ForeclosuresMass - ForeclosuresMass Monthly - Nothing Succeeds Like Success - Heidy Gisler Eases Into Real Estate Investing (July 2007)

Hang out with real estate investors long enough, and you'll hear plenty of stories from people who simply took the plunge and became full-time real estate investors. For many people, however, getting into the real estate game means first dealing with the fear of risk.

A real estate investor for two years, Heidy Gisler owns two rental properties in Lowell, MA. She recently shared with us the lessons she's learned being a landlord and how she has become more comfortable taking on bigger projects.

ForeclosuresMass Monthly: What types of rental properties do you currently own?

Heidy Gisler: Right now I own a two-family in Lowell, Massachusetts which I purchased two years ago. My other property is a single-family that's been in the family for years; we decided to rent it out. So I have a total of three rental units.

FMM: Can you share a few of the advantages and disadvantages of being a landlord in Massachusetts?

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Gisler: Obviously, the first one is that your tenants pay the mortgage for you. Buying a property like a two-family is a good way to get into real estate investing and building passive income. I got into the market when prices were going crazy. I was able to buy the property below market value because I bought from the owner directly. I used a conventional mortgage to buy the property because I wanted a conservative way to get into a very hot market. In other words, I'm not a big risk-taker.

For a while, the property appreciated and that was good, but as we all know, those days are over. However, I still have a positive cash flow.

Gisler: When I bought the property, I determined my maximum purchase price by factoring in the mortgage, taxes, insurance, maintenance and vacancy. With a two-family, you are either 100% or 50% vacant due to tenants moving out.

Gisler: One thing I don't see too many people talking about is the ability to positively impact your community. Right now I'm getting tenants through Section 8, which is a Federal rent assistance program. For example, I'm renting to a woman who has an 18-year old paraplegic son. I had to make some adjustments to the property to accommodate them; I also offered to pay for the installation of the wheelchair ramp. It makes me feel really good that I can help them - it's one way of giving back.

I also believe in providing good housing. When I see run-down multi-families I often think, "How can people live like this?" I try to treat my tenants the way I want to be treated and give them housing that I would live in.

Providing good housing also means you can charge higher rents. Two-bedroom apartments in my area go for $850 - $950 a month; I charge $1100 because my units are so clean and well maintained.

I would also add that being a landlord teaches you self-sufficiency. I did most of the rehab work on the second floor unit on the two-family myself. That made me feel good!

Gisler: Because I have so few units, the biggest disadvantage for me is when one is vacant. If I have one vacancy for too many months, I can easily go into negative cash flow. You also worry constantly about your property, and you get the occasional call you don't want, such as a broken water heater - e.g. it broke at 8:00 AM but the tenant didn't call you until noon and now the basement is flooded.

Also, being a landlord is a slow way to make money. That's why I'm now implementing what I learned at the David Lindahl boot camp with regards to purchasing apartment complexes.

My goal is buy a big apartment building and have a property manager oversee it. Lindahl talked about how to look for buildings in emerging markets and how to put together deals. I learned that it's easier to have 50 units under one roof rather than multiple properties.

Being a landlord for two years, and being involved with the real estate market, gave me the experience I needed. I feel comfortable owning property, and I now know what to expect of the process. Being a landlord took away my fear of looking at bigger and better deals.

Gisler: I do the standard one-year lease, which becomes month-to-month once the year is up. I verify income, credit, and references. I joined a national landlord association and got the Massachusetts lease contract from them and then made adjustments to it based on various lease documents I've seen over time. I ask tenants to provide the first month's rent and a security deposit. Most people don't have enough money to give first and last month's rent.

I also work hard to be a good landlord; I see it as my business. I provide good, clean housing and promptly get things fixed. My tenants tell me I'm a wonderful landlord.

FMM: Do you have additional advice for people considering becoming a landlord?

Gisler: Don't be afraid to make decisions based on your comfort level with risk. Find a way to get into the market that makes you feel comfortable. Once you're in and you learn a few things, you'll be ready to take on bigger projects. That's when things start to become really exciting!

Heidy Gisler is the principal of New England Property Network, LLC based in North Chelmsford, MA. She can be reached by phone at 978-703-0636 or by email at hgisler@nepn.com.