Opportunities in Real Estate

This was a "flip house" I did with my friend Tami.  What a project - but it sure is cute now!

By Sheila

There are lots of ways to make money in this world.  You can put your nose to the grindstone and never let up.  You can pursue years of education and choose a professional career that provides higher than average compensation.  You can be brilliant and come up with the next best idea, and actually follow through with it.  Or, you can do what many people have done over the years, and buy investment real estate. 

Real estate provides an opportunity for the average person to build wealth and an income stream.  It can provide a positive cash flow, appreciation, some favorable tax advantages, and all this leveraged with Other People’s Money (a mortgage).  We bought our first investment property when our kids were going to college.  We finally had the money together, and decided that we had a chance of recovering some of our costs with our kids moving into a rental with a roommate or two that we owned, rather than a dorm situation which is definitely money you won’t see again.  So we bought a small house in Gilbert, Arizona. This home was a pilot crash-pad for our son and his buddies for a while, and was a great rental for years.

A small courtyard in the center of this Walled Villa - this is a great feature tenants and buyers love!

I know, you are all thinking, of course Arizona, their real estate economy is crazy – and it has been, but that’s kind of beside the point.  The opportunity to buy good investment property exists in many areas.  It takes some shopping around, knowing your area and being prepared to move quickly when a good option becomes available.  It is not for the faint of heart, but then investing all your eggs in the stock market isn’t either.  And we all know how much good that stockpile under your mattress is going to do you in the long run!

For me, buying investment real estate is like buying a part-time business.  Because I am usually looking for the best deal, it often requires an initial clean-up and fix-up before it is tenant ready.  I am the eternal optimist, and I am able to see past the filth that some people live in, or the dated design of a shabby, neglected home that needs some TLC (and okay, elbow grease and $5000 in repairs).  I also enjoy getting my hands dirty with the fix-up, and have assembled a group of handy people that I can call on to help when needed.  Not the least of which are my Parents, who have been buying real estate ever since I can remember. This allows me to positively impact the value of the property, something I am not able to do with the stock market. 

Pools are very high-maintenance in a rental - I'll only do this again in a vacation rental.... we'll see.

I also like to do the monthly management myself, and have set up a system that works for me with minimal time involved.  There are many good management companies out there that will do this for you (advertise, screen tenants, arrange for repairs, maintenance, etc.) for a fee, usually about 10% of the rental income.  Because I have a flexible work schedule – I am a flight attendant by day – I am able to manage this myself.  Making my own decisions about issues that arise keeps me in tune with the property, the neighborhood and my tenants, allowing me to nip problems in the bud and maintain the property to my higher standard.  This in turn keeps better tenants in place and everybody’s happy.  

I admit to having coerced my husband into most of the deals we have done, and in the end he reluctantly goes along.  Then he brings his buddies by the 4-plex on move-in day when I am still wearing my tool belt and stuffing it with money from our new tenants to show off.  Hmmm? Who is the smart one here?

What are your thoughts on rentals?  Anybody else as excited about them as I am?  Love that positve cash flow!