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How to Become a Weekend Millionaire

2014

Twelve years ago I had virtually no assets.  Zip, zero, butkis.  To balance that out, I had big law school student loans (which I’m still paying), and a new law practice.  Retirement funds?  No way.

What I did have is a strong work ethic, a great education, an enormous ability to work hard and produce, and I’m honest.  That made me a good prospect as a partner.

My son/investment partner Josh, was busy building his loan business.  He has a fantastic  business sense, a strong work ethic, an enormous ability to work hard and produce, and he’s honest.  That made him a good prospect as a partner.

So we were off to the races.

When I look back now, I have no idea how we pulled off most of what we pulled off.  It was sheer intention.

I was getting older (just between you and me) and needed to get serious about putting together a retirement.  Josh was young and needed an investment plan so he didn’t party away his income.

As a loan broker, Josh has seen thousands of credit applications, and he says that almost everybody lives beyond their means, no matter how much money they make.  Very few people have income producing assets.

Think about that.

In about the last 12 years, I have bridged from earned income (the dreaded billable hour) to passive income.  I have an income for life and assets with equity that I can pass on to my loved ones.  I have a tremendous sense of peace and well being from that accomplishment.

That’s self made wealth.

I still work hard every day.  I never have to show up for work and wait for someone to tell me what to do.  I get to select my goals and choose my projects.

The only purpose for this little exercise in rear view mirroring is to say to you….if I can do it, anyone can do it.

There’s a book I wish I would have written that I want to recommend: “The Weekend Millionaire’s Secrets to Investing in Real Estate: How to Become Wealthy in Your Spare Time,” by Mike Summey. Mike retired at age 50 with a 7-figure annual income from his rental properties.  He started investing at age 34 while working at a demanding job.  Over time he purchased hundreds of rental properties in his spare time.  Mike has already walked the path.  You don’t have to invent it.  Get his book and start by following his program.

It’s doubtful that we will ever see real estate loans again at interest rates where they are now.

I hope every person who reads this blog will take the next step to becoming a weekend millionaire by adding at least one rental property in 2014.  Then follow Mike Summey’s program and keep going until you reach your own wonderful retirement, with cash flow.

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“No Vacancies” A Landlord’s Favorite Words

No Vacancies sign

One thing you can count on in business (and in life) is change…so I thought I better show off real quick before something changes.

To start off this new year, we have 87 apartments with No Vacancies!!

I can’t even remember the last time that happened.

We do have one vacant house…but houses are a different business in our world so I can brag about the apartments separately.  (That’s my story and I’m sticking to it.)

We had huge turnover last summer.  We decided it was a perfect time to sell a few houses, so we asked a few long term month-to-month tenants to leave for that purpose.  Then suddenly we had some other long term tenants give us notices.   Gulp.

At one point last summer we had 8 vacant houses.  Eight.

Plus normal spring and summer apartment turnover.

So I was one stressed out lady when the cash/bills graphs got crossed (bills up, cash down).  Filling vacancies is always my absolute top priority, so I had little time to blog.  I’ll try to get in a little pontificating now.

Josh and I would like to add a new apartment complex this year, so I probably won’t be basking in the No Vacancies glow for long 🙂

Articles

Does Your Credit Score Affect Your Insurance Cost?

Credit History

As landlords, we all know how important it is to run credit checks on rental applicants.  I’m looking for the words “As Agreed, As Agreed, As Agreed” down that right hand column.  I want to know if the applicants keep their agreements.

As investors, we all know how important it is to maintain a great credit report to get the lowest loan rates.

But did it ever occur to you that your credit report affects your insurance premiums?

Carrie Van Brunt-Wiley, Editor of the HomeInsurance.com blog gave permission to reprint her great article on the subject.  Enjoy!

“Your credit score and your insurance payments- what’s the connection?

“You’re likely not surprised when your loan officer asks for your social security number- a thorough credit check is standard when applying for a loan. However, many consumers are caught off-guard when a homeowners insurance agent asks for their social security number.  It’s widely debated, but quite commonly practiced- for an insurance carrier to use a customer’s credit score to determine their insurance premiums.

“What does your credit score really mean to your potential insurance carrier?

“While many businesses will use a consumer’s credit score to determine eligibility for a line of credit or to discern whether a deposit should be held for an advance of services, insurance companies actually perform a different type of credit inquiry that they use for a very different reason.

“A “Soft” Credit Check

“First and foremost, it’s important to know that when an insurance company runs your credit they are actually performing what is called a “soft” credit check which accesses only your credit score and is not reflected as an inquiry on your credit report. As you probably can surmise, this is different from a “hard” credit check that a lender, for example, may run which does show up on your credit report as an inquiry. Since credit inquiries from “hard” credit checks can hurt your overall score it’s good to limit these types of credit checks when shopping for a mortgage, for example. However, since insurance carriers only perform a “soft” credit check you can feel free to shop for multiple insurance quotes without worrying about hurting your credit rating.

“What they use it for

“Here’s where a lot of confusion, and sometimes even frustration, can set in from a consumer’s perspective. Once an insurance company has your credit score, they use it (along with many other factors about you and your home, car, etc.) to assign you an “insurance score”. This insurance score reflects your potential risk to the insurer.

“The insurance carrier then takes your risk potential and calculates your premiums. The more risk you pose, the higher your premiums will most likely be. This is where the real question comes in:

“What does poor credit history have to do with my potential to file a claim?

“If you’re asking this question, you’re not alone.

“There is much debate over the use of credit scoring as a way to determine risk, and therefore assign rates to insurance consumers. However, insurance companies defend the practice saying that studies have shown a direct correlation between a person’s credit score and their likelihood to file a claim. Therefore, consumers with a lower credit score often pay higher rates for insurance.

“Whether you agree with the practice or not, qualifying for better insurance premiums is just one other way that you can save money by keeping a good credit rating.”

Carrie Van Brunt-WileyAbout Carrie Van Brunt-Wiley
Carrie Van Brunt-Wiley, is the Editor of the HomeInsurance.com blogs. Carrie graduated from the University of North Carolina at Wilmington with a BA in Professional Writing and Journalism. She has been managing research and content development for the HomeInsurance.com network of sites since 2007.

Quotes

Warren Buffett on Gold vs. Income-Producing Investments

Warren BuffettThis is the best tutorial I’ve ever found on gold as an investment.  So I thought I’d share:

“Gold is a huge favorite of investors who fear almost all other assets, especially paper money.  But what motivates most gold purchasers is their belief that the ranks of the fearful will grow.

“The world’s gold stock is 170,000 metric tons.  If all of the gold were melded together, it would form a 68-foot cube – and fit in a baseball infield.  At $1,750 per ounce … [last year] its value would be $9.6 trillion.  Call this cube pile A. 

Now create pile B.  For 9.6 trillion, we could buy all U.S. cropland (400 million acres producing $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, earning more than $40 billion annually).  After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge).  Can you imagine an investor selecting pile A over pile B?”
[Photo credit: Fortune Live Media via photopin]

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Positive cash flow, equity build-up, depreciation…

How many reasons do you need to invest in income property?

Old Kitchen
Old Kitchen

Positive cash flow, equity build-up, depreciation, tax write-offs, leverage, the thrill of making things beautiful, building passive income for retirement, building an estate that can be passed on to your heirs.  There’s a few reasons off the top of my head.

Here’s another reason:  it’s so much fun!

New Kitchen
New Kitchen

Josh and I bought a little 7-plex at the end of October, 2012.

Six months later it has a new roof, new parking lot, new landscaping, gorgeously renovated units, and a lovely new tenant clientelle.

We have increased the annual rental income by $23,000.00.  (!!!!)

Old Front Room (East View)
Old Front Room (East View)

All of you number crunchers know that we have thereby increased our equity in the project by some fairly impressive number in the six figures.

That was the fun part.

But there was also a scary part when we had big renovations sums flowing out of our bank account with little rent flowing in.  Gulp.

Six of the units are probably still $50.00 per month under market, but I started marketing in the middle of winter when no one wanted to move so I got scared for a minute and dropped the rents to get them renting.

New Front Room & Diningroom
New Front Room & Diningroom

This was a perfect small project to use as a case study, so I’m writing an e-book which will walk budding investors through the process from beginning to end.  I’ll let you know when it’s ready for public consumption 🙂

In the mean time, I can’t remember a better time to buy rental property.  I hope you are paying attention.

Articles

“Biggest Mistake New Investors Make in Due Diligence”

tenement house

Thanks to attorney and multi-family investor Charles Dobens for this excellent and insightful article on due diligence, which we found on the MultiFamily Insight Blog:

“What is the biggest mistake new investors make in multifamily due diligence?  Due diligence is where many new investors start to go astray.  They find a deal, make offers, get an offer accepted, put it under contract and then start the due diligence process.  During the due diligence process their entire focus is centered around the real estate. They interview and negotiate rates with property inspectors.  They set up a date and time that they will go through each and every unit looking for the most egregious example of poor management so that they can go back to the seller and negotiate a repair allowance.

“The owner of a bad property will see this coming a mile away and be prepared for it.  They will inflate their purchase price to make you pay the repair allowance WITH YOUR OWN MONEY.  They will play hardball with you and structure the terms of the repair allowance such that the dollars come out of the deal in an in-kind transfer and not in cash.  You, at the end of the day, end up with a property that has a list of needed repairs and no cash to fix it.

“But that is not where your focus needs to be.  Here’s where the new investor goes astray.  After the property inspector has completed his task and submits his beautiful 100-page report that you pay for, you will review it and look at the last page that gives a dollar amount as to the needed repairs.  You then go back to the broker and open the negotiations all over again and I can assure you, they are lying in wait for you to return.

“But the problem with this over-dependence upon the inspection report is that, no matter what the inspector finds, it can be fixed with one thing – Money.  Just name your price and the roof is fixed. Get three bids and the foundation is fixed.  The brokers focus, along with yours and everyone else is on the real estate.  This is exactly where you should not be focused.  More…

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2013 started with a new 7-plex

2013 w/stats arrow upOur goal for 2012 was to increase cash flows and add cash flows.  Happily, we did that.  We now own and self-manage 100 lovely houses and apartments.

We closed on a great 7-plex at the end of October.  Over the following 3 weeks we installed a new parking lot, a new roof, new landscaping, and gave notices to all the smokers.  Bye-bye.

Tomorrow, the first gorgeous, fully renovated, 3BR townhome goes on the market.  I expect to be able to increase the rent on that first unit by $300/mo. over the former rents.  That’s my sick and twisted definition of fun.

So in 2013 I want to really “put a dent in the universe.” (Steve Jobs)

We have a tried and true formula at this point, and I’m going to spill the beans this year on what we do and how we do it.  Stay tuned!

In 2013 we plan on adding and beautifying more units, adding cash flows, doing some writing, and taking some time off.

I better get back to work 🙂

This is a great retirement gig!

Quotes

Fund Your Retirement with Rental Income

Dr. Steve SjuggerudReal estate is the best value that it has ever been in U.S. history.
Rental income is GREAT now, relative to any other investment.
 
Even better, you have built-in inflation protection. Both rents and real estate prices tend to rise a bit faster than the rate of inflation. Your money in the bank doesn’t have this inflation-protection benefit.
 
Mortgage rates are at record-lows, so housing is more affordable than ever.
 
You have a choice today.
 
You can be a victim of Bernanke’s zero-percent interest-rate policy… or you can take advantage of it.
 
The best way to take advantage is in real estate.”
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Warren Buffet Digs Real Estate

Warren BuffetOur favorite 82-year old mid-western billionaire is sweet on real estate.  Whodathunkit?

Warren Buffet just branded “Berkshire Hathaway HomeServices.”  This new real estate franchise will be operational in 2013.

It looks like he’s positioning his new company front and center of the real estate recovery.

Get ready for the rocket ride!

Read more about it at the KCM Blog and Bloomberg.

Video

15-Year-Old Landlord Buys Second Rental House

Do you know a teenager that can’t find a job?

Meet 15-year-old Willow Tufano who created her own “shovel-ready” job.  She’s a landlord who just bought her second rental house with her partner/mother.

Thanks to the KCM Blog for passing on this inspiration.