A little over five years ago, I started renting single-family homes and had no idea what to expect. All I had was a spreadsheet that looked promising and a good friend who was an experienced landlord to show me the ropes. When rent checks come in, it’s easier to stay calm—even with demanding tenants. Still, I’ve had enough odd moments to wonder: is being a landlord worth it?
Imagine you have $30,000 to invest. Here’s a 30-year projection of returns:
Now picture this: instead of taking option 2, you reinvest the profits from your first rental into the down payment for a second house, then a third, then a fourth. You quickly build a cash-flow snowball. Early retirement becomes much more realistic.
Real estate rentals come with several tax perks. The best surprise for me was depreciation. The structure’s depreciation can shave a big chunk off your tax bill each year until it’s fully depreciated. Because I plan to retire early, I accelerated depreciation on two of our rentals to reduce taxes during the higher-earning years before retirement. Depreciation is less helpful once you’re not a W-2 employee, so work with a trusted accountant to decide the best approach for your situation.
Warning: when you sell a rental, you must pay back depreciation to the IRS. That’s one reason rentals are best as long-term investments. An accountant can help plan for depreciation recapture if you need to sell.
You can also write off most legitimate business expenses—very useful when you need a new appliance or a furnace replacement. A tax write-off can feel like shaving 33% off the sticker price. Other helpful write-offs include business mileage, a home office, and part of your cell service—at least the portions used for the rental business. There’s a lot to learn about the tax side of rentals.
My first step was recruiting my friend’s real estate agent who specializes in rental investing. She’s no-nonsense, cautious, and a seasoned landlord. We looked at about a dozen properties before I found the house that became “Rental A.” At showings she pointed out things I would have missed—items that would fail a city inspection. For example, she told me the basement ceiling needed to be at least 6’9″ to count as a legal bedroom.
Once I found a place, I had to learn Minneapolis landlord rules and get the property licensed. So many boxes to check. That’s when you wonder, “Should I just put that down payment into an index fund and skip the hassle?” And then there’s finding a tenant.
It’s tough to find renters in January in Minnesota—empty house, no furniture, and a new landlord fiddling with light fixtures and patching walls. A few college students came and went. But eventually I signed a tenant. Despite a full month of vacancy at the start, that first rental has delivered steady monthly rent checks ever since. With only one day off work for closing, I got the house ready and rented within six weeks.
Here’s the key about passive income from rentals: about 80% of the work happens up front—in the two or three weekends right after closing. You’ll clean under and inside appliances, paint, replace fixtures and screens, and tame the landscaping. It’s a lot of grunt work mixed with a bit of fun design—adding cabinet knobs or a new faucet. The remaining 20% is occasional maintenance: clearing gutters, planting a tree, checking tenants in and out, and collecting rent. Once you set things up, it’s very manageable.
If you’re hesitant after reading this, I get it. Housing is tight, inflation hasn’t helped, and the Fed’s moves to curb inflation mean higher mortgage rates, which makes buying rentals harder. Keep learning and keep looking—good deals still exist, though they’re tougher to find. You might consider starting with a duplex: live in one unit and rent the other. And keep saving cash in case the market dips—what goes up can come down.