All Forum Posts by: Molly K.

I am new to the business and move slowly in my property dealings. The first property I ever bought was a duplex in which I lived in half, and rented out the other half. I was very new to the city, (I bought this property as a way to move into the city) and didnt know the area.

I knew this house was in a bad area but recent rehabs in the neighborhood had made me optimistic. In 2009 I paid $20k over what the previous owner paid in 2007 because I thought "well he needs to make money too" and I was IN LOVE with the building.

Now it's 2012, I mioved out of the property into a row house and rent out both units of the building. It has lost about $40k in value and the neighborhood is getting worse.

I'm not too concerned though because I still LOVE the building. I made a committment to this property when I bought it that I would own it and take care of it for the rest of my life. I wanted to turn it into a SFH but the plummeting value makes that a bad idea right now.

I still believe that the neighborhood is undiscovered and will one day start gaining value at a big pace. The street is gorgeous and the houses are mansions. Its just run down and full of crack dealers living in the mansions right now.

But one half of the property pays the mortgage in full. The other half is profit for me.

Lesson learned: Never FALL IN LOVE with a property. And I never have since. I just love that house. Still.

In GA I just priced out repairing gutters. It was $3500 for a 4400 sq ft structure. But that was also repairing roof patches where the existing gutters had backed up and caused water to leak into the house. Not an Apples to Apples comparison, but gutters, whatever the price, buys you piece of mind if you plan to hold onto the property.

Ok, Savannah, GA, is a big town, small city. The historic area (where I live/invest) is 6 square miles. The buildings are very old or they are new but created to look very old.

Due to a private college located in town, the rental business is phenomenal.

When I am asked about my rental properties, investing in RE, I am happy to talk about what I know.

I prefer to invest in duplexes because it is 1 managable building, 1 roof, 1 foundation, 1 outer structure, 1 set of taxes, 1 mortgage and 2 incomes. There is 1 big expensive structure, with 2 incomes coming from it.

When I explain that, it makes sense to people...sort of. They like the "Maximizing what you have" idea and try to take it farther than it should go.

They start looking at properties and telling me about taking a big duplex and turning it into a triplex or a quadplex. They want to take a 4 bedroom/4 bath duplex and divide it into 1 bedroom/1 bath quadplex.

Or they want to take a duplex with some land and build a carriage house behind it to rent out as well. "1 piece of land...3 incomes!" They say.

Here is my MINI theory on why thats a bad idea, then I will tell you my BIG theory on why that is a bad idea.

They are adding in the most expensive parts to a house. Kitchens and possibly baths. If you divide up a building you must add a kitchen which is the most expensive room in the house. The goal is to have the least number of kitchens you can get away with so you dont have to replace all those appliances and update it...forget adding more of them!

Carbon footprint. Am I the only real estate investor that cringes at what this industry does to the earth? Why cant we recycle what is out there rather than build new all the time?

Big Theory now:

Why do you want to ADD rentals into the market? Supply and Demand! XX number of rentals in the city. XXX number of people needing to rent. Less rentals means more demand. Higher rents.

Adding more rental properties by dividing structures or building on empty space, you are only hurting your own future profits.

As more rentals become available, rent prices go down.

I saw it in the foreclosure boom when everyone was trying to rent out their home/2nd home/vacation house before losing it to the bank. Rent decreased about $150 a month because there was a flood of available rentals. I'm just now getting my 2008 rental prices again!

STOP BUILDING IN MY CITY!

Anyways, I try and explain that and no one gets it. They only see it as having more properties and therefore more rental income. They dont see the big picture and that it ultimately will hurt their own profits.

Luckily, none of these people that propose these ideas actually follow through. But it is not because of my Supply/Demand talk, I' m not sure why they dont pull the trigger and get into RE. But I can tell I have never gotten that message through to someone.

Do you guys agree with my theory?

My husband and I are not trying to accomplish big monthly action, but we happened to be busy last month, and it happened to be January.

We closed on a duplex. 1 unit is 4 bedrooms 2 full bath. The other unit is 5 bedrooms 2full bath. We have the bottom unit almost ready to rent, and have 2 showings set up for this week. We'll work on the upstairs unit over the weekend and hopefully have it available next week.

We put a condo up for sale. It's been in my family about 30 yrs so it's not part of our business (we didnt aquire it as part of our business plan) but the profits will provide a huge well to dip into for future business. The condo has a full priced offer and now we are going down the Waiting To Close road.

One of my rentals was vacated Jan 1st, and rented out again for Feb 1st. The kids wanted to move in a few days early, so they have been in about 3 days...they made it into my January month by two days!

Thats about all the action we want to see for a year! Hopefully I'll get signed leases on the new duplex and that will be quiet for 2012.

I have 1 last lease ending in April but the tenants already asked to extend it month to month. Maybe they will stay in for 2012...that would be great.

My husband is looking to start an LLC with his father and buy 1 or 2 properties for it. That will likely happen sometime in 2012, but hopefully not till the Fall.

Albert, I lived in FL during the boom and got out of there after the bust. I have heard AZ, MI, CA are in the same state of huge declines in property value and mass exiting from the states. Your warning of how you bought in AZ and how you have seen so many people around you failing is a sobering thought. When I go to FL it's a completely different world than it was 5 yrs ago. This is a gental reminder that yes, I do need to go into work tomorrow. GA could be next.

Oh and BTW- I realize my parents had outgoing expenses over the 35 yrs of owning the condo (though no roof or exterior work came out of their pockets)- but I really did do out the math recently and it was around a conservative $275k profit plus appreciation. Though I did have a hard time figuring inflation into the equation. That math lesson was a light bulb moment for me!

This weekend has been so great, I am having a hard time facing Monday tomorrow. This morning when I wrote this post, I really wanted to leave my 9-5 (more like 8-8pm) job. I was really trying to get up the guts to put all my faith in real estate and create a plan to exit the steady employment, but mentally I dont have enough trust in RE or myself yet. This blog posting was a last hail mary to find the courage to not go in on Monday :P

Thank you everyone! I do feel better hearing the stories of older investors who have no regrets, and younger investors who also get reactions calling RE investing "crazy".

I think for me, it is to stay a little diversified (dont put everything into RE), go slow (1 or 2 deals a year), and have multiple income streams.

My husband calls me "cautious" all the time, but I try to overcompensate for his blind enthusiasm. We are doing well right now. I just dont know whats around the RE corner.

Though it is very exciting and fun!

Hi guys,
I am new to this forum and a little new to the industry. My husband and I have been slowly sinking more and more money into rentals over the last 4 yrs. We have been able to purchase a lot with cash, and our most recent purchase has been through a private investor. Overall, we are very cash heavy in real estate with very little mortgages.

It seems a little too easy. Buy a property, minor repairs, rent it and collect an income.

I am aware of nighmare variables that can arise, nothing catastrophic has happened to us yet.

My questions is...out of all our friends, my husband and I are the only ones doing this. We are the only people we know buying and renting. We know only a handful of people in Real Estate at all (agents, contractors, ect).

Do they know something we (I) dont know?

I'm in my early 30's, and my parents generation did very very well. My parents held onto their 1st condo for 35 yrs and just sold it for a $300k profit from initial purchase price. They rented it for 25 yrs and I figure they probably brought in $275k in rental income over the years that they had it. That is about half a million dollars produced from a condo.

Would I be setting myself up for a situation like that buying and holding too?

The people around me are just not interested. They are afraid of the market, or say they could never be a landlord.

Is Real Estate something some people have a knack for (an interest in), while others just dont have that interest? Does the financial committment weed out a lot of people from getting into the business? Or do people get more interested as they get older?

Or does everyone know something I dont know?

My husband lost his job and wants to make rentals and a few flips a year his career. I am tempted to go that route myself. But I am holding back due to my inexperience. I dont know what I dont know. And right now I'm trying to see the downside to this.

Asking a bunch of people who are in real estate might not be where I find a cautionary tale, but I dont know anyone else in real estate!