Financial Independence – A Landlord’s Perspective

Written on July 4, 2013 by , updated on January 5, 2016

financial-independenceQuestion: Why do we, as landlords, continually rent our most valuable assets to sometimes careless and ungrateful tenants, risk minor lawsuits, and then do it all over again, year after year?

Answer: Financial Independence

In this article, I not only discuss my opinions on using rental properties to build wealth, security, and financial independence, but also the importance of using that wealth for something greater.

The American Dream 2.0

Over the years, I think the once innocent “American Dream” has morphed from having a cute (paid for) house with a white picket fence into being something more; something full of greed and grandeur.

In my opinion, the dream is now for Americans to reach a grotesquely wealthy status, live in a mansion (mortgaged to the hilt) that will make the neighbors jealous, and have a car that cost more than a college education.

Though enticing, this is neither wise nor realistic for the majority, nor is it a source of happiness. Most of us will go into debt, at suffocating levels, trying to achieve this dream.

House with White Picket Fence

The OLD American Dream
A paid-for house. No Debt. Plenty of Savings


The NEW American Dream
95% Borrowed Funds, Zero Equity, Zero Savings.

Where’s the freedom in that?

Unbeknownst to him, Dave Ramsey has been a long-time financial mentor to me.  On his national radio show, he teaches about fiscal responsibility and freedom from debt.  One of my favorite quotes of his is “money is only good for 2 things: security and giving away”. I couldn’t agree more.

Money is only good for 2 things: security and giving away. – Dave Ramsey

Dave is trying to change this so-called American Dream into one that can truly bring joy and satisfaction to those who chase it.

Producing a Passive Income

Numbers And FinanceLandlording is one of the best ways I’ve found to create a continual passive income and pay off debt.  The word “passive” is the key here – the idea of making money with little or no ongoing effort.  You see, investing in real estate helps me invest in the lives of other people. (tweetable?)

Not only will this passive income help support my family now, but my estate will help support my children’s children for generations to come.  It’s about building a legacy free of financial constraints and debt.

The rich rule over the poor, and the borrower is slave to the lender. Proverbs 22:7

Running the Numbers

For me, landlording brings in about $12K/month in rent – granted, most of that goes to pay mortgages, taxes, and expenses. Nonetheless, every month my renters pay off slightly more of my mortgage principle, and in 15-20 years from now, all my mortgages will be paid off.

When my rental properties are free and clear of any debt, I will have the option of either continuing to receive a monthly rent check, or I can sell these properties for a lump sum of cash.  Both of these scenarios are excellent options.  In real estate, this is called “Buy-and-Hold” rentals, and I’m a big fan of this technique.

As long as I can live comfortably now, and not use my rental property’s equity to live off of, I will be saving that equity for later – when it has its greatest value.

The Secret

Top Secret InfoBuy-and-Hold rental properties have 2-3 times the value of any other types of properties. Over the long-term, I expect to make a 200%-300% return before subtracting expenses and depreciation.

Here’s how: the rental income you’ll receive over 15-30 years will pay off the mortgage.  Then, after the property is free and clear of any debt, you can sell it for double (or more) than what you paid for the property.

In essence, a single rental property could pay for itself 3x over (1x through rental income, and another 2x through equity when you sell it). However, a portion of that will go into paying back taxes on the depreciation and the any other fees.

Overall, this is the type of return on investment that I want to leave with my family, and hopefully create a debt-free future for generations to come.

There’s One Catch

There is one catch… you have to enjoy (or at least endure) being a landlord.  Landlording is not completely hands-off, and is still very much a business.  Personally, I like it, and have set out on a mission to show others how great it can be.

Having a Bigger Perspective

kid-flagI believe that financial independence is not the end, it’s just the means to something more.  If I am striving to build up my material treasures, I am wise enough to know that I will never be able to quench my thirst.

For me, being financially independent means that I can spend my time doing things that really matter, like investing in the lives of the people around me, loving my wife, and soon-to-be adopted daughter.

Our rentals are part of a bigger plan to free ourselves of debt and day jobs.  Though I have an ever-growing passive rental income now, I still maintain a full-time job that is not in real estate.  One day, our rentals will be able to fully support us, and will allow me to focus relationships rather than dollars.

Remember, you can earn more money, but when time is spent it is gone forever. – Zig Ziglar

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9 CommentsLeave a Comment

  • Al Williamson

    Lucas, I agree 100% and love long term holds as well. Just to add to the conversation, let me throw out an additional benefit.

    As we landlords watch our principle balances shrink, we have the option to bless the community that surrounds our rental. Taking care of you and yours is simply not enough in my book (or the Good Book).

    We landlords/business owners can further help ourselves (property values) by making small financial contributions to sponsor community events and organizations that make our rental’s neighborhood a fun place to live.

    Financial freedom gives us options. One option is to build a legacy of creating more value than we capture. Let’s celebrate that as well.

    • Lucas Hall

      Hi Al,

      Thanks for your comment. Right on man. I believe that serving others is simply the heart of Jesus Christ. In respect to landlording, I think this means serving your tenants by going above and beyond what they expect, or need. When I have new tenants move in, I tell them all about the neighborhood, and give them a welcome packet of useful local information – such as the locations of stores, police, markets, etc. Throughout the lease, I’ll forward them emails about local events and encourage them to participate.

      If most of my properties were all in the same area, I would definitely try to start new community events, but for me, I have properties across two states – thereby making it nearly impossible for me to be intimately involved in all of the various neighborhoods. But any little bit of involvement helps make a neighborhood better!

  • Seth Williams

    Well written article Lucas – love the Zig Ziglar and Proverbs references too. This is some good motivation for me to keep plugging away at my rental property portfolio (though I’ve got a way to go before I can catch up with you)!

  • No Nonsense Landlord

    As a buy and hold landlord, this is true. I have a lot of passive income, and for the hours spent, it is more than worth it.

  • Sherry Shipley

    Just read this thread … I have recently become a landlord. Not sure I went about it ‘smart’ … it is a sweet home in a nice area, I paid cash ($114,000). As I move forward, rather than ‘wipe out’ my remaining cash, I should begin acquiring properties using mortgage options?

  • Tory

    "I am forced to moderate the comments at this site due to the Obama defenders constant porn spam and threatening comntmes."When a Husseinite has no valid arguement they always fall back to inappropriate behavior and threats. They can not win without doing this.

  • Thomas Kelly IV

    Great read and follow ups guys! I am a new landlord to be in the Lehigh Valley area and am so blessed and excited to have an abundance of wisdom and resources at my fingertips!

    Like I say; “All you need is a vision and a belief!”

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