#30unitsbyage30. The journey continues! The premise of the goal is to own 30 rental units at any point of being 30 years old. I have four years left to accomplish this. Here’s a quick update on where I stand.
I own seven rental units rented out in central Connecticut. The property values and market rental rates in the area make it highly suitable to generate positive monthly cash flow (i.e., money left over after mortgage payments, taxes, insurance, maintenance, and other costs of doing business).
By the end of 2018, I will have performed two house purchases, two home refinances, self-listed two rental units via Zillow, moved in four new tenants, and turned over a rental unit to a new tenant after the previous one moved out.
This year certainly had its fair share of learning moments. I want to share a few lessons learned:
1. Real estate investing is a numbers game.
To maximize your return on investment (ROI), you need to be able to have access to and analyze hundreds (if not thousands) of deals quickly to find the few properties worth pursuing. I started out going to Zillow, Realtor, and Trulia, clicking on each house for sale that fit my parameters, then manually inputting relevant metrics into a spreadsheet I maintain to determine whether it's a good deal or not; this was a time-consuming task. To win at real estate, you will need a system to do this for you quickly. Fortunately, I've improved on how I find new deals and am no longer going through the cumbersome process just mentioned anymore.
2. Your profit in real estate is locked in at purchase.
As an investor, the name of the game is profit (and equity). Real estate has four types of return which benefit investors (1. rental income cash flow; 2. amortization of mortgage; 3. depreciation of physical property; 4. appreciation of property value). Most people when they think of real estate profits think of appreciation (maybe I’ll reserve another blog posts on the other types of return). Unfortunately, there is a limit on how much property can appreciate in the short term before entering into overvalued conditions. As an investor (and any prospective homeowner for that matter) it is pertinent that you purchase a house at under market values. That is where the profit resides. Don’t expect market conditions to remain favorable; a recession can always come about which wipe out your profit, evaporate your equity, and frankly destroy your motivation to stay in the game.
3. Your credit score is almost a sacred number in the game of real estate.
Anything you’re looking to do which requires financing will mean your credit score will play a factor. The second that score falls below a certain threshold (typically 720 for investors), your credit will dry up quicker than a puddle on a hot summer afternoon. It will be important to monitor that score from month to month to ensure your number is above your predetermined threshold. It will also be pertinent that you pay off old debts, especially bad debts (see past post for understanding on good debt versus bad debt), if you want to have a good score. Your real estate investing future will thank you.
That’s the quick and dirty on what I’ve come away one more year as a burgeoning real estate investor. To hit #30unitsbyage30, I need to purchase four units before age 28 (two duplexes!). I plan to incrementally increase the number of units purchased each year through Fall 2022 in order to hit the coveted #30unitsbyage30 goal.
Thanks for reading and continuing to follow my journey. Don’t hesitate to reach out if you have questions!
