Five years ago, I bought a 3 bed property in a lovely college town the UK. I shouldn’t brag too much about it and break my lucky strike, but since day one, I found a friendly roommate to share part of the mortgage with, and my then-boyfriend was also pitching in a below market rent, 30% lower than what we had been paying our landlord in our previous rental. It made his parents furious that I was getting rich on his back, but he didn’t want to buy a place, didn’t have a dime for a deposit, so I considered it fair that he would contribute towards our living expenses.
Anyway, for a while, it was the two of us in a room, the roommate in another one, and a third guest bedroom where we had a desk, and most of our clothes in the closet. We did have a few guests that summer so it was nice to have a spare bed, but came September, students came back to the college town and I took a second roommate in.
We were just a little more cramped in the room, but the deal was with the extra rent my boyfriend would pay even less rent, and I would pay for treats like restaurants and travel, so he was on board pretty fast.
A year later, we broke up, I moved out and relocated to Morocco, and the two roommates stayed, with a third one moving into “my room”. I knew I wouldn’t be back anytime soon and wasn’t leaving any personal stuff behind, so I had no problems renting it. With the $875 I was getting by renting that room alone, I had enough to find a nice place on my own in Casablanca.
Fast forward five years, and the roommates have come and gone, and been generally good people looking after the place and warning me if something goes wrong. They have recruited their successor every time they moved out, and chosen those people carefully. In return, I have been a good landlady and changed heaters and washing machines as soon as they break.
The property is cash flow positive since I left, by a few hundred dollars each month. And this month marks the day the accumulated cash flow reached the price of the down payment I forked out when I first bought.
So basically, thank you, roommies, for buying me that property!
The feeling is great because now, this property cost me absolutely nothing. The rents have covered the deposit, the legal fees, the furnishing costs, the heater repairs… everything. I could sell it at any price and still make money since my cost is $0.
Imagine you get a $200,000 property and put $40,000 down. The $500 positive cash flow every month means that under 7 years, your tenants will have repaid your deposit back. At the same time, they are also repaying capital on your mortgage, slowly buying you the other $160,000 of the property.
That is why I love investing in real estate. If the bank was more understanding of my weird self-employment status, I would have more rental units, although managing a property from the distance can get complicated if you happen to get a bad tenant.
In the meanwhile, the rent surplus now more than covers my housing expenses in Guatemala, so not only am I getting a free property, they are also putting a roof over my head. Real estate is awesome.