Real Estate Investing – Coulda, Shoulda, Woulda
At the time of my first attempted investment property acquisition, we had lived in a townhouse that I had purchased twelve years earlier, just after escaping from Iraqi occupied Kuwait (that’s a story for another time!). I bought that townhouse for $172k and had dreams of paying off the mortgage quickly, but twelve years later, I had barely paid that mortgage down at all (an unfortunately common problem with mortgages). In the meantime, the other three townhouses in our row had sold for as much as two times the amount each, as our neighbors moved away and upgraded to stand-alone single-family homes.
The funny thing is, none of those homes had sold for more than $172k in the ten years since I had bought mine, but in the eleventh and twelfth years, the sale prices had begun to rise. That means I could have owned the entire block of four for an investment of $688k within the first ten years of purchasing my own.
Over that period, my mortgage payment had been about $1,200 per month. When a job opportunity in the UAE took us to Dubai for a few years, we rented our townhouse out for $1,800 per month. After paying the property management company 10% per month to collect the rent and take care of maintenance, we were collecting roughly $420 per month in positive cash flow while we were gone. Had we acquired those other three units during that time, we could have been collecting $1,680 per month while our tenants made our mortgage payments.
Anyway, when we were ready to upgrade to our own stand-alone single-family home, we sold our townhouse for $450k (a tidy profit of $278k) and purchased a rambler for $365k. Had we purchased the other three units during that first ten-year time frame, that profit could have been a whopping $1.1M. Or, we could have held on to them…
According to Zillow, our neighbor’s unit sold for $640k on 7/14/2017 (thirteen years after we sold ours), and currently has a rental price estimate of $2,600 per month. This means that the value of the four units today could be as high as $2.56M. At our original purchase price, we could now have sold for a whopping $1.9M profit, if we had owned all four units and held onto them as rental properties in the meantime. Alternatively, we could have decided to keep holding onto them, in which scenario we could be cash flowing $4,560 per month (or $54,720 per year) while our tenants paid our mortgages down to zero over thirty years. Coulda, woulda, shoulda!
Now of course, hindsight is twenty-twenty… but what really kept me from purchasing those other units? It’s simple, and at the time, seemed perfectly logical: I had intended to pay off my first townhouse before taking on further debt. Unfortunately, what I failed to understand at that time was the power of leveraging real estate.
During that same time, I had been investing my retirement dollars in mutual funds, which I had no control over. Instead, I could have used a $6,500 ROTH IRA contribution as a partial down payment on those townhouses while letting tenants pay my mortgages and collecting a bit of passive income on top of that. Again, coulda, woulda, shoulda!
Fear, induced by what I did not know, kept me from taking the action that my gut told me I should take. What I did not know was that there were a multitude of investors that would have partnered with me on those deals for a portion of the profit to allow me to make the requisite 10% down payment necessary to get mortgages on those units.
Real estate is the best wealth building vehicle available in the free world and it’s a commodity that you do not need to worry about falling out of favor. For as long as there are families, they will need to have real estate properties to live in.
I urge you to learn from my mistakes and prepare your mind to be ready to follow those gut instincts! If you know what you are doing, you can mitigate your risks, overcome your fears, find profitable properties, and then finance them, all while building a better future for yourself and those that you love for generations to come.
Without further delay, make the decision to become educated in real estate investing so you can start building multi-generational wealth today!
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