I Felt Like I was Leaping off a Cliff!

I think it was two and a half years ago when I was sitting in your office discussing the 2 on a lot that Christine and I ended up buying. I’ll admit, for a long time I questioned that decision.

The numbers you ran with me weren’t great but they were decent. I believe it was the tax advantages that made us break even with the rent we were paying at the time ($1200) and it was the principle that made it better than renting. My financial adviser says “sometimes you have to put some money in to really learn.” Well this was a lot of money and I felt like I was leaping off a cliff.

What makes it difficult is the peer pressure. We live in an old 2B1B home while our friends are buying relatively newly built homes with 3+ beds and 2+ bathrooms. They have the open concept with plenty of space and that pool and spa provided by their HOA. Oh, and everyone is getting brand new cars!

After a long escrow and having to find a tenant to fill one of the units we closed and our real estate investment journey. We decided that we would manage the property till we needed to find a new tenant. Being the property manager and landlord isn’t hard, sometimes you just lose your free time.

Fast forward to this year, you refi’d us which saved us $200 on our month mortgage. During the refi process, we found out our tenant was going to have to move out 5 months sooner than expected. So we starting interviewing property managers using your list of questions.

That list of questions made vetting very easy. It dropped the list down to two that we wanted to talk to in person. Would you believe some property management companies feel they can asses a property without seeing the property? Well, we threw them out right away and decided between the two we liked.

We had done some homework and found that we had been undercharging for rent as well as being  “too compassionate” to raise rent. that compassion cost us over $1000 a year. Money that could have gone towards repairing our 1950’s rental property.

Our property manager was able to fill the unit 2 weeks before our tenant moved out. They had received multiple applications at a much higher rent than what we thought we could get. Our rent, after paying the property manager has increased by $500. The first months rent, which was a partial month (we decided to do some fixing between tenants) is more than what we charged with our original tenant for a full month.

Funny thing, people like to criticize property managers for charging for there services. How it “cuts” into their profit. Which ours does but also has the resources to better study the rental market, do a more thorough background check and has a lot more experience with the types of tenants that tend to be good and bad.

So you saved us $200 a month and the property manager increased our cash coming in by $500. Annually that is more than the raise I received from my day job! by the way, that raise only matched inflation. Love how management does their best to try and make that sound so wonderful.

For the first time, I don’t question the decision to dive into this property. I look back on my first few mortgage statement. It was the only time a part of the interest came out of our pocket. The rental income covered almost all of it. Now, rent covers 75% of the mortgage (that includes taxes and insurance) and we don’t have HOA fees. In your face social norms!

 We took that leap off the cliff and looking back at it, it wasn’t so high. Now, we are looking to get a second property but this time out of state. That cash flow property is just waiting for us to buy. In your face again Joneses! Buying a 2nd property only after two years is something I couldn’t fathom especially since these two years included getting married and a honeymoon. Friends do look at us weird wondering how we can afford to even consider a 2nd property.

 We wouldn’t be in this position if we didn’t have the right teacher. Thank you for all your guidance.

 Kyle