THE TWENTY-EIGHT-YEAR-OLD LANDLORD
Joel is a real estate mogul in the making
AFTER BUYING HIS FIRST HOME IN 2009, Joel Larsgaard considered it his goal in life to acquire and manage a second property as a rental. His love of the neighborhood that he bought in and the economics of the real estate market sealed the deal for him.
Joel is the twenty-eight-year-old associate producer on my radio show and the youngest member of my crew. I admire greatly the way he and his wife, Emily, have chosen to handle money in their life.
They drive a 2000 Nissan Altima that Joel bought with 150,000 miles on it for $3,200 in cash several years ago. They purchased a $40 couch for their living room at a scratch-and-dent furniture store. And even the $20 wedding ring Emily gave Joel is made of hammered copper. No gold or platinum for this boy!
Like other urban pioneers his age, Joel bought his first home in a slightly run-down but promising part of a metropolitan area. In his case, he and Emily reside in Atlanta’s historic Grant Park neighborhood.
“I wouldn’t have even purchased a home were it not for the Great Recession. The result of that economic catastrophe for so many was incredibly reduced prices and incomprehensibly low interest rates,” Joel tells me.
“These in combination with the [now expired] first-time homebuyer’s tax credit made it a no-brainer. I purchased a single-family home for $89,000 on a fifteen-year note. Even on a fifteen-year loan my payment was much lower than the cost of renting.”
His mortgage, including taxes and insurance, is around $570 a month. For his money, Joel got a postwar 1940s home that still has original features like the beautiful hardwood floors. It’s 1,050 square feet with two bedrooms and one bathroom.
When he and Emily married in late 2010, they spent time putting in new windows and a new bathroom. They also decided to save like crazy in order to make a down payment on another home in their neighborhood.
“We needed to put 20 percent down to avoid PMI [private mortgage insurance] and in order to make it an intelligent purchase. This meant that we had to forgo other purchases that others place a priority on. I continue to drive my ‘beater’ car with almost two hundred thousand miles on it,” Joel says.
They spent months looking for the right place at the right price. In late 2012, they found it—a 1925 bungalow of about 1,250 square feet with two bedrooms and two bathrooms that they bought for $163,000. Their monthly mortgage, with taxes and insurance, is $825.
They had to owner-occupy to get the low 3.25 percent interest rate on a thirty-year mortgage that they had been quoted. So rather than renting out the new property, they moved into it and rented out their first home.
“Our neighborhood is full of these turn-of-the-century to 1920s bungalows. They are our favorite style,” Joel says. “Since I’m almost six feet six, the taller ceilings are my favorite!”
Joel says he and Emily will have to replace the old HVAC system in the next couple of years and lay down some new coats of paint around the house. Their goal is to do what’s cost effective and most necessary in order to enjoy the home now but also to invest in it for the future—because they want it to become a money-making rental down the road.
“Our houses are almost a half mile apart and we really like it that way. We believe in our neighborhood and love the architecture and community. We have also decided to do the upkeep ourselves. It makes it an even smarter move when you don’t turn those responsibilities over to a real estate management company. If we didn’t have a deeper connection to our properties that meant more than money, it wouldn’t be worth it.”
As a landlord, Joel’s had to deal with requests from his tenant for new curtains, a couple of paint touch-ups, and a fix to an electrical outlet. He charges his renter $1,225 a month.
“I really like being a landlord so far. It certainly isn’t for everyone, but it appeals to me. You have to be ready to roll your sleeves up and spend some time getting things in proper shape. Emily and I could probably start a professional painting service at this point, as our skills are getting very good!” he says.
“We haven’t set up an LLC [limited liability company] or anything yet. Maybe that will come as we continue to save up and purchase another place. We aren’t set on it, but if conditions continue to be favorable and we continue to enjoy the process, we hope to find something that works well for us.”
Joel doesn’t exactly come from the thriftiest family, but seeing his folks grapple with money issues when he was growing up strengthened his resolve to better handle his own fiscal affairs.
“My inspiration for frugality all stems from my childhood. There comes a point in time when every kid realizes the monetary struggles inherent in a middle-class upbringing. Both of my parents worked extremely hard to provide for my two sisters and I. We were really fortunate to learn that skill well.
“As with most families, though, money was tight and was sometimes a source of tension. . . . The tension that money can cause in a family is something that I really wanted to avoid. This is why I have such an outside-of-the-box view towards money today. I view it as a tool, not as the end goal.”
What lessons can you learn from Joel’s story?
Follow the 90 percent rule.
Be sure that rentals are allowed.
Screen your tenants.
Consider giving an early-pay discount.
Protect yourself.