Moderation is not my strong suit.
I don’t just eat one chocolate-chip cookie — I either eat zero, or I eat the whole batch. I don’t just travel for a weekend — I either stay at home, or I hit the road for weeks/months/years.
And apparently, I can’t just buy one or two houses. Afford Anything Tribe, I’d like to introduce you to House #5, which is Rental Unit #7 in my ever-growing passive income portfolio.
NOTE: This article was last updated in 2015 (and all numbers reflect that year).
In this article, I’ll share the no-holds-barred, behind-the-scenes story:
- How I found this house.
- Why I choose this area.
- The NUMBERS! Yes, you nosy people — all $$ will be revealed. 🙂
But first … check out the pictures.
The “Before” Photos
UPDATE July 2015: These are the “Before” Photos. You’ll see the “After” photos … well … after this! Keep scrolling down!
This is what the exterior looked like when we bought it …
Selfie! Because the first thing you do when you buy a new house is take a selfie, right?
Ah, now that’s home security …
The stainless steel stove is a nice touch. Planning to add a dishwasher, though.
Thank goodness the tile and sink top are a neutral white color. Might swap the faucet for a modern chrome color.
The so-called “master” half-bathroom is small but in good condition.
Another selfie!! Will takes a pic in the bathroom mirror.
How on earth do you snap an interesting picture of an empty bedroom?
Irrelevant cat photo. Because the Internet needs more cat photos.
The ‘After’ Photos
UPDATE 2015: Now for some “After” Photos!
White paint + old bricks = amazing new look.
New cabinets, countertops, backsplash, flooring and trim.
Pro Tip — White ceramic subway-style tiles are cheap cheap cheap, and make a place look instantly awesome-er.
Never underestimate the power of “a pop of red.”
We upgraded the bath vanity and mirror for less than $200.
Here’s a much better photo of the other bathroom.
Because every batch of real estate photos needs its #TokenKitten!
How Did You Find This Property?
It started with this website.
People who write about money tend to know each other. We hang out and swap stories about our websites, usually over (several) strong margaritas.
So about two years ago, I had dinner with a blogger named Lauren Bowling, who (at the time) had just launched a site called L Bee and the Money Tree.
(When we met, she immediately blurted out: “I thought you’d be taller!”)
Lauren was getting started in real estate investing. She and her fiancé purchased a fixer-upper in an “improving” neighborhood. Their plan: Remodel the home, live there for 5+ years, and enjoy equity gains as the rest of their neighborhood slowly beautified.
At least, that was the theory.
Instead, they broke up. Ouch.
But Lauren is a strong lady. She kept the house, oversaw a major renovation by herself, and — about a year ago — invited me to her “housewarming” party to celebrate its official unveiling.
As I drove past the ramshackle buildings that dotted the road to her first investment house, I’ll admit: My knee-jerk reaction was, “OMG Lauren, are you f***ing crazy?!”
Her neighborhood — at first blush — doesn’t seem like a place where you’d want to invest.
You can tell a lot about a neighborhood by the types of businesses located there. In cushy middle-class neighborhoods, you’ll see Starbucks, CostCo and Panera Bread.
In respectable working-class communities, you’ll see little “bodega”-style food marts, beauty salons, thrift stores, and the occasional used tire yard or emissions-testing station.
But Lauren’s neighborhood? Several storefronts were boarded up; vacant. Uh-oh. That’s not a good sign.
But any good investor looks at a neighborhood not for what it currently is, but for what it’s on track to becoming. Formerly-vacant buildings are beginning to fill. The area is turning around.
Lauren saw its potential — and urged me to develop my vision, as well.
I was dubious — (all investors should nurture healthy skepticism) — but I started digging for information. And the more I dug, the more I began to conclude that she was right.
How to Evaluate a Neighborhood
Lauren’s neighborhood is still a tad outside my comfort zone (she’s a very early adopter), but a nearby section of Atlanta, called West End / Adair Park, definitely suited my style.
This neighborhood used to be thriving, I discovered, but it fell during the 1970’s and 80’s and experienced ensuing blight. Here’s a crime map: “Red” indicates high-crime-risk; “Green” shows low-crime-risk. As you can see, I’m looking for houses in the “Yellow” zone.
Image courtesy Trulia.com/local
This area is now seeing a slow-but-steady revitalization.
Jobs and Business – It’s close to the airport and features easy public transit access, meaning that many airport workers (TSA officials, baggage handlers, etc.) live here. The surrounding area also holds other service jobs (manufacturing, delivery, etc.) which also keep this neighborhood alive. One strong vote of confidence: Ace Hardware opened a location here. (Hardware stores are an especially strong sign of neighborhood development — by definition, they’re the first type of business than a re-developing area needs.)
Transit – The Atlanta Beltline is a planned 33-mile loop of multi-use cycling/walking/jogging trails alongside 22-miles of light-rail tracks. Once complete, the Beltline will link the city’s neighborhoods together, improving accessibility and reducing Atlanta’s car-dependence. Fortunately, the Beltline runs directly through this neighborhood. In fact, a 2.4-mile section of the Beltline has already opened here. That’s a huge +1 for this neighborhood.
Greenspace — This neighborhood opened a new park in 2008, alongside the Beltline. Why does this matter? It’s good for home-price stability, quality of life, and it’s a symptom of smart urban planning.
Infrastructure — The local authorities recently invested $2 million in new sidewalks, streetlights, trees, and other neighborhood improvements. Awesomesauce.
Artists – Atlanta’s “what’s happening” magazine, Creative Loafing, called this area the “Best Neighborhood for Artists” — another strong sign that the area is improving. (Tip: Follow the artists.)
What Are Other Investors Doing?
Signs point to neighborhood improvement, so Step Two is to start chatting with other local investors.
I met one person who purchased a home in this neighborhood for $25,000 in spring 2013. He invested about $100,000 into renovating it, listed it for $192,000 in spring 2014 — and received multiple offers. 🙂
This tells me two things:
- The underlying land is cheap …
- … yet people want to live here.
That’s a perfect combination.
Why? Land is overhead. I don’t make money from the land; I make money from the building. The less I need to spend on the underlying lot, the more I can put into updating the cabinets / countertops / appliances. Cheap Land + Consumer Demand = Happy Investor.
Meanwhile, on the corporate builder/developer scene, this neighborhood just opened its first condo — “SkyLofts” — in a former abandoned Sears parking lot, and the units are selling quickly. Another +1 for the neighborhood, as it reflects growing demand.
Three Crucial Concepts About Real Estate Investing
Okay, so I’ve identified a neighborhood that’s (potentially) improving, and I’ve met other investors who are profiting nicely in this area. But why should I buy a house there? How does “Theory A” lead to “Conclusion B”?
Let me take a step back for a second, and quickly explain three critical concepts:
1) Risk is Tied to Reward
If you buy stocks, you carry more risk than someone who buys bonds. You also enjoy the potential for bigger rewards.
That’s simple enough, right? But it doesn’t end there. WITHIN the niche category of “U.S. stocks,” some investments are riskier/reward-ier than others.
A large company like Coca-Cola or Nike probably won’t collapse — but it also probably won’t experience double-digit growth. It’s low-risk, low-reward. Likewise, a tiny startup company might flop. Or it might become the next Tesla Motors. More risk, more (potential) reward.
Risk is tied to reward, both across categories as well as within categories.
Are you still with me? Okay, let’s apply this to rental properties:
An established neighborhood features:
- Low turnover
- Low vacancies
- Stable values
- Low-risk, low-reward.
An emerging neighborhood features:
- High-turnover
- High-vacancies
- Volatile values
- High-risk, high-reward.
And that leads us to the next point —
2) Judge Your “Risk-Adjusted Return”
Occasionally, I’ll get an email from a reader saying: “You’re only getting X percent returns? Ha! I get Y percent returns!”
But that information alone is meaningless. Investors need to judge reward in the context of risk.
The stock/bond market is an obvious example: Getting 10 percent returns from your Enron stock is different than getting 10 percent from a U.S. government bond — it’s not “the same” 10 percent. If you’re comparing two investments with different risk profiles, X does NOT equal X.
That’s why you need to understand investments within their risk framework.
In traditional stock-investing, this is referred to as “risk-adjusted return,” and analysts have devised all kinds of fancy algorithms to try to understand it.
You don’t need a finance degree, though — you just need to understand this broad concept, and apply it to your own personal choices.
And that brings us to our last point —
3) Diversify Your Holdings
If you have a 401k or IRA, you should split your money between some combination of U.S. stocks, international stocks, bonds, and cash.
I mean, duh. That’s basic.
The same applies to real estate investing. If you’re going to own a handful of rental properties, you should diversify enough so that you’ve spread your bets, but not so much that you lose track of what you’re doing.
For example: I specialize in residential rental properties in metro Atlanta. That’s niche.
- I don’t flip houses.
- I don’t own retail space, offices, warehouses or mobile home parks.
- I don’t invest outside of metro Atlanta.
Am I missing out on plenty of great opportunities? Of course. But I can’t become an expert at everything, so I’ve narrowed my niche to a very specific property type and location.
I can’t do everything. I do ONE thing, and I do it well.
However, WITHIN that niche, I diversify. My properties are located in across the city, in neighborhoods that range from “trendy” to “suburban,” from “established” to “emerging.”
Here’s a map of my property locations:
Why This House?
Back to my original question: Why did I buy this house?
To diversify my holdings.
Most of my rental properties fall towards the conservative side of the risk-reward spectrum. I own properties in stable, well-established neighborhoods.
As a result, most of my properties (only) meet the One Percent Rule. They rarely exceed it. And they almost never double or triple it (with the exception of House #2).
But in the same way that an investor might put a small fraction of their portfolio in “frontier markets” like Ghana or Albania, I decided to put a small fraction of my portfolio into a “frontier neighborhood.”
And that leads us to House #5 / Rental Unit #7 —
- Stats: 4-Bedroom, 1.5-Bath
- Size: 1,625 square feet
- Style: Suburban Ranch House
- Condition: Good
- Built: 1972
Last Sold: $140,000 in October 2009
Foreclosure or Short Sale?: Of course! Everything I buy is a foreclosure, short sale or distressed sale. (That’s where you snag the best deals, y’all!) This house was a short sale, just like House #1 (my first investment). Houses #2 and #4 were foreclosures, and House #3 was a distressed sale / motivated seller.
UPDATE JAN 13, 2015: I’ve updated these numbers to reflect the actual (rounded) repair costs. We replaced the kitchen cabinets and countertops, bath vanities, carpet/padding, installed gutters and added a new A/C. We theoretically could have deferred the kitchen/bath upgrade for a few more years, but we decided not to procrastinate. Better property = better tenants. 🙂
What did I pay for this?
- Purchase Price: $46,000
- Repairs: $15,000
- “Total” Acquisition Cost: $61,000
What does that gross?
- Rental Income: $800 – $1,000 per month
- Does it Meet the One Percent Rule? Obviously.
What does that net?
- Mortgage: — (Paid-in-Cash)
- Taxes: $67.41 per month ($809/year) based on 2013 tax records
- Insurance: $58.33 per month ($700/year) estimated
- Vacancy: $75 per month ($900/year) at 92 percent occupancy, $900/mo rent
- Management: $90 per month ($1,080/year) at 10 percent fee, $900/mo rent
- Repairs/Maintenance: $50 per month ($600/year) based on “one percent of purchase price” rule-of-thumb
- Total Expenses: $340.74 per month
Cash Flow: $459.26 — $659.26 per month, or $5,511.12 — $7,911.12 per year
- $5,511.12 / $61,000 = 9.03 percent
- $7,911.12 / $61,000 = 12.96 percent
WTF does that mean?
In a nutshell:
- The “cap rate” (the “return on investment”) is between 9 to 13 percent. WAHOO!!!!!!!
- The “cash flow” (the $$ in my bank account) is $5,500 – $8,000 per year.
Another victory for the Financial Independence // Passive Income Brigade. This house offers uber-strong cash flow, a ridiculously awesome return, PLUS the potential for long-term equity gains (which is pure icing on the cake.)
Happy dance!!!!!
And with that …
FAQ’s:
Q: Is that literally the exact amount you’ll earn?
A: No, I’m not going to have precisely $600.00 in repairs annually, nor will I have exactly 92.00 percent occupancy. This is an educated estimate based on prior years’ tax records, current insurance rates, the maintenance history of my other properties, and an analysis of other rentals in the same neighborhood. In reality, real estate earnings will fluctuate every year — that’s why you should be prepared for a range. (Also, note that vacancy/management estimates are based on $900/mo rent.)
Q: How in the $%#&(&!@ did you pay cash for a house??
A: Will and I live on one person’s income, and save the other’s.
In 2012, we earned roughly the same amount, so we saved about 50 percent of our income. In 2013, my earnings outpaced his, which meant that we saved 77 percent of our income. My business continues to boom in 2014, and again, all of my income goes into savings (and taxes).
This goes back to the mantra I keep repeating on this blog: grow the gap between your income and spending. The more you earn, the easier it is to save.
Q: That’s all well-and-good that you can live on one person’s income (and therefore buy a house in cash), but that’s not realistic for most of us. Most of us NEED two incomes to survive.
A: First of all, the statistics show otherwise. The median U.S. household has 2.5 people and 1.3 incomes, according to the Census Bureau. In other words: The median American lives on one income per two people.
If millions of people can do it, why can’t you? Don’t take that as an affront; embrace it as a challenge. 🙂
Second of all, are you really “minding the gap?” Be honest with yourself. Are you really optimizing? Here’s what Will and I do:
- We live with roommates.
- We drive used cars.
- We don’t buy fancy clothes / jewelry / furniture.
- We don’t have cable TV.
- We choose to live in cities that have a reasonable cost-of-living.
- We either work-from-home (me) or live-close-to-work (him).
- We “self-insure” (buy cheap insurance with a high deductible; keep a huge emergency fund).
- We save tens of thousands on taxes by maxing out our 401k, IRA and HSA accounts.
- We’ve both always, always, always had a side hustle. We’ve never had “just” one job.
So … lather, rinse, repeat, and you’ll eventually amass $50,000 in cash. Invest it, then re-invest the profits, and you’ll create a self-sustaining cycle.
Q: But I don’t want to buy a used car / cut my cable / live with roommates.
A: That’s a choice. You can afford anything, but not everything. You can choose to spend thousands buying a new car or keeping your guest room vacant — but that choice demands trade-offs.
Be deliberate about those trade-offs. Never confuse “I can’t” with “I choose not to.”
**For more FAQ, check this post out, where I summarize everything you need to know about all of our rental properties.**
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Damn girl! You’re an absolute inspiration. It’s been so neat following your blog over the years from when you were starting out with your real estate side business to now…5 properties in!
I would kill for housing prices like the ones you enjoy in Atlanta…Toronto’s housing market is beyond crazy.
Also, I love the story about LB. So neat that you two are friends in real life!
@Charlotte — Thank you!! It’s been really fun sharing this journey with my readers … you’ve all seen me transition from a novice investor, buying her first house, to today … thank you so much for being part of that adventure! 🙂
And Lauren is awesome! I keep joking with her that we’re now “neighbors,” so to speak. 🙂
Deals like these are not hard to do at all. In fact you can buy the finished product and get deals like these all over the US. I have some 3-5 year old performing paper that will offer more than 15% ROI minimum. It’s harder for me to find buyers than it is to set up these deals.
Excellent work, Paula! Nice find! We close on properties 8 and 9 this week including our first duplex. Real estate investing is so much more fun when you buy with cash, isn’t it?
@Jason — It’s AWESOME buying with cash — it’s far less stressful, and the “immediate gratification” from the cash flow is HUGE. 🙂 Congrats on properties #8 and #9! Wow, two in one week?!
We *finally* sold our condo in Charlottesville, so we wanted to get the money back to work before school started. Thus, two closings this week, bookending a work trip to Costa Rica. I’ll go reread someone’s excellent article from Costa Rica (http://affordanything.com/2014/07/16/why-get-paid-to-travel-is-a-myth-and-what-you-should-pursue-instead/) for inspiration!
Wow, you and I are having the same summer! Costa Rica + buying houses = great way to spend the season. 🙂
Love what you’re doing and all the work you put in to make these posts! The only question I had was how do you typically identify potential properties? Are you using Trulia/Zillow or are there other methods that you typically rely on? I’m in the SF Bay Area so this probably isn’t for me right now 🙂 but I’d love to just learn more in general about your process!
@Mike — After House #3, I decided to become a licensed real estate agent. This allows me to check the MLS (Multiple Listing Service) directly, without needing to go through an intermediary. In other words, I’m my own agent. 🙂
I found House #2 through an agent, and I found Houses #1 and #3 by literally seeing the “For Sale” sign in the yard (which is why it helps to start by choosing a neighborhood, then learning everything about that area — you’ll quickly know what houses are for sale.)
Paula – enjoying reading about your and Will’s journey as investors/landlords. The pics really help. As a single mom aged 55, my friend and I are always looking for ways to save and maximize future income besides investing in the stock market.
I’m amazed you were able to buy this property for only $46K as I live in the Dallas area and even very old, damaged properties are listed at more than that.
I look forward to reading other posts and sending links to my friend. Best wishes for continued future success – you’re both an inspiration.
This is awesome. Good job! And, especially good job with buying the house in cash. $46,000 seems like a great price.
Well, kitchen furniture “before” looks weird to me, color and texture. Congrats on the new house buy!
Congratulations on your due diligence and discipline paying off.
Do you feel that by leaving so much equity in your home, your capital is becoming kind of stagnant? Have you thought about cashing out some equity to further expand your growing empire? I would think that leaving cash in a property puts it at risk in the event that something happens that is not covered by insurance.
Thank You.
Great question, Don — Is it better to maximize your leverage (by borrowing), or to reduce your risk (by holding a bigger equity position)?
I cover that in this article — http://affordanything.com/2014/04/10/showdown-keep-your-mortgage-vs-crush-your-mortgage-who-wins-the-championship/ — hopefully that’ll help shed some light on the question. 🙂
I read your other two articles and while I disagree with your conclusion, I enjoyed the excellent analysis of the pros and cons.
However, I will argue one point with you. You say that by holding a bigger equity position you are reducing your risk. This is actually the opposite of what you are doing. By holding a large equity position, you are reducing the lender’s risk while increasing your own. You have now sunk your cash into an asset that could be destroyed tomorrow as opposed to keeping it in a federally insured financial institution. If for whatever reason your house lost 60% of its value tomorrow, would you rather have had $100k or $20k tied up in it? This argument can be expanded to protect against a lawsuit brought on by a tenant. If structured properly, most lawsuits could only go after the property itself.
I can understand a person wanting to be free of a mortgage mainly for the emotional boost of confidence but to say that you are reducing your own risk is just wrong. Please let me know if I am missing something. Thanks.
Hi Don,
Thanks for reading — Those are excellent questions. 🙂 Here’s my take:
1) “You’ve sunk cash into an asset that can be destroyed” — That’s what homeowner’s insurance is for. In the event of a fire/tornado/etc., my maximum loss would be the insurance deductible. I recommend insuring for the value of replacing the home, not just the purchase price.
2) “If the house lost 60% of it’s value” — I’d rather be mortgage-free in this circumstance. If the house loses value, and you decide to sell, you’re “upside-down” on the loan. You’re stuck holding the house (against your desires), or you need to bring cash to the closing table, or you’re forced to “short-sell” the house, which tarnishes your credit. But if the house loses value and it’s paid-in-full, I retain the ability to sell the house anytime I want, without needing to bring cash to closing or process a short sale.
Furthermore, as a rental property owner, I don’t care about the underlying value of the house. I only care about the monthly cash flow.
3) “To protect against a lawsuit” — Holding a mortgage won’t shield you from a lawsuit. A tenant can still sue, regardless of whether or not you’re a debtor. The chief protection that you have against a lawsuit is:
— Hold properties in an LLC or a Trust (if possible)
— Buy an umbrella liability insurance policy
— Use licensed, bonded and insured contractors
— Use a licensed property manager (if you outsource this)
If a tenant wins a lawsuit, the judgment is levied against you (as an individual or as an LLC) — not against the bank. You’re personally liable for paying any judgment that comes out of the suit. That’s why it’s critical to carry liability insurance.
Hello Paula,
My wife and I love reading your blog! We have been reading a lot of books about real estate investing lately and definitely feel your strategy fits us best. Right now we feel we are ready to jump in, but have one thing holding us back. Any chance you could write an article about how to best set-up a LLC to protect your properties, and the steps you went through to actually get yours? I’m kind of thinking we need to setup a LLC before we buy a rental property, but maybe we can do it after and transfer the property to it? Please help enlighten us. Thanks!!
-J & L
So, in some ways, by ceasing to leverage it is as though you have traded your upside potential for peace of mind. You’re limiting what your returns / cash flow could be by the fact that you can’t get comfortable with your debt, no?
I think that is perfectly reasonable and I would probably do much the same as you have.
A detailed blog about asset protection will be very helpful.
I agree, a detailed blog about asset protection would be amazing.
Well done! Thanks for sharing your progress with all of us!
Thank you, Rich!
Congratulations. I found your blog from listening to an interview you did with the Mad Fientist and I really enjoy it. I have a question about your comment in the fourth picture of the kitchen. You mention you are going to be adding a dishwasher. Do you feel that this is a needed item? I admit I am a bit biased and don’t use the one I have because I grew up washing dishes by hand and prefer doing that to prewashing then putting them in the dishwasher to use more water. Anyway one of the older houses in my (very) small “rental empire” is hinting that they would like me to add one. I think they would even do it themselves if I gave permission. The thing is that I have always heard that dishwashers in rental units are a big headache and potential water damage point. What is your opinion on that?
@Paul – I grew up washing dishes by hand, as well, but I’ve come to realize that rentals need to be designed around what the aggregate consumer prefers, not about what you yourself prefer. (Here’s an article I wrote about that.)
In my view, the cost of not having a dishwasher is higher potential vacancy and turnover. If I lose a single month of rental income due to lacking a dishwasher (e.g. if it takes longer to find a tenant, or if a tenant moves-out after 1 year instead of staying for 2-3 years) then I’d be better-served by having one.
Hi Paula,
That property looks CLEAN!! Great find! Ill also add the investment property selfie on my next deal lol.
Thanks
Michael
LOL! Hooray for the “Investment Selfie” — inspired by Instagram!!
Congrats Paula, way to go!
Thanks Nick!
Congratulations! Such a great, informative article! I would love, love to start investing in real estate but I live in San Francisco and even the surrounding suburbs and not as expensive areas are ridiculously priced at $500k and up. I really can’t find any properties that meet the 1% rule-any advice?
Hi Isabel —
Three tips:
#1: Dedicate a significant amount of time scouting out the best deals (foreclosures, short sales, homes that are being sold at auction). You just need ONE super-undervalued property to make your personal numbers substantially better than the general average.
#2: Look outside of San Francisco. Imagine a bunch of concentric circles on a map, with your hometown as the epicenter. If there’s nothing that meets the One Percent Rule in your hometown, expand your search to the next ring. Then the next one. And then the next one.
For example:
I lived in Boulder, Colorado for 8 years. I never found anything in Boulder that meets the One Percent Rule. But when I expand outward to a small city called Broomfield, Colo., I can find a few rentals that meet the One Percent Rule. And if I expand even further, out to Arvada, my options are a lot more plentiful.
#3: Find out where the service-sector and lower-paid-professional workers live.
San Fran has an airport. Where do the TSA officials live? Where do gate agents and baggage handlers live? Where do it’s entry-level police, fire, teachers live? What about restaurant managers? Bartenders? Retail employees? Interns? Students? Look in these neighborhoods.
Hi Isabel, I have a property which meets 1% rule or more. I bought it by myself and live here for right now. I easily found tenant in another room because it’s great neighborhood. If you would purchase it I will be living here and paying rent by myself and tenant is very clean, quiet and responsible person, has stable job and will stay long term. The property is located at “Carmel village” in Charlotte, NC. There are a lot of investment properties here.
Congrats. Looks like a good purchase. Just curious as why you don’t use a personal residence like a investment due to the capital gain rules. You could sell and move ever 2 years gain free.
So inspiring as usual, Paula. We decided long ago that owning rental houses isn’t for us, but every time I read one of your posts like this one I reconsider.
Congratulations on the latest house!
Every time you find one for prices like that, it blows my mind. I liked the assessment of the neighbourhoods, too. I knew that Lauren’s neighbourhood wasn’t the best, but now I am even more intrigued, after your reaction.
Very nice house, but gorgeous cat! Is that the one that was on the Stacking Benjamins round table discussion?
This is a wonderfully detailed post – thanks for sharing all the juicy details! Since this was a short sale, how long did you have to wait from the offer to closing? Was there any back and forth on the price?
Haha, I was wondering how long it would take for someone to comment on the cat!! Yep, that’s the same cat that was clinking her collar against the food bowl during the Stacking Benjamins podcast. 🙂
Her name is Azra (a play on the word “azure,” for her blue eyes) and she just turned one.
This particular short sale happened quickly — I made the offer in March, and we closed in July. In the past, however, other short sales have dragged for 6+ months or more, so if you’re going to get into the short-sale world, be ready to be patient.
(Also, be aware that THIS could happen — http://affordanything.com/2013/04/16/the-last-house-i-didnt-buy/ )
We had a little back-and-forth: I went under contract for the house at $42,000, but the bank retorted with $48,000, so I volleyed back with $46,000, and they accepted.
What’s your pet elephant name (the one on your avatar)? Where do you keep it?
You’re such an inspiration! I’ve been thinking of getting into real estate for the past two years and have looked a bit in a few select communities in my area. I’ve also come across a company in my area that is primarily a property management company. They buy homes, fix them up, then resell them to investors with rental guarantees and cash flow estimates. Do you have any thoughts on these types of deals? As someone who isn’t real handy, they sound enticing.
Hi Matt — Sorry this reply is a month late, but I just found Afford Anything (Thanks Paula — great blog!). I remember reading a thread on Mister Money Mustache where people were posting about services like that, and the general feeling was that it’s very easy to get taken advantage of with those types of offers. Some of the pitfalls include sub-par rehabbing of properties, overestimated cash flow due to underestimated expenses, inflated rental rates which can’t be duplicated with subsequent tenants, and the probability that you’re purchasing the property for at least full retail instead of getting any sort of “deal”. Caveat Emptor! As far as not being particularly handy, neither am I; but I do go to the trouble of getting recommendations for handymen, etc. when work needs to be done. Keep in mind that you’ll still make mistakes, but that’s part of the learning curve. Just try to make as few as possible 🙂 and remember that, in the long run, the mistakes you (or your handypeople) do make along that learning curve are part of the cost of doing business. Good Luck!
Never confuse “I can’t” with “I choose not to.” So simple, yet so hard for so many to understand!
Mad props to you…as always! I knew it wouldn’t be too long before there was another addition to your empire.
Keep up the great work. You are an inspiration to a lot of us; even if my goal is NOT to be a landlord, I do see benefits in some sort of real estate investing and hope to make my mark by 2016.
p.s. Yes, Azra is beautiful 🙂
Congratulations. I found your blog recently and have greatly enjoyed it. I have two rental properties myself, and am in a group that owns two retail/office buildings (12 units total) and four rental houses.
The investment homes I own myself are very much like the one you just purchased. I focus on very inexpensive houses areas of town many people don’t even consider driving through, much less investing in. Their mistake, because it works for me. My two houses have a cap rate of 20% and 14.3%.
If I had the money, I would buy four more homes in the next month. The properties are there. As it is, finances will limit me to one by the end of the year. If things go right, maybe 2015 will be the first year I buy two properties.
Last thing before I ramble out of control. People are hopelessly lost when they say I’m “lucky” to be on this path. As you said, getting her required planning, sacrifice, effort, risk, and fortitude. Luck, was probably the sixth, seventh, or eigth thing on the list.
Hi Randy —
Congratulations on your rental properties, as well! I love your last paragraph — “People are hopelessly lost when they say I’m “lucky” to be on this path.” That is so, so, so true. The people who think it’s a function of luck — they don’t get it, and many of them are just trying to make excuses for their own lack of progress.
I’m lucky to live in a first-world nation like the U.S., I’m lucky to be in good health, and I’m lucky to live in the 21st century. I’ll totally attribute “luck” to those three factors. But when people tell me that I’m lucky … they’re not referring to those three factors. They themselves are also healthy people living in America.
One thing I love about Afford Anything is that on this website, you’ll find a community of people who “get it.” People who know that hard work results in success. Who know the difference between “I can’t” vs. “I choose not to” — and conversely, “I can” and “I choose to.”
Thanks for joining. 🙂
— Paula
Typos, UGH!
Here’s the question I have…what about families with kids? I didn’t see anything mentioned about kids in your post. We are a family of four (two adults and two kids— more in the future) on one income. We don’t have people live with us simply because there’s no space. We have a two bedroom townhouse. We have cut all other things you mentioned (no cable etc.) so how are we to achieve what you talk about? Live on half the income for four people and save the other half? It may just come down to different strokes for different folks, but in my opinion kids are more important than lots of money. We save where we can (consignment clothes, no cable, one car, I stay home with the kids so no daycare cost, etc.) but I’d like for you to speak to families like ours. What ideas do you have for us? My hubby already works 10 hr shifts so a second job for him is not realistic or he will never see his family. I stay home with the kids so we don’t pay for daycare (and bc I love being with them). I have a little side job but it doesn’t bring it tons and I can’t work much because I have my children to watch. Any suggestions?
Hi Blaire —
Thanks for reading, and great question.
First, focus on ways that you can cut back expenses further. You mentioned that there’s no space to rent out a room — but is that really true? Can the kids move into your room? My cousin, her husband and their elementary-school-aged son all shared the same bedroom in Queens, New York when they immigrated to the U.S., and they rented out the second bedroom. (This is very common among immigrant families who are trying to get a foothold in America.) My cousin used the proceeds from this (plus other income) to get a cosmetology license and open up a small beauty studio near New York University, and after a few years, her practice grew and she started hiring employees.
What about food — how can you cut back your grocery budget? Can you cut meat from your diet? (Beans/lentils are nutritious and much cheaper than eating beef or pork). When did you last comparison-shop for insurance quotes? Have you refinanced your mortgage into a lower rate? Do you pay to get haircuts, or do you cut your own hair? Are your lightbulbs incandescent, or CFLs? Do you run the A/C during the summertime, or use fans and drink water?
There are always more ways to cut back. You need very little money for bare-bones survival. Every dollar that you spend after “survival” is a choice. And it’s fine to make that choice — as long as you recognize that every choice comes with trade-offs.
Secondly, let’s focus on boosting your income. You mentioned that you have a side job but it doesn’t bring in tons of money, so let’s brainstorm ways to turbocharge that. Can you watch other children during the day (while you’re also watching your own?) Can you walk dogs in the neighborhood (and bring your children along?) Mow grass? Shovel snow? Can you learn basic programming or design skills, and work online while the kids are asleep?
Finally, focus on making small, incremental changes. Let’s say that you currently save 10 percent of your income. You won’t jump from 10 percent to 50 percent overnight … but you CAN jump from 10 percent to 12 percent. And then transition from 12 percent to 15 percent. And then from 15 percent to 18 percent. The more you incorporate these changes into your daily lifestyle, the easier that transition will become.
Oh my gosh…. I just found this blog and I am mesmerized. Your comment above is so inspiring to me. You are really creative and thinking outside of the box. These are very good pointers that I can incorporate in my life.
Blaire,
I have three children and did not buy my first income property until after my youngest was born. My wife does not share my drive to prepare for our future, which means she does not contribute financially to this cause. I pay the majority of the family bills and I do not have a high paying job. Still, I managed to save enough to get my first property. It took two years of saving every dime (literally) I could.
I have an unconventional life and job and work odd hours so I could be a stay-at-home Dad and primary caregiver for our children. It means I have to live off 4-6 hours of sleep a night and be a walking zombie some days, but that’s okay. I did it primarily so our kids would have a parent looking after them and not a day care employee, but I can’t lie and say the money saved wasn’t a small part of that choice.
You have to start. Just start.
One year, I decided to open a Rental House savings account at my bank. I started with about $25. Every chance I got, I deposited money in that account. Tax return? (having a mortgage and three kids helps there) Straight into the Rental House account. Xmas Gift money? Sorry kids and wife, but no big ticket gifts this year or the next. That money’s going straight into the Rental Home account. Friends want to meet at the local bar/restaurant and have fun? Sorry guys, I can’t go out until I buy an investment property. That’s $30 into the Rental House account.
I didn’t choose to buy a home that was outside my budget — say, the type of home/neighborhood you or I might choose to raise our children. That would be setting myself up for failure. Besides, it offers a sort of built-in excuse for not accomplishing my goal. I chose a price point that worked for me, went to the real estate websites, and searched for properties I could afford.
Then, after I’d saved a few thousand dollars, I went to my bank and asked how much money they would loan me. Remember, I don’t make a ton of money. I was disappointed when the bank offered $10,000 less than I wanted. No problem. I lowered my Rental House budget and kept searching. I found a property that needed a little bit of repair. Between the money I’d saved and the bank loan, I bought the property, fixed it up, and had it rented in two months.
I don’t view the rental income as “income”. It all goes to paying down the debt. The sooner I pay it down, the sooner I can buy more properties. Both my homes are owned free and clear, though I have a few thousand to pay back on a line of credit I used to help fix the second property. Also, I have a bank lined up to provide a HELOC on one of my rental houses. I will use that money (and some of my own savings) to buy my next property.
It can be done. You just have to start. Now. You don’t need a detailed plan initially. Just start saving. Now.
Nice post Randy
House #5? That’s pretty friggin insane. You seem to be doing well. I guess we all have our preferred investment vehicles. While you prefer real estate, I prefer equities and commodities.
So here is my scenario…
I have a rental property that I will have paid off by next March. I will be broke, but it will be paid off. I will then get the $850 a month free and clear off that property minus taxes and insurance along with the money I make off of my regular paying job.
Should I save up 20% and throw it down on another property immediately, or should I save up until I have enough cash to pay for another property outright. I figure I can grow faster by taking out another mortgage immediately but I will be in debt. Or I can take longer and just pay cash for my next investment…If I pay cash it will take longer to grow my empire but I feel it will be more secure as opposed to having a bunch of debt.
What do you recommend?
@Chance — First and foremost, keep “cash reserves” (an emergency fund) for your properties. You’ll thank yourself when the water heater explodes / the roof leaks / you have an unexpected vacancy that stretches longer-than-comfortable.
Here’s an article I wrote about paying off a mortgage vs. keeping a mortgage … the ideas behind it apply to your question (get a mortgage or not?) — http://affordanything.com/2014/04/10/showdown-keep-your-mortgage-vs-crush-your-mortgage-who-wins-the-championship/
Hope that helps!
You are such an extreme case; either its your way or a complete noway 😀 First, the house is fantastic and there is no doubt about it. Second, your research, knowledge and calculations are flawless. Third, I am totally in love with your confidence 🙂 And finally, congratulations for the fabulous achievement.. I loved reading this post!
Thank you, Chelsea!! 🙂
Can’t believe I’ve only just found Afford Anything: amazing! Always love to see how people manage RE portfolios. I’m more of a stock guy so I think the closest interest to RE as an investment I’d get is through REITs. But the fundamental/core concepts of your philosophy are the same as mine. Will be around regularly! Thanks for the great read!
Thanks Steve! Welcome to the Afford Anything tribe!
Great article! I love that you explain not only what you bought, but why and how to evalute rate or return and risk associated with the purchase.
I have just found your blog and love it. I totally get the fun and addictive-ness of buying rental property. We got up to six there a few years ago before tectonic forces had their way during the earthquakes in New Zealand in 2011 and destroyed two of them beyond repair – thankfully we had full insurance and walked away with cash in hand however I’ll always the lament the loss of future income and capital gains.
I’m so jealous of the prices you can get in the USA, that would definitely make income property more enticing. We can’t really buy anything near a centre of employment for under 200K NZD (170K USD) so can only purchase one property every two years, but still I love scouting websites and talking to agents all the time. I consider it my hobby!
Hi Emma…..as another Kiwi’ reading this great blog site….You are correct purchasing RE in NZ for cash is a tough call…..The USA has some easy deals. All property investors are mortgaged to the hilt in NZ with hope of capital gains….. Cheers
Really enjoy reading your blog, and have been reading through the older posts! I’m especially interested in rental properties recently so I’ve been going through those archives. My wife and I live in NYC…yes we’ve chosen to live in an expensive area (our families/friends are here), but we try our best to mind our gap! P.S:
I really love: “Be deliberate about those trade-offs. Never confuse “I can’t” with “I choose not to.”
So very very true…I see many people confuse the two.
Wow, I’ve read your blog before, but I didn’t realize your were this into rental properties. My wife and I have one and we want many more. Your plan is basically the plan we already follow. We buy homes, live in them, then turn them into rental property. It’s great for the tax benefits, but it’s also great for when we finance the home. We get a residential rate, instead of an investment rate. We prefer to pay cash for everything though, including real estate. Your an inspiration that my wife and I can own even more properties. I am adding you blog to my RSS reader. I’m sure I will include you on some link roundups in the future! 🙂
@Kalen — Congrats on your first rental property! I know a very successful couple that follows your same strategy: they buy a house (getting the owner-occupant interest rate), live there for 1 or 2 years while saving for their next down payment, and then rent out the house to buy another one.
The “key,” of course, is that when they shop for a house, they run all the formulas (Cap Rate, One Percent Rule, Cash-on-Cash Return) so that they buy the best rental property … even if it’s not the type of house that they personally would prefer. In other words, they might trade-off having a deck or a 3rd bedroom, for example, for the sake of choosing the best investment.
And if you really think about it, that’s a worthwhile trade-off. “You can either have high ceilings … or an extra $400 per month in passive income for the next 15 years until the mortgage is paid-in-full, followed by $1,000 per month in passive income for the rest of your life.” It’s practically a no-brainer.
So I applaud your decision … I think you and your wife have found an awesome way to invest. 🙂
Hi there, been reading your blog a while and loving it! Yet another amazing RE transaction!
I have been thinking to add rentals to our passive income as well. We have a few properties in the country where we are originally from, but have not dipped out feet into US rentals yet. In our area (Raleigh, NC), there are very few single family homes that fit One Percent Rule, but definitely some townhomes/condos that fit the rule. What is your take on TH rental investments?
@Nadia — The biggest problem with townhomes/condos is that they’re governed by HOAs, which often have restrictive policies. Your unit may or may be not on the “approved” rental list, and they can yank your approval designation at anytime. In other words, your decision-making power is not your own … another entity has the final say over whether or not you’re allowed to use the space as a rental.
If you DO choose the townhouse/condo route, be 110 percent certain that the unit you purchase is officially approved to be used as a rental. Look at the HOA’s financials to make sure they’re not in arrears, and verify that they have solid reserves.
A better alternative, though, is to buy a duplex/triplex/4-plex. Many single-family homes won’t meet the 1 Percent Rule, but subdivide that house into a duplex or triplex, and voila — now you’ve got something that meets the 1 Percent Rule with flying colors.
We have been doing exactly what you are doing for 15 years now and though the passive income is good, I am getting out of the rental business b/c I am tired of dealing with frustrating tenants and house repairs. We don’t hire a Property Mgt b/c I don’t want to pay them 10% and lose the income. Also, I would recommend buying home warranties for all your properties. They have paid for themselves many times over, esp if you have an older home.
@Leeanne — I highly recommend hiring a property manager. It’s better to collect 90% of the gross income than to collect 0%, and if you get out of the rental game, you’ll collect 0%.
In my view, hiring a property manager is no different than — say — hiring an employee for your small business. Let’s say you own a bakery, or a hardware store, or a consulting firm. You could hire someone(s), at the cost of 10 percent of your gross revenue, and that new hire could take a BUNCH of the workload off your hands. This frees you to either grow the business or spend more time with your family. Wouldn’t you do that? Of course. Almost everyone would — that’s why businesses have employees. So why should investing in rentals be treated any differently?
In fact, property managers are even better than traditional employees because they don’t require training (they’ve already gone through a rigorous certification process), AND they help spread out some of the liability issues (Fair Housing Act, etc.) Hiring property managers and contractors — and overall being diligent about outsourcing — is one of the best choices I’ve made in the past few years.
Great post and the pictures look pretty decent for a forclosure property. The taxes are crazy low compared to my area, and what’s your take on rental investors owning out of state property to avoid high property taxes that can eat into profits?
@EL — Making investment choices purely for the sake of minimizing taxes is “letting the tail wag the dog.” You should pick the property that represents the best investment, not the one with the lowest taxes. “Best” investment is determined by vacancy, maintenance, repairs, tenant profile, quality/access to contractors, managers and other service providers, and utility costs. For example: If you own a multiunit in the north, you need to factor for the cost of hiring someone to shovel snow and handle ice. In the south, you don’t need to think about snow/ice — but you do need to worry about other factors.
My advice is to run the equations on this post, and find the best overall investment: http://affordanything.com/2012/01/25/income-property/
Very cool! Congrats! I am up to 11 rentals in colorado. Getting harder to find deals though.
Hi Paula — congrats on the addition! As a fellow ATL owner, I can practically see all your properties in my head (and have probably driven by a few). You mention property and liability insurance, but no specific companies (I searched the site :-). For Georgia readers, would you share names?
I’m adding rental home #2 next month (also in the southeastern IP area), and am shopping for insurance that’s separate from my primary residential (going to separate rentals into an LLC in 2015). All leads welcome!
Love the blog and your outlook. Thanks!
Hi Anna –
I’m sending you an email right now with the name and phone number of my insurance contact. 🙂 Congratulations on your second rental house!
Awesome post! Thank you. I am interested in getting my foot on the property rental ladder and this is great information & advice.
Wow! You are the bomb.com! I’m so happy I came across this article. My husband John and I just purchased house #3. During the recession things really hit us hard! Our income went from $250,000 to zero! We had to let go of house#1 after using almost all of our 401K to try and save it. Then we moved out of the country where we were able to get contract work and that was our saving grace. We’re back and growing stronger and stronger everyday and boy did we learn some hard lessons.
In two week we’ll go to closing on an awesome duplex coming in with over $150,000 in equity. Thank you so much for sharing your story which will only add to our knowledge of home purchasing.
Wow, I’m so sorry to hear about that steep decline in income! But you’ve survived it, and you’re making a strong recovery — with three houses!! — in a short number of years. That’s awesome!! I love your attitude of growing stronger everyday. Keep it up!!
Hi Paula,
Is there a book or/and a course you could recommend to a newbie who is interested to build a portfolio of cash flow positive property like you and Will?
@Silver — My favorite book is From 0 to 130 Properties in 3.5 Years. This was the only real estate investing book that I read before I bought my first rental property, and it was critical to helping me understand the difference in mental framework between cash-flow investing vs. house flipping.
One caveat: The author is Australian, so ignore any tax-related information in the book (unless you’re also in Australia). Instead, read it for its insightful lessons on business strategy.
Love the blog. Quick question…why did you abandon investing in multi family properties. House #1 appears to produce the highest cash flow, no?
@Mike — Awesome question. I search for multiunit properties constantly; I haven’t found another deal that’s even close to being as great as House #1 (in terms of not only the price-to-rent ratio but also location, tenant quality, etc.) If I could find one, I’d snap it up in a heartbeat.
I love multiunit buildings, and one of my dreams is to own a small apartment complex (maybe 8 to 20 units). There’s a smaller supply of multifamily dwellings, which means slimmer pickings. By contrast, there are so many single-family homes that I can browse through many, many more listings to find the one that has that perfect combination of price, neighborhood, etc.
I know that I publish blog posts that announce “we bought another one!,” which makes the search seem simple, but behind-the-scenes, I probably look at 200+ online listings, visit 20 houses, and write offers on 5-10 houses, for each one that I buy.
wow this house is very beautiful and location of your house is also seeming very beautiful you have done a good job and you make the daunting job to find the house at best location at best price easy i really appreciate your post keep posting like that and keep us update. thanks for sharing this.
So jealous. No way I can buy a house, fix it up for 61k and rent it for 600-1000$ in my country. 🙁
Hey, Your house is looking so nice. Congratulations!
Your planning to add a dishwasher in kitchen is good, and your house is really very nice.
Hey, Congrats! Your house is looking very stunning.
You must have covered this at some point, but do you buy home warranties for all your properties (is that part of the repairs/maintenance cost)? If you don’t, I’d be curious to know why.
@Laura — Great question. No, I don’t, and in fact — speaking bluntly — I believe home warranties are a rip-off for most homeowners. Here’s why:
Reason #1: Self-Insure When Possible
As a rule, you shouldn’t purchase insurance in cases when you can self-insure. For example: I buy homeowners insurance that covers risks like fire, because I can’t self-insure against the cost of the house burning down. A fire could be catastrophic, and the consequence could cost tens of thousands, if not hundreds of thousands.
Likewise, I buy health insurance for the same reason: the cost of an accident or illness is beyond what I could pay out-of-pocket.
But I don’t buy insurance against my blender breaking, or my TV breaking, because I could easily buy a new one. Insurance, in this case, would be a poor use of funds. My premiums have a high likelihood to exceed my potential claims, and the worst-case out-of-pocket scenario is an amount I can easily cover.
Home warranties fall under this same umbrella. The premiums are likely to exceed potential claims, particularly given the onerous restrictions in coverage. It’s a much better deal to “self-insure” by keeping an emergency fund (cash reserves) that you tap when something breaks.
Reason #2: Build a Team
In addition, building a team is crucial to the success of all businesses, real estate included. After a few rounds of hiring-and-firing, we found a great contractor who provides awesome service. It’s not that he’s a “bargain,” — we pay people what they’re worth — but he definitely provides solid value, great service, and never rips us off or tries to up-sell us.
Reason #3: Repairs is not Maintenance or Renovation
Finally, the risk of calling something “repairs/maintenance” is that it’s tempting to classify both together in your mind. But in reality, repairs are a totally different animal than maintenance (and renovations).
— Repairs happen when something breaks.
— Maintenance is routine: mowing lawns, cleaning gutters, staining decks.
— Renovations happen when something is worn out: the roof, windows and siding need replacement because they’re 25 years old. The kitchen and bathrooms haven’t been updated since the 1970’s. Renovations are the most expensive aspect of real estate investing, and no insurance product will provide coverage against the 1970’s. 🙂
Home warranties cover some (but not all) repairs. They cover zero maintenance, and zero renovations. They’re not designed to cover the bulk of the costs associated with repairs and maintenance (and remodeling).
Two years ago I graduated from college and I moved out of my dorm room. Since then I live in an apartment with a room mate. Now I have a steady job and I earn enough to buy a house. I think I am ready for this step. I already looked a few houses but I still haven’t found the ONE. Thank you for sharing your experience. It is nice to read something on this topic because I am alone in this wild ride.
I love this. I think you did great work renovating the inside. The outside is nice too. Those subway tiles do make a great pop! I like the advice you gave about self insuring the a high deductible plan too. Signing up for that was the best decision I made! (my current employer offers a 3k deductible at no cost to me, and puts and additional $150.00 into an HSA for me per month, on top of what I contribute. Huzzah!) Congrats on the new property!
I used to live in Gainesville Ga, and currently now in California. I have inlays in GA. and I am seriously thinking about buying and renting homes in Atlanta, GA. Any advice on starting would be great. The House market looks perfect to build a portfolio of rental properties.
@Coral — Read through all of the real estate blog posts on this website. There’s a ton of information here on rental property investing in general (and plenty of commentary in Atlanta in particular.) If you read through the comments on some of the more popular posts, you’ll also see additional tips and advice. Also, jump onto the email list; you’ll get updates on the new real estate course I’ll be putting out in 2016. Hopefully that helps!
Nice picture of home .thanks for sharing this information.
What a crazy transformation! Looks so much better. Well done!
Thanks for the information.really informative.
Your story is exactly why I like to buy single-family homes in working-class neighborhoods. This is where you’ll find opportunities to make improvements that’ll boost your rental cash flow and property value. And I certainly agree that it pays to specialize in one geographic area. Great work!
George Lambert
Author, What You Must Know BEFORE Becoming a Greedy Landlord. How to build a portfolio of investment properties for an income that lasts a lifetime.
I bought one investment property in Atlanta and will never do it again. We had several in Florida and made money off of all of them. In Atlanta, neighborhoods are more unpredictable. Houses are not built well, and crime is high. We have two properties here. One in an established neighborhood and one in an up and coming neighborhood. Neither one is worth what we paid. You have to buy something dirt dirt cheap to make a profit. Finding a good tenant is also tougher for us here than it was in Fl. We will not invest here again. We are looking for properties in Florida. Thank you for your post though. I’m glad it’s working out for some people.
thanks for the advise i read everything u said n it makes sense im planning to do the house thing in a couple years fromnow!! its a big sacrifice that only limited people make n congrats on ur success!!!!
Thanks for this blog! The house looks awesome now!
Hi Paula,
I am a reader from Malaysia. I have been reading your blogs for awhile now. I really enjoy the tips, especially about hiring property manager instead of trying to do myself. I am trying to do the same approach of buying and renting property but I couldn’t get the rent to match the one percent rule for long term rental for my 2 apartments. Maybe different market..
Currently, I am trying to venture into vacation rental properties because there seems to be some potentials in Malaysia. I bought a 3 bedrooms villa in a well known resort and I am going to hire property manager instead of trying to do myself to see if this is a better way since I am still working too. Not sure how that will go but I am hoping this will work… Wish me luck!!
Hi Madness,
Congratulations on your first investment property! That’s fantastic!
Will and I spent a month in Malaysia a few years ago. We hung out in Kuala Lumpur for about a week, and then went to Pulau Tioman. Then we visited Malaysian Borneo. We loved it!
Thanks for the post .really amazing houses
Hi Madness,
Can’t say how much I loved your article.
Me and my wife follow the golden rules of saving you listed out.
I’m trying to hunt for rental properties, though I’m kind of newbie to Atlanta and looking for such good tips.
I would really love to have an opportunity to meet you- take some advice, evaluate my strategies, etc.
I loved this article. I have never been more motivated than right now. I have been looking for a way to get into RE investing. I paid cash for my current home. I bought is as a foreclosure and my husband and I fixed it. We love it and have learned to live on 1 income. How can I network in the Atlanta market? I do not have a RE license but want to network with others like me. I feel like you never know what information you can learn from another person. I used an agent to find my current home. Is there a trick to find short sales and foreclosure on my own.
This is a great article!!! It is entertaining, funny and most importantly it is educational. I have a little bit of money laying around not doing much. Your article has made rental housing investing a lot clearer and less scary. I just might take the plunge and buy a rental property. 🙂
Thank you!
RG
You’re the only one I know who buys houses with cash rather than leveraging their money to the fullest. I like seeing that other can be successful without taking on a lot of risk. I’ll consider leveraging myself for the first few properties, but eventually start paying them all off to increase cash flow by getting rid of those mortgages.
Thanks for the inspiration – and the Money podcasts are great, too.
Thank you K!
My choice to not leverage-to-the-fullest is rare and controversial in the world of rental investors. But I like the reduced risk, reduced stress, and fewer-passive-barriers that it provides. I started out by leveraging my way into this scene, and I still hold mortgages on multiple properties, but I enjoy the additional cash flow that comes from not leveraging-to-the-max.
Thanks again, K! Glad you like the podcast, too! 🙂
Congrats Paula awesome job of finding that Gem of a house and adding tasteful upgrades to attract the right tenants.? This is an excellent blog. I enjoyed reading all the post and great questions and your responses to them. I bought my first house 3 family in Brooklyn December of 2014 , I rent out 2 of the units and live in 1 myself (the 2bdrm). I saved and saved and then saved again until it hurt. I ate oodles of noodles 3 nights a week for 4 years…(I know that’s pretty drastic considering how unhealthy it is but I chose to do that because I had a plan to come up with down payment 3.5% and 3 months reserve the bank required Not to mention a host of other fees which brought up to around 52k (ouch.. ). I make about 70k a year and did this on my own. The rents provide $1300 a month after covering the mortgage. I am now looking for my second rental property and I am inspired by your success to try the Atlanta market. I will begin my research? Thank you and keep up the great work. Anything is possible you just have to sacrifice the needs from the wants?
Beautiful house. I like the bathroom and kitchen. Also, cat is cute. Thanks for the post.
In many ways renting vacation homes is as much a business as it is a real estate investment. Although there are companies that will lease and manage for you you’ll end up paying about 3 -4 times in management expenses vs what you would pay for a sfr two year lease rental
Hi there, Thanks for sharing the nice house. House looks awesome.
Really a great article and also very inspiring. I really like the after pictures and painting the brick white. The columns were a great touch also. I am a Realtor and a stager, just wondering why not spend a couple hundred dollars on some basic landscaping to frame the house in and make it look even more attractive? Curb appeal from the outside can be one of the most affordable little touches that makes the biggest difference. I know I am a little crazy, but am also a Florida Master Gardener and know how a $200 investment can add a value of $5,000 or more to the properties value, along with an attractive entrance. You got the “red door” correct. Great job!
This house renovation looks great. Thank you for all the interesting articles and sharing your experiences! One question I’ve had going through your rental properties is how you collect money / deal with taxes, etc. Do you personally buy the houses and have people pay you rent directly (and you pay income tax on the profits, etc). Or do you have a business that owns and collects on the houses? I’d love to see an article with some details around that. If it’s a business, is it an LLC? Do you have 1 LLC per house, or 1 single business for all of them? Do you transfer money to the business to put down payments on the house, etc. I’m sure you’ve thought of this and have pros and cons for both situations. Just curious to learn more around this. Thanks for the great articles!
Great job buying with cash, that’s the best way to own a single family rental property. We buy with cash as well and it is a slower way to acquire properties at first. But the risk is low when you have no mortgage payment. It also doesn’t hurt if the property stays empty for a month or two when finding the right tenant.
Hey Paula,
I am very impressed with your investing portfolio,i always read your blog.i have a quick question ,we are located in Canada ,i have searched a lot and finding deals like yours are nearly impossible,i already have a rental property and looking forward to get more in my real estate portfolio!Have you ever looked in the canadian market ? What do you recommend me to do to enhance my chances of finding good deals?By the way it is nearly impossible to buy a propery with 46000 and rent it out for 800-1000 here!Keep it up and take care Paula,you rock!
Thank you so much for sharing your personal experience with your readers. I can especially appreciate the great before and after pictures. Adding extra curb appeal by upgrading appliances and making things look more modern and homey are great ways to boost your property’s value and thus your monthly rental income. Your readers can learn a lot from your investment property #5. Thanks again for sharing!
I love your updates. The subway tile is fabulous…as is the cat 🙂
Fantastic article as usual!
I really love what you’ve done with the bathroom. Well done!
You did a great job with the house!
Bill Gates favorite game was Monopoly.
Thanks for sharing this valuable article with us. We all can learn something from you, for investment property planning. And also the kitchen looks amazing in “After” photos and kiiten looks really cute. Cheers. Keep up the great work.
Excellent!
I like your work and efforts you put on it.Pics are beautiful which you have shared.I enjoyed reading your blog.Thanks for sharing!
Awesome post! Just found you and subscribed asap. I plan on following a lot of your advice to the T. I saved up a bunch and am ready to invest, just not sure of the hows… until now. Can’t wait to start! I’ll keep you updated with my results!
Hello
I have a question – what about school ratings? if a particular property has low rating for school – is it still a good buy or i should look further?
thank you!!
Hi Paula,
Can’t believe I’m just finding you’re blog. True inspiration to those looking to start or enhance their dreams of owning properties. My husband and I are looking to start ours. We just did a few real estate class but hate when companies want to force you to purchase a course at $50,000 even after spending so much already on education on real estate. Don’t get me wrong investing in yourself is always worth it. But I’ve seen many successs stories that learnt from small business owners like yourself. I do have to commend you and your husband on your accomplishments. Your strategy seems to work and your properties looks great. All the best.
Great information! Although I think you very much underestimated repairs, maintaince and cap Ex. you can’t Always use a % of purchase, since roofs and appliances/etx roughly cost the same regardless if it’s a $50k or $150k house (yes probably smaller roof or smaller kitchen but still much closer costs).
Do you set up your rentals under a corporation, an LLC, or an LLC for all of them?
Great article! We are on the hunt for Property 6 now, but considering relocating, and starting over, closer to family. You seem to be of the same mindset that I am, pay in cash, have high monthly returns, in a neighborhood that consistently rents well. Much love from Washington.