My first rent check!
Hello BP.
It seems as an eternity since I embarked in this Real Estate investing adventure we share. I decided to go the buy and hold route.
I will tell the tale of what seems like the longest coming rental check ever.
First I will share a bit of background about myself. I have always been interested in Real Estate, dreamt the Monopoly dreams and started to work my strategy without any guidance but on pure desire and gut instinct. My desire was to purchase rental properties for cash flow and my gut instinct told me that I had to pay off my personal home before I could get started. You all know that is not the case, but I didn’t know it and that mistake did not hurt me. I devised a plan to pay off my home by making a separate principal only payment each and every month beginning with only $10.
Even that small extra payment made a difference I could se, so I examined my spending and found additional cash I could pay as principal only. One of the best things I did was to set my regular mortgage payment on automatic bill pay, so I never missed the money I didn’t see in my account.
However, it took a long time before I could automate the principal only extra payment.
I set the regular payment withdrawal for the first of the month and at the end of the month I would go into my account and look at the balance and scrape most of it into the extra payment. It was very random, and time consuming but motivational at the same time. I could see what a few extra dollars untouched by interest could make! Once adjusted to the frugal life style I had been living for about 6 months, I bit the bullet and set the additional principal payment on the automatic bill pay. I did it for only $30 but it was regular. As soon as I could, I bumped it up to $50 and kept it there for the next couple of years. It was great!
I changed jobs and my new employment overseas provided amazing benefits such as living expenses. Instead of elevating my life style, I paid the equivalent of monthly rent as extra principal. Soon, this payment was the same and even more as the regular mortgage payment.
Within three years of being overseas, I paid off my mortgage and had accumulated about $10K in savings.
Now I was ready to start investing! I read somewhere about a HELOC, so I researched it and decided I would use that as my seed money.
I got a modest $50K HELOC and began to look for a rental property to purchase. In the process I stumbled on BP and became a member. While reading the UBG, in January 2014 I set the goal of buying 2 rental properties per year for the next 5 years to subsidize my retirement.
There was every indication that this was an achievable goal, even with my limitations which seemed somewhat daunting.
Living abroad; I had no team nor any clue of what to do, but decided that even if I made mistakes, I would get started in 2014. I considered turnkey properties but wanted to invest in Atlanta and the few companies I could get some good recommendations for in my Go-To-For-EVERYTHING site BP were in Tennessee. With that said, I found the BP nation not overly excited about TK.
I networked and prepared to go it alone when I was able to spend time in the States. Once the school summer vacation came, I immediately headed for GA with the strong resolve to buy SOMETHING. I visited a team in Florida, liked them but couldn’t bring myself to jump in all the way since I wanted to own my own properties in GA where my daughter lives.
I was very fortunate in having dinner with a couple of BP Rock Stars during my stay in GA. One of them became my unsuspecting mentor. (Didn’t seem to mind when I informed him of his new title). The other Rock Star recommended a Realtor who in turn recommended a lady Realtor who helped me find my first rental but not until two days before returning overseas. I put the home under contract and had a mail away closing. Now what?
Rehab. The home only needed a paint and carpet rehab and here is where I really started to make a mess.
I hired a day labored that worked on replacing a tile floor in my residence while I was in town. He did a very nice job so I hired him to do the same in my rental once I departed, leaving my young and inexperienced daughter to manage the project. Long story short, that did not work.
Well, through God’s blessing, a family friend came in and saved me from myself. He has some construction skills I didn’t know of, his hospitality industry job was on low season, so he had time to help me. He fired the bad worker, hired some others and got my rehab done.
The scope of work I set for my rehab was also wrong. I rehabbed this house as one I would live in. Changed every single floor covering, because I hate carpet in my home, I replaced it with tile in the lower level and laminate on the stairs and the upper level with the exception of tiling the two bathrooms upstairs. This was not necessary to do for a rental right away but I did it. We painted the interior, which was necessary and installed a beautiful backsplash in the kitchen. Another unnecessary improvement, but something I really liked, so my personal taste got in the way of my investor sense. In conclusion.
The good
- I found BP!
- I got started although I knew I would make mistakes because I didn’t know what I was doing.
- I had my finances in order so that the mistakes were not threatening my security, just an expensive education.
- I was very fortunate to find the Realtor who was tenacious enough to help me buy the property although she is better suited for retail buyers.
- My good fortune continued when my friend rescued my rehab and managed it for what I now realize was a very reasonable fee.
- I learned many valuable lessons that will help me make my second deal a better one.
The bad
- I bought at retail price. Did not pay too much but did not buy low enough to make it a great deal.
- I spent too much time and money on the rehab and made unnecessary improvements.
- I allowed the holiday season to come in and my rehabbed home sat vacant from November until March. This leads me to the ugly.
The ugly.
- I hired a property manager in November and had to fire him in January.
- I had a lot of expenses in the form of holding costs. The most painful being the expensive vacant property insurance that my mentor recommended and I happily followed his recommendation.
- The PM I fired was worse than I thought when I terminated out agreement. The new PM, which falls under “The good” category, found two serious leaks in the bathrooms upstairs causing damage to the ceiling downstairs on her first visit to the property as she was deciding if she would add it to her management portfolio. My previous manager should have found and addressed those. I don’t regret firing him.
My home was finally rented mid March so I received a prorated payment. April’s check went to the PM as her tenant placement fee. Ouch! But she’s been an excellent PM. And the news I was waiting to share is I finally got my first rent check in May!
I have made a few offers, got a couple accepted but the due diligence indicated I should not proceed to closing. I have just put a property under contract and feel confident that once we close in early June, the rehab process will be much smoother, thanks to the expensive lessons I learned from deal #1.
This is a long journey and I intend to just put one foot in front of the other each and every day, although I may stumble, stub my toes and get blisters. I will keep moving forward ever so slowly until I get to the next stop.
In 2014 I only got 1 of the 2 properties I intended, However, in 2015, I am about to close on one right at mid year, so if prudent, I still have time to make the second purchase for the year. If not prudent, I will catch up along the way once my team is stronger and more complete. I will then be able purchase and rehab my properties faster than I can today.
If I can do it, so can you.
Best wishes!
Pyrrha