by David | Sep 15, 2014 | Uncategorized
I didn’t have an easy time starting out in real estate investing. In fact, my first two deals didn’t even go through. After those two deals failed, I had to decide how to continue and if to continue at all. I could have taken my savings and purchased bonds, or stocks, or real estate trusts. These, too, would classify as passive investing but they probably wouldn’t give me the returns that investing in real estate could provide.
After the two deals failed, I had to take a break for a few days… No reading about real estate, no replying to offers from whole sellers or turnkey providers. During those few days, I took time to think about why I was doing what I was doing. Why was I spending so many hours after work learning about real estate? Why was I researching different markets? Why was I talking to real estate agents, mortgage brokers, real estate investors, turnkey providers, and others?
So here’s what I came up with, here’s my “why:” I want to escape the rat race. I want to stop trading my time for money at a 9-5 job. I want to create passive cash flow to pay for my day-to-day life and take advantage of things like appreciation and amortization to build long-term wealth.
My goal is to own my time. All of it. Today I spend between 8-10 hours a day at work. I don’t have much choice since my employer provides me with a monthly income in exchange for those 8-10 hours each day. I want to stop that. Or at least have the option to stop that. I want to be able to spend more time with my family, and more time doing the things I enjoy. I believe that is true wealth. I believe that a wealthy person is someone who has full control of their time.
So that’s my “why.” Building that, getting to the point where I own my time, and having the financial freedom to do so. What’s yours?.
by David | Sep 1, 2014 | Income Report
I spent August continuing my research in real estate investing, specifically on turnkey real estate providers in markets that I’m interested in. I haven’t decided where my next purchase will be and with which provider but my goal is to purchase house number 2 during the month of September.
As for my first property, during the month of August, I received payment from my property management company for rent collected during July. I purchased the house during the month of July so I only received the rent payment for the last 10 days of the month that I owned the house. The only expense I had during the month of July was for the Property management company’s services for the same number of days. The reason I don’t have any other expenses (such as insurance or property taxes) is that I paid for the first year of insurance and $233.2 for 2014 city property taxes as part of the closing costs, and the county taxes of $697 will be due in October. I didn’t pay mortgage since my first payment is due September 1st. With that, August’s income report:
| Rent |
$256.46 |
| Mortgage |
$0.00 |
| Insuance |
$0.00 |
| Taxes |
$0.00 |
| Management |
-$25.65 |
| Total cash flow |
$230.81 |
by David | Aug 3, 2014 | My REI History
So my wife and I have been taking a small adventure across the country. We’ve actually been at it for around 2 years!! (Yeah we’re awesome!) 🙂
On our way to the East Coast we just so happened to be in Memphis at the right time. We arrived the exact week that we closed on the house AND the week before the tenant is moving in and right after the renovation was finished. Which means I got to go see the house I just purchased! It was a great experience since the house looks really good and gave me a huge boost of confidence in the turnkey provider I’m working with.
It’s also cool since most investors never make it to see their properties and I got to meet the team who work at the turnkey provider, got to see the neighborhood my house is in, and was able to meet the title company and sign all the contracts in their office.
Here are a few pics of my real estate investment.
by David | Jul 31, 2014 | My REI History
I purchased my first property!
Wow, what a relief, a huge rock has been lifted from my heart. Why, you ask? Well I’ve been saving for some time and have been convinced for over 2 years that real estate investing is the best way to create passive income and eventually wealth! Fear has been the main thing keeping me back. Questions like, “What if I purchase the wrong house?” “What if there’s no appreciation?” “What if the tent stops paying rent?” “Do I need to consult a lawyer?” And many many more questions kept holding me from making this purchase.
Now don’t get me wrong…. My mind is still racing with questions and uncertainties. Real estate investing does have risk to it and my property might not perform as well as the numbers look on paper, but I understand that the only way to proceed is to start and take action! There are so many things that I couldn’t have learned by researching alone, that I was only able to learn during the actual purchase process. There are many things I’m sure I’ll learn over the next few weeks that will make my next purchase better and easier to complete.
So what did I buy? I live in an area where a condo costs over a quarter of a million dollars, not to mention a single family home. So I decided to work with a turnkey property company in Memphis. Through them I purchased a single family home valued at $72,700. I used a 30 year conventional loan to finance 80% of the price and put down 20%, which comes out to $14,540. Together with closing costs of $4,602 my total out of pocket cost was $19,142.
The turnkey company renovated the property prior to the purchase and placed a tenant in the home. Monthly rent for the property is $795. You can see the rest of the numbers below:
| Item |
Monthly Cost |
| Rent |
$795 |
| Taxes |
– $100.83 |
| Insurance |
– $33 |
| Management |
– $79.50 |
| Debt service (P+I) |
– $316.67 |
| Cash flow |
$265 |
My cash flow is around $265 a month when there are no vacancies and no maintenance costs, so to make sure my expectations are inline with reality I’ll deduct 5% for both of these each month and my total cash flow after vacancy and maintenance should be around $185 per month, or $2,220 per year. That’s an 11% return on investment (ROI).
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