Side Hustle Profile

I have spent a good part of my career investing time and energy towards side hustles.  I generally categorize them into two distinct types of ventures.  The lazy side hustle involves starting a business or consulting in a field tangential to the main hustle.  For example, an accountant who works normally as an auditor may do a few tax returns on the side during tax season.  I call this type of work “lazy” because most likely, the professional does not need any extensive extra training on top of what they already have obtained for their primary career.  The non-lazy side hustle, like real estate, usually requires stepping out of one’s comfort zone and learning a new skill or starting a completely unrelated business.  Today’s post is a side hustle profile.

I currently am engaged in a number of different lazy side hustles.  They boost my W2 income and allow a great deal of freedom and choice when it comes to how I spend my time.

My non lazy side hustles, however, are fewer in number.  My favorite, by far, is my gig as a landlord.

Why would anyone want to buy and rent condos?

The Good

We bought our first condo in the city to use on weekends.  When we realized that our need and interest were less than expected, we decided that becoming a landlord was  our best economic option.  Unwittingly, we stumbled into this side hustle opportunity that now makes up anywhere from 1/4 to 1/3 of our net investment capital. Almost a decade later, we now own four condos.

Each property cash flows fairly well.  While it’s difficult in Chicago to earn a great cap rate, we are able to create a steady income stream that nets between $50k-$60K a year.  Furthermore, since these are fairly expensive properties, we are able to deduct depreciation and completely defer all tax on the profits.

Not only do we receive our monthly “dividend” but the properties have appreciated greatly.  I suspect that when we eventually sell, we will make even greater profits.  Those profits also can be tax deferred if we do a 1031 exchange and purchase more rental properties.

Real estate is uncorrelated from the stock market and thus provides a great opportunity to diversify our portfolio outside of broad-based low fee index funds.

Since we bought our properties in long-standing, well established, but still popular neighborhoods, there is no shortage of renters. To date, the longest a condo has gone unrented is 14 days. Since our properties are part of associations, much of the outside maintenance and upkeep is managed by someone else.  Internal repairs are often cheap do to low square footage and the basic structure of the condos.

The Bad

Like being a doctor, when you are a landlord, you are constantly on call.  Owning multiple properties like I do, it is just a  matter of time before someone wakes you up with an issue or calls at an inopportune time.  Leaky or clogged faucets, toilets on the fritz, or a CO detector going off.  I have been called with just about everything.

Renting the units can be a pain.  Often I have to pay to put an ad in MLS and sometimes have to show the apartments myself.  Picking a good renter can be like dating.  You sometimes have to kiss many frogs to eventually pick a prince.

Rentors can be flakey.  Late on monthly  payments.  Or destroy your property.

Real estate is illiquid.  Once your money is parked in this asset, it can be costly to convert back to cash.

Owning in a condo association also has its drawbacks.  HOA’s are constantly on the rise.  Special assessments can happen at anytime putting you out of thousands of dollars.  Condo associations can go rogue and ban the rental of units in your property.

The Ugly

When real estate goes bad, it goes really bad.  Almost all landlords have faced a major catastrophe at some point. Burst pipes are a common one.  Infestions are a close runner up.  A major gas or CO leak has been known to occur from time to time.

Sometimes tenants refuse to pay but also refuse to leave.  The eviction process is long, drawn out, and often costly.  There are few things that will turn you off from landlording more.

Lastly, liability is an issue.  Our properties are each owned in separate LLCs and we also have a fairly large umbrella insurance policy.  If someone is injured or killed on your property, be prepared for a lengthy and often emotional legal process to ensue.

 In Conclusion

I have thoroughly enjoyed being a landlord.  We are able to mitigate some of the hassles by owning condos instead of single family homes or buildings.  We have had a relatively easy time finding renters, and the properties cash flow nicely.  There have been a sprinkling of late night and emergency calls, but most have been manageable.

We have screened our tenants carefully to avoid dealing with eviction, and used the legal options we have at our disposal to protect our assets and livelihood.

Is landlording for everyone?  Probably not.  Real estate is a highly illiquid asset that requires maintenance and care.

But for us, it creates nice “dividends” and helps diversify our portfolio and uncouple from market returns.

How about you?  Do you own any properties?  How do you real estate?