Listen to the Podcast Here:Philip Taylor is an investor and CPA who turned his first home, a townhouse in a nice area of a major Texas city, into his first rental. On today’s episode of The Real Estate Nerds Podcast, our host and real estate attorney Scott Smith interviews Philip, whose friends and fans call him PT. He is here today to share a Best Deal and Worst Deal combo. While the townhouse has ultimately been a win that reliably profits an average of $4,000 annually, it hasn’t been without its challenges. Tune in to hear the two investors dig into all of the deal’s details, how Phil overcame the hurdles in his path, how you can mimic his strategies, and why Phil is holding on to this property for a very long time. Thanks for joining us! Description Useful ResourcesPhilip Taylor’s First Home: A Townhouse-Turned-Rental Property SuccessPhilip Taylor joins Scott to share about how his first property for his family also became his first rental property. PT also shares how this property became his best deal, and his most reliable investment.[1:00] Philip, known to his friends as PT, spent some time in accounting, and still maintains his CPA but doesn’t practice publicly. In 2006, he got married and bought his first home with his wife, which is now a rental property. Though he describes himself as an Average Joe from Texas, he spends most of his days running his incredibly popular website and managing a major conference called FinCon. The two investors bond over their love of Texas and the many hot market’s in the state.[2:50] Philip and his wife loved the Townhome they bought, and decided to put 20% down on another in December of 2016, but they had to wait for it to be built. They closed in September of the following year: “We bought that for $205,000 and put $45,000 down.” Along the way, they had some children and decided they wanted more space and different school options for their growing family of five.[4:00] Philip and his wife decided to rent out their first home and bought a new home. “It’s been a very positive experience that’s cashflowed on average about $4,000 a year for us. I’m totally happy that we’ve done that and am excited about the experience with it and going forward.”[5:00] Scott asks Philip about his first experience becoming a landlord. He was nervous, but his initial plan was to find someone to help him manage it. He hired a management company to help him with tenant issues, repair issues, and other unexpected issues. He was new to the world of entrepreneurship, but got some good advice. He refinanced his original home before moving out to increase its cashflow.[6:34] After talking to many fellow investors and landlords and doing lots of research, Philip decided to take on management himself: “I did everything myself, from renting it out to finding the tenants. Everything.” When Scott asks what gave him the confidence to make this jump, Philip shares how his blogging community influenced his decision. He was fortunate to be close by to his rental property, making management easier–and he even blogged about his experiences. He was given a confidence boost, but also had the desire to fully understand property management through direct experience.[8:00] Scott asks what communities investors who don’t have blogs like Philip could use. Philip shares about an attorney friend who has been helpful, and also shares how helpful BiggerPockets.com has been to him. BiggerPockets allowed Philip to add other “accidental landlords” to his network. Scott also loves this community, and shares articles there frequently.[9:00] Philip shares how finding a tenant was his major challenge. He had no prior experience with screening tenants, but developed the: “Ultimately, I decided to reverse engineer the standard I wanted for a person living in this nice townhome.” He kept his standards high and held out for 1.5 months to get the right tenant in.[10:45] Philip shares some other tenant difficulties. He has had tenants break the lease, maintenance emergencies while he was traveling, but fortunately the property has done well overall in spite of these issues. He now has a network of trustworthy contractors to and the experience to address these issues.[12:00] Some years, PT only cashflowed $1,000. He had to solve these problems as well, especially since the property values fluctuated under his ownership. Fortunately, this property has performed well on the tax front. Philip’s problem-solving skills and network have helped him create an average cashflow of $4,000 annually, a number he is pleased with.[13:30] Phil owns two other businesses, and now chooses to focus his attentions on those and hold steady with this rental property. There’s a method to his investing strategy: “It diversifies me. I’ve got tons of money in the stock market, tons of money in both my businesses. So having a piece of real estate is cool to add to that mix.” Scott points out that Philip also simply loves this house, and PT acknowledges this emotional attachment to his first home.[14:19] Philip’s rental may not remain a rental forever: “Ultimately, we feel good about the property long-term, because may move back into it to take advantage of homeowner exclusions.” He’s unlikely to sell it any time soon, and may even retire in it once his children grow up.[15:30] Philip is satisfied with his deal: “I like being an owner. I like being a landlord. Because the property is nicer, we’ve always had great tenants. It’s been a real joy to work on and figure out solutions for.”[16:15] On top of being a great real estate deal, his work on this property has become fodder for PT’s incredibly popular blog. He has shared his efforts on this project every step of the way to his enthusiastic following. He has a venue to share struggles, and a network to get advice and encouragement from.Not All Sunshine and Rainbows: The Challenges of Philip’s Townhome RentalScott switches gears to discuss some of the less enjoyable experiences Phil has had with owning this otherwise wonderful property.[17:21] Phil shares about a conflict he had with the next-door neighbor. When a fire sprinkler burst in the neighbor’s home, it spilled over into Phil’s house ruining his floors and parts of his drywall, and even creating mold. The tenant had to live upstairs–an inconvenience Phil handled by giving the tenant a free month of rent for. He shares some of the emotional stresses and anxieties he experienced as result of this issue.[19:00] Scott asks how Phil handles problems like the one they just discussed, and where his ability to roll with these punches comes from. PT’s answer is simple: “I think the key is communication, just being open and honest with everyone I’m dealing with. I try to get honest, straightforward answers from everyone else, too.”[19:57] Phil has another motivation to solve problems: “I love this property. It was my first home. I raised my first kid here. I’m in it for the long-haul.”[20:00] Phil shares how his long-term commitment and closeness to this property has helped him stay accountable. It has also contributed to his personal growth, whether that’s learning how to create a lease or learn other knew skills to be the best landlord. He has pushed through many challenges because of his devotion to this property.[21:50] Philip doesn’t think his experience is unique: “If you have the opportunity to own a property, it’s only going to leave you a better person on the other end.” Scott agrees that owning real estate investments has advantages that are more than simply financial gains.[22:30] Scott asks how Philip handles raising the rent in terms of tenant relations. First, PT sets an expectation to keep tenants well-informed ahead of time about rental increases. He sees rent increases as one of life’s inevitabilities, just like death and taxes. Granted, this is true in his market where rents consistently raise. Your mileage may vary.[23:53] Philip also examines comparable properties and is transparent about the rises in property taxes. This way, he can be armed with this information and the data backs up his need to increase. If a tenant refuses to pay the increase, the good market analysis means another person will. Even if the tenant negotiates down, it’s still an increase for Philip.[25:00] Scott points out that there are two schools of thought on negotiating rent increases. The first is similar to Philip’s, and the other tactic is more assertive–simply demanding what you need as a landlord. Regardless, the investors agree that it’s important to not make the increase seem personal, but essential because of the numbers. Numbers don’t lie.[27:00] Philip also keeps a professional separation between himself, his property, and his tenants. His tenants don’t necessarily know about his blog, for instance. PT finds this creates a higher level of professionalism, but he is still able to approach tenants with a healthy degree of human connection.The Takeaways: Take A Chance, Find Your Tribe, and Create Accountability MeasuresThe pair of investors conclude this episode with their key takeaway points. Philip Taylor and Scott Smith agree that education is important, but taking action is even more so. They also touch on how to find a community and hold yourself accountable–or find others who will.[28:30] Philip offers tips directly to investors in the position he was in in 2006: ”If you’re like me and contemplating turning your home into a rental, for me, it was worth the risk. I got over the hump by educating myself and surrounding myself with people who had done it before. Really look at it, because it can be a life changing experience.” He encourages listeners to take the chance.”[29:30] Scott agrees about the education component, and notes the number of people he knows who are great at gathering information, but don’t always take action. He also observes that there’s something special about Philip’s community that drives him to take action.[30:30] Scott asks Philip for more resources that help people take action. For Phil, “I think it comes down to accountability.” He recommends finding a way to teach what you’re learning as your doing it. The two investors agree that the internet is a great resource for surrounding yourself with people that are growth-minded and financially savvy. But accountability groups can also be local. Finding your community requires simply putting yourself out there. Phil considers finding these people the “game changer” of his investing life.[32:40] Phil has one last tip regarding networking: “Surround yourself with people you want to be like, and people you want to be moving toward.”Connect with Philip TaylorConnect with Philip on Twitter (@PTMoney) or through his website, PTMoney.com. Listeners who visit the site can take advantage of Bill’s free guide to improving your financial life in just 31 days. This is just one of many investing and finance tools you will find on the site. You can also check out Philip’s incredibly popular podcasts, Masters of Money and The Part-Time Money Podcast. Don’t forget to subscribe to get the most current episodes directly in your listening library. Finally, you can email philip directly at email@example.com.Listener ResourcesThank you for joining us on today’s episode of the Real Estate Nerds Podcast.For even more free educational resources on real estate investing and the law, check out the Royal Legal Solutions blog. You can also reach our host Scott Smith directly, connect with him on LinkedIn, subscribe to the Royal Legal Solutions YouTube channel, or join our investor community on Facebook.Don’t forget to subscribe to stay up to date and have the most current episodes of the Real Estate Nerds Podcast directly in your listening library. Every subscription helps us create new, custom content for you. What did you think of today’s episode? What would you like to hear more about in the future? Leave your thoughts and questions in the comments section below, or leave us a review in the iTunes store. We love hearing your feedback, so fire away. Join us again next time for an interview with successful real estate investor Kathy Fettke. Thanks for listening and joining us on our journey to become better investors!Hosted by Scott Smith, Lead Attorney and Founder of Royal Legal Solutions. Schedule your personal consultation now. If you have questions about our content or suggestions for future episodes or guests, reach our podcast team at firstname.lastname@example.org.