All Forum Posts by: Alan Pederson

I'm currently reading "The Millionaire Next Door" and it talks about some of the stuff I read here. It's crazy how much people spend vs how much they make.

I work with a lot of people in this category. They live paycheck to paycheck and have been for years. All of them make over $20 an hour. When I ask them if they want some overtime, they usually turn it down. These are the same ones that talk about their $50-60k cars or trucks they drive and the $250-300k houses they live in. My wife is a teacher and I'm a production manager at a paper company. We could afford a bigger house and luxury vehicles but choose to live well below our means so we can build wealth and retire in relative comfort. I drive an '06 Nissan truck and my wife drives a '08 Ford Escape. Our 3 grown kids drive better vehicles than we do. I keep telling my wife "if it ain't broke, we ain't replacing it". My goal is to hit 300,000 miles on my truck (at 220k now) before I even consider buying something else. I've always been good at saving money. If my bank account ever got below $1,000 I would start to panic. Now that we have a few rent houses, we always have to keep money on hand for emergency repairs. If I couldn't come up with $400 I would be out there looking for a second job.

Asbestos sucks. I have never dealt with it and probably never will. I would think with a fire and all the water they used to put it out, you might end up with a mold issue. We bought a house a few months ago that had a 30 year old roof and a few leaks. I found mold in the kitchen due to improper install of a counter top/backsplash and that alone cost me $1,000 to fix. I was able to spot treat the other areas but it could have been much worse. The inspector didn't find any of this...

I would say do your due diligence when you walk thru a property to see if any repairs or upgrades are going to need to be done. Look those areas over very close for asbestos (or in my case mold). We bought a house 1.5 years ago that had mold in both bathrooms but I didn't care that much because we were going to gut them and replace everything anyways. Check out the wet areas very close. Open every cabinet and look for damage. Look for missing caulk around tubs and between cabinets and counter tops.

If your total out of pocket for this property is even $900 a month and you rent it at $1,300 a month, that's not a bad deal. With zero down you still end up with $400 cash flow.

2 & 3 you have 2 choices. Either use a putty knife and utility knife and remove the old grout and put in silicone caulk. Silicone will not crack like grout does. You can even get colored caulk if you need that. Or, just caulk over what's there to try and make it look as good as possible.

4 I would get a grout removal tool and remove the cracked grout and replace with new grout. The hard part would be trying to match the grout color.

all other options would probably overwhelm him

A

I had a few people offer to pay the entire year rent up front. The problem was when I told them I would still be going thru the standard background and eviction check. I never heard from them again. I suspect that they had something that would have disqualified them and they thought by offering cash that I would not do my due diligence. It was tempting though.

Pass. It's better to let a property sit for a month or two vs. having to spend the time and money to evict a bad tenant.

I would hope that anyone that works for an employer that provides matching contributions would put in at least enough to get all of the contribution. My job offers a 5.5% match so I put in 6%. I was putting in 17% up till 2 years ago. That's when I realized I could make more money in real-estate than in my 401k.

So I lowered my 401K contribution to 6%, I started putting in $6,500 a year in a Roth IRA, and save the rest for investing. I wish I would have done the Roth years ago. At some point I figure I will be making more in retirement than I do now and the Roth will give me some tax deferred income. My 401K made 25% in 2017 but it has averaged about 14% since 1999. I don't regret taking a 401K loan because I know my rental property will bring in more money than my 401K over time.