Positive cash flow, equity build-up, depreciation…
How many reasons do you need to invest in income property?
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
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)
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
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.
Smokers suck!
I don’t know why a landlord would put up with smokers.
Smokers cause huge damage to property and they stink the place up and scare away nice tenants.
I just got an apartment back that reeked. It took a full paint job and a ton of chemicals to finally make the apartment livable. We lost a couple weeks rent because we had to shut the apartment up and bomb it with anti-smoke concoctions, clean every square inch, and then air it out.
By the way, the lady that lived in that apartment, who repeatedly lied when we tried to find out who the smoker was after numerous complaints and notices, wanted her deposit back!
Luckily, we were able to save the carpet.
We have a little complex in escrow at the time of this writing, that is full of smokers. It’s nasty. We have a big job ahead of us. But we’ll be able to raise rents significantly just by getting rid of the smokers and the stench.
That’s what real estate agents call upside potential!
Professionalism
I ran into an old friend a few nights ago. His name is David Read and he’s the real estate broker that sold my son, Josh his first home. It was a view condo. Josh was 20 years old and I was a single mom going to school.
Dave treated us like we were special.
Josh made a bundle of money off of that first home. He lived in it for a couple of years, then he rented it out for a couple of years, then he renovated it and moved back in, then he sold it for a $65,000.00 profit.
It’s doubtful that Josh could have “saved” $65,000.00 in the same time period. Plus when you factor in the tax benefits and the benefits of having his tenants pay his mortgage down, Josh figures that he pretty much lived in the condo for free for the years that he lived there.
The experience also made Josh a believer, so I was able to recruit him as my real estate investment partner and that has worked out pretty good too!
Dave got Josh off to a great start in life, by helping him buy that first home. And it wasn’t easy, because Josh was a 20 year old punk kid :), he was a commissioned salesman at Lifestyles 2000 Fitness at the time, and Dave had to work hard to find Josh that first loan.
Here’s what I learned from Dave’s professionalism and kindness:
1. Show up at the close (or go over the HUDs in detail beforehand so your clients know what to expect when they sit down to sign hundreds of pages).
2. Make your clients feel special.
3. Solve problems.
Not necessarily in that order.
Pride of Ownership
This morning I rented a house to a cute trio of roommates in a popular area.
This evening, on my way to pick up my dog at doggie-day-care, I happened to drive by the house again. The new tenants were out in the front yard playing football.
I wanted to cry. It was the cutest darn thing I ever saw.
We took the house back a couple of weeks ago, when the last tenancy ended.
My great handyman prepped and painted the interior, power washed the exterior (hey it’s white!), painted the front deck, repaired the fence, pulled the basement carpet, repaired the swamp cooler, changed the locks, plus a few other odds and ends.
My great landscape contractors cleaned up the yard and upgraded the entry landscaping to give the house better curb appeal. When they finished, the landscape contractor texted me “now this house will sell itself.” He was right. More…