Good morning, friends! Today we’re sharing the story of how one family went from deep in debt to being successful real estate investors. Enjoy!
Tell us a bit about yourself. Who are you, how old are you and what do you do?
My name is Kim Parr, and I’m 41. I’m an Optometrist and personal finance blogger, I’m married to my husband Jim, who is a school principal. We have one daughter in the third grade.
When did you first start considering real estate investing?
I became interested in real estate investing very early in my career after making a friend who had several rental properties. His first home was a duplex. He and his wife lived in one side and rented the other unit. Since then, they’ve added another half dozen properties and have never really had to pay a mortgage, all while earning a profit every month.
What steps did you have to take financially to get to a place where you could afford to invest in real estate? How long did fulfillment of those steps take?
My husband and I took many wrong financial steps in the beginning of our marriage years and found ourselves deep in credit card and other consumer debt. We spent about a decade in debt until finally getting our act together by cutting spending, selling lots of stuff that didn’t add value to our lives, and doing everything we could to increase income. It took about 6 months to put those steps in place and another 18 months to pay off our debt. When our debt payments stopped taking all of our salary, we started saving to buy rental property.
Tell us about your first investment property.
Our first investment property was an 800 sq ft single family home. The former owner was an elderly lady who had to go into a nursing home. It was obvious that she wasn’t able to care for the home in recent years because the house was filthy and jammed full of clutter. However, it had a good floor plan and didn’t require much other than cosmetic work. We watched the house for a while, hoping for a price drop. Sure enough, about a month after that first showing, the asking price fell by $15,000 and we made an offer that same day.
How many properties did you have to look at before you made your first deal?
Probably about a dozen. The very first property we saw would have been an amazing rental, and the price was right, but we were hesitant to make an offer. By the time we decided to go for it, it was already under contract. That was a good lesson. We learned to move fast once we found the right house at a reasonable asking price.
Do you still own that first property? Why or why not? Was it a positive cash flow deal right out of the gate?
Yes. We spent about a month cleaning and updating the property and it has been rented consistently ever since. It has always cash flowed $200-$300 per month. Our mortgage on the house is only around $40,000, so we’ll probably keep it forever.
What obstacles have you faced as a real estate investor?
We currently use a property management company and will continue to use them as long as we are working at our day jobs. That means we don’t have to take middle of the night calls or deal with late rent payments. I would be much less enthusiastic about having income property if that were not the case.
Probably our biggest obstacle to date has come from the city inspector. We did a big renovation on a four-plex purchased at the end of last year. Everything went pretty well until two weeks before completion when he hit us with the news that we’d have to upgrade the entire water line into the property. The fact that it needed to be done was not terrible but finding out at the last minute was difficult. Had we known earlier, it would have been easy to cut costs on other aspects of the project, but we were literally at the end of our budget and had tenants waiting to move in. Even if you plan for all contingencies, there are always things that come of the woodwork at the absolute worst time!
What does your current real estate investing portfolio consist of?
We have the single family house, the four-plex, and a commercial office building.
Where do you see yourselves 10 years down the road as far as your real estate investing goes?
In ten years, I hope all of our current properties are paid off. I also would like to add a few more rentals. We don’t want an empire, but 6-10 properties would be ideal. We also plan to do more of the day-to-day operations once we retire, hopefully in 8-10 years.
What advice do you have for those considering delving into the world of real estate investing?
Make sure you always buy undervalued property and have enough money to cover monthly expenses without going into debt. Don’t get attached to a rental and overpay or over-renovate. That being said, I do feel that the quality of your home reflects the quality of the tenants you attract.
In our case, we’ve always made our rentals a little nicer than others on the market but not over the top. You don’t need granite counter-tops and hardwood floors, but spending a bit for nice laminate flooring and a washer/dryer in unit will give great return on investment and hopefully gives tenants a reason to take good care of the place.
Aside from that, I would say don’t be afraid to ask for help. It can be a full time job to manage multiple rental properties. If that adds too much stress to your life, then find a team of people to help. Saving a few hundred dollars but spending every free moment trying to keep up with your property is not worth it.
To learn more about Kim and her family’s journey from deep in debt to profitable real estate investors, you can find her blogging at www.eyesonthedollar.com.