Sunday, 26 April 2009
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The Absentee Landlord: How to Retire Within 18 Months to the Destination of Your Choice
Part III: Property Management, Going Mobile, and Moving to Your Destination
All right, so you've started working on building your Absentee Landlord empire, and by empire we mean a few rental properties. You can start to picture that white beach in Costa Rica a little more clearly, but there are still some pieces missing from the puzzle.
Property ManagementYou need a property management company, to keep an eye on your rental units, field phone calls from tenants, repair broken pipes, and screen new tenants. Most property management companies charge a commission of total rent collected, which is one very good reason why you only want a few rental units, with minimal expenses on each. Generally speaking, property management companies charge between 5-10% of gross rent collected, but this is often a flexible figure, and negotiable. If you can secure a good property management company at 7%, you'll be good to go.
This will free you from any obligations to the rental units, other than simply paying your bills (real estate taxes, hazard insurance, etc.); this is the first step in going mobile.
As you begin to achieve your target monthly cash flow ($3,000 in our example), it's time to start looking into actually moving to your Absentee Landlord Destination. You've probably already picked out a general area you want to live (such as a specific beach-side town in Costa Rica), but now it's time to actually go in person, and start checking out specific properties. While you're there, be sure you check on infrastructure, such as cellular service, internet, clean water, electricity, etc. in the property or neighborhood you're considering. As a final note, internet access is far more important than phone access, as you can use a headset plugged into your computer to make cheap international phone calls through services like Skype and Jaxtr.
Going Mobile & Reframing the Concept of Success
Don't think too extravagantly, as you're on a limited income. Location, infrastructure, and safety are the most important priorities; size and luxuries are secondary. Who cares if you live in a little bungalow, if you overlook beautiful sunsets on a Costa Rican beach? As we discussed in Part I, the Absentee Landlord lifestyle is not about glitz and glamour, it's about living your dreams independently of having to work.
It is entirely possible to lead a very comfortable and rewarding life on very limited income, especially if you spend the time to do your homework. Don't go to a big-shot real estate agent who caters to "rich American expatriates," but look into a long-term sublet of a furnished house, or go talk to the real estate agents the locals use. Buy local food at farmers markets; it will be less expensive and fresher. Here's one thing you probably don't want to hear, but need to: you probably don't need or want to have a car in your Destination. America is somewhat unique in the world, in its emphasis on roads and cars as a requisite for transportation. Sell your car, and either sell your home in the States or have your property management company simply rent it out as well!
As a final piece of unwanted advice: get rid of most of your stuff. You don't need that table out in the garage, or that beanbag chair in the basement. Sell it, give it to charity and take a tax write-off, or lend it to friends or family if you really can't part with it.
Going mobile to become an Absentee Landlord requires a totally different state of mind than most of us Americans are accustomed to; it's about minimizing your STUFF (because you can't travel with a lot of junk), and maximizing your experiences. Forget the idea of compulsive consumerism, and instead buy one good laptop computer and one good surf board, or one good set of skis, or one good set of scuba gear. Where you're going, you don't need roads.
Links the Absentee Landlord Part I and the Absentee Landlord Part II
Online property management software through EZ Landlord Forms
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