The townhouse investment property aka House #3
So it had been a few years since I started accidentally building passive income with house #1. The tenants that I had, were happy renewing there third lease. I was making $650 a month like clockwork(which I discovered was way below market value). At the time I was running another business that was running well, and I was using the rent payments toward my mortgage along with my other income to pay off my new house fast. I think it took me 3 years to pay the hard loan off. I admittedly buckled down and focused on paying off my second house as fast as possible because, well I hate owing money. I actually didn’t really even take being a landlord serious, I would always fix issues with my tenants right away but I still wasn’t thinking of it like a business, but when my loan was paid off, I was suddenly actually generating $650 a month without doing any real work, it was awesome. I was beginning to tire of the business I was in, and begin looking into other ways to generate income. I soon realized that if I had more houses, Id have more passive income….duh! Im not sure why I didn’t think about it sooner, but as soon as I did, I was ready to buy another house.
I scanned daily for deals on properties, this time wasn’t going to be an accident, I was making a conscious decision to buy a rental property. A lot of the prices I was seeing, were high. If you know me I won’t buy it unless I get a deal. Finding a deal has always been one of my talents, so after a month of screening potential properties, I spotted a 2 bedroom, two story town home for 45K, for sale by owner. I knew by finding a direct owner to buy from I had a better chance negotiate my price. Whenever you go through realtors, there is a series of people you have to deal with, and it can be difficult to negotiate without the sellers realtor messing up negotiations. I normally would not be interested in town homes because I didn’t want to worry about HOA fees. HOA Fees are the cost to maintain the property charged to each owner to keep things up. This particular townhouse did not have HOA fees, in fact it was similar to a house as each owner was responsible for there own property. I went to check it out, and it was great. I mean the last owner had a tenant who left the home a little dirty but, it didn’t need any repairs, just a good clean. I told the owner I was interested in the townhouse investment property, and would be in contact later in the day. To make sure I was getting a good deal, I went home and hopped on Zillow.com and researched what the other properties had recently sold for. They were averaging 40K needing minor work, but as I mentioned, I needed a deal. I called the owner and told him I wanted to make an offer of 37K, I figured at that price, I could replace the carpet, fix the minor drywall issues, and replace the carpet and still be under 40K. Fortunately the owner was wanting to sell and my offer was accepted, I sent him a contract and we scheduled a closing date about 20 days later.
I was closing on my second rental property, and I was excited. I decided after much research that I was going to rent this property via section 8, it was in a decent neighborhood and I hoped to attract a responsible tenant. I checked with my county to see what the requirements were, as I had always been told section 8 is a lot of trouble to deal with, me being one to like to learn things for myself. I quickly found out that the requirements were just pretty much common sense stuff, i.e. all doors must be weather proofed, all outlets along countertops needed to be GFI compliant, no leaks, same stuff I’d do anyway no big deal. I listed my property in a few of rental websites, with pictures and began getting calls right away. I was very meticulous in the wording of my ad, knowing how to find good tenants, was essential to filter out the rift raft. I listed all my requirements, which were realistic, no violent felonies, renter must have atleast 2 years rental history, no evictions, and I was going to run a background check to verify. I wasn’t concerned with employment history or credit because the majority of people on section 8 have the majority of rent paid for them by the state. I located a tenant who was honest and passed the background check, now it was time to schedule the inspection I scheduled an inspection, and waited. About a week, until someone was available to inspect my townhouse. The inspection was brief and, I was told I passed. I notified the tennant, and she has been there going on 3 years now. I was able to rent this property out for $850 per month. Now the combination of house #3 and House #1 were generating $1500 a month in rental income. I was officially and lanlord. I’ve heard a lot of “experienced” investors say that townhouses are bad investments, but now that I’m 3 years in, I’ve find this to be false, I LOVE my townhouse investment property. I believe that under the right circumstances anything can be a good rental.