All Forum Posts by: Ken P.

The 4-year owner finance loan on the condo was paid off in December, cash flow is $350 a month, and yesterday we took delivery of my wife's new 2019 Ford Edge!

A little over 4 years ago, I wrote a forum post on BP with the same title as this post.  Click on the link below for the details behind this  unusual title:

https://www.biggerpockets.com/forums/48/topics/165...

Right on time in December 2018, we sent the final payment of the land contract / owner financing loan, and now own the property free and clear.  Here are how the monthly numbers look now:

Rent - $650

HOA - $135

Taxes - $75

Insurance - $15

Maintenance & CapEx- $75

Cash flow - $350

The cash flow is at the high end of the range I had expected to be at when we purchased this unit 4 years ago.  Fortunately car price inflation has been moderate in the intervening years, and there are a wide variety of cars, trucks, and SUVs available to lease for $350 or less.  My wife wanted an SUV, and today we took delivery of a brand-new Ford Edge!

When the lease is up in 2 years, we may have to pay a bit more to lease her next new vehicle.  The nice thing about rental property is that, unless you're in a war zone or economic basket case area (which this condo is not), rents will creep up every year, keeping up with inflation so as to cover rising expenses and provide slowly rising monthly cash flow.

Some of those reading this post, perhaps those in expensive markets, or high earners, may be turning up your nose at the small amounts of money involved in this deal.  The bottom line is though, despite the low cost of entry into the deal, we now have an asset that pays for a new car for my wife, essentially forever.  Since adding the subject property, we've purchased a number of similar units which will be coming online over the next several years as cash flow machines as the short-term financing used to buy them is paid off.  Start stacking up enough inexpensive rentals that reliably throw off $350 per month and financial independence and retiring early become realistic choices.

Although the Rich Dad Poor Dad book wasn't what got us started in real estate (a colleague was), it teaches about the importance of accumulating income producing assets to create financial freedom.  A few years ago I assigned Rich Dad Poor Dad to our daughters as a mandatory summer reading requirement, and both of them read the book and wrote book summaries to demonstrate they understood what they'd just read.  Whether it was due to Kiyosaki's book, or to our example with this condo and others, our younger daughter asked me if she could buy the next unit I found that met our investment criteria, which I agreed to.  She took the money she'd been saving toward her first car and used it as a down payment on a property that needed almost no work, minimizing her capital outlay.  She was chafing at having to wait all the way until the ripe old age of 21 until her property will be paid off and she can lease a new car, but seeing her mom driving a new car today has probably made the whole plan seem a lot more real and worth following.

Ken

@Nick Meservey

If you're going after appreciation, why not invest in the stock market rather than real estate?  Stocks are way more liquid than real estate, and in general a lot less hassle.  With a very good dividend-paying stock yielding only around 4%, most people are investing in the stock market for appreciation, not current cash flow.  

Investing in real estate for cash flow is much safer than investing for appreciation.  If you have decent cash flow, you can afford to hold on if another real estate market correction comes along.  Planning to make money on appreciation could leave you in the same position as many Miami condo investors, or Las Vegas or Phoenix single family home investors, found themselves in back in 2009...

Now just a few years away from the 30 year point in a corporate job, I want to replace both the income and the sense of purpose and accomplishment that comes from my work.  I've spent a career doing a job that I dreamed about doing as a kid in high school, and it has been a wonderful gig.  I've been part of creating iconic products that are used and enjoyed by several million people, saved my company and our customers billions of dollars, worked with, learned from, and mentored interesting and talented people, while living in four countries and traveling all over the world. Thanks to real estate investments made on the side over the last 6 or 7 years, I'm on track to be able to retire from this job with enough 'youth', energy, and capital to launch a business that will be meaningful and make life better for others in a completely different arena.  I'm hoping to roughly double my current corporate income with real estate active and passive investments, which will maintain our current lifestyle and cover increased travel and other expenses while the new business is launched.  As a number of other writers above have expressed, to me it is the chance to do interesting work that makes a positive difference in the lives of others that provides satisfaction.  I'm thankful that real estate investment should provide the opportunity to launch a second interesting career, this time on my own terms.

Thanks for all the helpful replies everyone. We (the HOA Board) went ahead and paid the tax.

Thanks for the rapid response with documentation, even though it's not what I wanted to hear.

A condo HOA where we have a number of units and where I sit on the board is being told by our accountant that we owe tax on the profit on the sale of a unit owned by the Association. The Association has owned it for a number of years after foreclosing on it during the global financial crisis for unpaid dues and fees. I've Googled and read many articles that say the HOA does not owe tax on the substantial capital gain that the HOA enjoyed when we sold, but our accountant says it's clear that we do. Proceeds from the sale were put into reserves and subsequently mostly spent on needed concrete parking lot replacement work, and we haven't budgeted for the tax payment we're being asked to pay. Can any CPA with the proper background (with the caveat of course that you're not giving legal advice) comment on this topic? Thanks in advance.

Alex, best wishes for your professional and real estate investing careers.  Hopefully, after living in the house and experiencing the benefits, our daughter arrives at the same conclusion you have. 

@Thomas Bushman  Thanks for the kind words.  If it wasn't for your inspiration, my wife and I likely never would have started down the real estate investment path!

@Julius Hill  That was our thought.  Financial education wasn't covered at all in her high school, and even if it had been, it likely wouldn't have included the advantages of rental real estate ownership.  By starting out with rentals, particularly by house hacking, rather than buying a typical single family home, she could end up in a very good position down the road relative to her income peers.  We couldn't think of a better to teach that concept than having her experience it.