Three rental properties that cash flow and two commercial lots that doubled in value!
In just two and a half years our real estate investments have more than doubled in value and our three investment properties all have positive cash flow. We started by purchasing our first condo for $164,500 in late February of 2005 and then bought two more in late July for $122,000 and $195,000. All of these condos are now providing a positive cash flow for us after subtracting out property management fees, repair and maintenance costs, and insurance, taxes, advertising, and HOA fees.
The first deal was shown to me by a realtor, the second deal was a FSBO, and the third deal was in the paper. The second deal was almost lost when waited to long, but I bought it when the other buyer couldn't find financing. I mailed my earnest money check for the third deal before I saw it and then drove over to see it when I had the time.
After partnering with a well known realtor, we bought two commercial lots that have doubled in value just during the eight months before we closed on them. Our first option was to build self-storage on them,but because the construction costs exceeded my original estimates, we have them up for sale. The purchase price for these two lots was over $1,000,000, but we have them listed at over $2,000,000. This means that I will make over $400,000 on this investment when they sell. They will sell for our asking price because of the demand for lots in this area. The appreciation on these lots is faster than the interest we are paying on them with our monthly payments so I am not in a rush to sell them.
All of the condos were purchased with bank financing. I took out a 10% HELOC as a second and only put down 10% on these three condos. I got 30 year fixed mortgages on all three because I wanted to hold them long-term, but am open to interest-only ARM's for the future as well. I insisted on as little down as possible for the land loans and the bank gave me what I wanted after they appreciated. I am trying to understand more about financing the deals because it is such an important aspect of real estate investing.
Everyone makes mistakes and I did this as well being a beginner. I wasn't afraid of making mistakes and just took action. As long as the mistakes were small and I learned from them, it all worked out in the end. Education was the key for me so I would have the confidence to make decisions and recognize opportunities. I looked at hundreds of properties and read a lot of books and articles on the Internet to know what a good deal looked like.
They say “hindsight is 20/20,” and I know that I did pass on a number of good deals, but at least I gained experience from them as well. They say you learn more from your mistakes than you do from your successes. I formed LLC's for tax purposes and asset protection. After spending a lot of time researching markets out of state and even out of the United States, I have only bought in Colorado. It may be hard to time the real estate market in the Denver area, and with the slump after the bubble, now is a great time to buy smart. I believe it is always a good time to invest in real estate and feel it has many advantages over the stock market or “safer” investments.
My wife was unsure about what I was doing when I started, but is very supportive now and involved in our budding real estate investing business. It is important to have your family involved and supportive because attitude and confidence are everything and the people closest to you will influence you. I have learned that you are what you think about and you become like the people that you associate with. Be careful what you allow into your life. I have also become a big believer in goal setting and self-improvement. There are a lot of average realtors out there, but work at developing a relationship if you find a good one.
I hope this success story provides some inspiration and knowledge to anyone looking to provide some additional security for his family in the future. Real-estate investing is more than just a form of investing for me; it has become a passion and my future career.
This Success Story Is Only The Beginning!