Year #1 of "10 Year Plan" is in the books - A look back
One year ago today, I took the leap I had been threatening for years and bought my first investment property. A 7-Unit Mixed Commercial/Residential building. Since it was my first deal, I didn't do much along the lines of negotiating the deal, which in hindsight probably left money on the table, but it has been a solid investment so far.
In January of 2012, I closed on my second 7-Unit building bringing my first year total to 14 units. I had no intentions of buying 2 buildings in my first year, but I acquired the second building for less than the price of a Chevy Tahoe and I had the money saved for the down payment. It was a situation where the owners wanted out FAST and the place was mismanaged. During inspection, I found roughly a dozen issues the could be resolved for little money and have a big impact on cash flow, so I decided, "why not?" It is still a work-in-progress but when completed, should bring in a nice profit that I can tap for future property.
Things I have learned that have helped me along the way:
- Always remind yourself that each problem you resolve today puts money in your pocket every day following.
- Real Estate is a full-time job disguised as part-time.
- Replace the workings on every toilet regularly...This was a $1700 lesson I learned early on. Imagine my dismay when that water bill was pulled out of the mail. My neighbors to the South of me still hesitate to come out of their house when I am around!
- There will be days when you just want to sell it and move on telling yourself you "gave it a fair chance"...Take 5 minutes, go look at your pay stub from your 9-5 job, then imagine your boss' pay stub...Then get back up.
- Don't pull a single dollar out of your investment, unless its for investing. Hold off on any "treating yourself". You don't need it, trust me.
- Tax Season, although a lot of paperwork, is much more a gratifying experience than years' past.
- Even when money is tight (which it will be) always pay your bills the day they come in your mailbox.
- Find a mentor, stay humble, shut up and listen.
- Eventually you can pay to have work done...Until that day comes, be there when everything is being fixed, and ask a ton of questions. Every skill you can pick up will save you $. Plus, there isn't a better feeling than stepping back and knowing that you did it on your own.
The best feeling I had my first year:
My father allowed me to borrow 30k for the down payment for my first property. A loan he begrudgingly agreed to but saying "every landlord I ever met was miserable". I responded with "Sounds like they are all doing it wrong" and assured him that whether this works or blows up in my face, he will get a check for 7k each year for the next 5 years (30k + 5k interest on his money). I sent him a check for the 7k earlier this month. He called and said he would understand if I needed to delay payment and that he didn't want that payment to put me in a bind...I said, "No pops...I've got it...We are good on this end."
I could hear him chuckle on the other end, then he said "Nice work, kid".