I know this site is all about weddings – business stips for wedding pros, and planning tips for engaged couples. But a big part of my life is being a “mini” real estate investor – one of those many landlords of one or two small pieces of property as a side source of revenue or retirement investment. It served to offset taxes (somewhat) while I built my business, and also allowed me to miss a few years of retirement savings while I built my business (since you’re not exactly making a killing the first 2-4 years). So, having my condo really helped provide stability during my business, and I thought this post would assist small business owners and also, for engaged couples planning their long term finances. THus 0 this post! I hope you enjoy it and please ask me any questions – firstname.lastname@example.org
How I bought my first property
First of all, I’m only just now onto my SECOND piece of property – a house that we are moving into shortly, as a family. In 2005, I bought a condo, lived in it until 2009, and since then have rented it and officially became a real estate investor. The housing market was insane at that time; cash investors were swooping in and multiple (like 10..15…20) offers were coming in on houses hot and heavy, as people were taking advantage of the downswing of the economy. Given I was pregnant and wanting to have the option to work part time, start a business (natch :) ) or stay home with the baby for about a year, we figured best to rent. And that was a good call. (It’s not always a good time to buy – don’t be hard on yourself if you rent. Buying and owning is expensive in many markets, like ours here in L.A.)
So, now that you know the backstory, my first purchase in 2005 was way too easy. It was during the housing boom. My FICO score was very good, and I got a ‘stated income’ loan where I literally didn’t have to provide any proof of income. And I only had to put down a 3% deposit. The condo was $240k for a grand total of 842 square feet. (By the way, the value soared in 6 months to a peak of $300kI! Yeah, those were crazy days.) I wanted very badly to have real estate investment, and even considered buying cheaper property out of state to add to our portfolio, as a long term piece of side revenue and side hustle.
A Real Estate Investor for The Long Term
In this specific market – the housing bubble of 2004-2008 – you had to carefully play the market to flip a house for 6 figures overnight. If you were an everyday “Jane” like me, you had to be patient, and make it a long game. It wasn’t until recently that I could raise the rent to pay for the mortgage – I basically put the amount of a proper down payment into the condo after the fact, in small bits, month by month. In this case, the cost was wildly overinflated, and at odds with the current low rent I could charge.
But, I refinanced 2 more times to a nice low interest rate, looked at increasing rent once the market increased, finally found a property manager, and now the condo will pay for itself. Also, interest is a write off, as you probably already know (though beware of the new tax reform that has limited how much can be written off for some homeowners). And while you’re onto the topic of taxes, this thorough article by the Tax Crisis Institute is a huge help come tax time.
Passive Rental Income During Retirement
When it’s paid off, right before my husband and I retire, we will likely earn $30k-45k a year, depending on rents, how often it’s vacant, and maintenance. (Basically, our ‘backup fund’ in case our investments go haywire, have high medical copays, etc. Of course we are diligently saving as much as we can to retirement and long term investment accounts. it isn’t always easy, but we do our best. CVS Coupons add up, haha!) We strive to charge middle-market rent – we want to be fair, find responsible tenants, and have enhancements throughout – granite countertops, hardwood floors, neutral paint, and consistently updated appliances.
Advice for Working With Tenants
Before I bought the condo, I met with a real estate attorney, and it was the best thing I could have done. Laws vary from state to state, and the attorney was able prepare me for the best and worst case scenarios. This advice helped manage my expectations and allow me to make excellent decisions during tough situations.
Overall, I’m so glad I invested in the condo, and I recommend it for those with a strong stomach for calculated risk and mild stress (i.e., wedding planners!). And again – any questions, shoot me a note anytime at email@example.com!