Browse Category by Buying houses

Financial independence – FI

You know it’s time to move when you look through pictures of your home after you remodeled it and realize you’ve changed out most pieces of furniture.

My brother Phillip was in town visiting for the holidays recently and as usual we got into talks of our hopes and dreams. He showed us this amazing video of a man named Slomo in San Diego who rollerblades all day and night and is living his best, and happiest life.

The conversation then shifted to financial independence. Phillip asked if we had heard of the FI movement, and the answer was yes. Back when we lived in Colorado I remember reading Mr. Money Mustache’s blog a few times, as he was located just 15 min from where we lived, and I’ve always been fascinated by personal finance. I had also just read this NY Times article on the FIRE movement (Financial Independence, Retire Early). During this conversation Zach and I became acutely aware that we have gotten too comfortable.

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Business planning, Buying houses, Debt Free Living, Fixer Upper, Investments, Move forward, Planning, Small living, Smart money, Uncategorized

We bought a duplex.

Back in 2016 we bought a duplex in Vancouver, WA. We went in on the purchase of this investment with my parents, and my brother and his wife. We started making a video of the process, but it was difficult to do because this property was already rented out on both sides and we didn’t want to invade anyones privacy.

This home is not the most beautiful, and it needs a lot of updating. We plan to make exterior improvements (I’m thinking some shutters, fresh door color, and removal of the awning would be a great start) as well as many interior improvements (The washing machine and dryer are in the kitchen so those need to be enclosed, replace carpet on lower levels with laminate, and fresh paint -goodbye cream!- would be the first items on our list) when the time comes for our renters to relocate. But we like our current residents, so there is no rush!

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Business planning, Buying houses, Fixer Upper, Investments, Planning

Treat your tenants like customers.

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We’ve all heard the horror stories of tenants ruining properties by putting holes in walls, staining the carpets, refusing to leave a property at the end of their lease etc. This concern is what I would assume is the leading cause of people not being interested in owning rental properties.  Sometimes there’s nothing you can do to prevent this kind of behavior, but you can put the odds in your favor by treating your tenants like customers. Having rentals is a business, and with any good business comes great customer service.

Every single time we’ve met with a prospective tenant, we do our best to ensure that we want them to call us if something stops working or if they notice anything that needs attention. We do this for a couple reasons. 1. We want them to live in a place they love (the more they love it, the longer they will stay), and in order to do that they need to feel like they are being taken care of. And 2. These houses are investments for us! We want them to stay in good condition and don’t want something small to not get taken care of and turn into something huge.

We’ve looked at rental properties to purchase where the seller says “the tenants are amazing, they never call about anything, very low maintenance” and honestly, that’s a red flag for us. We’ve gone into several properties like this where it becomes evident that the tenants didn’t call because they just didn’t care about the house or they were getting low rent and were worried if they did call their rent would go up. Again, we want our tenants to call us, and you should want that too.

We’ve been extremely fortunate and have never had bad tenants. That being said, as with any business, you need to plan for unexpected things to take place. We always had money set aside in case something did happen to one of our homes and honestly, we planned for something bad to happen. We did this because we rental properties is our plan for retirement, we are in this for the long haul… so we planned for things to go bad so that if and/or when they did, we would be prepared and wouldn’t let it get us down. Luckily that never happened, and we like to think that a lot of that has to do with the fact that we treat our tenants with respect and are prompt to respond to their needs. Of course, there’s a lot that goes into finding the right tenants as well, but we’ll save that post for another day.

Business planning, Buying houses, Investments, Planning

Easiest way to save money.

Zach has been out of college and in the workforce for 8 years now. For the past 8 years he can count on one hand how many times he has paid to go out for lunch, impressive! Going out to eat for lunch is such the norm and most people don’t think twice about how much money they are spending. Based on the idea of paying $10 a day (which I wouldn’t be surprised if this number was actually higher) 5 days a week… you are looking at $200 a month. Now, what if you are a double income family, and both of you are eating out every day? That’s $400 a month!! Four. Hundred. Dollars!

So, if you can afford eating out for lunch every day, you can afford a house. If you and your partner were to pack a lunch every day for the next 22.5 months, less than 2 years, you would have enough money for a 3% downpayment on a $300,000 house. That’s right. Less than two years from now, rather than having nothing to show for your $400 a month… you could have $9,000 saved and be moving into your first home. Start packing!

 

Buying houses, Move forward, Planning, Small living, Smart money

Offer accepted… now what?

The house was listed at 218k, we were able to get it under contract at $203,029 which we felt was super awesome. However, there was no inspection contingency with this property. Meaning that we could do any inspection we wanted but we would not be able to get our earnest money back in the event we decided to back away from the house. (Earnest money is held by the title company and used towards your downpayment-usually 1-2% of the house price- but this can be lost if you walk away from the property.)

The bank sent us a purchase and sale agreement and we had 48 hours to sign it before the house would go back to auction and before we would have to turn in the earnest money. So… we used our time wisely and had the house inspected by my Dad and also made sure the septic tank was running smoothly.

When you buy a house, you want to know everything you possibly can about it before you purchase it. So inspections are critical. 48 hours is not enough time to get everything done, but we wanted to make sure the big stuff was good. And as it turns out, the septic tank was shot. Needing full replacement. After talking with several septic companies we found out that costs were anywhere from 8-15k and that doesn’t include redoing the lawn that was just torn out! You can’t get a full quote until the soil is tested and the system is designed, so this price range is all we had to go off of.

When you don’t have a functioning sewer or septic at a property… you cannot get financing. So, we went back to the bank with an all cash offer of $165,000 and they said no. We decided that this news of the septic put us over our comfort level with this house and we decided to back out. Luckily we did this all within the 48 hours and are now free and clear of this money pit! We are bummed because we are anxious to get a property and get it rented out, but we are also going to make sure that we make sound investments.

And icing on the cake is that the bank re-listed the house at 218k and didn’t disclose that the septic is not functioning. I feel like posting a sign at the property for the next interested buyers.

And now, the search continues!

 

 

Be decisive, Buying houses, Fixer Upper, Investments

On the hunt for our first investment property.

We finally went out to look for our first investment property. We had all 4 kids with us, and Jane and Michael were taking turns being in charge of  holding the new microphone. Sound quality is off, but we will work on that for next time! Watch and see what changes we would make to this house and why we think it would make a good investment. Leave a comment with any questions and we will do our best to answer!

This house:

3 bed/2 bath 1,356sf single family home listed at 239k.

After pulling comps (comparable home sales within the last 6 months) we felt like this home was overpriced. A goal offer price would be 210k leaving our payments around $1200 a month (with a 20% down payment). Based on what’s currently on the market for rent, we feel we could rent it for approx. $1550 once all the updates were made. Which would leave us at a cash flow of $350 a month.

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Buying houses, Fixer Upper, Investments

Could we live here forever?

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Zach and I bought our first house during the big housing crash of 08′. During 08′ a lot of people were not buying homes in fear of housing prices continuing to plummet and with major lack of trust in the housing industry. Because we came out of college at one of the worst economic downturns our country has ever seen, when we bought our first house, and subsequent houses, we had this question in mind “Could we live here forever?”

History has shown time and time again that after a housing crash, with enough time, the housing market will recover. This gave us confidence that buying would be ok. But of course, like others, we were concerned that we hadn’t seen the worst of it. So, each time we purchased a house, even though we weren’t planning on any of these houses being our “forever home” we wanted to make sure that if Zach lost his job or the market worsened, we would be able to stay in the house as long as needed.

I honestly believe that to this day we could make each of our houses work, even with a family of 6. The smallest house we’ve had was just under 1200sf which is larger than the average home in Hong Kong, China, UK, Japan and Spain. Every time we purchased, I would walk through the rooms and picture what it would look like if we stayed long term. What if I have another baby, and it’s not one, but two, or three! Twins, Triplets? Yep, I still felt confident I could pull it off. Just doing this exercise helped me feel at ease that we weren’t making a mistake. Or that we wouldn’t wish later on that we had held out for a larger home.

When buying a home, even if you plan to only live there for a year or two, try this exercise and ask yourself “Can I live here forever?”. It can help ease the home buying anxiety, and leave you feeling confident that you can make anything work. Because let’s face it, in hard times, I think each and every one of us would just be grateful to have a home.

Be decisive, Buying houses, First time homebuyer, Planning, Small living