Whenever I talk to friends and family about investing in real estate I can tell that they are very intrigued with what we are doing. However, I also get a sense that they think we’re a little crazy. Well, maybe we are a little crazy but Kelly and I see investing in real estate in a different light. Most of my family probably has a 401k’s or an IRA as their primary investment for retirement. Well, to us it’s crazy to sock away money every month into the stock market in the hopes that it will go up for the next 30 years without any crashes. My last post “Another Loss for the Year…Time to Cash in the 401k” shows exactly why I feel this way. With the recent history of the stock market, we’ve all seen that movie before, and it doesn’t end well. So, unlike the rest of the lemmings, we got a little crazy and started investing in real estate.
Now, I know they’re thinking we’re crazy because everyone has heard horror stories about tenants gone wild, or major issues people have run into while renting a property out. Heck, I even have a great first hand story of my own. When I was 10 years old my parents moved us to Michigan, and instead of selling our home in Chicago, they decided to rent it out. Their horror tenant never paid them a cent, trashed the place, and because of sympathy from the courts it took about six months to evict them. When all was said and done my parents decided to sell the property only to have it burn halfway to the ground the day before they were set to close. It was a complete disaster for my parents, and it really set them back financially. However, now that I look back, I can see the mistakes they made. They didn’t fail because renting the property was a bad idea, rather they failed because they made mistakes all along the way. They didn’t screen their tenants at all, they hired the next door neighbor to “look after the place”, and they certainly didn’t follow the rules for eviction when they needed to.
Well, our approach to renting properties is certainly a little different. Kelly and I have taken the time to learn about investing in rental properties, and as a result, we’ve had a lot of success. Now, I’m not going to say it’s been all sunshine and roses, but we certainly haven’t had anywhere near the issues my parents faced with their rental property in Chicago. Have we had tenants not pay the rent, sure, but we’ve never had to evict anyone yet. Have we had maintenance issues, sure, but we’ve budgeted those costs into our rentals.
You see, to be a successful rental property owner you have to anticipate what can go wrong. If you can anticipate these things, you can manage things to either prevent them from happening or minimize the chances of them happening. This is our approach, and we try to set up every aspect of the investment so it will be successful. This includes the locations where we are purchasing, how we rehab our properties, how we screeen our tenants, how we set up our contracts, and the list goes on and on. The beauty of it is that we are in complete control of the investment. If things aren’t going right, unlike an investment in stocks, we can actively manage the investment making changes to get things moving in the right direction again.
Currently we have 5 rental properties in our portfolio and after we pay all of our expenses, make monthly contributions to our reserve account and pay all of our loans we still cash flow approximately $1800 per month. When I compare this to how my 401k has performed over the last few years, it really makes me crazy…but that’s why we continue to invest in real estate, and you can too. If you’d like to talk about real estate investing, please give me a call or shoot me an email anytime and I would be happy to talk. Maybe we can make you a little crazy too!