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For 28 years I was stuck on the Corporate
treadmill. By stuck, I mean that I did what most everyone does, get a good job
and climb the Corporate ladder. My background was software engineering for
mainframe computers and more recently for web sites. It was fun..... for a
while. Then in 2001, my wife got me a book called 'Retire Young Retire Rich', written by Robert Kiyosaki. At the time, I never heard of him or his RichDad series of books. I found his concepts interesting and his views on Real Estate eye opening. Then I started getting more Real Estate books and CDs - wanting to learn more. In 2002, we decided to try it. Could investing in Real Estate be as easy as Robert described? Our theory was we'd try it with 2 properties. If we didn't like it, we could always sell them. We contacted a Realtor friend and went out looking for homes. There was many to choose from and most were in horrible condition. They needed to much repair and cleanup work. And as we were just starting out, we didn't want to invest that much money. After looking for several days, she said "you know... if I was the one looking for an investment property" (she didn't have any) "I would look at new homes. You'll get a 1 year warranty and a new home should be easier to rent" OK - that made some sense. And we bought 2 new homes. My wife and I knew we didn't want to manage the properties ourselves. We already had jobs - we didn't want another job interviewing prospective tenants and fixing problems with the house, even while it's under warranty with the builder. So we asked our Realtor friend for some Property Manager recommendations. I talked to them and they seemed competent, based on my limited knowledge of managing rentals. But their cost was high... 8% to 10% of the monthly rent plus an additional Leasing fee to find a tenant. I opened the Yellow Pages and found a company that only charged $40 a month. Could this be to good to believe? You know the saying 'you get what you pay for'? Well I contacted them and was told, we do a better job finding qualified tenants, so there's fewer problems to deal with during the Lease. OK - that made some sense and I hired them as my Property Manager. My wife and I decided to give it 6 months to decide if this was right for us. I'm the analyzer of the 2 of us, so I had my spreadsheet with the projected rental income, expenses, and net cashflow to help prove the case. Now, here it is 6 months after purchasing the 2 homes. Was it as easy as Robert's book described? The Results: 1) The Property Manager had tenants in the homes 2 weeks after we closed, and we received rent money before we even made the 1st mortgage payment. 2) We got the anticipated rent, to ensure the mortgage and other expenses were covered. 3) Both properties had positive cashflow of $25 a month. YES - it all worked, almost like Robert described. But not everything was easy. The Learnings: - A team of advisors helps more than you can imagine. And to be sure the advise is sound, those advisors should also be Real Estate investors. Our Realtor friend was a great help when we didn't know anything, but we later went with another Realtor who owned more than a dozen properties. Other neccessary advisors; Accountant, Attorney, Property Manager. - It takes some work to find the right investment property. A good investment Realtor will have already weeded out the duds, so you can focus on choosing from several good opportunities. - You need a good FICO score. The interest rate for financing is based on your FICO score. So if it's low, your financing could eat into your expected cashflow. Surprisingly, the insurance industry also uses your FICO score to determine your cost of insurance. High insurance costs will also drain your expected cashflow. - With a property only earning $25 a month, how many properties will be needed to replace our salary and allow us to retire? Today we have more than dozen properties and I'm a Realtor. I would like to be your Real Estate advisor, to show you how Real Estate really works as an Investment. That means helping you understand the pros and cons of owning Real Estate. And help you see how Real Estate would be a great addition to your portfolio of investments. David Johnstone 480-444-2520 david@GrowYourWealth.net Licensed Real Estate Agent in Arizona Devas & Associates Real Estate |