This as-told-to essay is based on a transcribed conversation with Matt Krueger, 30, about building income from rental properties in Des Moines, Iowa. Business Insider has verified his ownership of the properties with documentation. The following has been edited for length and clarity.
After getting married in 2014, my wife and I moved into an apartment together. We were renting but wanted to buy a house.
We weren’t earning much. I was a cellphone rep on an hourly wage, making around $35,000 in 2014, and she was a veterinary technician who made $24,000 that year.
My in-laws inspired us in our real estate journey. My father-in-law worked as a meat cutter in a grocery store but was able to quit his job at 45 after becoming a real estate investor.
I was listening to a podcast and discovered house hacking: fixing up a property as you live in it so you can rent it out to tenants. We used this method several times and generated income from long-term rental properties.
In 2021, I decided to enter the short-term rental business, listing properties on Airbnb. It hugely increased our revenue from property investment and enabled me to quit my day job in 2022.
I feel blessed to have increased my earnings to the point where I could become a stay-at-home dad at 29.
In 2015, we bought our first home in Des Moines, Iowa, for $92,000. At the time, we lived off my salary and saved all my wife’s income, which we used for a 3% down payment minus $1,000 “first-time home buyers credit,” around $3,700.
The house was a dive, but we started fixing it up. We couldn’t afford to hire contractors, so my father-in-law helped us, and we used YouTube to learn how to renovate. We would do one project, save up my wife’s income, and then start the next project, working on the house bit by bit. We spent around $5,000 on renovations.
It was like living in a construction zone, but we loved it. Painting and flooring the house connected us as a married couple. We made an ugly house into something we could call a home.
After 15 months, we moved out and straight into a second house, which we bought for $130,000 in 2016. We paid the $4,700 down payment with savings from my wife’s salary.
We rented out our first property for $1,200 a month, and after paying the mortgage and expenses, we made $515 in net income monthly.
We continued to house hack fixer-upper properties using conventional loans. Because they were primary residences, we only had to put down 3% deposits and would slowly renovate the houses until they were ready to be rented. That year, we had our first kid and my wife stopped working.
In 2017, we sold our first property, which we purchased for $92,000, for $145,000, and bought another house for $130,000.
In 2018, we bought our fourth property for $195,000, which we live in now. It was a dump, but we liked that it came with land, so we decided to fix it up and stay put there.
To ensure we were renovating competently, I’d have my father-in-law and my father, who’s done some woodworking, check through things. I also asked questions in Facebook groups, but overall, I felt it was relatively easy to learn basic plumbing and electrical stuff. At points, we did hire some professional help, like an electrician and someone to help us move a wall.
It took us about a year to renovate and move out of each of our first few properties and for them to become cash-flowing. We’d work on renovations in the evenings and weekends together.
Between 2017 and 2021, our rental income averaged $1,200 to $1,500 monthly, taking into account money set aside for mortgage payments.
One day, I listened to a podcast about short-term rentals and Airbnb. It seemed different from what I knew about long-term rentals, but I was enticed by the crazy numbers they were earning.
I wasn’t sure if it would be possible in Des Moines — the online data suggested it was a bad market for Airbnb — but I wanted to try.
We could take out a $150,000 home equity line of credit, or HELOC, on our primary home, which we’d been renovating for two years. In late 2021, we used it to buy a $160,000 family home as an Airbnb rental.
We used money from our HELOC to invest around $30,000 in renovations and furnishings. We tried to target families by adding amenities like a game room and getting professional photos taken. When we listed the house on Airbnb, the bookings rolled in pretty quickly. We made around $52,000 in revenue from that house in 2022.
I decided I wanted to go all in on real estate in 2022. I’d moved jobs a few times within the cellular sales field and was on a $68,000 salary, but I was making more from properties, so I called my boss and quit. I was 29 at the time.
In 2022, we bought and flipped a condo in Texas using money from our HELOC. We also bought a second short-term rental in 2022 using our HELOC to pay for the deposit, furnishings, and renovations. We sold the condo for nearly $100,000 profit and used that income to repay the line of credit.
Then, we used the HELOC again for the down payment on a fourplex and duplex in 2022.
At the end of 2023, we did a cash-out refinance on our second Airbnb property, which paid back half of our HELOC. Then, at the beginning of 2024, we sold our duplex to pay off the rest of the HELOC.
Lastly, in April 2024, we drew $80,000 of our HELOC for the down payment, renovations, and furnishings on our third and most recent Airbnb. We plan to do a cash-out refinance in a year to pay back any remaining balance on our HELOC, but we are also using the cash flow from the newest Airbnb to pay it back.
Taking out a line of credit on your primary home can be risky, but we always ensure we pay back the credit as quickly as possible. We have the cash flow, and in the worst-case scenario, we could sell one of our properties to make the payments.
In 2023, we made around $97,000 in revenue from long-term rentals and around $143,000 from two short-term rentals. In May this year, we opened our third short-term rental, hoping to increase our revenue even further.
We’ve been successful with short-term rentals because we’ve focused on creating an experience for guests. We invested in hot tubs, barbecues, outdoor games, and arcade rooms. Last year, we hit around 70% occupancy.
Compared to long-term rentals, I do have to put more effort into maintenance. I wanted the income to be passive so I could spend as much time with my family as possible, but initially, we did the cleaning ourselves.
I now have a cleaner who goes in after each guest’s visit. I’ve also started using software to automate certain processes. PriceLabs helps me update prices based on demand, and Hospitable automates some messaging with guests and notifies our cleaner about bookings that are happening. It’s hugely reduced the amount of admin I need to do.
We set aside money from our revenue for maintenance and paying cleaners. We also cover all utilities and monthly restockables like shampoo and toilet paper.
I wanted real estate to give me financial freedom. Now that I’ve quit my job, I can provide more time and energy to my children. During the day, my wife does most of the homeschooling while I take care of the rental business and manage my social media accounts.
I also wanted to build generational wealth. I plan to leave the properties to my kids, and they can decide what to do with them.
We knew there was a chance this might not work, that we could lose money or not find a tenant, but by buying homes that needed cosmetic updates, we’ve built sweat equity into them, giving us a safety net from debt.
If something went wrong, I could sell all the properties and be left with a good chunk of change even after mortgage payments. If the market crashed and property values dropped, that doesn’t necessarily mean rents will decrease. I think we’d still be able to land on our feet again.
I think it’s riskier to rely on an employer to keep your paycheck coming than to bet on yourself. From making $35,000 a year at my day job to seeing over $258,000 in revenue in 2023, I’m making way more than I ever expected.
