Life With a Tenant Upstairs + Kitchen Renovation #474 Part 3

In this episode we're discussing a life update which is renting out part of our home + kitchen renovations we are doing.
We are breaking down the financial lessons we’re learning as a physician household with tenants. 

FREE DOWNLOAD -  7 Considerations Before Starting Locum Tenens - https://darkos.lpages.co/7-considerations-before-locums

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Transcript

SPEAKER_01 1:43

Alright, y'all, we are back. We just got to finish talking about Wale's new album as well as why you need to put um or at least make sure you put in a contribution this last December because this is gonna be the last time you can contribute. Make sure you check out the last segment so we can talk about why that's really important to you. Right now, let's jump into our house that we look at.

SPEAKER_02 2:04

Oh, what'd I say?

SPEAKER_01 2:05

What'd I say?

SPEAKER_02 2:06

You just said make a contribution. Make a contribution to your make a contribution to Docs Outside the Box Podcast.

SPEAKER_01 2:13

That would be nice, Alfred. Put down our cash app right there.

SPEAKER_02 2:17

Bless my cash app.

Renovation Plan And Tenant Upgrades

SPEAKER_01 2:18

Mm-hmm. So we got a house. Um, in that sense, it's a duplex. It's a house, I don't know how many years ago that this house was built in the 1920s. But anyway, it's a it's a it's a house that sometime, I don't know, 20 years ago, 25 years ago, someone decided to, you know, cut it up and make it into a two-family. And um, so when we purchased it, we also inherited a tenant, a great tenant, and we like it because you know they pay us rent and we use that rent to pay off a significant portion of the mortgage. Um, but there's some expectations that come along with it, right? We are landlords now. Um, there are things that we got to take care of. If you know there's a leak, we got to take care of that. If the heat don't work, we gotta take care of that. If the refrigerator don't work, we got to take care of that. And as a matter of fact, all those different things have happened in some form or fashion, right? So um what we're doing right now is um upstairs uh kitchen hasn't been updated. I don't think it's ever been updated. Um and uh the neighborhood that we live in is right along a train line. And as a result, anybody who knows Jersey and neighborhoods that are along train lines, it's easy access to New York. Um, so there's a significant amount of new apartments that are growing in our neighborhood or in the periphery of our neighborhood. And we are upgrading the kitchen just to make sure that we're kind of keeping up with what everybody else has or expects, just in case something were to happen and our tenant were to leave. If we were to get a new tenant, you know, at least we don't have to worry about the kitchen, so to speak. Um so one of the things that we're doing is, you know, we're changing the floors, taking out the cabinets, putting in new cabinets. Um, we're moving the washer and dryer that usually is in the basement that the tenant uses, and we're moving that into their suite. Um, so that is called, you know, an in-suite washer and dryer, so they don't need to go downstairs or outside of their apartment. Um, putting in some new built-ins. Um it's a lot. But yeah, I feel comfortable about that.

SPEAKER_02 4:19

It's a big project. Yeah.

Landlord Math And Tax Strategy

SPEAKER_01 4:20

It's a big project. It's a um if yeah, if if just so people know, like so, based off of the square footage of their portion of the house in comparison to ours, it's roughly about 21% that they occupy. So because this is a rental, 21% of everything, in essence, you know, is in essence treated like a business or a business expense, right? So 21% of the mortgage interest is considered tax deductible. 21% of the electric bill or anything that's shared between us is tax deductible, right? Um, but because we're doing repairs as well as um making some capital expenditures like a new washer machine and dryer, that's a little bit more of a complex tax talk. But in essence, this whole project is tax deductible because this is a business expense. Did you freeze? No, I didn't freeze. Oh, I'm sorry. What were you laughing at?

SPEAKER_02 5:26

No, I'm just listening to you. Like, I know how you like to keep money in your pocket.

SPEAKER_01 5:32

Hell yeah, I like to keep money in my pocket. Who doesn't? Guys, if you're listening right now and you like money to flow, actually, there are people who like to do that. That's let's not front. Let's not front. There are people right now who got lucids, there are people right now who got shoe addictions. There's people who got whiskey addiction addictions, there's people who got a whole bunch of different things going on.

SPEAKER_02 5:50

So you're just gonna call out all your friends. You just call them all your friends.

SPEAKER_01 5:54

No, I'm not. I love everybody. What's my addiction? What's my spending?

SPEAKER_02 6:07

People got exercise addictions.

SPEAKER_01 6:10

Um exercise. I have high blood pressure in my family, and I also have diabetes in my family. Who doesn't? And I have a letter of necessity from my doctor. Excuse me. I have a letter of necessity from my doctor saying that that is for the prevention of that. So that makes my membership to future.com. That makes my purchase of barbells, adjustable dumbbells, and whatever other gym equipment that I have tax deductible if I need to take it out with my HSA. Another benefit of the HSA. See, I keep it here. Boom. I keep it here. If I'm gonna spend something, it's gonna be spent smart. You know what I'm saying?

SPEAKER_02 6:55

Because everybody knows Need Darko likes to keep his money in his pocket. I like to spend to spend no money. I like to spend to spend no, you don't like to spend. But if you have to spend, you're no. You this is you, this is your slogan. I don't like to spend money, but when I do, I spend it smart.

SPEAKER_01 7:14

Well when you come from the gutter. This is your slogan. When you come from the gutter, this is what you do. You all can't grow up in Park Slope, Gowanis. You know what I'm saying? We we all can't grow up from that part of Brooklyn, all right?

SPEAKER_02 7:24

I guess we can because I sure didn't.

SPEAKER_01 7:27

You sure? Let me check your Addy. I'm sure. Let me check your Addy Sure. Let me check your Addy. Everybody, go ahead, tell us your Addy so we can put it in Zilla. Everybody put it in Zillow.

SPEAKER_02 7:37

Cardi B, this is where he goes to do locums.

unknown 7:40

Yeah.

SPEAKER_01 7:41

But it's it's look, let's let's get serious. But it's it's I mean, you you think about it now, right? That's basically another business upstairs. That's another business, right? Podcasting business, doctor business, landlord and business. Don't forget the other landlord business that we have in Pennsylvania. Um, so it's it's a process. You have to be very, we're learning right now, right? Because now you are you are in essence the property manager for upstairs as well as the property manager for the other properties. Like we have to be, you have to be way more organized. You have to keep receipts, the bookkeeping has to be up to date. You know, you got a uh a phone number that a fake phone number so that people don't have your real number. A fake phone number. You got a burner phone. This is why I don't trust you sometimes. I'm like, yo, where's that flip phone at? Who what where you put that flip phone at? I know you got a flip phone. Who you talking to?

SPEAKER_02 8:28

It's a Google Voice, bab.

SPEAKER_01 8:30

Relax yourself. You got Star Trek.

Managing Like A Pro: Systems And Vendors

SPEAKER_02 8:36

Star Trek. What's up? So um, yeah, so I am managing the properties at this point, um, keeping reps or essentially what they call a real estate professional status. So I'm keeping hours tracking how much time I'm spending on real estate because then we can essentially use that against our income for taxes and off, you know, offset that, offset our income for taxes. So it'll be a very interesting year. Uh 2026 is gonna be a very interesting year because once I hit 720 hours, then I will officially have hit rep status. So I wonder what that's going to to make our income taxes look like.

SPEAKER_01 9:30

Yeah, I think obviously, yeah, obviously at the end of next year, that's what we will see it, you know. So, you know, I think this serves a m a bunch of different things, right? It hedges our bets, right? Like the first thing for me is like, look, like you said, like I don't want to pay the entire mortgage by myself. So if I can have somebody else who lives upstairs, who's quiet, who's okay with our kids being noisy as hell, and pays the rent on time, you know, why not? And it takes care of a significant portion of the mortgage, why not? So we're but let's be on, we're providing a service to that person, right? This is transactional. We're providing a service, and as a result, we get to be smart and efficient, IRS-wise, tax-wise, whatever, whichever way you want to look it, we're trying to be smart to make sure that you know we're using that extra income in a way to help us pay off this house in an efficient manner, to help our taxes be paid off. And then we also want our kids to also see that listen, like, it's not just like you just mentioned before, you got to go to college to make money. It's like, no, you can start a business just based off of what you have. Like you have to purchase something or you need to be, you need to own something, whatever it may be. It could be IP, it could be a property, but you need to be able to own something that people will pay you to use, to rent, to use, and so forth. Yeah. So it's it's hella important for me in in multiple aspects from a family perspective. I want the kids to see that also. I want them to see my wife. I want to see want them to see my queen, my wife, you know what I'm saying? Really need my be, you know, making it work. You know what I'm saying? That's what I like.

SPEAKER_02 11:07

You're a queen, really. Okay, kawaii.

SPEAKER_01 11:15

Yeah. So that that's that's that's what we're doing. So hopefully it'll take about 10 days. Um, and that's another thing. You know, you're doing 10 days of renovations. The other thing that you gotta think about is well, are you going to have your tenant move out during this time while you're fixing the kitchen? That means they can't get access to the kitchen, they can't get to the fridge. What do you do in that situation? So, what we wanted to do is offer a hotel stay during those 10 days, like an extended stay, so that they could be in a place where, you know, they're comfortable, they don't have to hear the noise. Like right now, I don't know if the audience can hear, but there's a saw that's going off upstairs. They don't have to hear that all day. And then, you know, in those and extended stays, they got they got stoves, they got, you know, refrigerators and so forth. So that's just one thing to consider, also. But you know, it's it's tough. Yeah. It's not just easy to do. And that's usually optional.

Is Rental Income Really Passive

SPEAKER_02 12:06

Yeah. Unless it pre unless it poses a a danger to the actual tenant, then that that really is optional for the tenant to decide to stay or or to move out for that, for the time of the renovation, for duration of the renovation. But yeah, I mean, it's it's been a very interesting. Um, it's been very interesting taking over as like the property manager, like the actual landlord at this point, not just a name, not, you know, you don't just own it and then pay somebody to manage it. It's been very interesting. The other property that we have, the multi-unit property that we have, um, we've talked about before having a property manager. And that property we had to take away from the property manager. And I think that's a discussion another day.

SPEAKER_01 12:59

That's what it was.

SPEAKER_02 13:00

Yeah, I think that's a discussion for another day because I think, you know, to unpack that, um, we'll need a much more time. But I will just tell you that it's very interesting taking over as a property manager and having to deal with tenants one-on-one, having to kind of um almost plan what to do, like what the next steps are gonna be, like three steps ahead, and then dealing with, you know, vendors, establishing relationships with vendors and figuring out okay, what do I want a vendor to actually do versus what I can do myself?

SPEAKER_00 13:35

But this is passive income though.

SPEAKER_02 13:38

It it it is, it's supposed to be.

SPEAKER_00 13:41

That shit ain't passive.

SPEAKER_01 13:42

You know, that's the other thing. It's like look, that there's a lot of active work that we're gonna have to put in, right? Before it gets to that quote unquote passive level. But even at that point, I cannot envision a point where you're not putting any type of work into yeah, yeah, you know, this thing.

SPEAKER_02 13:58

I mean, this ain't the stock market, right? Like this is not the stock market where you just put your money in and just wait, wait for it to grow, wait for something to happen. It's not so passive, semi-passive. I'd say semi-passive.

SPEAKER_01 14:16

Yeah, yeah. Yeah. I mean, even things like making sure that the washer dryer that we get for this for upstairs is a gas one because if we get electric, electric is a cheaper washer dryer, right? Or excuse me, the dryer component is overall is cheaper if you get an electric one. But it's gonna drive up the tenants' costs. So next you know, several months from now, they're gonna be yelling at you, yo, my electric bill goes through the roof, like you did this. Right. Yeah, but at least if we stay gas, it's more of an expenditure right now, but at least it's efficient. So these are things that we're just thinking about. Even when you purchase the the dryer, right? It's like, well, for us, we don't really believe in extended warranties. But because we are not gonna be using it, I don't know what kind of crazy stuff they're gonna do to it. I gotta get one. I think it's feasible or it makes sense to get one. So these are just things that we just you gotta think about. We we'll keep you guys updated. Um, but hopefully by the end, we'll take some pictures and sh and put it on the, you know, on a future episode and let people know how that's going. But um, I think it's it's really important to kind of discuss what we're going through. Um, and I think this is really different than even our property in Pennsylvania, mainly because the person is living above us, right? So we get to hear those complaints while you're cooking dinner or you know, you're outside with the kids and he pulls up into the driveway. Like these are things you can't run away from, so to speak, right?

SPEAKER_02 15:41

Right, right. So it's something that needs to be addressed. It needs to be addressed like in that moment.

SPEAKER_01 15:47

Yeah. You know?

Practical Choices: Appliances, Costs, Warranties

SPEAKER_02 15:48

Yeah. So um, and and not to mention, not to mention something that we talk about all the time, um, you know, between us, is that it is very important, at least for me, having grown up in a duplex that my parents owned. It is very important.

SPEAKER_01 16:06

Told y'all, told y'all in Park Slope, told y'all, yo, you rich, yo. You was rich, yo.

SPEAKER_02 16:12

I know you're not talking. You grew up in a mansion. What are you talking about?

SPEAKER_01 16:15

No, in Irvington. In Irvington. Irvington.

SPEAKER_02 16:18

Yeah, but it was still a mansion.

SPEAKER_01 16:21

First of all, stop playing. It was a house, it wasn't a mansion.

SPEAKER_02 16:26

It's a mansion. How many bedrooms you got? How many bedrooms did you have? Okay. Okay. Full. And one full bath. Did you have did you have an attic? Yeah, we did. That's not a room. Excuse me. Did you have an attic crawl space or or in a full blown Brady Bunch? Greg is gonna move upstairs.

SPEAKER_00 16:53

We had a full, we had a full attic.

SPEAKER_02 16:55

I mean, this ain't this ain't Brooklyn. Thank you. Exactly. Exactly. Is that how it goes? Let's get a chance. Hold on, but I didn't finish my, I didn't finish, I didn't finish my point. I gotta go get the kids, so you gotta keep them moving. I know. I didn't finish my point though. My point was that it is very important if you're going to live in a duplex, if you are going to live in that duplex with your tenant, make sure, make sure that you understand that the peace that you get from living is going to be more important than anything else. Any money collected, any money saved, any whatever, the peace that you get is going to be the most important thing. And that's all I had to say about that.

unknown 17:39

All right.

SPEAKER_01 17:39

So for y'all who don't understand riddles, basically what she's saying is if you got a good tenant, even though you're not getting as much money as you could get from them, the fact that you just have a good tenant that puts up with certain things and pays on time, like that stuff is great. If you're chasing the dollar, you might like get more money, but you might get a whole bunch of headaches. So let's keep it at that. All right, listen, I gotta get these kids, Dr. Renee. All right. So let's let's move on to our next topic. We're gonna take a break, but when we come back, we're gonna answer a listener question about how do I know if I'm ready for locums?