Why I am happy to be loosing money in a month

[Chris Svendsen]

So my venture into real estate investing at this moment may seem on the surface to be a dismal failure, but to me it is an opportunity at this moment.  Why you ask, I will explain.

Currently I own 3 homes. First house we purchased 3 years ago, rehabbed and rented to a family who was paying well and cash flowing about $600 a month. A year later we purchased our second home, a student rental, which before we even technically owned the home had it fully rented and was making $500 a month cash flow. Home 3 we purchased in April, with a HELOC from home one's increased value and working on rehabbing and most likely be putting on the market to sell.

That all sounds great, but the reality is less rosy.  Since COVID we have been collecting reduced rent on home number one, and was cash flowing $100 a month.  Now tenants having even harder time paying and I am looking at loosing $100 a month.

Home number 2 went from 3 students down to 2 thanks to a developer building a huge apartment complex by campus and killing the single family student rental market about a year ago, then second student left to live with boyfriend and last student just informed me she is buying a home with boyfriend and be leaving at end of December.

Lastly, home number 3 is about 3 months behind, 10k over budget to date, looking like going to be 17k over, and will take until after first of year.  So being that I am staring down the prospect of 2 mortgages and ever exceeding cash going out to finish reno why am I not worried?  The reason why is because I followed the number one rule I try to live buy, you make your money on the buy.

See, house number one was purchased for $107k, put $35k into reno, and now is valued at $250k.  House 2 we purchased for $72k and is currently valued at $84k, and house 3 we purchased for $80k, will have $92k into it, and be valued at $250k plus.  The first home allowed the purchase of home number 3 thanks to a heloc.  With home number 2 being vacant soon we will be fixing up some and renting to a family and should stabilize the house income.  Home number one will be working with tenants to get back on track or move them on after sell house number 3.  If house 3 cannot sell due to market then we will finance the property, get all our money back out of it and rent for $1700-$2000 a month.  If did not follow the rule of making your money on the buy and stretching the numbers I would be under water.  If I have to spend some of our personal money to cover the mortgages on the properties it is just me protecting my investment.  

Figured I would just tell my tale so others may learn.  Don't fudge your numbers, be true to yourself and your estimates.  I currently have $45k of my own money tied up into all 3 of these homes and have equity of over $250k if I need to sell all three homes.  Once get House 2 fixed I should be back to making $300 a month cash flow, and if cannot get house 1  back on track with rent, will turn over and get new tenants in home and increase cash flow to $900 a month on that one.  Everyone out there still trying to get a handle on this, just remember to keep numbers honest and eventually the right deal with come your way.