My Three Main Reasons For Writing This Blog
1. Assist other investors with different cash flow ideas.
2. Share some of the problems that have happened to us.
3. Begin a network for all investors to help each other for free.
Here is a quick synopsis of my real estate adventures.
We purchased our first house in 2000 for $203,000 in California. (Our first house was so small: it only took a quart of paint to finish two coats).
But it was a house and not an apartment. And we had a yard.
I worked as an (Emergency Trauma Technician) or EMT and my wife worked as an elementary school teacher. She made almost twice the money I brought in so we were on a tight budget. EMT’s don’t really get paid much.
The real estate boom was on the way and we used the appreciation (increase in property value) H to “move on up” to a better neighborhood and a larger house.
This process worked several times until we were living in a house within walking distance from the beach. (I am looking forward to the day when I can raise my head 6 inches to see the wave). Not quite there yet.
My primary goal when purchasing real estate was to provide sufficient income to leave my job (J.O.B. = just above broke).
We first purchased several income properties when the mortgage rates were relatively low, thinking they would provide sufficient income for our needs. We bought 12 properties in les then two years. Some cash flowed and several were purchased for appreciation to sell in a year or so. What a dumb idea.
After the properties funded, over half of the tenants ended up moving out, leaving several units in need of paint, carpet, gapping holes the size of small children, and appliances either stolen or in need of replacement. What a mess.
We lost a refrigerator in Phoenix, AZ through the wall, that’s right, the wall, not the door. Our tenant ripped out the wall and stole the refrigerator. Thankfully it was an old one. I wish I had pictures.
And check this one out. I have a four unit near the east coast and found out one of my tenants was cooking crack out side in the back yard in the early morning hours last year. That’s right, crack. How did I know he was cooking crack? My property manager was a retired Chief of Police.
Lightning hit one of my houses in Phoenix and destroyed an A/C unit. Fried the thing, though thankfully the house didn’t burn down like some houses that I have heard of doing.
Had one house that the tenants moved out at around 3 am, according to the neighbors. They stole all the doors on the inside, the refrigerator, and “borrowed” a light fixture. They left without paying 2 months rent. Nice
We built a house in Phoenix and the builders took 2 months longer then expected. All the property needed was a driveway and then I could get my certificate of occupancy. Well, I was finally able to close on the property after I filled a complaint with the contractor, The City of Phoenix, and threatened his bond never allowing him to build in Phoenix again.
Scenarios such as these created severe cash flow problems even before some of the properties were a month old. Granted cooking crack is not the norm so I needed back-up plans and different cash flow ideas that would help in our future real estate endeavors for the usual situations.
So, I began to look into creative ways of making extra money from my properties that are either seen in the typical and conventional property management arena. I researched ideas from other investors from investment clubs plus what has worked for me in the past. Plus, I needed creative ways to increase my cash flow so I researched even more.
When we first purchased property, we learned from some one who had purchased property in the past. Seemed like a logical methodology, learn from some one who does. We went to his classes and learned his techniques; though most of them needed a tune up.
We were taught to buy income property that both cash flowed and some that we knew would be a negative every month although the negative cash flow properties had equity built in prior to the purchase. We could use the equity because the property was increasing in value at an enormous rate. . This was called “Buying for Appreciation”. The logic behind this “technique” was the negative investment properties or the properties that we were definitely going to pay out money every month would balance out the positive cash flow properties. Plus, every 5 hears, we could refinance and take money out of the properties to buy more properties. This would be a great idea in a perfect world although someone forgot to tell the tenants the same technique.
I thought this was a great idea until half of my tenants moved out and I found myself with half a dozen or so negative cash flow properties as apposed to one or two. Now, every month, I had thousands of dollars in mortgages coming form lines of credit, savings, overtime from my job, friends, and selling properties to cut my losses.
This lesson taught me several things; the main message was, don’t buy property that doesn’t cash flow.
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