All Forum Posts by: Sarah McConnell

PS

 I forgot to address the issue of the lease.  I would ask them to sign a long term lease and they will get a ceiling on rent for an amount of time that you determine. But, even if they don't sign a lease, I really don't see them going anywhere.  You would want to have a lease that states whatever protections you would like to build in for yourself.  Really, that would be the main purpose of the lease.   

Well, this is the difficult part of being in the business.  I have seen both sides. My parents own 6 units and lost an 8 unit apartment complex because of poor renters. One might ask how this can happen if someone is a smart business person but it can happen. The moment we think we are too smart for such things to happen is the moment we are fooling ourselves. Anyhow, here is the part about seeing both sides. If my parents did not own these properties they would not make it. My dad worked as a professor at a large university for many years. Even with that he doesn't have a great retirement. My parents got a lot wiped out during 2008 and have not fully recovered and never will. If they did not have rentals they would have combined social security of just under $1,600 per month. Realistically all of us know that this cannot be lived on in the long run when you look at rent, utility bills, food, and gas. Then you add on things like a $1,000 bill here and there for broken vehicles or any other expense that was not foreseen. So, if my parents did not have rentals they would be in your tenants situation. But, then there is the other side of things-- the business side.  It's true that you purchased this property so that you could secure your financial future.  As long as you have a unit that is renting below market value you will wonder if you can raise the rent. This is where the big picture is required. If you let the couple stay, then you have guaranteed renters for a long time and you know they will take care of the property. This in itself is great. The situation that is your worst enemy is having tenants come and go frequently.  This is because each time a tenant goes, there are always expenses.  There will always be wear and tear and there'll always be a scenario where something could stay on the market for a month at a time.  When this happens, you lose a whole lot of cash potential at once.  Honestly, I would leave things as they are for a little while.  That way, there is always one unit that you will not have to worry about.  That is a big deal.  My husband and I have our own rental as well.  We have found out that getting an excellent, long-term tenant and giving them a lease that is a little less than what the market supports is a winning strategy. Sure we get less money but we are spared A LOT of heartache.  We learned our lesson when we got a bad tenant and charged a little more than the market supported.  This tenant left the water running in the soaker tub on the third floor.  Before they realized it, water was pouring through the ceiling and the walls.  It was a lot of money to make the repairs and we also had a scare about black mold. Luckily there was no mold after an environmental crew cordoned the area off and checked. Lesson learned!

We went to the big island of Hawaii a few months ago because my husband had a conference there. Our kids loved it so much we were thinking about investing in a vacation property there. But after analysis, it turned out to be low cash flow, even if purchased free and clear. 

Does anyone know about how to find high cash flow properties and in which markets they might be located?

Thanks so much!! 😊😊

Sarah

Okay, so I have what is a N of 1 story about Rich Dad, Poor Dad. I read the book in 1999 and was impressed enough with it that I asked my own dad to read it. He was retired and wanted to make the little money that he and my mom had to work for them. My dad got pulled in by Rich Dad's charisma and paid for some very expensive seminars that went nowhere. He also put all of his retirement $$ in real estate. I am not impressed in terms of what happened with real estate. Things went from bad to worse. I have come to the conclusion that Robert K. actually makes more money by suckering people into his $25,000 (per training session) courses. Thus, I would conclude Robert K. actually makes his money on intellectual property and not real estate. The book is okay to read if you take it with a grain of salt and see it as a book that can open one's mind to possibilities. But, don't necessarily take it as instructions that you should strictly follow.

Also, to be fair-- there are always risks when it comes to investing. It doesn't matter if investing is done in real estate or the stock market. There are no guarantees in life; however, even if there are no guarantees in life, if you take the time to do thorough research, analysis, and projections, you can make better decisions. The one thing I liked from RDPD is that Robert K. talks about the concept of investing in the stock market and compares it to a wave. General consumer behavior is such that most people buying stock buy it just after the wave has crested and is ready to hit the beach. In my opinion, this concept applies to all forms of investing. Therefore, I believe success begins with creative thinking and reading trends. It is furthered by research, analysis, and projections. Investing is a math game, but it's also a game where one must make decisions with a cool and clear head. I believe all of this together minimizes risk in whatever venture one chooses. My interest these days is purchasing low-cost land in economically booming areas and building modular triplexes on that land and then renting them. It would also have to be an area where there are too many people wanting to rent and too little inventory. I would put in as much cash as possible so that if anything suddenly went all pear-shaped, I wouldn't owe a ton of money on the property. The last thing I wanted to say about real estate investing is don't give up your day job and always make sure you will have cash to carry you through if disaster strikes. 

I think where my own dad went wrong is he purchased several properties (before the crash) with almost no down and these properties provided little cash flow. I let him know up front this was a bad idea (even though the housing market was seemingly booming at the time). If you read trends you know that for every up there is a down and for every down there is an up. Write it out and post it on your wall. 

I would not recommend Ocean Shores. My parents are pretty savvy investors and own several multi-family units. They built a house on spec in Ocean Shores and put a lot of their own cash into it. Big mistake. They lost it during the downturn and never made back the cash they lost on it. If you want to invest in WA state, I recommend Tacoma. It was recently featured as one of the top 20 cities for real estate investors. There are also decent management firms in the area.