Well Rounded Investor

My journey of becoming financial independence by 35 years old

The Decision is Made for My New Rental Property

 

172028-the-future-is-brightLast week, I posted about another rental in the work when I didn’t know which one to go for. But after looking at all the option. I finally made my decision on Option # 4 – Mix-used commercial and residential property. Here are some of the details how I came up with the decisions:

Option 1 – it was no longer an option as the duplex was already under contract. Yikes!

Option 2 – boy oh boy! The 4-plex was a total redone. I was lucky to go see it on a rainy day. After I saw several bucket of water at several different location, plus the awkward layout making it difficult for to rent. On top of the mountains of trash. When I say mountains, they were in every single room all the way to the ceiling. I mean missing window and wall. I look at it, and I was thinking of at least 2-6 months before I can get any money out of any of the units.

More over, no bank would lend me the money at the listing price $200K per duplex $400K for the 4-plex. I think they were way over prized, and it looked like they weren’t willing to come down on the price. (I take that back, there is some rehab loan I could get, but I don’t want to get involve in properties that required extensive work.)

Option 3 – to keep the cash and wait for the crash. I truly believe a big correct is over due. But the market has been behaving differently. So, I don’t know how much the stock market would go up before crashing. And bond is not as lucrative. So, expanding other options is in order. That is why I’ve decided to buy another property.

Option 4 – This is a 5857 SqFt building. Right now it has 3 units.

  1. The bottom floor is a commercial front 2000 soft + 1000 soft basement for storage. This can also be split into 2 restaurants as all the plumbing are all there. Or 1 restaurant, 1 office. That would make the building a 4-plex.
  2. The upper floors are divided into 2 apartments 2 beds, 2 baths – This unit can be rented right away. That is why I’ll hustle hard to get that rented. While the other need some work in the bathroom and new floor, as subfloor are done.
  3. And 3 bed and 2 baths units. That needed about $5K to get it going.

 

  • The building is brick, so I know the structure is sound. Basement was solid.
  • The only draw back to any building in downtown is no assigned parking. I’m going to look for parking nearby and sign a contract to promote it for tenants friendly.
  • It listed for $300K, I got it for $285K, which taxes and fee, it might come out to $295K. I need to put in additional $5K to get the other unit going.
  • Rent potential: Each would go for $1200 x 2. Restaurant $2000. Total per month could come out to $4400.

Worst case scenario. No tenant. I will be paying taxes of $3000/year. If I couldn’t find any tenant within 2 months, I’ll think about opening my own restaurant. It will be a lot of work, but my first business was a catering business. I didn’t lose money out of the whole thing. I know it’s a lot of hardwork is involved when owning a restaurant, that’s why I opt to be a landlord instead. I’ll see if anything will happen.

More pictures will come on the up coming post.

******

What does it mean to my dividend portfolio? Well I had to raid it the 2nd time, taking profit. Consider $300K investment and the return is $4400/mo or $52.8K/year. I don’t think a dividend account would give me 17.5% in return, just talking about cash flow only. Compare to dividend income going at 4% or $12K/year. This is almost 5 times higher. (My dividend return was around 2-3%). With that said, dividend is still my favorite income source.

What does it mean to my income? Well, if everything goes as planned, I’ve just replace 100% of my income again with this property. That will added extra security to my already financial independence life. That means, more money to give away to family, charities, and possibly travel to other parts of the world.

So far, this year I’ve bought 2 properties paid in full. So, I’m have not brought on more debt. But taking on this property leaves me no emergency fund. I could use my husband as leverage, but I’m an independence woman, I can get through this cash crunch period. If it means I had to stay on working until the cash pile is back up, I’ll do so.

Which brings to my real estate portfolio to 11 units. I probably I don’t to buy anymore after this.

Anyways, these are rough numbers, but they are reasonable numbers, not wishful thinking. I’m excited about the opportunity. That is why I couldn’t wait to share with you guys.

I will continue to post my passive income number. And I will post the number regarding this property on this website.

 

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What do I need to do to get that $285K to close on the property?

  • First, I’ll close out on every single one of my stock portfio
  • Second, borrow some money from Mr.W (he doesn’t like it that I’m involved in another property, I’d probably doesn’t have anytime for him. Between working full-time at the hospital and working not the building to get it fully rented
  • Third, if Mr.W doesn’t lend me the money, I’ll have to cash out my principle on my Roth IRA. Which I’m going to the bank or call them tomorrow to see how fast they can do it.
  • Forth, if the paperwork takes too long, I can try to get money from my brother. 🙂 He’s buying 2 more properties, so I’ll see how it’s going to go.

Are you making any buys anytime soon? Have you bought a mix-used property before? Have you open or run a restaurant before? What was your experience? Please don’t hesitate to link your website if you have a post about that. I welcome everyone’s feedback. 

 

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7 comments on “The Decision is Made for My New Rental Property

  1. Investment Hunting
    December 7, 2016

    Congrats Vivianne. I like that you have a building with commercial and residential options. There are a lot of things you can do here. I look forward to future posts.

    To answer your questions, yes. I’m looking at buying a condo or house where my daughter goes to college. Why pay rent when I can put her in the master BR and rent out the rest of the rooms. If I do this my goal is to pay the mortgage with monthly options income -). We’ll see if it happens, but that’s the plan right now.

    Best of luck to you with this new venture.

    Like

    • Vivianne
      December 7, 2016

      Cool, when you buy the property, make sure to block up the living room to get another bedroom out of the house. Students usually don’t care. They usually study in the library or spend time in their bedroom anyways. That way you can get another $500-$600. You can let the contractor know that it’s only a temporary wall, and that they would make it so that it would be reversible for future selling purposes. If it’s a 2-bedroom condo, you make it into a 3 bedroom condo, you’ll get 33% increase income, and it doesn’t affect a thing.

      Liked by 1 person

  2. Team CF
    December 16, 2016

    You are on fire vivianne (pun intended). Go girl!
    We will be looking at another duplex over the Christmas break. But prices here are high and funding difficult to get. Will see where we will end up. The housing market is crazy in this part of the country, so opportunities are hard to come by.

    Like

    • Vivianne
      December 22, 2016

      I’ve just posted an update on the rental property and you’ll see the inside is not all rosey. I think the key to “cheap” is buying a fixer upper. There is no “easy” money per se . I’ve been searching on loopnet.com for the past several years. There were properties that I think I could get and still make some money, but this one I think I get a little lucky buying it $150K lower than what the owner paying for it. The keys are patience, persistent, and willingness to put in extra time to to fix it up.

      Like

  3. Monsieur Dividende
    December 16, 2016

    Congrats Vivianne. I too think real estate (actually own and rent) is part of one’s success. But I need to work on this aspect. I don’t have any rentals (just yet). You are a true inspiration! 😉

    Like

    • Vivianne
      December 22, 2016

      Real Estate does has its perks. Especially beating out dividend with rent being a lot higher than dividend. So, I think if you want it, you’ll find the property you need.

      I don’t have a realtor send me a list, because they’d want to you buy anything to make a commission. What I generally do it searching zillow.com and loop net.com, auction.com for court house property to buying things on the “cheap”. Then I’ll call my realtor to show me the properties I have in mind.

      Like

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This entry was posted on December 7, 2016 by in Best post.

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