Documenting My Saga
I figured this would be a good place to document what I'm doing. (I'm sure we can move this if we need.) I welcome constructive criticism. I even welcome someone telling me I'm an idiot. The goal is to write it down so I can learn and others can learn from my mistakes.
Where I'm coming from
I am one of the "accidental" land lords you may have read about in the paper. Back in throws of the bubble bursting my wife and I were fortunate enough to find a great deal on a new house and still be able to keep our old place as a rental. Under the watch of a good friend of mine we created an LLC to manage the rental, and all but two mortgage payments and nearly all the maintenance have been covered since. (First when we moved, second between tenants and a way too long mini-rehab.) I consider the old place to be cashflow neutral. On a monthly basis we are ahead, but maintenance and whatnot seems to keep balances for the property pretty near zero. This has been the case for about the last four years. Even when the balance sheet for the property had a ton of cash in an account I didn't touch it. (Thankfully, because we needed that.)
First - there are some things I am doing to improve cash flow. We are refinancing the loan. We are shopping for insurance. Should this tenant move (seems likely) we will probably increase rents to better align with what the Denver market is doing right now.
In the last years I have been doing a ton of research. I've read a lot of books. And I'm ready to step out and purposefully get into another, better cash flowing property. Since Denver is a sellers market at the moment, I am looking elsewhere. I suspect my next purchase will be in the Colorado Springs area. I grew up there. I know the area a bit. My parents still live and work there. And based on the pretty colors in the zillow map it looks like it could be a decent spot to find some cashflow.
And here's the plan.
I am going to tap into the equity of my primary residence. This will put me in a "cash purchase" position. With this I should be able to purchase something that might need a bit more work than most people would accept. I will then get things cleaned up and ready to rent. I work slow. I have a day job. From the time I close on a property to the time I would consider it ready to rent should take just under three months. Unless I manage to find some local help. (I have been talking with my Dad about that.) So my "holding costs" are going to be higher than most people.
Then, the plan is to refinance the newly refurbished place to pay off the equity loan against my primary. Looking at the calendar, I'm guessing there won't really be time to jump on another home this year (trying to rent something between November and January really stinks), but maybe I will repeat the exercise in the spring.
In general, the whole process will look very much like a fix-n-flip, only I will be selling it to myself at the end.
I had a meeting with my mortgage broker yesterday. Things are moving forward, but maybe not as quickly as I would like. At this point I'm not sure if we'll close the refi on the old place first or get cash for the investment first.
The next big step is get money in my account. From there I will start really shopping for houses. I have a couple neighborhoods scoped out. I may try to hit up the county auctions. We shall see what comes.
I won't update this every day, but I'll try to update it every time I feel I make good progress (and am not too wiped out from rehabbing).
Thanks for sharing the adventure with me.
-Matt