significant downsides: (1) the actual cost and (2) the opportunity cost.

Instead, I recommend you think about these two alternatives to buying a starter condo:
1. Continue renting until you’re ready to buy a more permanent residence; or
2. Buy a small multifamily building where you can live in one unit and rent out the other units.
Before covering these two alternative ideas, let’s talk about the (1) actual costs of owning a condo and the (2) opportunity costs of owning a condo.

What are the actual costs of owning a condo?

The actual cost of owning a condo is like owning any other property, with one additional cost to be acutely aware of.

Besides the mortgage, insurance, taxes, and maintenance, condo buildings involve an additional cost that can be very expensive:

HOA Dues and Special Assessments.

Remember all those attractive amenities that drew you to the building in the first place?

Those amenities come with a price. Oftentimes, a substantial price.

On top of the HOA dues, be aware of unexpected special assessments, which can wreak havoc on your finances.

Special assessments may be needed to cover major maintenance or renovation projects in the building. When special assessments are due, you don’t have a choice but to pay up.

Ask any former condo owner why they no longer own a condo. My bet is most of them will blame the HOA dues and special assessments.

Photo by Point3D Commercial Imaging Ltd. on Unsplash

The other reason you’ll hear from former condo owners?

They outgrew their place.

This should not come as a surprise to any single person who buys a condo while also seeking a significant other.

You know how the saying goes: first comes love… then comes marriage… then the condo’s got to go.

That means additional money to prepare your condo for sale, for closing costs, and for moving expenses.

By the time you add up all these costs, you likely won’t walk away with any profit from owning a condo as a starter home because you only gave yourself a few years to benefit from appreciation.

Even if you do make a profit, it’s a gamble. Owning any home for a short period of time is not a good investment strategy. The transactional costs are simply too high.

Besides these actual costs, you should also consider the opportunity cost of owning a condo early in your career.

What is the opportunity cost of owning a condo?

While you may be OK with taking on the risk and these actual costs, don’t ignore the opportunity cost of owning a condo.

The opportunity cost refers to what you are losing out on by choosing to buy a condo.

In this context, the opportunity cost is that whatever you paid for the condo could have been used to invest in other assets. For example, instead of a down payment on a condo, you could have invested in stocks.

Or, you could have purchased a rental property that generates long-term wealth for you and your family (or future family). More on that below.

So, before you opt for the cute condo, think about both the actual costs and opportunity costs involved.

There’s nothing wrong with renting until you are ready to buy a more permanent home.

Owning real estate is a long-term proposition. The conventional wisdom is that you should not buy a property unless you plan to hold it for at least 7-10 years.

If you are not planning on staying in your starter home for at least that long, just keep renting. Invest your money elsewhere.

Save yourself the headaches of being a homeowner while building your net worth through an increased saving rate and other investments.

This is not groundbreaking information. This is Personal Finance 101.

Yet, many young professionals can’t resist the temptation to finally own a property after years of school and finally earning an income.

It’s up to you to set aside your ego, keep renting, and build a strong financial foundation.

By the way, many smart people think it’s financially foolish to buy a primary residence instead of renting.

And, I’m not just talking about buying a cute condo early in your career.

These really smart people think it’s almost always a better idea to rent instead of own in any circumstances.

While it’s beyond the scope of this post, you can find an in-depth analysis on the question of buying vs. renting in this video from Khan Academy.

I believe in the power of real estate as an asset class, especially small multifamily properties.

Instead of buying a condo for a starter home, consider these four reasons to invest in rental properties:
When these benefits combine, real estate investors can generate significant wealth over the long run.

Below is a quick breakdown of each of the four main benefits.

For a more detailed description of each benefit, you can read my series on investing in real estate here.

1. Rental property cash flow is king.

With cash flow, you can cover your immediate life expenses. For anybody hoping to reach financial freedom, it is essential to have income to pay for your present day life expenses.

For my money, cash flow from rental properties is the best way to pay for those immediate expenses.

If your present day expenses are already covered, you can use your cash flow to fund additional investments.

That might mean buying another rental property or investing in another asset class, like stocks.

2. Long-term wealth through appreciation.

Appreciation simply refers to the gradual increase in a property’s value over time.

While cash flow can provide for my immediate expenses, appreciation is all about the long-term benefits.

Like investing in stocks over the long run, real estate tends to go up in value. The key is to hold a property long enough to benefit from that appreciation.

To benefit from appreciation, all I really need to do is make my monthly mortgage payments, keep my property in decent condition, and let the market do the rest.

Photo by Krzysztof Hepner on Unsplash

3. With rental properties, other people pay off my debt.

When I buy a rental property, I take out a mortgage and agree to pay the bank each month until that mortgage is paid off. At all times, I remain responsible for paying back that debt.

However, I do not pay that debt back with my own money.

Instead, I rent out the property to tenants. I do my best to provide my tenants with a nice place to live in exchange for monthly rent payments.

I then use those rent payments to pay back the loan.

As my loan balance shrinks, my equity in the property increases. Equity is just another way of saying ownership interest.

When my equity in a property increases, my net worth increases.

4. Real estate investors earn massive taxes benefits.

When you earn rental income, you must report this income on your tax return. Rental income is treated the same as ordinary income.

However, the major difference between rental income and W-2 income is that there are a number of completely legal ways to deduct certain expenses from your rental income.

Common rental property expenses may include mortgage interest, property tax, operating expenses, depreciation, and repairs. We’ll touch on a few of these deductions below.

With all of these available deductions, the end result is that most savvy real estate investors pay little, or nothing, in taxes on their rental income each year.

Yes, you read that right.

I’ll say it again, just to be clear:

Most savvy real estate investors legally pay nothing in taxes on their rental income each year.

I highly recommend you consider house hacking if you’d like to start investing in real estate.

When you buy a small multifamily property, you can live in one of the units and rent out the others.

If you pick the right property, you can end of living for free because your tenants pay your mortgagee.

The strategy of living in a building you own while tenants pay for it has been around for ages. Brandon Turner popularized the name “House Hacking” for this timeless concept.

You can read all about house hacking on BiggerPockets here.

For even more information on house hacking, Craig Curelop wrote a book for BiggerPockets called The House Hacking Strategy: How to Use Your Home to Achieve Financial Freedom.

My wife and I house hacked for years before buying our forever home.

Without a doubt, there is no better strategy for entry level real estate investors than house hacking. We talked about the financial upside earlier in this post.

Besides the financial upside, it’s like landlording with training wheels. Since you live on site, you can more easily learn how to manage a rental property, including responding to tenants and handling routine maintenance.

The naysayers will say something like, “I don’t want to live with my tenants. They’re going to stress me out. I don’t want to be bothered at 2 a.m.”

Ignore them.

My wife and I lived with our tenants for five years at our first property and two more years at a subsequent property. We did this while working full-time jobs as lawyers and raising two kids (now three kids).

Because we didn’t listen to the naysayers, we now have four income-generating properties and our “forever home” just outside Chicago.

Even though we’re no longer living for free, the income from our rental properties is enough to cover the expenses of our home.

Before buying that cute condo, think about house hacking instead.

There’s no better time to house hack than at the beginning of your career. This one decision can pay massive dividends for years to come.

No, your friends might not gush over your cute condo.

But, you’ll be well on your way to generating long-term wealth for you and your family.

Even if you’re not just starting out in your career, house hacking is still an incredible wealth-building strategy.

My wife and I house-hacked until I was nearly 40 years-old with two kids. We wouldn’t be where we are today if we instead opted for a cute condo.

Did you buy a starter home in your 20s or 30s? Any regrets?

What do you think of house hacking?

Let us know in the comments below.
October 10, 2025
Refinance Now or Wait for Mortgage Rates to Drop?
The big news this week was that the Federal Reserve cut rates for the first time in 2025.

Naturally, those of us who bought homes in the past couple of years are starting to think about refinancing.

In case you missed it, here’s a key takeaway from the announcement, as reported by CNBC:

The Federal Reserve on Wednesday approved a widely anticipated rate cut and signaled that two more are on the way before the end of the year as concerns intensified over the U.S. labor market even as inflation is still in the air.

With the rate cute, the important question people are asking is: should I refinance my mortgage now or wait for rates to drop even lower?

Today, I’ll share exactly what I’m doing with my mortgage.

First, let’s discuss one common point of confusion.

The federal funds rate is not the same thing as mortgage rates.

When we see news like we did this week that the Fed is cutting rates, many of us think that means mortgage rates automatically drop.

Nope.

The federal funds rate is not the same thing as a mortgage interest rate. That said, mortgage rates are indirectly tied to the federal funds rate.

No need to overcomplicate things. The typical homeowner (and I include myself in this category) does not need to fully understand how mortgage rates and the federal funds rate relate to each other.

Instead, the typical homeowner just needs to know that when the Fed cuts rates, mortgage rates also tend to drop, but not always.

For those curious, here’s a quick synopsis from Bankrate:

The U.S. Federal Reserve sets borrowing costs for shorter-term loans by changing its federal funds rate. This rate dictates how much banks pay each other in interest to borrow funds from their reserves, kept at the Fed on an overnight basis.

While this rate isn’t the same as the rate you’ll pay for your mortgage, they are related. As the cost for banks to borrow increases or decreases, the cost for you to borrow tends to follow suit.

And when the Fed doesn’t change the federal funds rate, it generally encourages lenders to maintain mortgage rates in the current range.

The takeaway is that when the Fed cuts rates, it’s likely that mortgage rates will also drop.

But, there’s one more piece to the story.

Mortgage rates often drop before the Fed actually cuts rates.

It may sound backwards, but mortgage rates usually factor in pending rate cuts before the Fed actually announces its decisions.

To that point, look at how mortgage rates were already dropping over the past month in advance of this week’s announcement:

The Federal Reserve’s rate cut this week is rippling through the housing market, sending mortgage rates lower and spurring a jump in refinancing.

The 30-year fixed mortgage rate averaged 6.26% for the week ending September 18, down from 6.35% last week, according to data released Thursday by Freddie Mac.

This is the fourth-straight week of declines as mortgage rates fell in anticipation of the Fed’s quarter-point rate cut on Wednesday.

As you can see, mortgage rates were already declining for weeks in anticipation of the Fed’s rate cut.

The point is that it’s not always clear when the right time to refinance is. It’s not as simple as saying “the Fed cut rates, so now I’ll refinance.”

To help you make a good decision, I’ll walk you through my current thought process when it comes to refinancing.

First, here is some context about my personal situation.

Photo by Austin Distel on Unsplash

I bought my home in early 2024 when rates were high.

When I bought my home in early 2024, we took out a 30-year fixed-rate mortgage at 6.875%. At the time, we were very pleased with a rate under 7%.

In the back of my mind, I hoped I would have a chance to refinance in the next few years. But, I didn’t hinge my decision based on whether I could eventually refinance or not.

I’ve long been an advocate for buying a house when the time is right in your life, regardless of mortgage rates.

My wife and I decided early last year that the time was right to buy our “forever home.”

I was about to turn 40. We had two kids and were thinking about a third. It felt like we had started to outgrow our small apartment in the city.

Of course, we enjoyed the short commute downtown. We liked walking to stores, restaurants and coffee shops. But, those opportunities to enjoy the city were harder to come by with two young kids at home.

Plus, my daughter was one school year away from starting kindergarten. We thought it would be nice if she made some friends in the neighborhood before kindergarten started.

Add it all up and the time was right for us.

Besides these personal factors, I had a suspicion that home prices were only going up.

For years, buyers in the Chicagoland area have struggled with a limited supply of quality homes. I had been watching the market and observed that the good houses went under contract quickly.

I had no way of knowing for sure that prices would continue to rise, but time has proven that we were right to buy when we did.

Since early last year, prices have only gone up in Chicagoland, despite elevated mortgage rates.

That’s why my advice is to buy a home when you’ve decided it’s the right moment in your life to do so. Make that decision regardless of what current mortgage rates are.

In other words, ignore mortgage interest rates.

Here’s why.

Why do I recommend you ignore mortgage rates when buying a home?

There are really only three things that can happen to mortgage rates over time.

Mortgage rates can:
1. Stay the same.
2. Go up.
3. Go down.
In any of those three scenarios, there’s no point in basing your decision to buy a home only on the current rates.

Let me explain.

Let’s say you have a crystal ball and can look three years into the future. Looking into your crystal ball, let’s play out each of the three scenarios mentioned above.

1. Your crystal ball shows you that mortgage rates stayed relatively consistent.

Since rates stayed the same, there would be no point in waiting to buy a home because of rates. The rates three years from now are the same as they are today.

By waiting, you’re likely going to experience that homes have gotten more expensive. The longer you wait, the more expensive they are going to be.

This is exactly what has happened in Chicagoland where home prices are up more than 9% since just last year.

On top of the recent trends, the historical data confirms that homes have become more expensive. In 2024, U.S. homebuyers paid nearly double what they paid for homes in 1965, accounting for inflation.

So, even if rates stay the same, prices are likely to go up the longer you wait. In this context, you shouldn’t sit around waiting for them to drop.

2. Your crystal ball shows you that mortgage rates went up.

If rates go up, it’s easy to conclude that it’s a mistake to delay your home buying decision. Higher rates, combined with higher prices, is… not good.

Let’s move on to the third scenario, which is the scenario people sitting on the sidelines are usually waiting for.

3. Your crystal ball shows you that mortgage rates went down.

This is the scenario that many people are waiting for. When rates go down, you can afford a more expensive home. That’s a good thing, right?

Not so fast.

Do you think you’re the only person sitting around waiting for rates to drop? For the same reasons that you’re waiting, many other people are also waiting.

So, what happens when lots of people are waiting to buy the same thing?

Demand goes up. When demand goes up, you have more competition to buy that same house. That means prices go up.

You’ll end up paying more money for the house, even with a lower interest rate.

Take it from me, bidding wars are not fun. I would much prefer to get the house I want without the added competition.

If mortgage rates end up dropping later on, you can always refinance (the topic of today’s discussion).

You may pay more on a monthly basis in the short term, but long term, you have the house you want at the best available current rate.

So, there you have it. No matter what happens to rates, in my opinion, you’re best off shopping for a home when the time is right in your life.

And, this leads us back to our question of the day: is now the right time to refinance?

Photo by Kai Pilger on Unsplash

Should I refinance now or wait for mortgage rates to drop?

We would need to dust off our crystal ball again to know exactly when the time is right to refinance. Just like everyone else, I cannot predict if mortgage rates will continue to drop.

Rates have already been dropping for the past month in anticipation of the Fed cutting rates this week.

Plus, in the announcement, the Fed signaled two more rate cuts this year. That means rates may continue to drop.

Of course, there’s no guarantee the Fed will cut rates. Economic factors can always lead the Fed to change course. And, further rate cuts do not guarantee that mortgage rates will continue to simultaneously drop.

So, am I personally going to refinance right now?

For now, I’m holding off on refinancing.

My guess- and it’s only a guess- is that mortgage rates will continue to drop. In my current financial situation, I’m OK with taking that risk.

My current rate is 6.875%.

As a general rule, I wait to refinance until I can qualify for a rate at least 1% lower than my current rate. For this decision, I’m waiting until rates drop into the “5s.”

Besides the monthly cost savings, which could be substantial, I am excited for the potential emotional high of dropping my rates into the “5s.”

By the way, this is the emotional side of money that has nothing to with the numbers. It will just feel good to be under 6% for the next 30 years.

How will I know when I can qualify for a rate under 6%?

This is why you need to have a great mortgage broker on your real estate team.

I don’t have the qualifications or the time to closely monitor the mortgage rate market. By keeping in touch with my mortgage broker, he’ll know exactly where my head’s at.

Then, he can keep an eye on things for me and let me know when the rate I’m personally eligible for drops below 6%.

Never underestimate the importance of having a great mortgage on your side. The right broker can save you thousands and thousands of dollars over the long run.

If you need help evaluating mortgage brokers, check out my post:

How to Evaluate a Great Mortgage Broker for your RE Team

Is there risk involved with waiting for rates to drop?

Is there risk in waiting?

Absolutely!

Rates may not drop any further. They could even start to go back up.

I’m willing to take that chance right now.

I can comfortably afford my current housing expense, so I’m not desperate for the cost savings that might result from a refinance.

Plus, there are costs involved with refinancing.

Just like when you initially buy a home, there are closing costs associated with refinancing. Those costs can eat away at any savings generated by refinancing if your new rate is not low enough.

There are also time costs involved in refinancing. If you haven’t had the pleasure, it’s not a whole lot of fun to track down and provide all of the required documents to the underwriters.

At this point, those costs are too high for me to justify refinancing. That’s why I usually target a 1% drop in rates, which should be enough to make the cost and effort worth it.

Are you refinancing now or waiting?

Now you know exactly how I’m thinking through the decision on whether to refinance.

I’d like to see a 1% drop before I commit to a refinance. That will save me enough money each month to make it worth it.

It will also give me the emotional high of dropping into the “5s” for the next 30 years.

On the other hand, if rates don’t drop, I’m comfortable with my current situation.

Without a crystal ball, I feel good about this thought process.

Are you currently thinking about refinancing?

What factors are you weighing?

Let us know in the comments below.
September 19, 2025
Don’t Give Up When Being a Landlord Feels Heavy

There comes a time for every rental property investor when the job of being a landlord starts to feel like too much.

It all starts to feel too heavy.

You’ll want to quit.

You’ll convince yourself that it’s much easier to be a passive stock market investor.

When that moment as a landlord comes for you:

Don’t quit.

The long term benefits are too good.

Remind yourself why you bought a rental property in the first place.

I know there are tough moments. I’ve been there. Many times.

In fact, my wife and I had a couple of experiences recently that pushed us close to that point of quitting.

With the passage of enough time to reflect, I’m happy and proud of us for sticking with it.

We’re still on track to achieve financial freedom quicker than we ever could have without our rental properties.

Today, I’ll share a couple of experiences I’ve recently had as a landlord that had me thinking about quitting.

If you’re a landlord, I’m sure you’ve had moments just like these.

Here’s a look back at our recent experience leasing out two apartments.

This past lease renewal season started off looking very strong. We were thrilled that 80% of our tenants signed on for another year.

That left only 2 apartments to turnover.

This was great news because vacancy is a rental property investor’s worst nightmare. Every week that an apartment sits empty is money down the drain.

Vacancy can eat away your entire year’s profits. That’s why we usually offer current tenants the chance to renew at the same rent.

When you do the math, it almost always works out than continued occupancy beats the prospect of higher rent plus vacancy.

When you have an empty rental unit, doubt creeps into your mind. You start telling yourself that you’ll never find a new tenant and your place will sit empty forever.

I know, I know. A bit extreme, right?

But, I’m telling you. That’s where your mind goes. Any landlord out there knows what I’m talking about.

So, when 80% of our tenants renewed for another year, we were very happy. We assumed that meant we would have an easy leasing season.

As it turns out, that was not the case.

Here’s what happened in each of these two apartments.

For one apartment, we received an odd request.

Before these tenants decided to leave, they made an odd request.

As a side note, this apartment was the unit where my wife and I lived for about five years. We brought two babies home to that apartment.

It’s located in the first building we ever bought and will always hold sentimental value for us.

OK, back to the story. This past spring, we actually thought the former tenants would renew for another year. That would have meant 90% of our units would have stay leased for another year, a major win.

When we first approached these tenants about renewing, they indicated that they wanted to stay. They were great tenants, so we were happy.

Then came a unique request.

These tenants were students and wanted to live at home for the summer. They asked if they could keep their stuff in the apartment but not pay rent for July and August since they wouldn’t actually be living there.

We’ve had all sorts of requests from tenants over the years. Keeping an apartment without paying rent for two months was a new one.

I understood the request from their perspective. Rent is a major expense. They didn’t need an apartment for the summer. They liked the apartment, but it was hard to justify paying for something they didn’t need.

The problem from our perspective is not hard to spot. If we agreed to their offer, we would be left with the equivalent of 2 months of vacancy.

Losing out on 2 months of rent payments is the equivalent of foregoing 17% of the total rent for the year.

We thought about it. And as tempting as it was to not have to find new tenants, that arrangement was not going to work for us.

Photo by Kaffeebart on Unsplash

Turnover is a chance to make property improvements.

After they moved out, we took the opportunity to refresh the apartment. We knew this would take some time and result in at least a few weeks of vacancy, but the apartment needed some love.

So, we replaced the flooring and painted the entire apartment. We did some needed repairs in the bathrooms (i.e. caulk, grout, new shower rod).

Plus, we made a point to tackle any deferred maintenance throughout the apartment.

We used a contractor for the work, so our involvement was limited to paying the bills and supervising the projects. Not exactly time intensive, but not exactly cheap either.

When the work was finished, we lined up a number of showings and had the apartment rented out after a few of weeks of effort.

In total, the apartment was vacant for 6 weeks.

What did we learn from this experience?

On the positive side, we now have a rehabbed apartment and fresh tenants. Plus, the apartment was empty for only 6 weeks instead of 8 weeks.

On the negative side, it was stressful to get the apartment fixed up and re-leased.

To state the obvious, it’s not fun spending money to fix up an apartment without a signed lease in place. Every week that goes by, money is going out without any money coming in.

During that phase, you can’t help but doubt yourself as a landlord.

Did we make the wrong choice?

Should we have let the former tenants stay, even if that meant automatically sacrificing two months of rent?

If we had gone that route, we would not have spent any money this year turning over the unit.

We also would have had a less stressful leasing season. We would have saved a lot of time and mental energy if we didn’t have to worry about this unit.

On the other hand, the apartment would still have needed a facelift as soon as it was empty. At some point, we were going to have to do the rehab. Now, that project is behind us.

We also have great new tenants who seem more likely to stay for an extra year or two.

In the end, I’m happy with the decision we made. That doesn’t mean it was right or wrong, but we made it through a unique challenge.

I’m good with that.

Photo by SAJAD FI on Unsplash

The second learning experience involved letting our tenants out of their lease after two months.

In our other vacant unit this past spring, the former tenants bought a condo so needed to move out. They had lived there for two years and were wonderful tenants.

This unit was located in a different building from the one we just discussed. The building is in a terrific location and the units are in great shape.

We’ve never had any trouble finding tenants. This year was no different.

After three showings and very little effort, we happily signed a lease with new tenants. As a bonus, the former tenants had moved out early, so we were able to fill this unit with zero days of vacancy.

All was well… until it was not.

Let’s just say that after about six weeks, it was apparent that the relationship with our new tenants was not working out. The tenants were not bad people, but it was clear that we could not meet their expectations.

Instead of living through a difficult year with these tenants, we offered them the chance to break their lease, without penalty. They accepted our offer and moved out two weeks later.

We all remained civil and amicably split up. The tenants left the apartment in good shape and we all avoided unwanted confrontation.

We re-listed the apartment and found a wonderful new tenant after one showing.

In the end, we lost out on three weeks of rent between leases but now have a very happy new tenant.

Upon reflection, I’m confident this was the right decision for all parties involved.

The tenants could find a place more to their liking, and we could start over with a new tenant.

So, what’s the takeaway from our experiences with these units?

As a landlord, you are running a business. It won’t always be easy.

You have to make business decisions, even when there’s no clear right answer.

Sometimes that means foregoing profit and dealing with confrontation.

In each of these instances, I’m happy with how things worked out. In the first instance, I sacrificed some of my profit this year to improve my asset.

For the second apartment, it was clear that the relationship was not working. Even though we lost some money in the process, all parties involved should now be happier.

These are tradeoffs I would readily make again.

Even with stress like this, I’m not ready to give up on being a landlord.

Compared to my day job as a lawyer, this is nothing.

Should you become a landlord?

The truth is my wife and I know so many people who have owned rental properties but did not like being landlords. There’s nothing wrong with that. It’s not for everyone.

If you’ve been in, or are currently in a similar boat, I hope these experiences resonate with you.

In the end, as stressful as it can be to run a business, this is also what makes being a landlord fun.

What do I mean, fun?

When you are a landlord, you are a business owner. You get to make the final decision. It’s your business and you are in control.

Having that autonomy is a nice change of pace for most W-2 employees.

Still, you may be faced with tough decisions. You may not know what to do in the moment. It’s helpful in those moments to have people to talk to so you can make the best decision possible.

I happen to like being a business owner. However, it’s not for everyone.

If just thinking about making decisions like these stresses you out, I would not recommend that you become a landlord.

If you can handle the job, you can benefit immensely.

Landlords- have you been in situations like this before? How did you handle the stress of the job?

Let us know in the comments below.

September 8, 2025
Dreaming About Rental Properties but Ignoring Money Mindset?
Do you dream about owning rental properties so you can generate semi-passive income while spending more time with your family?

I want to hear about those dreams. What would you do with that time?

Travel?

Exercise?

Read?

It’s so motivating for me to learn what you would do with that kind of freedom.

At the same time, it’s my job to remind you to not ignore key personal finance fundamentals while you’re dreaming about the future.

When it comes to buying rental properties, this is especially true.

Let me explain.

If you’ve been keeping up with the blog, we’ve now learned how to run the numbers on potential real estate deals.

In fact, I showed you that the analysis is not actually that hard. Your job is simply to account for the fixed costs and make informed predictions for the speculative costs.

Then, we did the math together on an actual property in my target zone. By using a real example in Chicago, my goal was to further convince you that running the numbers should be easy.

Finally, we talked about how to evaluate a rental property when the initial math looks bad. The truth is most rental properties are not going to immediately look like great investments. It’s our job as investors to negotiate and look for potential.

By this point, you may be thinking that buying a rental property sounds great, except for one big problem:

How are you supposed to come up with the money for a downpayment?

Great question.

It’s such a great question that it requires us to take a step back.

Before evaluating rental properties, you need to evaluate your personal finances.

It’s no secret that in order to buy a rental property, you first need available money for the downpayment.

Unless you plan on taking on partners or getting the money from family, coming up with a sufficient downpayment is a major challenge.

Yes, there are loan options available that require a smaller downpayment. We’ll soon talk about some of those options. I’ve used loans like this in the past.

Still, a “smaller downpayment” does not mean “no downpayment.”

So, how can you come up with a downpayment?

For a downpayment, you need to have available money.

To have available money, you need a budget that actually works.

To have a budget that actually works, you need honest, powerful life goals.

Does this sound familiar?

It all comes back to money mindset.

When was the last time you checked in on your money mindset?

If you take a look at the Think and Talk Money homepage, you’ll see six main category tabs across the top of the page:
- Money Mindset
- Budgeting
- Debt
- Credit
- Investing
- Real Estate
Each one of these categories builds upon the previous categories.

It all starts with money mindset.

A strong money mindset is the foundation of the personal finance journey. Maintaining a strong money mindset requires constant and intentional thought.

Photo by Pietro De Grandi on Unsplash

I revisit my money mindset every week by taking a quick look at my Tiara Goals for Financial Freedom.

It may seem overly simplistic, but money mindset is what separates people who reach financial freedom from those who struggle to get ahead in life.

Don’t believe me?

Budgeting is really not that hard. We all understand the basic concept: spend less money than you earn. Still, most of us can’t do it.

The same applies to debt and credit. We all know to avoid debt. We know to use credit responsibly. So, why don’t we do it?

Investing can seem complicated at first. Is it really that hard? Entire books and websites have been created to show you how to create massive wealth through simple index funds.

What about buying rental properties? We did the math together. Analyzing deals is not that hard. The impediment for most people is coming up with the money for a downpayment.

You may be in a similar boat right now. You want to buy a rental property but you’re discouraged because you don’t have the downpayment saved up.

It’s not just about how much money you make.

Buying rental properties is not just about how much money you make. Plenty of lawyers and professionals make a lot of money and struggle to come up with any excess money to invest.

Sadly, the struggles don’t just relate to coming up with money for investments.

Lawyers as a profession have long struggled with mental health issues. I first learned about these challenges during law school orientation. Today, I see it in practice.

Being a lawyer is a hard way to make a living. When you work as a lawyer, the hours are intense and stress levels are consistently high.

In 2023, the Washington Post analyzed data from the U.S. Bureau of Labor to determine what the most stressful jobs are. The study confirmed that lawyers are the most stressed.

Of course, lawyers are not alone in struggling in this regard due to long, stressful hours.

The same study showed that people working in the finance and insurance industries were right up there with lawyers as being highly stressed.

Well, what can we do about it?

How can we address these struggles?

Where can we find money for a downpayment?

I have some thoughts.

How motivated are you to truly get ahead in life?

Are you truly motivated to get ahead in life?

Have you worked on your money mindset and found the motivation to actually create a budget that generates savings?

If you’ve successfully created a budget and still need to generate more fuel, have you thought about a side hustle?

When I mention side hustle, is your initial reaction that you’re too busy or important?

Some lawyers and professionals reading this won’t even allow themselves to consider a side hustle. They automatically think, “I’m way too skilled or busy to even think about another job.”

In my personal finance class, we spend a lot of time challenging that notion.

Very few people- and I mean very few- are too important or too busy to take on a side hustle.

For most of us, it’s an excuse.

You may think you’re one of those “too important” people.

I would challenge you to assess whether you’re confusing “too important” with “too stressed” or “too tired” or “too cool.”

Is continuing to worry about money really better than spending a few hours a week earning extra money doing something you love?

Setting that conversation aside, the ideal side hustle is something you enjoy doing that can earn you extra money at the same time.

Some examples of side hustles my students have come up with in class include:
- Bartending. Entice your friends to come to your bar by offering cheap drinks. You get to hang out with them and get paid at the same time.
- Fitness instructor. Instead of paying $48 for the spin class you love, become the instructor and get paid to lead the class.
- Dog Walker. If you love dogs and don’t currently have one of your own, what better way to fill that void in your life while making money. The same applies to babysitting.
- Home Baker. Make homemade treats with your kids and sell them to parents who don’t have the time.
How about this idea for aspiring real estate investors: part-time property manager?

My wife and I recently needed some help with apartment showings. We reached out to one of our favorite young people in the world to see if she’d be interested.

A chance to make some money on the side and learn a new skill?

She jumped on board without hesitation.

We’ve known her for years and were not the least bit surprised. She’s exactly the type of person who will no doubt be successful in whatever she chooses to do.

There is always a way to make more money.

The point is there are always ways to make more money by doing things you like to do anyways. Even if you’re busy. You just have to exert some mental energy to figure out how.

Then, when you make that extra money, put it to work for you. Make all your hustle worth it.

At that point, we can talk about investing or buying real estate.

Unfortunately, most people don’t want to go through this process.

Photo by Timo Stern on Unsplash

Too many lawyers and professionals come to me and primarily want to talk about investing or buying real estate.

They want to skip the foundation and jump right to the more exciting stuff.

Most of the time, these are people who have never kept a budget. Or, they have massive student loan debt with no real plan to pay it off. Maybe they have a good W-2 job but no other sources of income.

When I start exploring their situations with them, it’s clear they haven’t thought much about the personal finance building blocks.

When they mention how hard it is to save for a downpayment, they haven’t considered looking for a new job that pays more or starting a side hustle.

Before jumping right to owning rental properties, these are the personal finance obstacles that need to be addressed.

If this sounds like the situation you are in, your ongoing mission is to generate more cash to fuel investments.

The fun part is once you’ve discovered your motivations and established strong habits, you will consistently have money available so you can invest month after month for the rest of your life.

My wife and I would not own five properties today if we didn’t first learn personal money wellness.

My wife and I would not own five properties (11 rental units) today if we had not first learned money wellness fundamentals.

I don’t just mean we wouldn’t have had money available to invest, although that is certainly true.

I also mean we wouldn’t have the skills and knowledge to successfully run our real estate business.

If you’ve ever wanted to be a business owner or investor, working on personal finance skills now is critical.

Robert Kiyosaki put it best in Rich Dad Poor Dad, “It’s not how much money you make. It’s how much money you keep.”

If you knew someone that made $1,000,000 per year, and at the end of the year, had only invested $20,000, what would your reaction be?

What if you knew someone who made $100,000 per year and invested $20,000? Did your reaction change?

How often do you think about your money mindset?

Do you tend to think more about the “fun stuff” (investing, real estate) than the fundamentals (money mindset, budgeting, debt, etc.)?

Let us know about your money mindset in the comments below.
August 5, 2025

How to Analyze a Property When the Initial Math Looks Bad

Most rental properties that you evaluate are not going to immediately look like great investments.

Does that mean you should just give up?

No way.

It’s up to us as real estate investors to research, negotiate and buy properties only at the right prices. Or, to buy properties that have untapped potential.

Ideally, we can do both.

The other day, we ran the numbers on an example property in Chicago that had caught my eye in.

Through that example, we learned what costs to include in our initial analysis to quickly determine if a property was worth pursuing further.

Today, we’ll look at the next step of the evaluation process.

Specifically, we’ll focus on what we can do when the initial math on a potential property doesn’t look very attractive.

Now, let’s get to it.

Our example property is a small multifamily building in Chicago.

Our example property is a five-unit apartment building listed for $1,800,000 and located directly in my target zone in Chicago.

Remember, this analysis is for educational purposes only. You are responsible for running your own numbers on any potential deal.

Here’s the listing description from my preferred listing site, Redfin:

Fully Gut Renovated 5-unit building, a prime turnkey investment opportunity in the best Logan Square Location Possible. Double Vanities, Fully built out walk in closets, in unit W/D, tankless hot water heaters, thin shaker kitchens and full height quartz backsplashes are just a few of the features that make this building feel more like condo living. Perfectly situated just steps from the Logan Square Farmers’ Market, residents can enjoy an eclectic mix of trendy bars, restaurants, cafes, and shops right at their doorstep. Renovation done with full plans and permits, include a new roof, windows, insulation, drain tile system with sump pump, back deck, and still warrantied appliances!

This property passed my initial screening, so we ran the numbers to see if it would be a good investment.

Here’s what the initial numbers looked like:

Asking Price: $1,800,000

Monthly Rent: $13,840

Mortgage Payment (Principal and Interest)	$8,982
Taxes	$1,429
Insurance	$400
Utility Bills	$350
Property Upkeep	$200
Preventative Maintenance	$200
Vacancy Rate (5%)	$692
Unexpected Repairs (5%)	$692
Property Improvements (5%)	$692
Total Monthly Cost	$13,637

Monthly Cash Flow (Rent – Costs): $203

It took me less than five minutes to do this initial evaluation.

A few notes on the above numbers:

For the mortgage payment, I estimated a 25% downpayment, which is common for investment property loans, and a 7% interest rate.
Taxes are a major cost that can make or break any deal. Make sure you are familiar with how taxes are assessed in your market. For example, in Chicago, property taxes are reassessed every three years. That means taxes go up every three years.
Many property listings will indicate the prior year’s taxes because they are lower. This particular listing has the prior year’s taxes, which I know are soon going to change for the worse. For now, I’ll run the numbers with the current taxes but would definitely account for higher taxes before moving forward with this deal.
Property insurance is a real wildcard these days. Insurance costs are going up everywhere. You’ll need to talk to a good insurance broker for an accurate estimate. I used my experience in the neighborhood with similar properties to make a reasonable estimate.

The initial math on this property did not look great.

In the end, I concluded that this is a beautiful property in a great location but would not be a good investment for me.

The reason is simple: I invest for cash flow. For me, this property is way too expensive for only a couple hundred dollars of monthly cash flow.

More specifically, I am not interested in shelling out a down payment of $450,000 (not to mention more for closing costs) to earn $2,400/year in cash flow.

At a price point of $1.8 million, I would only be interested if this property had a monthly cash flow of at least $4,000 per month.

For another investor, it’s possible that this would still be a good investment based on appreciation and debt pay-down. For me, that’s a big risk I’m not willing to take with that kind of money.

So, what now?

Is that the end of the analysis?

Cross this property off the list and move on?

Not even close.

This is when the fun starts.

person using laptop to evaluate a rental property using real numbers. — Photo by Kaitlyn Baker on Unsplash

What to do if you don’t like the results of your initial evaluation.

Most of the time that you evaluate properties you won’t love the initial results.

You should expect that to be the case.

Think about it from the seller’s perspective. Ask yourself: why is the seller putting this property on the market?

Obviously, the seller is trying to make a profit. Maybe the seller is a developer or flipper who just completed an expensive rehab. He might even have investors who paid for the project that now expect to be paid back, at a profit.

The seller wouldn’t be doing is job if he didn’t try to find a buyer at a high asking price. He can always lower the price later on.

Also, you can think of it another way.

If a seller owns a wonderful property that is making tons of money every month, how motivated is he to actually sell?

He may list the property at a high price just to see if anyone will bite.

In our example, if the seller was cash flowing $4,000/mo, he’d probably just keep it.

And, if he had that kind of cash flow coming in, he may just list it at an astronomical price because he doesn’t really need to sell it.

Sure, there are exceptions. Some sellers don’t want to be landlords and others might just want to cash out. But, I don’t see very many of these situations.

When these situations do pop up, you need to act fast because other investors will take notice.

The point is these are just a few reasons why you will rarely find great investment properties based on your initial evaluation.

Don’t give up.

Your job is to figure out if a property has untapped potential that would make it a good investment.

Now, let’s return to our example to see what I mean.

Is the property overpriced?

The listing price is only the start of the negotiation.

The listing price may just be too high. In recent years, the listing price has oftentimes been too low, leading to bidding wars because of high demand and limited supply.

Your job is to find a price that works for your cash flow needs. The seller may not accept your price, and that’s OK. You may need to move on.

Let’s explore putting a price on our example property where it would be attractive for me.

Keep in mind that I would want a monthly cash flow of $4,000 to move forward on this property.

With that target in mind, I can return to the online calculator on Redfin to see at what price this property might make sense for me.

Playing around with the calculator, I learned that I would need the price to drop to $1,100,000 to get around $4,000 in monthly cash flow (holding all other costs constant).

That’s about a 40% price reduction.

Do you think the seller would go for that?

Not a chance.

Depending on your market, sellers may be willing to negotiate the price. But, if you come in too low, they won’t take you seriously.

If I were to move forward with this property, I would need to find ways to improve the math besides just the price. Still, I might be able to get it for below the asking price.

For our example, let’s assume the seller would agree to knock 10% off the purchase price.

Here’s what the numbers look like at 10% reduced purchase price.

Offer Price: $1,620,000

Mortgage Payment (Principal and Interest)	$8,083
Taxes	$1,429
Insurance	$400
Utility Bills	$350
Property Upkeep	$200
Preventative Maintenance	$200
Vacancy Rate (5%)	$692
Unexpected Repairs (5%)	$692
Property Improvements (5%)	$692
Total Monthly Cost	$12,738

With monthly rents of $13,840, that means this property is now cash flowing $1,002/mo.

We’re heading in the right direction, but I think we can do better.

Besides negotiating the purchase price, what if we can shop around and improve our mortgage?

Start with the purchase price but see if you can further to reduce the overall cost.

For example, can you shop around for a better mortgage?

Let’s assume you can find a loan with a 6.75% interest rate instead of 7%.

With a 6.75% interest rate, your mortgage payment drops from $8,083 to $7,880.

Now, your cash flow increases to $1,211/mo.

You can start to see how this part of the analysis works.

The point is to reduce the costs of owning this property to improve your cash flow.

What other ways can you reduce the costs?

You should go through this process with each cost associated with the property.

Maybe you can find insurance for less than $400/mo.

Or, maybe you are willing and able to handle more of the maintenance responsibilities yourself.

The idea is that each time you reduce your monthly costs, your cash flow goes up.

If you can reduce the costs enough, a property may start looking appealing to you.

two people meeting with laptops as they run the numbers together for a potential deal. — Photo by charlesdeluvio on Unsplash

On top of reducing the costs, can you can earn more income from this property?

At the same time you look to reduce the costs, you should look to see if you can earn more income from a property.

In other words, can you earn more rent per month than the current rate?

This is where you’ll need to study the neighborhood to see what similar apartments are renting for. Your broker should be able to help you with this.

In our example, let’s assume that you do your research and determine that the apartments are under-rented.

In fact, you learn that each of the 5 apartments could earn $200 more per month.

Adding that additional $1,000 per month brings our total cash flow to $2,211/mo.

Now, this property is starting to look more enticing.

You might be surprised how many sellers under-rent their properties.

Over the years, my wife and I have been successful in finding properties that have been severely under-rented by the previous owners.

We don’t renovate properties ourselves because we are busy professionals with full-time jobs and a family. We try to find properties that have bee nicely rehabbed but are currently under-rented.

You may be surprised to learn that a property flipper doesn’t always know the local market as well as you. It could be that he is just in a hurry to get a property rented out so he can sell it and move on to the next job.

If you become an expert on market rents in your local area, you can be the one who benefits.

A few years ago, my wife and I purchased a three-flat in our local area. It was about a half-mile from where we lived at the time and was on our regular walking route. We took an interest in the rehab and followed its progression closely.

When the property was completed, I saw the rental listings online. It was a beautiful property in a great location. I was shocked when I saw the units were listed for only $1,700/mo.

This was my local area and I knew these units could easily go for $2,500/mo, if not more.

When the property hit the market a few months later, we pounced and had it under contract the next day.

When the original tenants chose to move out at the end of their leases, we quickly found new tenants happy to pay $3,100/mo.

Sometimes sellers just don’t know what they have.

Don’t fool yourself into thinking a property is a great investment by unrealistically changing the numbers.

After reading this post, you can hopefully start to see how to run the numbers to make a potential property more attractive.

In our example, we tweaked the purchase price, mortgage rate, and rental income to improve the cash flow enough to make this deal potentially attractive.

After going through an analysis like this, you may be ready to make an offer. Just don’t get your hopes up too high.

Sellers won’t always negotiate.

Properties won’t always be under-rented.

Many of your offers will end up getting rejected.

Don’t quit.

There will always be another property out there.

If you can’t get a property with numbers that work for you, it’s time to move on to the next one.

No matter how much you love a property, don’t fool yourself into thinking it’s a great investment if it’s not.

Readers, have you made offers on properties that you knew were undervalued? Did you successfully cash flow on a deal that did not look great on paper at first?

Let us know in the comments below.

August 3, 2025

How to Easily Evaluate a Rental Property with Real Numbers

For beginners, running the numbers on a potential real estate deal can seem complicated.

It doesn’t have to be.

If you’ve been practicing good budgeting habits with your personal finances, this part should actually be easy.

The key is simple: more needs to come in than goes out.

When you have more coming in than going out, that means you have positive cash flow.

For lawyers and professionals acquiring rental properties to accelerate our journeys to financial freedom, we don’t need to overcomplicate things.

What we need to know is whether a property is going to put more money in our pockets than it takes out.

Today, we’ll look at a real example of how I quickly and easily evaluate potential deals in my primary market.

If you haven’t already, check out my previous post on evaluating real estate deals for a detailed explanation on why I focus on the below elements.

As a quick refresher, let’s first look at the fixed costs and speculative costs involved in evaluating rental properties.

There are fixed costs and speculative costs involved in evaluating a rental property.

Whenever you evaluate a rental property, there are some fixed costs and some speculative costs involved. This holds true whether you are a beginner or an experienced investor.

It’s helpful to differentiate between the fixed costs and the speculative costs. In a lot of ways, we can control the fixed costs, but we cannot control the speculative costs.

Fixed costs generally include reoccurring monthly bills that are relatively constant.

The main fixed costs you’ll want to know when evaluating a rental property include:

Mortgage payment (Principal and Interest)
Taxes
Insurance
Utility Bills
Property Upkeep
Preventive Maintenance

Speculative costs include those unpredictable, irregular costs that do not occur every month and maybe don’t even occur every year.

I separate the speculative costs into three main categories:

Vacancy Rate
Unexpected Repairs
Property Improvements

Vacancy rate refers to the percentage of available units that are unoccupied at a particular time. When running the numbers on a prospective rental property, I recommend adding in the cost of 5% vacancy.

When you own rental properties, things are going to break and require money to fix. If you target properties in decent condition, I recommend saving 5% of the monthly rent for unexpected maintenance.

If you don’t improve your property over time, you risk your unit becoming unattractive. Again, if you target decent properties to begin with, I recommend saving another 5% per month for property improvements.

With these costs in mind, we can now quickly and effectively run the numbers on any available property.

Let’s take a look at a property that recently became available in my target market of Chicago.

I regularly check available properties in my target area in Chicago.

I have a searched saved on the Redfin app for multifamily properties within a certain price range in my target areas of Chicago.

That makes it easy to scroll through the listings a few times every week to keep myself educated on my local market.

I do this for a few reasons, regardless of whether I’m actively shopping for a property.

white ceramic sink near brown wooden table indicating a nice rental property but do the numbers check out. — Photo by Huy Nguyen on Unsplash

First, I want to know what new properties come on the market. I’m interested to see if developers and rehabbers are still drawn to my area.

I also check to see how much properties have sold for recently so I can stay on top of market conditions. For example, I’m curious if sellers are accepting below-asking-price offers and how long properties are staying on the market.

I’m also looking to see if there have been any price reductions on properties that previously caught my eye.

All of this simple research helps me move quickly when an attractive property becomes available.

This research has also helped me develop a list of basic requirements I look for in a rental property.

Before running the numbers, a property has to match my initial requirements.

Before I run the numbers on any property, it has to satisfy some basic requirements. This is not an exhaustive list, but here are some of the most important factors my wife and I evaluate when considering rental properties in Chicago:

Location, location, location. In Chicago, proximity to the L and social life (coffee shops, restaurants, bars, etc.) are crucial. Most of the young professionals we rent to are still in the “going out” phase of life. They want to live in fun neighborhoods so they can enjoy themselves when they’re not working. They typically stay in our apartments for 2-3 years, oftentimes before buying a place of their own and “settling down.”
Taxes. Property taxes can eat away your cash flow. We have high property taxes in Chicago across the board, but taxes vary widely from neighborhood to neighborhood. I look for properties in areas that have more attractive taxes.
Big bedrooms. One of the most common questions I get when I do apartment showings is, “Can I fit a king size bed in here?” People love big beds these days. This can be a challenge considering Chicago’s standard 25-foot wide lot. I look for properties with a minimum bedroom size of 10 x 10.
Outdoor space. Young professionals want to have outdoor space, even if they never use it. When I was a renter, I always wanted an apartment with a balcony for my grill. It didn’t matter to me that I only used it a handful of times each year. Maybe having outdoor space made me feel more grown up?
Parking. Even though Chicago is a very public transit-friendly city, people still like having cars. Because most young professionals aren’t using their cars every day, they want to keep it safe in a dedicated parking space.

If a property becomes available that meets these requirements, I’ll then run the numbers.

Only after confirming that a potential property meets these requirements do I actually run the numbers.

There’s no reason to waste time on a property that may project well in a spreadsheet but will cause me nothing but headaches as a landlord.

The other day, a new property popped up that caught my eye: 2501 N. Sacramento Ave.

It’s a five-unit apartment building listed for $1,800,000 and located directly in my target zone.

Here’s the listing description from Redfin:

Fully Gut Renovated 5-unit building, a prime turnkey investment opportunity in the best Logan Square Location Possible. Double Vanities, Fully built out walk in closets, in unit W/D, tankless hot water heaters, thin shaker kitchens and full height quartz backsplashes are just a few of the features that make this building feel more like condo living. Perfectly situated just steps from the Logan Square Farmers’ Market, residents can enjoy an eclectic mix of trendy bars, restaurants, cafes, and shops right at their doorstep. Renovation done with full plans and permits, include a new roof, windows, insulation, drain tile system with sump pump, back deck, and still warrantied appliances!

It’s not always the case, but in this instance, the pictures seemingly match the description of a beautifully renovated property. Of course, we can confirm the quality of the work when we tour the property.

So, this property passed my initial screening. Now, I can run the numbers to see if it would be a good investment.

By the way, I target gut-renovated properties because I have a full-time job as a lawyer and don’t have the time to dedicate to a major renovation project.

Let’s plug in the numbers to see if this would potentially be a good investment property.

Just because a property looks nice and is in a great location does not mean it’s a great investment. As investors, it’s our job to make sure the numbers work out so more money comes in than goes out.

Using the cost categories above, we can pull most of the information we need directly from the listing.

For example, Redfin (like most sites) provides a useful payment calculator where you can adjust the downpayment, interest rate, taxes, etc. for any property based on your personal situation.

Home office vibes perfect for running the numbers on a rental property. — Photo by Paul Calescu on Unsplash

Here are some tips before you get started:

It’s a good idea to talk to your mortgage broker ahead of time to learn what mortgage rate you will likely qualify for and what downpayment you’ll need.
Remember, this is an initial evaluation. Before you make your final decision on a property, you’ll need to confirm these numbers with your real estate team during the due diligence period.
Try to be conservative with your projections. When you otherwise like a property, the temptation is real to modify the numbers so it looks better on paper.
You’ll notice listing agents may try to enhance a property’s value by suggesting “potential rent” or “market rent” instead of the actual rent. Don’t fall into this trap and end up with a nice-looking property that makes no money.

OK, let’s look at the numbers on this property for educational purposes only. You are responsible for running your own numbers on any potential deal.

2501 N Sacramento Asking Price: $1,800,000

Monthly Rent: $13,840

Mortgage Payment (Principal and Interest)	$8,982
Taxes	$1,429
Insurance	$400
Utility Bills	$350
Property Upkeep	$200
Preventative Maintenance	$200
Vacancy Rate (5%)	$692
Unexpected Repairs (5%)	$692
Property Improvements (5%)	$692
Total Monthly Cost	$13,637

Monthly Cash Flow (Rent – Costs): $203

It took me less than five minutes to do this initial evaluation.

I can see that based on these numbers, the monthly cash flow is $203. We’ll talk about what that means in a moment.

A few notes on the above numbers:

For the mortgage payment, I estimated a 25% downpayment, which is common for investment property loans, and a 7% interest rate.
Taxes are a major cost that can make or break any deal. Make sure you are familiar with how taxes are assessed in your market. For example, in Chicago, property taxes are reassessed every three years. That means taxes go up every three years.
Many property listings will indicate the prior year’s taxes because they are lower. This particular listing has the prior year’s taxes, which I know are soon going to change for the worse. For now, I’ll run the numbers with the current taxes but would definitely account for higher taxes before moving forward with this deal.
Property insurance is a real wildcard these days. Insurance costs are going up everywhere. You’ll need to talk to a good insurance broker for an accurate estimate. I used my experience in the neighborhood with similar properties to make a reasonable estimate.

So, what have I learned from running the numbers on this property?

First, this is a beautiful property in a great location. If I made my decision based only on the pictures and the location, this would be a winner.

Unfortunately, the numbers tell a different story.

This property would not be a good investment for me. I invest for cash flow. For me, this property is way too expensive for only a couple hundred dollars of monthly cash flow.

At a price point of $1.8 million, I would only be interested if this property had a monthly cash flow of at least $4,000 per month.

Now, your preferences and goals may be different. Maybe you’re more focused on the other benefits of investing in real estate, like appreciation and debt pay-down. In that case, you may view this deal differently.

So, is that it?

Cross this property off the list and move on for good?

Not necessarily.

In our next post, we’ll explore ways to make this property a more attractive investment.

We’ll take a look at how the numbers change if we can successfully negotiate the purchase price, find a better loan option, and improve the monthly rent.

Real estate investors: let us know what you think of this property as a potential investment.

Would you be interested in moving forward at these numbers?

August 1, 2025

Running the Numbers on RE Deals Should be Easy
For beginners, running the numbers on a potential real estate deal can seem complicated.

It doesn’t have to be.

If you’ve been practicing good budgeting habits with your personal finances, this part should actually be easy.

The key is simple: more needs to come in than goes out.

When you have more coming in than going out, that means you have positive cash flow.

Today, we’ll discuss what information you need to forecast positive cash flow. My goal is to make this part of the process as simple as possible.

I’ve read full books dedicated to evaluating the numbers on real estate deals. If you want to take a deep dive, I recommend Real Estate by the Numbers: A Complete Reference Guide to Deal Analysis by J. Scott and Dave Meyer.

But, the truth is that most of us lawyers and professionals targeting rental properties as a supplemental income stream don’t need that kind of depth.

Sure, if you’re targeting large multifamily properties or hoping to make rental property investing a full-time pursuit, you’ll absolutely want to pick up a book like Real Estate by the Numbers: A Complete Reference Guide to Deal Analysis.

For the rest of us acquiring rental properties to accelerate our journeys to financial freedom, we don’t need to overcomplicate things.

What we need to know is whether a property is going to put more money in our pockets than it takes out.

In other words, we want to buy assets, not liabilities. When we’re tracking our net worth each month, we want to see that a rental property is helping.

So, the question is: how do I know if I’m buying an asset and not a liability?

Let’s take a look.

There are fixed costs and speculative costs involved in evaluating a rental property.

Whenever you evaluate a rental property, there are some fixed costs and some speculative costs involved. This holds true whether you are a beginner or an experienced investor.

Fixed costs generally include reoccurring monthly bills that are relatively constant.

Speculative costs include those unpredictable, irregular costs that do not occur every month and maybe not even occur every year.

It’s helpful to differentiate between the fixed costs and the speculative costs. In a lot of ways, we can control the fixed costs, but we cannot control the speculative costs.

Regardless, we need to account for both in our deal analysis.

Here are examples of fixed costs when evaluating a rental property.

The clearest example of a fixed cost is your mortgage payment. If you take out a 30-year fixed-rate loan, you’ll know exactly what your monthly mortgage payment will be for the next 360 months.

You’re required to pay that amount each month, that’s why it’s a fixed cost. Easy enough.

I also include insurance costs and property taxes in my fixed costs. These are fixed costs, at least for 12 months at a time, that you are required to pay each month.

You’ll oftentimes see the acronym PITI to reflect the above basic elements of a mortgage payment:
- Principal
- Interest
- Taxes
- Insurance
It’s safe to also include utility bills, like water, trash, and common electricity, in your fixed costs since there shouldn’t be much variation month-to-month in these expenses.

The same goes for landscaping, snow removal, and pest control. I refer to these fixed costs as property upkeep.

The final category of fixed costs includes preventative maintenance, like regular HVAC tune-ups.

Photo by Aykut Eke on Unsplash

Yes, it’s true that the cost of insurance, taxes, utilities and other bills will go up over time. But, you usually don’t see dramatic increases in these fixed costs year over year. At least, in ordinary times. Plus, rents also go up, which offset the higher costs.

To recap, the fixed costs you’ll want to know when evaluating a rental property include:
- Mortgage payment (Principal and Interest)
- Taxes
- Insurance
- Utility Bills
- Property upkeep
- Preventive maintenance
If your goal is monthly cash flow, there’s no excuse for ignoring any of these fixed costs when evaluating a rental property.

Here are examples of speculative costs when evaluating a rental property.

Speculative costs are, by definition, harder to forecast. Even for experienced investors, the best we can do is guess at what these costs will be.

I separate the speculative costs into three main categories:
- Vacancy Rate
- Unexpected Repairs
- Property Improvements
What is vacancy rate?

Vacancy rate refers to the percentage of available units that are unoccupied at a particular time. Obviously, vacancy is bad for rental property investors because we are not collecting rent from the unoccupied units.

To calculate your vacancy rate, simply divide the amount of weeks (or days or months, if you prefer) in a year by the amount of weeks (or days or months) your rental unit was unoccupied.

Then, multiply that number by 100 to see your vacancy rate as a percentage.

If you have multiple rental units, add your units together to get your total vacancy rate, like I show you below.

Vacancy Rate = (Weeks Unoccupied / Total Weeks) x 100

For example, I have 10 rental units in Chicago. This past spring, we had eight lease renewals and two leases end.

We filled one of the two units without a single day of vacancy. The other unit resulted in six weeks of vacancy so we could tackle some needed repairs. More on that below.

This means that I had 6 weeks of vacancy spread over 10 rental units. To calculate my vacancy rate, I can take 520 (10 rental units x 52 weeks in a year) and divide that by 6 weeks:

(6 weeks of vacancy / 520 weeks) x 100 =1.154%

Now, what do we do with this information?

This is where the guesswork comes in. That’s because there’s no guarantee that next year I will have a vacancy rate of only 1.2%. In some years, we have 5 or 6 units to turnover. We may have 24 weeks of total vacancy instead of 6 weeks.

The best I can do is speculate what my vacancy rate will be moving forward.

I wish I could tell you that a 1.2% vacancy rate is a good forecast. In reality, predicting 5% vacancy is a better idea. That allows for about 3 weeks to turnover a vacant unit, reasonable estimates in decent markets.

So, when running the numbers on a prospective rental property, be sure to add in the cost of 5% vacancy.

As an example, if a potential property brings in $6,000/mo in rent, subtract $300/mo to account for 5% vacancy.

What are unexpected repairs?

Remember the leaky toilet?

When you own rental properties, things are going to break and require money to fix.

Predicting how much money you’ll need for these unexpected repairs depends on a variety of factors.

If you are handy and don’t have to pay a plumber to fix the leaky toilet, you’ll save money on these kinds of repairs.

Likewise, if you have a new construction property instead of a 100-year-old property, you’ll likely need to do less repairs.

The bottom line is you’ll have to make educated guesses how much you’ll need to save for these kinds of repairs.

This is actually one of the main reasons I recommend beginner investors don’t quit their day jobs. It’s a powerful advantage to have income coming in from your primary job to help cover any major, unexpected expenses.

If you target properties in decent condition, I recommend saving 5% of the monthly rent for unexpected maintenance. With our prior example of $6,000/mo in rent, you should deduct another $300/mo for unexpected repairs.

You shouldn’t need to use that 5% every month, so that balance should build up until you need it.

What are property improvements?

I mentioned above that we took 6 weeks to improve one of our vacant units. The floors were in rough shape and the apartment needed a full paint job.

By the way, these are two relatively easy jobs that can add a lot of value to a property.

Since we were in great shape with our other units all being occupied, the timing was right to spend a bit of money and lose out on a bit of rent.

In the end, we spent about $5,000 and have brand new floors and a nice looking apartment. We didn’t have to spend that money, but we risk our units becoming unattractive if we don’t keep them fresh.

Photo by Elena Mozhvilo on Unsplash

How should you account for this type of property upkeep?

Again, if you target decent properties to begin with, I recommend saving another 5% per month for property improvements. That’s another $300/mo subtracted in our deal analysis based on $6,000/mo in rental income.

Too many beginner real estate investors skip these speculative costs in their deal analysis.

It’s tempting to ignore these speculative costs when you otherwise like a rental property. You might see monthly rents of $6,000/mo and fixed costs of $5,000 and convince yourself that this is a great deal.

By ignoring the speculative costs, you’ve ignored the additional $900 for vacancy, unexpected repairs, and property upkeep that this property will cost you.

Those extra costs might make this property unattractive.

You can easily find most of the information you need to run the numbers online.

It has never been easier to access the key numbers you need to know when evaluating a rental property.

Sites like Redfin and Zillow typically have all the information you’ll need for your initial evaluation.

One of the most useful features of these sites is the mortgage payment estimator. You can quickly see whether the PITI payment is going to exceed the amount of rent you can reasonably expect.

Because of high interest rates and high property costs, most deal analysis I’m doing today ends right there.

Of course, if the PITI payment is too high, you can play around with the asking price to see at what cost the property might be worth pursuing. Just don’t forget to take into account the other costs discussed above.

Note: above, I specifically wrote “initial evaluation.”

Before closing on a property, you’ll want to confirm the numbers in the property listing are accurate and not being exaggerated.

For example, you’ll want to get verification from the seller on the actual monthly rent. As part of the due diligence process, sellers are required to turn over the current leases.

Sometimes you’ll see listings where the rent is listed as “maximum monthly rent” or “potential rent.” That means the seller is suggesting the apartment could rent for that much, but there is no lease in place for that amount.

I’m always skeptical of listings like this. If it was so easy to obtain the maximum monthly rent, why didn’t the seller get leases for that amount? If they did, they could surely expect a higher sales price.

Always confer with your real estate broker on what the rents are in your market. And don’t forget, a five-star real estate broker should be able and willing to teach you how to run these numbers.

Likewise, you’ll also want to verify with your mortgage broker exactly what your monthly payment will be based on current rates and your qualifications. The same goes for verifying what your actual insurance costs will be.

Did you notice that I did not include a cost for property management in the above?

If you are pursuing your first rental property or have a small portfolio, I recommend you self-manage.

Most importantly, you need to learn how to be a landlord.

There’s no better training than first-hand experience. If you do end up hiring a property manager someday, you need to know how to “manage the property manager.”

There’s another good reason why beginner investors should self-manage.

Unfortunately, it’s hard to find good property managers who are willing to work with small investors. It’s a near certainty that your property manager will not care about your property as much as you do.

Plus, because of the cost involved, a property manager will likely suck up most of your monthly cash flow.

While it varies by market, in major cities you can expect a property manager to charge between 8% and 10% of the monthly rent. It’s hard to cash flow with that kind of drag on your profits.

If your portfolio grows or your circumstances change to the point where you can no longer self-manage, be sure to factor in this major cost to your deal analysis.

Buying a rental property does not require an advanced degree in math.

If you’ve been reluctant to buy your first rental property because of that math involved, hopefully you now see that it doesn’t have to be that complicated.

You need to account for certain fixed costs and predict some speculative costs.

There are countless online calculators to help with the math. You can also use a basic spreadsheet.

Plus, your real estate team can help you with running the numbers.

In an upcoming post, we’ll run through some examples of how I run the numbers on potential rental properties.

Experienced real estate investors: what did I miss?

Beginner investors: what else would you like to know about running the number?

Let us know in the comments below.
July 29, 2025
Stop Fearing Toilets with a Good Handyman on Your RE Team
“You really want to be a landlord? You don’t want to fix leaky toilets at 2 a.m.!”

If you decide to invest in rental properties, this is one of the first comments you’ll hear from the haters.

Mind you, these haters who are so scared of the imaginary leaky toilet are not landlords. I’ll go a step further and would wager that none of them have ever even seen a leaky toilet before.

Instead, they probably heard a story one time and decided that being a landlord was too hard.

The sad part is that they have shut themselves out from one of the best asset classes (and my personal favorite) for achieving financial freedom.

The other comment you’ll regularly hear?

“I can’t be a landlord. I’m not handy.”

Guess what?

I’m not very handy either. And, I have 11 rental units in two different states.

The truth is that you do not need to be handy to be a landlord.

In reality, you don’t need to be handy to be a landlord.

And, you definitely don’t need to fear the 2 a.m. leaky toilet.

Oh, this is not to say that things aren’t going to break and need attention at the most inconvenient time.

Every landlord has those stories. I’ve certainly had my fair share.

One example seems on point.

A few years ago, my family and I were living in one of our rental apartments.

One evening before leaving for vacation the next day, we were sitting around when my sister-in-law pointed at the ceiling and exclaimed, “What is that!?”

Well, “that” was a huge, previously undiscovered, water spot in my ceiling.

Turns out the toilet in the unit upstairs was leaking. (See, on point.)

The water gradually spread into the wood floors of the upstairs unit and the ceiling of my unit. It also dripped all the way down the plumbing stack to the lower level carpet in the bedroom where my two little kids slept.

What did I do about this catastrophe?

I called my handyman and got on a plane the next morning.

By the time we returned, the wood floors, ceiling, and carpet had all been repaired and there was no sign of damage.

When you have a good handyman on your real estate team, you don’t have to worry about things like this.

One of the biggest myths of being a landlord is that you need to be handy.

Have you noticed that we’ve been talking about investing in real estate for a couple of months now and I haven’t once mentioned leaky toilets or the need to be handy?

That’s because there are so many other parts of being a landlord that are more important than your skills with a hammer.

To name just a few more important skills: running the numbers on potential deals, selecting good tenants, keeping good records, dealing with tenant complaints, and paying the bills on-time.

Plus, for most of us lawyers and professionals who want to own rental properties, we have other time commitments. Even if we have the skills or enjoy doing repairs ourselves, it still makes sense to hire a professional.

That’s why every good rental property investor has a good handyman on his team.

Before we talk about what to look for in a handyman, let’s take a look back at the other key members of your real estate team.

Your Spouse is the Most Important Person on Your RE Team

The most important person on your real estate team is your spouse. Make sure you each understand the financial, time, and emotional commitments involved.

Owning rental properties should not be a solo adventure. The entire experience is better when you have someone to share it with.

Isn’t that true for most things in life?

If you’re considering your first rental property, don’t fool yourself into thinking you’ll be earning passive income.

Before you buy a rental property, I encourage you to talk to your spouse first. Make sure you both are on the same page.

No, you do not have to have an equal division of labor.

Yes, you each have to commit to the good and the bad that comes along with owning rental properties.

If you both can make that commitment, you have the best shot at owning your properties for a long time and reaching that ultimate goal: financial freedom.

Photo by Colourblind Kevin on Unsplash

Build Out Your RE Team Starting with a Five-Star Broker

Once you and your spouse are on the same page, it’s time to start building out the rest of your real estate team.

Start building your real estate team by finding a great broker. Your broker is like a five-star hotel concierge who can make your entire experience so much better.

During your search for a great rental property, a good broker will:
- Educate you about the market you’re investing in.
- Send you properties that match your goals.
- Tour properties with you to help identify any red flags.
- Negotiate on your behalf to ensure you get the best possible price.
- Connect you with other key members of your team.
- Steer you away from making poor choices.
But, you don’t just want a good broker. You want to work with the best brokers as a rental property investor.

The best brokers will do all of things for you during the acquisition process. But, that’s just the beginning.

The best brokers are in it for the long run and will help you navigate challenges as they pop up. That might mean helping with marketing and showing your property.

More importantly, that means continuing to give you advice and tutelage as you learn to be a landlord.

How to Evaluate a Great Mortgage Broker for your RE Team

With a five-star real estate broker on your team, it’s time to find a great mortgage broker.

A great mortgage broker is like a tour guide who is the local expert and knows the ins-and-outs of the neighborhood. She has an intimate knowledge of the local food scene based on years of experience.

She’ll show you the hidden gems and recommend what to order at each restaurant based on your personal preferences. She can educate you as to what’s in certain dishes and why you may like to try them.

She’ll also steer you away from the tourist traps and prevent you from going to the wrong places to ensure you have the best experience possible.

Recommendations? Education? Preventing mistakes?

Love all those things.

And, this is exactly what a good mortgage broker will do for you.

A good mortgage broker will:
- Recommend the best loan for your goals.
- Stop you from borrowing more than you really can afford.
- Help get your loan approved.
- Explain the numbers.
- Not let you refinance until the time is right.
Take your time finding a good mortgage broker. It’s important to work with someone who does more than just promise the best rates and terms.

With your spouse, a five-star real estate broker, and a great mortgage broker on your team, it’s now time to fill out the rest of the key positions.

Be Sure to Have an Experienced Accountant on your RE Team

I invest in real estate for the massive tax benefits.

In fact, the massive tax benefits are one of the four main reasons why I invest in real estate. The other three reasons are cash flow, appreciation, and debt pay-down.

I’ve previously written about how I earn rental income and legally pay close to nothing in income tax on my rentals each year.

How is that possible? Am I some type of tax wizard?

Of course not.

But, I do have a tax wizard on my real estate team.

OK, more accurately, I have a Certified Public Accountant (CPA) on my real estate team.

Your accountant is so integral to your financial success that he is the next person you need to have on your real estate team.

The federal government has long encouraged investment in real estate. People need places to live, work, and socialize. The government long ago decided to reward investors who take on the risk of providing these opportunities.

These incentives come largely in the form of tax benefits.

The challenge for real estate investors is to actually take advantage of all these tax incentives.

That’s where your accountant comes in.

Because I work with an accountant, I don’t have to be a tax expert. I just have to know enough to have intelligent conversations and make decisions when the time comes.

My accountant makes sure I get all the tax benefits for owning rental properties.

Photo by Annie Gray on Unsplash

What to look for in a good handyman.

Here are some of the things I look for:

1. A handyman who responds to my messages promptly.

The last thing you want is a handyman who is flakey. When something needs fixing, you need someone who answers your call or messages you back right away.

Most repairs are not urgent, meaning your handyman does not need to drop everything right away to tend to the issue.

But, it’s important that you let your tenant know that you’re on it and someone will be around in short order to address the problem.

2. A handyman who Is not too big for a small job.

It’s much easier to find a handyman to do a full kitchen renovation than to replace just the kitchen sink. Obviously, the bigger the job, the more money to be earned.

As a landlord, you need someone who can handle the small jobs. These come up more frequently than the bigger projects and are often necessary to keep tenants happy.

We recently had a tenant message us that the kitchen sink was leaking. My handyman got over there the same day and fixed the leak for $80.

This is the type of guy you need on your team.

3. A handyman who makes a good impression with the tenants.

Your handyman will inevitably have to interact with your tenants. You want someone who makes a good impression. That means someone who is professional, courteous, and respectful of the tenant’s space.

It is also very helpful if your handyman can explain to the tenant what the repair involves and what to do if there are still any issues.

4. A handyman who does not run up the bill.

Handymen tend to charge by the hour because they don’t usually know the extent of the repair until they begin working.

While there’s nothing wrong with charging by the hour, you can imagine how someone untrustworthy might take advantage of this billing arrangement.

With more experience as a landlord, you will start to have the same type of repairs come up regularly. Based on that experience, you’ll know when a handyman is running up the bill on you.

5. A handyman who comes recommended from other landlords.

Like anything else in life, a good recommendation goes a long way. It is always a good idea to work with someone who people you trust can vouch for.

The trust factor works both ways, too. If your handyman knows that you are reputable and come recommended, he is more likely to take your calls and go into business with you.

6. A handyman who has worked on rental properties.

When we first started shopping for a rental property, our real estate broker taught us about “condo quality” vs. “rental quality.”

Condo quality is nicer, more expensive, and tends to be for people buying a home for themselves.

Rental quality is more affordable and comes with the expectation that things will break and need to be replaced.

When it comes to a handyman, you want some who understands the difference. It makes no sense to overpay for quality that you just don’t need in a rental unit.

This has nothing to do with the skill of the handyman, just the wherewithal to make “rental quality” repairs in rental units.

How many would-be rental property investors have been scared off by the imaginary leaky toilet?

If you have been reluctant to become a landlord because of the hypothetical leaky toilet, hopefully this post has given you something to think about.

Being a successful landlord has nothing to do with being handy.

Don’t let your fears about potential repairs stop you from exploring this powerful asset class.

If you’re a landlord, what is your best “leaky toilet” story?

Was it enough to give up on being a landlord?

Let us know in the comments below.
July 22, 2025
Use Common Sense to Help Identify Good Rental Properties
If you want to be a successful rental property investor, you need to buy good rental properties.

Good rental properties equal good tenants.

Good tenants equal less headaches.

Less headaches equal a longer holding period.

A longer holding period equals more cash flow, appreciation, debt pay-down, and tax benefits.

Add it all up and that equals more financial freedom.

And, it all starts with buying the right property.

How do I know if I’m buying the right property?

One of the biggest mistakes that beginners make is buying bad rental properties. The reality is that most properties that hit the market are not good rental properties.

I typically look at hundreds of properties online before finding any that are even worth walking through. Of the ones I walk through, less than 10% are worth buying.

Don’t waste your time by running the numbers on every property that hits the market. The numbers only tell part of the story, anyways.

Instead, the first step is to develop and commit to specific criteria for attractive properties in your market.

If a property does not meet your criteria, move on.

This will save you precious time, especially important if you are still working a full-time job.

It will also save you from the disappointment of visiting properties that looked good on paper but failed to meet your other requirements.

So, how do you develop a set of standards for quality rental properties in your market?

Use common sense and your own life experiences to develop criteria for your market.

Obviously, every market is different. Don’t believe anyone who tells you they have a one-size-fits-all solution for evaluating properties. What works in Chicago won’t necessarily work in Los Angeles.

However, regardless of what market you’re in, you can and should use common sense and your own life experiences to evaluate rental properties.

Don’t overcomplicate this part.

Before you do anything else, think about what you would personally want in a rental property.

Forget about complex formulas and deal metrics. We’ll get to the numbers soon enough.

Start with a basic question:

What would I want if I were a renter in this market?

Before anything else, write down a list of the most important features that you would want in an apartment. Then, use that list as a guide to finding the right kind of properties.

By the way, using your own common sense is one of the best parts about investing in real estate. You don’t need an advanced degree or a background in real estate.

We all have some idea of what makes a neighborhood a good place to live. The same goes for what makes an apartment a good apartment.

We may not always agree on what those things are, and that’s OK. It may be for a simple reason, like we are not targeting the same potential tenant pool.

The bottom line is you should absolutely use your common sense and life experiences to help formulate your investing strategy.

Ask yourself what you would want in an apartment. Don’t waste your time running the numbers on any property that doesn’t match your criteria.

I prefer to invest in properties that make sense to me.

Warren Buffett has famously said that he does not invest in companies or products that he doesn’t understand.

We can apply that same logic to rental properties. Invest in properties that inherently make sense to you.

If you are a buy-and-hold investor like I am, you are going to be dealing with a certain tenant pool in your market for years to come. You want to make sure that you understand that tenant pool so you can buy properties that will be appealing to them.

You also want to be able to effectively communicate with prospective applicants and current tenants. The best way to ensure that happens is by investing in markets that you understand.

Photo by Sawyer Bengtson on Unsplash

Work with a real estate broker and don’t be afraid to ask for help.

If you’re having trouble identifying the key factors to look out for in your market, ask around.

Talk to your colleagues and friends about what people in your target demographic look for in an apartment. Most of us tend to want the same things.

Of course, don’t underestimate the importance of working with a good real estate broker.

A good real estate broker can help you come up with a list of the most desirable features for renters in your market.

My wife and I have worked with the same broker for almost a decade now. He’s been a mentor to us and helped us come up with our list of key factors. More on that below.

He also knows exactly what we want in a property and doesn’t waste our time with properties that don’t match our criteria.

Having a good broker on your team is essential if you want to be a successful investor.

How I’ve used my life experiences to target rental properties in Chicago.

I invest in a Chicago neighborhood that typically attracts young professionals in their 20s and early 30s.

Why do I target young professionals in Chicago?

Well, I am one.

OK, fine.

I used to be one. Oof.

As a young professional in Chicago, I rented apartments throughout the city for nearly 15 years. Based on my own experiences, I have a good idea of what that demographic is looking for in an apartment.

I believe that gives me an advantage in targeting the right kinds of properties.

Plus, I teach nearly 100 law students each year and work with young professionals at my law firm. It’s a demographic that I’m comfortable with and still have a good understanding of what matters in a rental apartment.

Besides my personal experiences, why else do I target young professionals?

Generally speaking, young professionals earn consistent paychecks, are respectful to apartments, and are too busy to complain about minor issues.

All good things, as far as I’m concerned.

Location, location, location.

We’ve all heard the number one rule in real estate:

Location, location, location.

While a number of factors combine to make particular locations attractive, I’ll highlight one factor that’s very important to me in the Chicago market.

First, for a bit of context.

As mentioned earlier, I target properties in Chicago that would be attractive to young professionals.

Traditionally in Chicago, young professionals commute to office buildings in The Loop (Chicago’s downtown, central business district) via public transportation.

Yes, even in the “work from home” era, most young professionals living in Chicago commute downtown at least a couple days each week.

Since I know my ideal tenant likely commutes downtown, I look for properties that make commuting easier.

That means targeting properties near public transportation.

More specifically, I target properties within a half mile of the L (Chicago’s train system, short for “elevated.”)

Photo by Pablo Merchán Montes on Unsplash

I target properties close to public transportation because of my own experiences as a renter and because of what I’ve learned from potential tenants.

When I was renting apartments in Chicago, I always wanted to be close to the L. There’s nothing worse than walking 20 minutes to a train when it’s 10 degrees or 90 degrees outside.

It makes sense that now as an investor, I should target these same types of apartments close to public transportation.

Having done hundreds of apartment showings over the years, I’m confident that young professionals want to live close to public transportation.

I believe that the most desirable properties for young professionals are the ones close enough to an L station that people can walk there in 10 minutes or less.

Plus, coffee shops, restaurants, shops and other attractive offerings tend to be located near L stations.

So, in terms of location, proximity to the L is one of the most important factors for me.

No matter how attractive a property looks online, I’m not interested if it doesn’t satisfy this requirement.

What are some of my other top requirements for a rental property?

What I look for in a rental property may be different from what you look for. Use your own life experiences and common sense to decide if these elements would be beneficial in your market.

My wife and I have relied on our own life experiences, coupled with advice from our real estate broker, to come up with this list.

It’s not an exhaustive list, but here are some of the most important factors we evaluate when considering rental properties in Chicago:
1. Location, location, location. See above. Proximity to the L and social life (coffee shops, restaurants, bars, etc.) are crucial. Most of the young professionals we rent to are still in the “going out” phase of life. They want to live in fun neighborhoods so they can enjoy themselves when they’re not working. They typically stay in our apartments for 2-3 years, oftentimes before buying a place of their own and “settling down.”
2. Taxes. Property taxes can eat away your cash flow. We have high property taxes in Chicago across the board, but taxes vary widely from neighborhood to neighborhood. I look for properties in areas that have more attractive taxes.
3. Big bedrooms. One of the most common questions I get when I do apartment showings is, “Can I fit a king size bed in here?” People love big beds these days. This can be a challenge considering Chicago’s standard 25-foot wide lot. I look for properties with a minimum bedroom size of 10 x 10.
4. Outdoor space. Young professionals want to have outdoor space, even if they never use it. When I was a renter, I always wanted an apartment with a balcony for my grill. It didn’t matter to me that I only used it a handful of times each year. Maybe having outdoor space made me feel more grown up?
5. Parking. Even though Chicago is a very public transit-friendly city, people still like having cars. Because most young professionals aren’t using their cars every day, they want to keep it safe in a dedicated parking space.
There are certainly other factors we consider, but these are some of the first things I’m looking for when I look through listings on the internet.

These factors were important to me when I was a renter and are still important to the young professionals I rent to today.

While I don’t invest in other cities besides Chicago, I imagine these factors would also be important for young professionals everywhere.

What is your specific criteria for rental properties?

The fist step in purchasing good rental properties is having a set of specific criteria that match your needs and market.

Don’t overcomplicate it. Use your common sense and life experiences as a framework.

Run your criteria by your real estate broker and other investors in your market.

Only after you have come up with a list of important features should you worry about running the numbers.

Whether you currently own rental properties or are hoping to get started, what factors are most important in your market?

Let us know in the comments below.
July 6, 2025
Invest in Real Estate and Other People Pay Your Debt

Imagine that you have the chance to own something that might be worth a lot of money down the road.

To buy this thing, you will need to pay 25% of the purchase price. The other 75% of the price will be paid by someone else.

Your job is to take care of that thing and keep it for a long time. It won’t be easy, but if you can handle it, you’ll wake up years from now owning something outright that is very valuable.

So far, this sounds pretty good, right?

Of course, there’s a catch. That person paying for 75% of the item will want to be paid back. He’ll want to earn interest, too.

You might be thinking that this opportunity doesn’t sound so promising anymore. Having to pay off that debt might be enough to convince you not to move forward with buying this thing.

You’re smart to be thinking about the debt. I could understand if the prospect of paying back a debt like this didn’t appeal to you. Who really wants to use their own hard-earned money to pay off debt anyways?

Fair enough.

But, what if I told you that other people are going to pay back that 75% (plus interest) on your behalf?

Even more, while those other people are paying back the debt, you still get to benefit from owning the item.

Does that change how you’re viewing this opportunity?

Maybe now you’re thinking that this is too good to be true?

Nope.

This is exactly how real estate investors generate long-term wealth. They buy a property using a loan and then pay back that loan using other people’s money.

This example leads us to the next main reason I invest in real estate:

Other people pay off my debt.

When you acquire the right rental properties, your tenants will pay monthly rent and that rent can be used to pay off your loan.

That means you can pay off that loan without using any of your own money.

As your loan balance shrinks, your net worth increases. As your net worth increases, you are creating wealth for you and your family.

Along the way, you can reap the benefits of monthly cash flow and appreciation. That means your net worth increases even more.

That’s a powerful combination to generate long-term wealth.

If this concept sounds like something you may be interested in, read on.

Before we talk more about debt pay-down, let’s review two of the other main reasons I invest in real estate.

1. Rental property cash flow is king.

With cash flow, you can cover your immediate life expenses. For anybody hoping to reach financial freedom, it is essential to have income to pay for your present day life expenses.

For my money, cash flow from rental properties is the best way to pay for those immediate expenses.

Photo by Frames For Your Heart on Unsplash

If your present day expenses are already covered, you can use your cash flow to fund additional investments.

That might mean buying another rental property or investing in another asset class, like stocks.

2. Long-term wealth through appreciation.

Appreciation simply refers to the gradual increase in a property’s value over time.

While cash flow can provide for my immediate expenses, appreciation is all about the long-term benefits.

Like investing in stocks over the long run, real estate tends to go up in value. The key is to hold a property long enough to benefit from that appreciation.

To benefit from appreciation, all I really need to do is make my monthly mortgage payments, keep my property in decent condition, and let the market do the rest.

Now that we’ve reviewed how cash flow and appreciation work together to generate long-term wealth, we can look at the additional benefits of debt pay-down.

With rental properties, other people pay off my debt.

When I buy a rental property, I take out a mortgage and agree to pay the bank each month until that mortgage is paid off. At all times, I remain responsible for paying back that debt.

However, I do not pay that debt back with my own money.

Instead, I rent out the property to tenants. I do my best to provide my tenants with a nice place to live in exchange for monthly rent payments.

I then use those rent payments to pay back the loan.

Each time I make a mortgage payment, part of the payment goes to interest on the loan and part of the payment goes toward the principal. This concept is known as amortization.

By the way, this is how real estate investors use Good Debt, also know as leverage, to generate wealth.

You may be totally against debt of all kind. That’s OK. Debt certainly carries risk. I’m not here to convince you that debt is a good thing or a bad thing. I’m just showing you how it works.

For more on the difference between good debt and bad debt, check out my post here.

What is loan amortization?

Amortization is the process of paying back a loan over time in predetermined installments. While your payment amount remains the same, the composition of that payment changes over time.

In the early years of paying off a mortgage, the vast majority of your payment goes to the interest. With each additional payment, more of the money goes towards the principal.

When you take out a mortgage, your lender will give you an amortization table that shows you exactly how much of your monthly payment goes towards interest and principal for the duration of the loan.

For example, if you take out a 30-year mortgage, you’ll receive a chart that shows 360 payments (12 monthly payments for 30 years). You can then look at any month in that 30-year period to see how much of your payment goes to interest vs. principal in that month.

Photo by Naomi Hébert on Unsplash

If you’re so inclined, you can also use an online calculator, like this one at calculator.net, to create an amortization chart for any loan you have.

I’ll admit, looking at the amortization chart is the least fun part of any real estate closing.

Seeing debt payments as far out as 30 years is a bit scary. It’s hard not to think of all the things that can go wrong during such a long time period. That’s why I prefer to think of amortization in general terms instead of specifics.

Generally speaking, I know that some of my monthly payment goes to interest and some goes to principal. The longer I pay back the loan, the more of my payment goes to principal. That’s good enough for me.

With a fixed-rate loan, your monthly payment remains the same.

When you have a fixed-rate mortgage, your payment remains the same for the duration of the loan.

At the same time, because of inflation, rents tend to go up over the long run. Rents may also go up if market conditions improve or if you have forced appreciation through enhancements to your property.

When your rental income goes up, and your debt obligation remains constant, that means more cash flow for you.

For example, say your monthly mortgage payment is $2,500 each month for the next 30 years. And, let’s say you currently earn $3,000 in monthly rent payments.

Over time, your rental income should gradually increase. Some years in the future, you may be earning $4,000 or $5,000 per month in rental income. All the while, your monthly mortgage payment remains $2,500.

You can use that extra income, after covering all other expenses, to pay for your immediate life expenses, pay off your loan faster, or invest in other assets.

It’s for these reasons that having a fixed debt payment over a long time horizon is one of the biggest advantages to investing in real estate.

Think of it this way. Just like with your personal Budget After Thinking, you can make significant strides towards financial freedom when your income increases and your expenses remain fixed.

What do you think of investing in real estate so other people can pay off your debt?

Now, you know three of my main reasons for investing in real estate: cash flow, appreciation, and debt pay-down.

Regarding debt pay-down, each month my tenants pay rent, I can use that income to shrink my loan balance.

As my loan balance shrinks, my equity in the property increases. Equity is just another way of saying ownership interest.

When my equity in a property increases, my net worth increases.

So, on top of monthly cash flow and appreciation, debt pay-down is another way to generate wealth through real estate over the long run.

That’s three ways to make money off of a single investment.

Not bad, huh?

If you’re a real estate investor, let us know how you’ve used debt to increase your net worth.

June 22, 2025

Tag: real estate

I get the temptation to buy a cute condo.

What are the actual costs of owning a condo?

HOA Dues and Special Assessments.

What is the opportunity cost of owning a condo?

There’s nothing wrong with renting until you are ready to buy a more permanent home.

I believe in the power of real estate as an asset class, especially small multifamily properties.

1. Rental property cash flow is king.

2. Long-term wealth through appreciation.

I highly recommend you consider house hacking if you’d like to start investing in real estate.

My wife and I house hacked for years before buying our forever home.

Ignore them.

Before buying that cute condo, think about house hacking instead.

The federal funds rate is not the same thing as mortgage rates.

Mortgage rates often drop before the Fed actually cuts rates.

I bought my home in early 2024 when rates were high.

Besides these personal factors, I had a suspicion that home prices were only going up.

Why do I recommend you ignore mortgage rates when buying a home?

1. Your crystal ball shows you that mortgage rates stayed relatively consistent.

2. Your crystal ball shows you that mortgage rates went up.

3. Your crystal ball shows you that mortgage rates went down.

Should I refinance now or wait for mortgage rates to drop?

So, am I personally going to refinance right now?

How will I know when I can qualify for a rate under 6%?

Is there risk involved with waiting for rates to drop?

Are you refinancing now or waiting?

Here’s a look back at our recent experience leasing out two apartments.

For one apartment, we received an odd request.

Turnover is a chance to make property improvements.

What did we learn from this experience?

The second learning experience involved letting our tenants out of their lease after two months.

So, what’s the takeaway from our experiences with these units?

Should you become a landlord?

If you’ve been keeping up with the blog, we’ve now learned how to run the numbers on potential real estate deals.

Before evaluating rental properties, you need to evaluate your personal finances.

When was the last time you checked in on your money mindset?

It’s not just about how much money you make.

How motivated are you to truly get ahead in life?

When I mention side hustle, is your initial reaction that you’re too busy or important?

Some examples of side hustles my students have come up with in class include:

How about this idea for aspiring real estate investors: part-time property manager?

There is always a way to make more money.

They want to skip the foundation and jump right to the more exciting stuff.

My wife and I would not own five properties today if we didn’t first learn personal money wellness.

Our example property is a small multifamily building in Chicago.

Asking Price: $1,800,000

The initial math on this property did not look great.

What to do if you don’t like the results of your initial evaluation.

Don’t give up.

Is the property overpriced?

Here’s what the numbers look like at 10% reduced purchase price.

Offer Price: $1,620,000

Besides negotiating the purchase price, what if we can shop around and improve our mortgage?

What other ways can you reduce the costs?

On top of reducing the costs, can you can earn more income from this property?

You might be surprised how many sellers under-rent their properties.

Don’t fool yourself into thinking a property is a great investment by unrealistically changing the numbers.

The key is simple: more needs to come in than goes out.

There are fixed costs and speculative costs involved in evaluating a rental property.

I regularly check available properties in my target area in Chicago.

Before running the numbers, a property has to match my initial requirements.

If a property becomes available that meets these requirements, I’ll then run the numbers.

Let’s plug in the numbers to see if this would potentially be a good investment property.

2501 N Sacramento Asking Price: $1,800,000

So, what have I learned from running the numbers on this property?

The key is simple: more needs to come in than goes out.

There are fixed costs and speculative costs involved in evaluating a rental property.

Here are examples of fixed costs when evaluating a rental property.

You’ll oftentimes see the acronym PITI to reflect the above basic elements of a mortgage payment:

To recap, the fixed costs you’ll want to know when evaluating a rental property include:

Here are examples of speculative costs when evaluating a rental property.

What is vacancy rate?

The best I can do is speculate what my vacancy rate will be moving forward.

What are unexpected repairs?

What are property improvements?

Too many beginner real estate investors skip these speculative costs in their deal analysis.

You can easily find most of the information you need to run the numbers online.

Before closing on a property, you’ll want to confirm the numbers in the property listing are accurate and not being exaggerated.

Did you notice that I did not include a cost for property management in the above?

Buying a rental property does not require an advanced degree in math.