www.MoneyandMovement.com

Efficient Business, World Travel

Category: Real Estate

People That Actually Receive A Rent Check Every Day

There are some people that are actually making it in this business that aren’t bullshitting. It’s rare to find them but heres a couple examples. I personally know a few people that have 30 rental units. I’m sure they have all their checks paid to them on one day of the month, but in theory it can be setup as a check a day, and it’s nice to imagine having a check sent to you every day in perpetuity.  They are all people a generation above me. Like my parents age. 60-70.

Not my parents. They are losers. But other people’s parents.

 

So here’s a couple stories about them.

 

One is a girl I knew, her dad owns a State Farm agency in the middle of Michigan.It’s a small town outside of Lansing. From what I learned about his system is that his main business is obviously the insurance agency and he has been buying single family houses is his hometown for years and he finally acquired 30.  He plans to grow slowly from there and sell his business to his kids.  With this insurance agency he can profit a few ways from this business. He insures all of his houses through his agency and he also can sell the renters rental insurance through his agency. Its not that much revenue but he is still making money a few different ways on these houses. It’s a small town so he just has the tenants come into the state farm and pay the rent. While they’re there he also tries to cross sell the tenants on auto insurance. If the tenant decides to buy a house in a few years he also will sell them home owners insurance and any other products he can. This is extremely smart and proves to be very lucrative for him.  When he retires from State Farm he going to have really good income coming in from his years of real estate investing.

Another is a friend from college

His dad was a dentist and he bought 30 single family houses in his small town in central Ohio.

My friend was telling me his dad started buying before he was born and what he would do is buy 1 a year with 30% down and every one of them was a three-two. Three beds, 2 baths.

When he was younger he would do most of the work himself. As he got older what his dad did and another benefit of knowing people in a small town is he found a young guy my friends age that was handy,

he gave him a free house to live in and 30K a year to manage and maintain all of his properties. The guy that maintains the houses loves it. His wife is a nurse so they have health insurance through her and they will never have to worry about a mortgage.

There is a distant cousin of mine who is very wealthy.

I’m not too close with him but when I see him we talk about real estate. He does thing a little different though. He owns apartment buildings totaling 30 units, in a blue-collar suburb of Detroit. He owns a large distribution company in Detroit and lives a huge

house and drives exotic cars. At the same time he does all the work to these buildings himself and he even cuts the grass at his own house. I can’t understand this guy he is so cheap he won’t even hire a kid for $40 a month to cut his damn grass. He told me this and I couldn’t

believe it. He says he paints all his rental properties too. This is the exact opposite of what he should be doing because he is turning his real estate business into a second job for himself. But he won’t listen. I told him focus on your main business where you can make millions and

hire all his manual labor out, just have your real estate passive. But he won’t. Some how he finds time to do it all, and doesn’t seem to mind, and it works for him, he’s very wealthy. Stubborn, but wealthy. Who am I to tell a multi-millionaire what to do with his time or

business. But just imagine if his tenants knew who he really was when he was over at the apartment building painting the walls? Why is there a millionaire painting the building?

Another is my plumber.

He and his dad have been buying for years in this specific area in Detroit city. He told me he worked at the bank for a while and he couldn’t stand it, he just hated it. So he learned plumbing and started working with his dad.

It turns out he grew up in this area so they know it very well. The property is still somewhat cheap there and is slowly increasing in value. His dad owns 15 duplexes there, and he owns four. He said he keeps buying and pays one off every year. He mostly just rents to college

students and he says it’s easy money. It makes me think he hated the bank so much that he would rather be a plumber and work with shit all day. So whats the point to go to an average college to get a job like that. I’d rather be a plumber and real estate investor too. He will eventually take over his dads properties and have a very nice portfolio.

 

These people are actually doing it. They all have some things in common. Long term investing, and having a day job while they build their side business.

There is an option for these people to retire but they don’t want to. I think the younger generation wants more freedom and thats how I set up my business and many other people my age are too.

Keep in mind when these people started investing there was no internet available.

Whatever way works for you its going to take serious time, but it is possible.

#MAM

The Myth of Making $5,000 in 5 Hours

There are a few bloggers and real estate hype-men that promise you that making money by renting houses out is quick and even easy. Saying that they make money hand over fist month after month and that it’s basically like an annuity payment.

There are some that say they make $5,000 in 5 hours!

There’s a couple problems with these claims.

Yes I own rentals and most of the time I receive my money every month without too much of a hassle or too many man hours. With that said I own real estate in the nicest neighborhoods in Metro Detroit and Chicago city. Yes, for the people that hate Detroit there are very affluent,

and safe areas in and especially around the city.

I’ll use myself as an example:

If I receive 10k a month in rent payments (which I come close to every month, post on that coming soon) and I only have to be on the phone for an hour that month calling my property manager, and spend an hour at a house meeting with a contractor, that doesn’t mean I made 10k in 2 hours.

If I could make 10k in 2 hrs. extrapolate that over a full work week. This would make me damn near 10 million a year. I know for sure I wouldn’t be here writing this I’d be in a tax haven and not telling anybody about it.

When people say they only had to do a few hours of work this month and made thousands. Sure it’s true but you are not making that money consistently over every hour or the work day.

In the example above making 10k a month if it were the only thing I did for income and was my full time business it would equal to $62 an hour or the example in the title of this article would be $31 an hour.

No one is going to write an article bragging about how they make $31 an hour or 60K a year.

They also aren’t taking into account all of the repairs and labor they had to do the previous months before. A personal example again, I had to repipe part of a rental property when I bought it and do some serious plumbing repairs. That ate into my profit that month. I made 4k less

after that bill and I spent hours there with the contractor trying to solve this problem and watching them rip open the walls. Those examples are rare but the example is given to show that there will be times when your returns fluctuate and its not all gravy.

This business is not easy or quick. I have most of my properties paid for which is a huge advantage.

Also if you have less than 10 properties and you have a vacancy or 2, or a major repair. That can drastically hurt your business.

You will be juggling swords trying to pay all of the mortgages and make repairs, tax, and insurance.

Don’t fall into this trap that it so easy or you’re going to get rich in real estate. Unless you own hundreds of houses it will be very difficult to make thousands of dollars an hour.

But that is what we’re striving for!

#MAM

Every Unit is Uniformed

for-rent

You notice when you go into a chain store or restaurant anywhere in the country it looks familiar to you? When you walk into the CVS you know the pharmacy is in the back, the refrigerated drinks are to the right. The colors are all the same and the employees are wearing the same uniform.

When you’re on a road trip and you stop at your favorite burger joint in Boise Idaho, it looks, and tastes the same as it did in Detroit, MI.

There are reasons for this; efficiency and knowledge of the building and how to run it, or repair it if needed.

This is exactly what I do with my units.

In my residential units I use the exact same plumbing faucets, electrical fixtures, paint, sinks, toilets, windows, appliances, and anything else I might need to replace.

This makes the houses very easy to maintain and fix if needed. Of something goes wrong I know exactly how to fix, replace, or who to call to fix it.

When I buy a house here’s the first things I do to uniform it and make it efficient.

Bathroom- I immediately put in a single handle faucet in the bathtub. With only one piece of hardware in the tub there are less moving parts to break and fix than those old three handles. I buy Delta for all my faucets they are reliable and I’ve never had a problem with them. If there’s a leak behind your tub it will be a costly problem to fix. Which I’ve had to do. The Deltas not only look much better and more modern but they won’t leak and break as easy as the others.

If needed I’ll do the same for the sink faucet. Sometimes I’ll have to buy a new sink cabinet. I just co to Home Depot or Lowes and buy one for a few hundred bucks.
I always buy a new toilet seat and rarely have to buy a new toilet.

I always try to shop local and support small biz first. But here’s the problem. Usually they won’t have what I need in stock. I just went to get a lighting fixture 3 weeks ago they said they don’t have it in stock and need to order it. Said they would call me in a few days when it’s in. Well 2 weeks go by and it’s still not in. I say fuck it and get a refund. So I go to Home Depot and pick up a fixture in 10 minutes. This disappointment has happened way to many times with these small hardware stores. So I always go to the big box now.

Electrical- If needed I replace all outlets, switches, and covers. All white.

In the living room I always install a ceiling fan. Usually there is already a junky one there and I put up a new Hampton Bay from Lowes. $50. All other light fixtures I use I get from Lowes about $20 a piece, in every single room they are all the exact same I install them myself they are very easy. They are white with a silver strip around the base.

I always make sure there are updated circuit breakers in the house. If it has the knob and tube panel I pass.

The houses I buy never need a full remodel it’s not worth it. But they always need serious updating.

Kitchen- New stove. White, electric, glass top. If gas I’ll have it changed. The stoves are cheaper, and I don’t trust my tenants with an open flame. It looks clean and when it’s new I leave some of the tape on the outside so they know it’s brand new. <$500

White fridge I bought used before but it didn’t turn out. It was just junky. Spend $500 get a new fridge. No ice maker or water dispenser. Just freezer on top with some ice trays.

If there is a dish washer and needs to be replaced. Same thing white and clean.

The floors I get dark gray sticky tile put down.

If cabinets are old I just paint them white. And throw on new silver hinges and pulls.

If cabinets need to be replaced go to Ikea and get them for around $1,000. You install them yourself and they are really easy to do.

Basement- You won’t believe how many houses I see with old single pane basement windows in them. Even houses in bad areas I don’t see that much glass block windows.

These old windows you can tap them and they’ll break.

Always put in glass block windows they look much better, they keep the heat in, and they are much safer than the old single pane.

In the basement I just sweep the floor and clean it up. I don’t make it livable I do put in new electric washer and dryers tough. About $600 total.

If needed a new finance with central air this gets a bit pricey around 4-5K

I have a guy that puts them in right away and he’s done in half a day. I’ve bought 4 from him so far.

I rip any old wiring from TV antennas, door bells, old phone lines, or anything that isn’t needed I rip out. Doesn’t matter how big or small. It’s just something for your tenant to break or hurt themselves on.

If there are many storage closets in the basement. I’ll close all but 1 off for the same reasons. Anything extra is always taken out or closed off. Same with the attic. I lock it off if I can, and just have management say it’s landlord storage.

 

The main areas of the house- I always have the floors sanded, always have hardwoods in there the carpet will get ruined every time. They look much better than carpet anyway.

If I have to I will install new windows $400 a piece. Most my units have ~10-15 windows this can be pricey. Start with the bedrooms and bath only. Make sure they can open the bathroom window after a steamy shower. It will make the paint last longer. The bedrooms with new windows will

look more inviting. Then over the next couple years piece the house together with new windows if you don’t have the money all at once. Plus you can write all of this off on your taxes. (I am not giving tax advice)

I paint all the walls in all the houses the same color. An off white. If it ever needs touch up after someone moves out its very easy. You know exactly what color to use.

The outside- Take down any antennas. Trim all trees and bushes. Put wood chips down in the back of garage or side of house. I am thinking about experimenting with fake grass so I dont have to pay to cut it. I write a post about it if I decide to do it.

All of this eliminates guessing it saves time, makes the house more efficient. Plus it looks great.

Implement this uniformed code on all of your rentals it will make your life a lot easier.

Dead Dick

rip-tombstone-md

I rented one of my units to an elderly gentleman named Dick. (Or who I though was a gentleman) About 8 years ago I had a vacancy and this man name Dick answered one of my ads for rent. He came over to look at the place wearing a suit. He told me he was looking for a place he could live in forever and didn’t plan on moving. I thought this would be a great tenant. He was proper and he wanted to stay forever. I knew I would always have my rent on time. He had social security and a pension from the city of Detroit. So I rented to him I was excited to have him in, I had great expectations.

A couple years go by and I have been receiving my rent on time and everything was perfect. Then I had the city call me and they told me they had to do their bi-yearly inspection. The inspection is basically just a shakedown to get $100 from every rented unit in the city and force you to do unnecessary repairs or they fine you.

So I don’t have a choice, I meet the city inspector over there and go in the unit.
The unit was a mess. It turns out this guy is a neurotic hoarder! There are newspapers all over and he apparently had a compulsion with bars of soap and tin foil. There were layers of tinfoil with bars of soap on them scattered all over the house. His bed had layers of newspaper on it instead of blankets. The place was a mess and there was old food left all over the place. I knew my dream tenant was turning into a nightmare. I asked him why the hell is there bars of soap all over the place? He laughed and said it wasn’t my business. Well now he’s being a real pain in the ass. The city made me do minor updates to the place, but what a mess. It passed inspection and he was paying me on time every month. What could I do? I remembered him saying he wanted to stay in that house forever, and I knew I would walk in on him dead on day. So a couple of years go by and I increase the rent slightly, he keeps paying me on time every month. He was still under paying and the neighborhood was increasing in value, new stores and bars moving in, and a lot of college kids. I knew I could get a couple hundred more out of this house but I didn’t want to ruin a good thing. I also had to replace the furnace in the house. Which isn’t cheap.

So I knew I’d eventually have to clean the place up one day, every time I go over there I see more newspapers and bars of soap laying all over.
In his 8th year of renting from me I get a Facebook message from a friend who lives on the same street and she tells me that there’s been a light on in the house for 3 days and hasn’t been turned off at night. Then I knew, I was in for some shit. Then she tells me the cops were over there looking in the windows.
I immediately go to the police station and ask what the hells going on. They said they were doing a welfare check because one of the other neighbors called them. I told him that Dicks really old and he’s probably dead. I asked them to come with me to the house. Which was smart on my part because what if he was murdered what if there was a break in, or he killed himself. So the cops come over, we unlock the door and one of the officers walks in and immediately says… “Well, there’s Dick”. I knew it Dicks dead.

Now I have a fucking dead body to deal with and garbage all over the damn house. The officer walks trough the house to make sure there’s nothing suspicious going on and I was just standing there like what the hell do I do now. The officer says he needs to call a coroner to take the body out. I say ok what do we do until then? He says wait and look for a trust or some kind of document with contact numbers on it. So we start sifting trough all the garbage in the house the whole time there’s a dead body here and it’s starting to smell. I would describe the smell as someone who hasn’t took a shower in months, but plus you can just tell that what you’re smelling is a rotting body. It was awful so over an hour goes by and the coroners finally come over and haul the body out. We don’t find a will or trust or any contact numbers and he never mentioned any family to me. I asked the cop after the body was taken out, OK what do I do with all this shit? He said it’s all your responsibility now. What?! He dies and leaves me with this fucking mess! I’m furious, I look through the house for a couple hours. I find an extension cord, a silver dollar, and a mag light. That’s it, there is nothing of value here! I lock up and go home, just thinking what the hell am I going to do?

I decide fuck it. The next day I contact a junk hauling company and had them come over and throw his entire house out. I told them anything that isn’t attached get it the hell out of here. Fridge, stove and all.
I cleaned the entire place, bought new appliances, painted, had a new kitchen floor put in, sanded all the floors, installed new fixtures, and faucets, and new windows in the bedroom. A month later I was able to rent it out for $200 a month more than what Dick was paying.

This was a nightmare I should have been more strict with Dead Dick and made him clean that junky house and give me emergency numbers. This was all before I used a management company. Now they deal with all of that. He was a great tenant and I didn’t want to disrupt the perfect timing of the rent. He paid down a lot of my mortgage for me over the years, but looking back there were a few things I would have changed.

This is just another experience you have to go through being a landlord. Everyone has to PAY THEIR DUES if you want to make it in this business.

Powered by WordPress & Theme by Anders Norén