How I Afford Living in High-Cost Cities With Rental Property Income

This as-told-to essay is based on a conversation with Ilona Limonta-Volkova, an early-stage investor, the founder of Bear and the Bull, and the creator of the Money Memories podcast. The following has been edited for length and clarity.

I never thought I’d buy a house as a single 32-year-old woman — or that I would become a landlord.

When I lived in high-cost cities like San Francisco and New York, I felt like homeownership would remain out of reach until later in life, when I had started a family. As the child of immigrants, I didn’t see many examples of investment property ownership.

Everything shifted in 2020 when I moved home to Louisville, Kentucky, to ride out the pandemic. It was more affordable than my prior home in Philadelphia, so after living with my parents for about a year, I started to look for a condominium to purchase and move into — but the most exciting properties were historic Victorian houses, which felt too large for me.

After looking for about a year, someone suggested that I buy a Victorian home as a rental property. I talked to more people about this idea, and it turned out that I knew quite a few landlords. That was a real “aha” moment: I realized that becoming a landlord could be a feasible path for me.

I bought low and asked for help whenever I felt stuck

The first property I purchased was not the vision I had of home ownership. There was a hole in the roof, the plaster was falling off, and it required new electrical and plumbing work.

However, I was able to get the property at a discount because of the condition: the 2,200-square-foot house only cost $152,500. Plus, my mom saw the potential in the house and pushed me to put in the offer, saying she’d help with the renovations. Having her on the ground was especially critical because soon after signing, I got a new job that required me to move to Los Angeles. I had to manage the bulk of the renovations remotely.

At times, I questioned whether I had made the right decision. What I learned was that if you ask enough questions, you’ll find your way.

For instance, after my offer was accepted in March 2022, my real estate agent said the house didn’t qualify for conventional financing because of its condition. With her help, I found a lender who would provided a construction loan instead, which financed all $100,000 of renovations. Then the property was in a state where I could get a traditional mortgage.

I also had to learn how to find renters for my single-family home. As I worked on the renovations, I started talking to neighbors who mentioned that a lot of travel nurses need housing in the area. A friend who works in the profession told me about Furnished Finder, which I used to quickly find renters once the renovations were done in October 2022.

How I scaled my real estate investment

Throughout my career, I’ve always been a saver. While many of my peers lived in apartments with doormen or washers and dryers, I focused on my needs so that I could keep my rent low and put more in savings, which I used for my initial down payment.

When I moved to Los Angeles mid-renovations, I took a similar approach: I rented for as cheaply as I could and focused on saving to build my reserves back up. I didn’t take a single vacation that year. Instead, I went to Louisville to fix my house.

Once that property was move-in ready and I felt like I knew what I was doing as a landlord, I started looking for more real estate investments. Instead of using the profit from my first house to offset my rent or live more lavishly in California, I saved it for maintenance and purchasing future properties. I did the same with my work bonuses.

After using these strategies for two years, I was able to buy my second property — a duplex in the same neighborhood as my first for $202,000. These required some renovations too (about $40,000 worth), but I was able to take advantage of historic tax credits to get a portion of the renovation costs returned.

I rent these to yearlong tenants. It’s been helpful to compare different approaches to renting property.

Positive cash flow is a top priority

I make sure my properties have a positive cash flow.

In addition to accounting for the mortgage minimum, I thought about insurance and property tax. I also thought about utility costs and a buffer for maintenance for when things inevitably go wrong. I track all of these expenses carefully in a spreadsheet to decide my rental fees.

With my first property, I initially listed the rent a bit low compared to what I would need for a steady cash flow in the long run to get feedback from my first tenants. Because these were three- to six-month leases, I didn’t feel like I was locking myself into a low rent for an extended period. However, the first two or three tenants said I was charging too low, which gave me the confidence to raise the rent.

For my duplexes, I took the opposite approach: I researched comparable properties in the area, set my rent at a premium yet fair price, and still had tenants within a week.

Today, my properties each generate healthy margins, ranging from roughly 20 to 25% on the mid-term rental and 25 to 30% on the long-term rental, after deducting expenses.

My plan is still to own a primary home one day, but I’m glad I started on the path to homeownership as a landlord. It’s been satisfying to provide comfortable living spaces for people while experiencing the transformational wealth opportunity of investing in real estate.