30 hours for £30,000 and what it taught me about money?

I am absolutely exhausted.

The last 24 hours had been so tiring. My tenants vacated the house in the evening, I went to check them out, discovered some moulds on the bathroom ceiling which I had to clear away. I then came back the following morning to continue fixing the minor damages before letting in the electrician, inventory clerk and cleaners to do their jobs. Afterwards I dashed off to my office, finished 2 meetings before rushing back again to hand over the keys to the new tenants, finally before heading home.
All in all, I slept about 5 hours and cycled over 40 km across London in the past 24 hours. I was asleep before even hitting the bed (in the hindsight, what I should have done was to heed to my advice and slept that extra hour).
Was it worth it? Well I think so as I just signed up 3 tenants for a minimum of 12 months in a contract worth £30,000. More importantly they were very happy with the state of the property as I ensured it was kept in pristine conditions.
What have I learnt?

1. Not all works are created equal

Being an employee is work, being a business owner is work and being a landlord also requires work. However the same unit of time does not generate the same amount of return.
For example in total I spend around 30 to 40 hours per year per property when managing my property portfolio. I’m paid around £20 per hour of wage for my main employment and that translates to £600 of employment income.
Yet the same number of hours leads to almost 50x higher income when transposed to rent.
I also don’t have the hassle of commuting or waking up at early hours. So no, not all works are created equally.

2. Leveraging off asset rather than trading time for money

This brings me into my second realisation. My career and financial goal should be focused on accumulating assets rather than trading time for money.
What is an asset? If you’ve read Robert Kiyosaki’s Rich Dad Poor Dad book then you will remember the vivid phrase which says “assets put money in your pocket whereas liability takes money from your pocket“. This is the primary reason why he never views your main residence as an asset (assuming you are a homeowner) as it takes money from you (maintenance, repair, mortgage etc) whilst not putting a penny directly into your pocket (who’s heard of you charging yourself rent).
Personally I like that definition but I think it’s too narrow. Take your main home as an example, although it doesn’t generate a cash flow directly for you, however it prevents you from further cash outflow:
  • If you own your home outright then you could live in there without significant housing expenses. The alternative would be to pay a landlord to rent, which can be very high in some areas.
  • If your property is mortgaged and your mortgage (hopefully) is on a capital repayment option, then you would effectively be increasing your equity portion with every payment.
My definition of an asset would be anything that produces a regular income and/or appreciates in value over the long term.
The unfortunate and inconvenient truth is that the value of labour has been increasing at a much slower rate compare to the value of assets over the past 30 years. Consequently it is far more advantageous financially to be asset owning than relying on the fruit of labour.
Going back to my property, over the next 10 years it will produce a steady income stream every month while its capital value would hopefully appreciate at an above-inflation rate as a result it being located in a high-demand and restricted supply area. Neither of which relies on my time dedication.

Wrap up

My property rental experience has taught me some valuable lessons about how economics works. The key is to be owning income-generating assets.
Right, I’m too exhausted to write further. Time for some zzzzz…