Thank you for always willing to share your awesome ideas and for the encouragement and inspiration to solve even the toughest of conundrums!
Dear Robert, Kim, Chris, and Rich Dad Team:
This is a note of gratitude and a brief report on what I was able to accomplish thanks to the Rich Dad Coaching program, without any previous investment experience or knowledge and plenty of fears.
After reading seven of Robert's books, I took the Real Estate Coaching course from January to March 2014 and the Choose to Be Rich Group Coaching in 2013. My boyfriend, Jeff, and I were living in upstate New York at the time and we had planned to move to Arizona in May of 2014. Shortly after moving, I started calling and interviewing real estate professionals. I spent the entire month of June meeting people, three or four per profession, assembling my team as instructed by Robert, Kim and my personal coach, Chris.
Guess which member of my team took the longest time to establish and required the most interviews and phone calls? If you guessed the lender, you are correct! It was a
Challenge despite having great credit and a good-paying job. Without any prior real estate ownership, 14 out of the 15 lenders I called, would not even discuss FHA loan options for investment properties. All of them wanted a 20-25% down payment. Trying to get creative before I'd ever tried traditional, I came across some owner-financed deals, but the prices and the down payments they wanted were simply astronomical. Once the 15th lender said she could find me a FHA loan with 3.5% down for a duplex, my realtor came across someone else with the same deal but up to a fourplex, and then my lender agreed to a loan with 3.5% down for up to a fourplex. I qualified for a great loan amount and the price of the property was in fact much less than the loan I could get!
I started looking at multi-family homes and continued looking for 2 months. Since my schedule as a registered nurse was quite busy, and I was starting my own digital marketing business, you can imagine I wasn't able to devote a great deal of time driving around. I did, however, manage to look at 47 properties. The property I ultimately purchased had significant gross monthly income. The owners did not budge on the sales price. They put the property on the market nine months earlier, lowered four times, and received only one offer prior to mine. After the inspection, they spent almost $4,000 for repairs I requested as many items had not been properly maintained. I hope I didn't disappoint Robert too much by not looking at exactly 100 homes. I remember him saying that, if you spot a deal, better take it.
The best apartment had tenants on a month-to-month lease, which is currently our home right now, per the FHA requirements. My real estate agent, an investor himself, convinced me to manage my first property myself in order to learn...and yes, it has been quite a learning experience so far! I have to say that tenants provide you with learning opportunities left and right. I am grateful to Robert for his listening assignment in which he explains in detail why we need real estate agents that are also investors! My agent has taught me so much on dealing with difficult tenants, and he even allows me to use his management company for credit and background checks on potential tenants, once the tenants submit their applications and nonrefundable fees. I have had two difficult tenants, so I had to add an eviction lawyer and a collection lawyer to my team to learn the process.
As I was taught in the Rich Dad course, I immediately invested in increasing the value of this property by adding a new washer and dryer into the shared laundry room, which only had one of each with room for two of each. I could not believe the former owners had four single mothers with young children share one washer and one dryer! The tenants also informed me the old washer was completely compromised, so I replaced it.
The property's two double garages were completely empty and their heavy doors had not been automated. I couldn't help but wonder, was the former owners expecting the tenants to handle metal garage locks in 124 degrees in Phoenix? I called a garage professional who automated the doors in a matter of four hours and the tenants are now using them and love the fact that their vehicles are safe from the heat and secure.
We've updated three of the four apartments (replaced all yellowed and broken blinds, painted, replaced some appliances and a bathroom vanity, repaired some sliding closet doors, and replaced carpet in two bedrooms with inexpensive yet sharp looking vinyl cherry-bark-colored flooring. All of these improvements allowed me to increase each apartment's rent by $100/month this year. We also fixed small items in the apartments which were items the tenants had asked the former owners for numerous times. The only unexpected expensive repairs were two hot water heaters and rewiring of all outlets…many of which had burned on the inside. I was glad I called the electrician, rather than risk a fire!
As Ken McElroy points out in his book, it's apparent I could have budgeted better. I could have been more diligent in my due diligence period, even though the inspector I had was nicknamed "The Deal Breaker" by many home owners. Thanks to the Rich Dad Coaching, I had my real estate LLC set up and my business account with great credit card reward points. All the expenses got covered very well with some cash back. Additionally, I got a great deal of money back in tax revenue this year, thanks to the business expenses.
The most recent development is that I just refinanced my FHA loan, after six months and 210 days of paying the mortgage. The new loan allows me to pay $135/month less than what I was paying up to this point, resulting in a monthly cash flow of $75.00 after all monthly expenses, with us living in the largest apartment for free. Should I decide to rent this apartment today, I would have $900/month of passive income!
Another way I could make my property more profitable was to buy coin matched washers and dryers for the shared laundry room. I decided to leave the machines free to use, and told each of the new tenants that it was important to me that my tenants feel at home here and not have to worry about finding quarters for their laundry each week. As a marketer, I figured this would be a great perk that would encourage them to choose my property over every other fourplex in this community that has vacancies.
While purchasing the property, my wonderful coach Chris was such a great help throughout the entire process! He looked at my numbers, gave negotiating advice after the inspection, as well as suggestions on how to deal with tenants. He requested that I attach some pictures of the property, so I have added them below.
Thank you, Chris, for being so supportive and helpful! What an enthusiastic teacher you are! Thank you for always willing to share your awesome ideas and for the encouragement and inspiration to solve even the toughest of conundrums! I am now convinced that this is the only way to face challenges.
Robert is right when he tells us in all his books that the more money problems you solve, the more creative and financially efficient you become. I will continue to learn and refine my investment strategy with each new property.
Thank you, Rich Dad Team, for everything!
— Alexandra D., AZ, USA