First rental, now what??

Question

BP'ers

For my first post I have a very confusing yet exciting question for you guys. I have just secured my first rental property. By just, I mean the last 5 months. I'm breaking even on the bills (mostly because I am helping the family out and know and trust them to really care for my place). Some may say as a business I should be taking advantage and making sure that I'm pulling some positive cash flow from this property, but to me, helping these people and having the comfort of knowing who is in my first place is very comforting :) Regardless, my question is NOW WHAT?

What were ways that you continued to accumulate wealth? Do I wait for my equity to grow and refinance? Do I look to increase rent (if family moves on) and use that for future endeavours? Do I continue to save from my job and look to put that towards the next one? I'm always curious as to how people then accumulate more :)

I would even appreciate maybe some examples from your own successes. Thanks for the help.

FV

Chris Adams · Answer

Well your not going to want to hear this, but if your breaking even on the cost of ownership, your loosing money. Your carpet is getting worn, your roof is getting older and your not saving for future repairs and maintenance. And when you move on to the bank for the next property they are not going to be impressed that your first investment property isn't profitable.

But you made the move to get your first property so that the positive side.  Now you should be concentrating on making the first unit profitable. Maybe not tomorrow but some time in the near future.

Im not familiar at all with Canada and the financial side of investing there. But if you want to increase your wealth there is not better way than accumulating more real estate investments. IF this is the direction  you want to go then I suggest you start researching different types of REI. SFR's. Multi's, and commercial space. Figure out which way you want to go. Then learn the correct way to analyze a property.

When I started out I analyzed something like 100 properties, just as a way to practice and understand all of the factors involved. Today I have 5 SFR's that cash flow very well. I have a LOC dedicated to purchasing these homes so I can make cash offers. I refi later after i do some rehab and get tenants in.

Hope this helps.

Elizabeth Colegrove · Answer

I understand that you don't want to be that "big bad landlord". That you want to help people while making money. That being said, I started out the same way. I wanted to be the one they all respected and "liked".

I found out VERY quicky and with alot of painful minutes when the tenants left me in the lurch. That you didn't want to be their friend you wanted to be their landlord. While you respect and appreciate them as tenant you need to make money. When the X goes out, they aren't going to care that you have been giving them a break they will want it fixed NOW!

Think of it this way, a GOOD mother is NOT a child best friend. You can be loved, appreciated and respected WHILE being a great business person.

That being said, the bug will BITE you and before you know small margins will become larger ones. Just don't give up.

John Kim · Answer

Scott C. I've got the same question lingering in my head as well. How do people amass several rentals when their strategy is buy and hold? If you ever get an answer I'd be super glad for you to share it. It just eludes me.

Roy N. · Answer

Scott C.

Congratulations.  In which part of Moncton is your property?  We have looked at a couple of properties by Université de Moncton, but the ask was far too high given the NOI being produced.   There are a couple more I may come to see next month.

It is always an honourable thing to help out people - we do it from time to time - but, for the security of your and your family's future, you do need to ensure you can afford to be helpful.

Property taxes on non-owner occupied residential property here in New Brunswick is approximately double that of an owner occupied residence.  The 2015 taxes bills will be coming in the next 3-weeks and they are due by the end of April - are you setting aside enough reserves to pay this tax bill?   What about repairs?

Eddie Werner · Answer

The easiest way is to save cash flow for the next purchase but if your not cash flowing....I guess reduce your expenses or get another job to save what you need.  There is nothing wrong with charging market rent.  If you are priced below what the market will pay you need to raise it.

Account Closed · Answer

Thanks Dennis,

Congrats to you as well. I definitely have some more experienced connections to which I can run ideas off of. Knowing people is so valuable. May I ask how you will go about purchasing a new rental so soon.

Saving 20% down payment for the next venture won't be the quickest of things to accomplish. I'm always curious as to how rental guru's manage to purchase so many houses in such a short period of time. I've read instances where people have purchased 5 houses in a relatively short time frame. Is this all through LOC's? Equity?

Dennis Jervier, Jr · Answer

Congratulations Scott !

We're both new rental owners. I've had no regrets in the last 5 1/2 months.

Try to keep an emergency fund on hand for repair costs. In my case I've had about $850+  in repairs so far and that emergency fund really helped out.

I'm planning to buy another rental property next year to aggressively build a early retirement fund and college fund for our child.

Buy and hold and as time goes by you'll also find a mentor, someone who owns numerous properties , they can be very insightful for any beginner in realestate.

I've already found 2 mentors and their advice is very valuable, so take notes.

Best Regards,

Dennis

First rental, now what??

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