Are you interested in real estate investing?
Have you thought how cool it’d be to have some properties so you’d enjoy passive income?
Have you wondered how people who own many properties did it?
Well… we did.
We’ve always liked houses and liked the idea of owning properties. So in 2001 to 2002 in Seattle, when one of us worked and the other was in graduate school (not the loooong kind, fortunately “just” the two year variety that was very intense), we looked. Prices were so much more affordable here than in San Francisco Bay Area where we lived before: we can find rentals here with good income.
The landlord of our duplex owned a sausage company, a few rentals and was a real estate agent. He offered to sell us the duplex before moving to California. We loved the idea of living on one side and renting out the other side. But when we ran the numbers, we were surprised that the property put no income in our pocket each month. After double checking our numbers and realizing this was no mistake, we passed up that one and looked at a few more. Wow, no positive income to speak of. We were baffled and didn’t know why. Since we couldn’t find any, we became discouraged. We got caught up with our careers, settled into our new house, eventually started a family and put this on the backburner.
From time to time, we’d talk about investing and maybe even consider small apartments due to the economy of scale of running it. Life was busy, so this moved along at glacial pace. Plus, we didn’t have $$300,000+ lying around for a 30% down-payment for a small apartment, which we were told was the conventional requirement.
So we continued in the hamster wheel (or the rat race as many real estate investors would say) and in 2008 started to see many people we personally knew cope with layoffs or stress about the prospects of layoffs. In 2010, we decided it was time. It was the best real estate market of our lifetime, we’re more educated about real estate and with our formal work experience and education, we can surely pull off something. So one of us quit to dedicate full-time effort to acquiring real estate properties and build a steady pipeline of project-based income. Imagine quitting in the middle of a recession!
In early 2011, an instructor in a real estate class explained that coastal markets such as Seattle are hard to cashflow*, that most investors buy for appreciation and cashflowing properties often acquired by finding off-market deals. WOW, what an eye-opener! Can you imagine if we had known this back in 2001? (Okay, we might have gotten into trouble buying at too-high, but we could have taken off in the real estate direction sooner).
Today, we own several properties, have completed some projects and continue to work towards our goal of an income portfolio. It’s been an amazing path filled with challenges and rewards. We’ve learned so much already and would like to share with you how it is possible to invest in real estate and earn some passive income too!
*Cashflow – our definition of a positive cashflow rental may differ from other investors’. We define a property as cashflow positive when rent covers debt service, property taxes, insurance (PITI), operating expenses such as property management, repairs, improvements, maintenance reserves, and vacancy – and still put money in our pocket each month. Others define cashflow positive rentals as Rents covering just PITI or PITI and vacancy and maybe maintenance reserves. We set aside some funds for legal and accounting work, periodic work such as yard cleaning, pest control. It’s more comprehensive so that the net income every month truly stays in our pocket.