How much income did I earn through real estate investing last month?
And how much time did it take?
I’m back for another round of baring my financial books to the world.
Ready?
If you’re new to this website, here’s a quick synopsis: I own 7 rental units, and I spend a great deal of time teaching people how to develop their own rental property portfolio.
(Actually, I spend my time cracking jokes about Steve Harvey and posting cute cat photos. And once in awhile I throw in something semi-intelligent about real estate, too.)
I hear from many readers who hold the same misconceptions, excuses and limiting beliefs:
- “I don’t want to wake up at 2 a.m. to plunge toilets.”
- “I’m not handy.”
- “I don’t have enough time.”
- “I don’t live near any good deals.”
- “Are you going to eat that?”
Oh wait — I said that last line. 🙂
Anyway –
Rather than trying to explain confounding concepts like “no, I don’t plunge toilets at 2 a.m.,” and “seriously, I don’t do that,” I figured I’d show the complete behind-the-scenes picture.
Here’s exactly:
- What I earned
- What I spent
- What’s leftover
- How much time I spent
Take a look at the numbers and decide for yourself if you’re interested.
A few notes:
- This is a cash flow report, intended to show volatility. Some months I’ll pay for new windows + replace a stove + have a vacancy, and cash flow will be minuscule or negative. Other months I’ll have no expenses other than mortgage payments, and cash flow will be ridiculously high. Keep watching month-after-month to get a sense of the full range.
- I track time by jotting down, to the nearest 10 minutes, the tasks I’ve handled. I’m not going to carry around a stopwatch and be like: “Sent a text message. 42 seconds!” But I will tell you whom I texted, about what, and approximately how long the overall project took. And when in doubt, I round up, assuming that things take more time instead of less.
- I’ve created a Master FAQ page. I turned this FAQ page into a 2,200-word article just by copy/pasting my answers from the comment stream in October and November’s monthly cash flow reports. Whew! I’ll continue adding to this page so that all Q’s and A’s can be collected in a centralized location.
Alright, let’s get down to business!
December Gross Income: $9,259.27
Last month, the rental properties collected a total of $9,259.27.
If I were some spammy real estate guru, this is the point where I’d show you a photo of myself holding an oversized novelty check. Then I’d cut off the conversation here, with no mention of the expenses.
Please don’t listen to anyone who does that.
Here’s the breakdown, with commentary:
- Unit 1: $2,750
- Unit 2: $1,490
- Unit 3: $1,295
House #2: $200.50 — See note below.
House #3: $1,273
House #4: $1,500
House #5: $750.75
Ridiculously Tiny Interest From Bank: $0.02
Oh Yeah, One More Thing:
Last month we deposited two small refunds:
- Refund of Stupid Bank Fee: $3.00
- Refund of Excess Insurance Premium: $54.18
Our bookkeeping software classifies refunds as “income,” which is why the screenshot below shows gross income of $9,316.43. Not a big deal, but wanted to mention it for clarity’s sake.
If you’re wondering why House #2 shows a paltry $200 in rental income:
My property manager subtracts the cost of repairs, maintenance, new appliances, etc., plus her management fee, and sends me whatever is leftover.
House #2 needed three windows last month, at a total cost of $650. After subtracting for windows plus her normal management fee, the leftover amount — the “income” — totaled $200.50. Wheee! #DrinksAreOnMe
By the way, this is why I’m styling these reports as actual cash flow.
If I were like, “I brought in $X, and I’m saving $Y for big-ticket repairs,” then later — when I spend $650 on windows — I’d have to re-adjust all the numbers. Otherwise, the windows would be counted twice.
And if I said, “I’m also saving $Z in case of vacancies,” then later — when I have a vacancy — I’d again need to re-adjust the numbers.
And that would turn into a huge spaghetti tangle.
That’s why I’ve chosen to show you cash flow.
Speaking of which —
What OTHER expenses did we incur?
Mortgage: $3,524.03
- This is PITI (principal, interest, taxes and insurance) for several houses.
Mortgage, Part II: $583.33
- This is specifically the payment for House #3. Throughout 2015 we paid this quarterly, but effective January 2016 (and sent/deposited in last month of 2015) we’ve moved to a monthly payment system. I have no idea why my bookkeeping software decided to classify this differently, but here we are.
Utilities: $164.16
- We pay the water/sewer bill for the triplex. The tenants pay for all other utilities (including water/sewer for every single-family home).
Equipment Repairs: $116.30
- This includes $108.22 to buy a timer for a washing machine, plus $8.08 at Home Depot. These are classified as “equipment repairs” since both are related to washing machine repair.
Property Repairs: $29.03
- This is miscellaneous repair-related stuff. (My contractor buys a lot of random crap — a tiny section of PVC pipe; a 10-pack of outlet covers; a bottle of spray foam, a box of screws. That kinda stuff.)
Bank Fees: $3.00
- Grrr. I hate our current business bank. (Hint: Their name begins with a “W” and rhymes with “Smells Bargo.”) They nickel-and-dime me every month. (Well, technically, they $3 me). And every month, I email them and ask them to refund it. And they do. And then we repeat the cycle the following month.
The insane part is that I know there are better business banks — heck, the Afford Anything LLC account is at a different institution — but I haven’t gotten around to switching. I’m too busy watching Downton Abbey reruns. So instead, we continue our monthly fee-then-refund dance. How uncivilized.
Total Expenses (Including Debt Servicing): $4,419.85
Cash in My Pocket: $4,895.58
Total net cash flow came to $4,895.58 after paying all expenses, including the mortgages.
Hooray!
#MaybeDrinksReallyAREonMe
Bear in mind, this is a cash flow report, intended to showcase monthly volatility. That’s a nerdy way of saying “Some months will suck. Others will make you feel like a baller. Join me every month for the full-throttle rollercoaster experience.”
This is a good month: no vacancies, no major renovations, and our mug shots haven’t been featured on the nightly news.
During these good months, stockpile cash so you’ll be prepared for the bad months. It’s not all daisies and kittens.
How Much Time Did This Take? (Spoiler Alert: 5 Hours, 30 Minutes)
How much time did Will and I spend in pursuit of this $4,895?
Here’s exactly what we did:
- 1 hour — Dealing with ongoing squirrel-in-the-attic issue. It never ends! Turns out, it might not be a squirrel at all. It might be a raccoon. Or maybe a rat? This is why I’m not a zoologist. My species identification sucks.
-
1 hour — Coordinating with an appliance repair guy to repair the washing machine in Unit 2.
- 30 minutes –Routine check on triplex during a trip to Atlanta.
- 15 minutes — Routine check on House #3 during a trip to Atlanta.
- 15 minutes — Routine check on House #4 during a trip to Atlanta.
- 15 minutes — Routine check on House #5 during a trip to Atlanta.
- 90 minutes — Total commute time for all these routine annual checks. (Hooray for driving during off-peak hours!)
- 30 minutes — Reading property management reports and looking through the bookkeeping software.
- 10 minutes — Emailing the House #2 property manager.
- 5 minutes — I’m just adding this here, because otherwise it would total “5 hours 25 minutes,” and that’s a goofy amount of time to report.
Total: 5 hours, 30 minutes (including commute time)
I don’t know if you want to count this, but I also spent about 30 minutes shopping for a holiday present for my contractor. He got champagne and dog toys. (Seriously.)
We earned $4,895 with 5 hours, 30 minutes of work (or 6 hours, if you count shopping for booze + puppy treats).
You could describe this as roughly $906 per hour. But that’s silly.
Passive income investments are created to stop trading time for money.
I’m not making $906 as an hourly rate; at this stage in the game, the hourly rate formula flies out the window.
This is what can happen when income derives from capital rather than labor.
A few notes:
- I like to visit the properties 1-2 times per year (eh … once per year) to check for red flags, like missing gutter sections. My philosophy: catch these NOW before they inflict long-term damage. An ounce of prevention is worth a pound of cure.
- Yes, I trust my contractor and (when applicable) my property manager, and I know they’ll inform me about any warning signs. But I’m also a believer in the expression “trust but verify.” Visiting the properties at least once a year is a prudent move.
- OMG, did I just use the adjective “prudent”? A prudent move? Really? I must be the least-exciting-person you’ve ever met. “C’mon kids, let’s be prudent!” Don’t you want to come party with me in Vegas? We’ll be soooo prudent!
Questions, I Have Questions!
You’re probably wondering:
- How much did you pay for these properties?
- Where are they located?
- Who are you?
- Why do I exist?
- What’s the meaning of life?
- Could you tell me more about taxes?
- What the heck is PITI?
- Do you use property managers?
- How did you misidentify a squirrel vs. rat vs. raccoon?
- What’s the best guacamole recipe?
- Is coffee good for you?
- How about chocolate?
- Red wine?
- Ah, you’re kidding. I thought donuts were a health food? You’re saying they’re not?
- What if they’re rosemary pistachio donuts?
- Ginger donuts?
- Coconut?
Here’s the thing:
Some of you have been reading me for years. You already know the answers to questions like “what did the properties cost?;” you were there (as a reader) when I bought them.
Others just discovered this website last week. All of this is new.
So I’m tasked with the twin goals of (1) answering questions, while (2) not boring my longtime readers.
Solution: The Ultimate FAQ Page. This is a living, dynamic list that’ll keep growing.
The more questions I get, the longer this page will grow, until eventually the Internet runs out of space.
The Search for House #6 Begins … and Ends
I’d like my next property to be in Atlanta, rather than Las Vegas where I live, for one simple reason: I’ve already built a team there. If I need a plumber, electrician or HVAC installer, I know who to call.
I spent a week in Atlanta in December, kicking off the search for House #6. And for the sake of keeping y’all in the loop, I tracked my time with the toggl app.
Here’s what it looks like:
Searching for House #6 consumed:
- 15 hours
And resulted in:
- Zero properties! 🙂
I’ve never tracked my time searching for a property (from start to finish), but I wouldn’t be surprised if I spent 100+ hours for every house that I buy.
“But that’s a lot of work!”
Yeah. You know how I always say that passive income is not free money?
In order to create the incredible benefits that I enjoy today, I front-load the workload. Work hard today; reap rewards for years.
It’s like planting seeds in a garden. Tilling the soil is a pain-in-the-butt, but you get awesome tomatoes all summer long.
Here’s exactly how I search for properties:
First, I narrow my focus.
It’s easier to spot trends and contextualize prices if you specialize in a narrow geographic niche.
I picked a couple of zip codes, using strategic and specific criteria.
For House #6, I looked for the following:
- 3 bedroom / 2 bath single-family residence
- Minimum of 1,200 square feet, with each bedroom larger than 120 square feet (10′ x 12′)
- Ideally a fixer-upper.
- Must be a foreclosure, short sale or estate sale.
“How come you’re not considering multifamily homes?”
Start small. Expand later.
I can’t search for multiple types of properties simultaneously. I focus on ONE type of property.
This is a systematic approach.
“Okay, cool. Any other search criteria?”
These next two points are critical:
- ARV (after-repair value) should be roughly $90,000 to $100,000 ….
- …. but I should buy it for $60,000 to $80,000, including the cost of upfront repairs.
In other words, I want to buy the property for roughly 20 to 30 percent below market value.
“How is that possible?”
Foreclosures, short sales, estate sales, driving for dollars, sending mailings to the owners of vacant houses, foreclosure auctions.
“How … isn’t that overwhelming?”
Only if you’re bouncing from idea to idea. When I search for a property, I methodically work through a zip code, step-by-step.
Overwhelm comes from a lack of planning.
“Any other criteria?”
Yep! I’m looking for an 8 percent Class B cap rate (or a 7 percent Class A cap rate.)
If I invest $70,000 into a house that rents for $900 per month, assuming $400 of monthly operating overhead and 5 percent vacancy, I’d have roughly an 8 cap property. (It’s a 7.8 percent cap rate, which is close enough for my purposes.)
“Tell me about your searching-for-a-property process?”
In a nutshell:
- I study a few specific zip codes, looking for positive signs (new construction, building permits, well-maintained yards) as well as negative signs (boarded-up houses, front yards with lots of clutter). There can be a LOT of variation within a zip code — even on the same street.
- I learn the prices, rents and occupancy rates of targeted areas. Everything fits within an organized, systematic process. This allows me to understand what’s a winner … and what’s a dud.
In December:
- I toured roughly 10 houses.
- I made offers on two houses: one through the HUD Home Store (foreclosures) and one through a foreclosure auction website.
“The who? The what? HUD?”
Yep. If a property purchased with an FHA-insured loan gets foreclosed upon, the federal government (Housing and Urban Development, or HUD) will repay the defaulted loan and then sell the house.
These properties are listed at HUDHomeStore.com and they’re a gold mine for investors — but they’re also competitive. Preference goes to owner-occupants, and HUD will only sell to an investor if they can’t find a qualified primary resident.
There are other risks, as well, which are beyond the scope of this article, but suffice to say that HUD can be a great opportunity if you’re patient and strategic.
I made an offer on a HUD home. They countered with a price I wasn’t willing to pay.
Ultimately I walked away.
“Okay. And … foreclosure auctions?”
Yep, I got into a minor bidding war over a property that I toured.
It came down to myself vs. one other bidder.
I knew how high I was willing to go — and the other bidder was willing to go higher.
In those situations, it’s tempting to raise your bid. “What’s another $2,000?”
But I held strong.
I ran the analysis. I knew my final price. And I knew when to walk away.
In fact, I physically shut down the laptop and walked away. 🙂
Real Estate Course … Coming Sometime!
That brings us to today.
I can describe the deep inner workings of my brain in four points:
- Creating the course
- Creating the course
- Squirrel!
- Creating the course
Here’s a snapshot of my home office:
(Apparently I missed the memo that I’m allowed to write directly on the whiteboard.)
Here’s what I realize:
There’s a difference between knowing a skill and knowing how to teach a skill.
I’m deep in the throes of trying to understand the latter.
It’s not enough to just present information. This needs to rise above-and-beyond.
How do I design course material in a way that keeps students engaged? Motivated?
More importantly, how do I design curriculum that results in students taking action? Changing lives?
I can’t just say, “this is how to calculate cap rate.” You can learn that in five seconds of Googling. Heck, you can learn that here, for free.
That’s not enough.
The problem facing most of my readers isn’t a lack of information.
It’s a lack of a system that can convert information into action.
Students can’t graduate from the course as (merely) knowledgable people. My goal isn’t to help people win Trivial Pursuit: Real Estate Edition. That would be a colossal failure on my part. My goal is to develop students into successful rental property investors.
I want graduates to send me emails saying: “Guess what? I’m bringing in my first $800 per month in net rental property passive income!”
#DrinksAreOnThem !!
So I need to design curriculum that can lead to real, tangible results.
In service of this, I’ve been spending a lot of time learning how people learn. (If you’re interested in this topic, I highly recommend Julie Dirksen’s book Design for How People Learn
After deep-diving into this field, I’ve figured out that this course needs to be:
- Interactive. It needs quizzes, worksheets, checklists, homework, and group interaction.
- Multi-Sensory. It needs both visual and auditory teaching strategies.
- Accountability-Structured. It needs cohorts of peers who keep each other motivated and accountable. And maybe it should have grades?
In short, this course is occupying every iota of my time, attention and energy.
Here’s how I’m clearing space for this:
- I dropped clients. I used the end of the 2015 calendar year as an ideal time to cut several of my freelance writing and marketing clients. This frees more of my time to focus on the course.
- I raised my team’s hours. Yes, I simultaneously dropped my revenue while increasing my expenses. (You should’ve seen my Dad’s face when I told him!)
- I enlisted a learning consultant. I’m working with a Harvard-trained consultant who specializes in teaching-how-to-teach.
I want this to be effective. And I’m willing to put muscle behind that goal.
I’ve also decided to put the search for House #6 on hold for the moment. Searching for a rental property requires mental space, and I want to devote 110 percent of my mental space to creating the world’s most badass English-language residential rental property investing course.
I don’t know when the course will be ready, because I’m not going to rush it. I’d rather be slow-and-great than fast-and-average.
Sign up here to join the VIP List for special announcements about the course release.
Learn How To Escape the 9-5
Get free updates on building wealth and living to the fullest.
Zero spam.
Nice comprehensive report! That’s great you have a go to team to call to fix stuff.
I’m impressed you have so many units. Im up to four after my last purchase in early 2014. I think I’m at my limit for the next 5-10 years. More would be just too much. I also want to keep RE under 40% of my net worth as I think lean times are ahead.
Sam
A good month, indeed! If only that STUPID SQUIRREL would go away it would’ve been a great month! I can’t wait to hear about your course at Camp Mustache. It sounds super interesting! Too bad I’ll have purchased my property by then hah!
I can’t wait for Camp Mustache! It’s gonna ROCK!! 🙂
Thanks Paula.
I think it will be a few years before I take the REI plunge. Your transparency helps but doubts reign supreme.
Whew! If I ever get to the point where I’m ready to invest in real estate, I’m definitely coming to you for the answers. Your reports are super-comprehensive. I love it!
I’m bringing in my first net $1000/mo in rental passive income! That’s the quote you were looking for right? Well there you go. Partially inspired and educated by you.
YAY!!! That’s awesome, Joe! I’m honored and happy and every other positive adjective out there. 🙂
Very informative,. Paula! I definitely appreciate the cash-flow picture instead of just income. And although the search process sounds time-intensive, it also sounds like you enjoy it, in addition to it being all part of the investment process. Is that accurate?
Wow. You are on FIRE! Good for you. I wish I had done what you’re doing when I was your age.
I’m in my early 50’s and have 14 total units. They are doing well and I wish I had more — just don’t think I’m up for buying right now though. I wouldn’t mind a bit of a market drop as I love to buy when things are cheap.
Best to you!
Congratulations on your 14 units! That’s a great number. 🙂
Thanks for undertaking such a cool project such as real estate education. I’ve learned from experience, interviews and reading…your website certainly included.
I’d love to learn more about market selection and purchase strategy. At 40 units and looking for a new market. I was thinking about how challenging it must be for bloggers to educate and inspire the spectrum of readers.
Macro-level I’m reading The Land Grabbers…about potential abroad investments and education. Like you I continue to invest in pre-existing vs. new. Better for environment and wallet.
I always love these updates and glad to hear the course is progressing. If your study of humor is anything like your study of courses, I suspect your course will be really well delivered so I look forward to seeing it.
Paula, what steps do you take to protect yourself when your buying homes via an auction? I’ve heard of liens, houses that needed tens of thousands of dollars of work, etc. I should’ve mentioned this in the survey you sent, but didn’t think of it!!!
@Stephanie — A few tips:
#1: Always, always, always get the house inspected before you start bidding, particularly if you’re using a platform like Hubzu that doesn’t allow for a buyer’s general right to terminate.
The value of knowing what you’re getting into is worth the inspection fee, particularly if you know that you have a reasonable chance of winning the bid. Alternately, if you work with a trustworthy general contractor, pay him an hourly rate to throughly check out the property. This is cheaper than hiring an official inspector.
I’ve paid for many, many inspections on properties that I never purchased. This is merely a cost of doing business — not unlike renting an office space or hiring employees in any other field of work // type of business. The objective is to target properties that provide a high enough profit margin that you can cover all the other costs of running your business.
#2: Offer the smallest earnest money figure possible (depending on which auction site you’re using). When I send traditional offers, I often include a high earnest money sum as part of the negotiation. This signals to the buyer that I’m serious. But when I’m bidding at a foreclosure auction, I know that my right to terminate the contract is limited or nonexistent, so I offer the smallest amount of earnest money possible. Some websites set specific standards regarding EM sums, while other websites allow buyers to use their own discretion.
We’ll cover auctions in-depth in the course. Thanks for filling out the survey — I really appreciate it! The feedback has been tremendously helpful.
This very impressive, you really have a handle on everything. Im very jealous of how many properties you own and the amount of passive income you make is incredible. Keep it going and build your empire; i look forward to following your journey!
Hi Paula,
This is my first time here and I must say that you write SO well. It’s really captivating.
I am good in financial investments like Equity, Fixed Income products, Mutual Funds, and so on. I would definitely love to include RE in my portfolio.
Looking forward to joining your course. I am based in India. Would this course teachings be applicable for Indian properties too?
Thanks,
Avadhut
I just stumbled on this website and boy do I love it! You write sooo well and your personality shines right through. Great job!! I’ve been investing in real estate for almost nine years in Canada and just launched my blog about my journey. It is awesome to see your blog.
I just have to say – Wow, that is a lot of information!
Thank you for showing us everything you do, this is not only educational but also inspirational.
I read all your posts and i love them all, they are long but very good.
I don´t have anything even close to this here in my country, Brazil.
I really aprrecciate all the things you do to help people online and offline, you are an amazing person and i am a fan.
Thank you Marcelo! 🙂
Hi – I stumbled across your site and your blogs caught my attention because, like you, I am a long distance landlord. I own five rental properties in New York region while I live in California due to job relocation. I find your numbers a bit misleading, though. I know you said this would be a cash flow report, but to make numbers correct, I think you need to deduct some expenses that may not be monthly but quarterly or semiannual such as insurance premiums and property taxes. Also, your repairs seem to be little things but every so often, as a landlord, you get hit with a whapper of damage that can take away any gains you may have made for the whole year, or even set you back couple of years. I had couple recently. One was oil tank leak costing me $20K+ damage to not just replace the tank, which was the cheapest part, but contaminant removal, rebuild basement. Another one was water tank rupture, which led to mold remediation and reinsullating the whole basement. While regular home owner insurance will cover these costs, when you rent a place, you get a commercial insurance and commercial is a lot more restrictive in their coverages. These were on two separate properties. In the long run, I am finding that what I collect in rent evens out with my expenses.
Where I am making most money is from the appreciation. My first property was purchased in 20 years ago and that property has gone up 4X, second 5X, third 3X, and so forth. Since I put down 20%, 4X increase in value means 20X initial capital expenditure – 5 times leverage X 4. Of course, I made monthly mortgage payments and all the properties except for my last acquisition is fully paid off.
That being said, if you are seeing profits on the properties on consistent basis, after accounting for taxes, insurance, and large capital expenditures, more power to you! You definitely seem to have picked better properties than I have to extract cash from it like you can.
Jay —
“I think you need to deduct some expenses that may not be monthly but quarterly or semiannual such as insurance premiums and property taxes.” >>>> Yep, I do that. Read my previous cash flow reports, which show me paying quarterly/biannual/annual bills.
In November, for example, I paid $2,023.75 for my CPA and lawyer, plus $903 as an annual property tax bill for a house I own free-and-clear.
These are annual bills, documented for the world to read.
“I find your numbers a bit misleading, though.” — You know what I think is misleading? Artificially spinning numbers.
If I had “spun” November by saying, “yeah, I paid $2,023.75 for my CPA and lawyer, but REALLY that’s $168 per month over the span of 12 months, so I’m only going to deduct $168 from the November report!” — that would be baloney. THAT would be misleading.
There’s nothing misleading about showing you screenshots of actual cash flow. You can view, month-by-month, exactly what happens in my business bank account. What’s more transparent than that?
Paula.. On average, how long does it normally take you to find a renter for each property? With our 1st rental, we had a signed lease within 3 days of listing. We have now purchased our 2nd rental house but it is not generating as much response as the first one. It has been listed for about a month now. Based on research of the surrounding market, we feel that it is priced right. Also, it is in the same area as the first house and has similar features. Do you think that December/January are slower months due to the holidays? Thanks!
@Kate —
In my experience, December is the worst month (and November is the second-worst) due to the holidays. January I usually see an uptick from people moving into the area for new jobs. But as a general rule, winter is the worst season, since many tenants don’t want to move when it’s cold outside. My properties are in Atlanta (where there’s no snow/ice), and I still see a winter decline, so I imagine it’s worse in states that experience snow/ice.
That being said, though, there are pro-active steps you can take to improve your chances of finding a tenant in the winter.
First, make sure your photos are excellent. Use a wide-angle lens and a tripod. Open the window blinds before shooting to maximize light. Turn on overhead lights, even in the daytime. “Stage” photos in simple ways: a bowl of fruit on the kitchen counter, a vase of flowers. Close the toilet lid. Include a few close-up shots of your nicest features, like crown molding or a cool sink faucet.
Second, review your written listing. Write it in a way that SELLS. Most listings are snoozers: “3-bed, 2-bath blah blah zzzz zzzz.” Write yours in a way that’s exciting: “Gorgeous hardwoods throughout the home” or “Brand-new wall-to-wall carpet.”
Finally, one tactic that I used for House #5 was surveying the prospects after a showing. If you have a prospect’s email address, just send them a quick email that says:
“Hey there!
Thanks for checking out my rental at [ADDRESS]. Could you do me a quick favor?
I’m trying to understand how I can improve the property. Could you please take this short survey? [LINK]
Thanks!
— [YOUR NAME]
P.S. I appreciate it! Again, here’s the link: [LINK]
__________
You can build the survey through SurveyMonkey or Google Forms. Ask specific questions: “Did you like the layout?” // “Were the rooms large enough?” — and also ask open-ended questions, like “What did you like most? Least?”
Some of the responses will highlight things you can’t change, like the location. I’ve had plenty of feedback from prospects who don’t like the fact that Property #1 (the triplex) is located on a busy street. There’s nothing I can do to change that, although that’s useful to know when I’m searching for other properties.
But some of the responses will highlight things you CAN change. Several tenants had the same negative feedback about House #5 — the largest bedroom (the “master”) didn’t have an attached bathroom. In fact, the closest bathroom was located on the other side of the house. The occupant of the master bedroom (Mom & Dad) would have to put on their bathrobe, walk across the living room, and walk down the hallway to reach the bathroom. And Mom & Dad don’t want to do that … but they also don’t want the smaller kid-sized bedrooms. So we built an extra bathroom into House #5, and after we did, it rented instantly.
I know that’s an extreme example — building a new bathroom is a huge upgrade — but you might get feedback that the windows are too drafty (e.g. people are worried about their heating bills), or that the paint is too ugly (e.g. I made the mistake of painting a house BRIGHT BLUE, and prospects called it cartoonish and compared it to the Smurf village). Those are traits you can easily change.
In short: there’s nothing you can do about the weather, except wait it out. So while you’re waiting, focus on finding the qualities that you can improve. 🙂 Good luck!
Jay- see above–Paula’s mortgage expense includes PITI- this means many (most) large annual, bi-annual expenses are actually accounted for monthly. Her numbers are more solid than you think. I’ve read this blog for a long time……. (am also a seasoned investor)….the secret is in buying the property right. –Paula does, her numbers do make sense. Yes, she bought them very well. The cash flow does make sense, …..in my humble, respectful, experienced opinion. (….Also–really feel for your ruff patch of expenses. I’ve been there, it stinks. )
HI Paula,
I have a few properties northwest of downtown Atlanta, in Lawrenceville and Norcross area. I have been self-managing for the past 3 years. Looking to transition to a property manager, any companies that you know if and are willing to suggest? Also, looking for recommendations on plumbers, electricans, contractors, etc… too.
Thanks,
Andy
Hi Andy,
I work with a property manager who specializes in south Dekalb (south of I-20), and I have good friends who run a different property management firm that specialize in the Intown neighborhoods. I’ll ask them if they have colleagues who specialize in Lawrenceville and Norcross. I’ll send you an email.
Great numbers and a great month for you. Congrats 😉
I am super inspired! I own a home in a very wealthy area and I am ready to sell/ grab the capital / minimize and have more time for things and people outside of the work a world. Take some time off travel ect. This seem like a great next step to take and I am excited to learn more from you. Keep up the G*R*E*A*T work. If need be I can bring my dog by to herd the squirrels for ya!
LOL … I might take you up on that squirrel-eradication-offer! We’ve tried damn near everything!! 🙂
I just started reading you blog and I think it is AWESOME! Could you tell me if you hold these properties in your own name or do you hold them under an LLC?
I own 4 rental properties under an LLC and this causes the insurance to be much higher on the homes. My insurance agent says if I would put the insurance under my own name it would be much cheaper however wouldn’t that expose me personally to a possible lawsuit? That is the whole reason for the LLC. Do you have any advice?
Hi great post. How are you currently looking for deals besides HUD? And when you find a HUD property are you able to bid on it yourself as an individual or do you go through an agent? thanks!
@Tim — You’re required to bid on a HUD home through an agent. (I myself am an agent, but if you want to bid you’ll need agent representation.) Other great resources: Hubzu is a foreclosure auction website that’s good for finding single-family homes; Loopnet is great for multifamily housing.
Paula, please don’t kill the critter. You might be able to borrow a tender trap from a local cat or wildlife rescue group to trap the critter and then release in a safe place. Do make sure there aren’t any babies left to starve to death. A wildlife camera would help with this. If there are, trap them and take to a wildlife rehab place to care for them until they can be released in the same area. Make sure the critter isn’t injured before releasing. After you make sure there aren’t any other critters, just make sure all entries are sealed with wire mesh etc…thanks and good luck.