Quit my job update for December 2015
Every month I write a report on the progress that I have made with creating passive income to quit my job. December was an exciting month for my rental business because I purchased my first property in Houston Texas.
On top of that, I had to find a new property manager for my properties in Ohio!
On December 9th, I closed escrow on my most recent rental property that I purchased in Houston Texas. The closing date was set for December 18 but I closed a week early because I wanted to get started on the rehab and installation of the new septic system.
In my November monthly report I explain the details on the deal and how I got the price down by almost 10%.
The property is currently listed for rent at $2,300 and there have been some good showings with potential tenants. If I can get the property rented for $2,300 a month, I will make $1,000 a month positive cash flow. Realistically, it will rent for around $2,100.
That will be $800 each month from this one property!
That is after all the expenses, taxes, insurance, PM fees, etc!
Since I am using the B.R.R.R.R. method of investing, I am currently doing the last four steps at the same time. Currently getting the property rehabbed, already have the financing going, as well as already showing the property.
Each of these steps take time and You need to keep them in order. I cannot rent the property until the rehab is done, and I cannot refinance the property until the property is rented. So these all have to be completed in order.
The refinance is going well. Currently have 4.675% 30 year note with $3,500 in fees lined up. This is a great mortgage for an investment property. Once the rehab is done, we will get it rented as well as get an appraisal on the property.
The appraisal will be used for the banks refinance criteria and will lend me 75% of the value of the property up to 100% of the purchase price.
So I will make $1,000 each month on a property that I have NO MONEY in the deal!
My rate of return is infinite because I have no money into the deal. Try to buy stocks for your 401k with no money down and make money each month! How about try to have a banker lend you money to buy stock so you have no money in the deal?
But you can buy rental properties just as I am doing and I’ll show you how.
Property Management Struggles
So, onto the other big thing in December.
My other area that I invest in rental properties is in Ohio. As I explained in the past my property manager will be retiring in March. I have been in the process of transitioning the management of my properties to a new property manager.
After calling many property managers, and asking lots of questions, in the area I found that three managers were worth considering.
As I’ve said before, a good property manager is absolutely vital for your business. If you want your rental business to be passive you need to allow other people to do the work for you and trust that they will get the job done.
A bad PM will make your life miserable.
In all my businesses I personally hire slow and fire fast. The same goes for your PM’s that you hire. If they are not making your life easier, they are making it harder. Fire them fast if they are not making your life easier.
A good property manager will make your life much easier and allow you to rest assured knowing that your properties are in good hands.
I took all the potential property managers through the 22 Keys to Finding A Good Property manager and felt only three stood out above the rest for me to consider more closely.
The three property managers that I was looking at fit each of these Key criteria well and I felt like they would each do a fine job.
Since there were three PM’s that fit the Keys to a Good Property Manager, I needed another way to pick my next PM.
I needed to make a gut level decision, based more on instinct, to select the one I would work with for many years to come.
How I Made My Gut Level Decision
Communication with your property manager is absolutely vital in this business. If your property manager does not call you back within a short matter of time meeting 24 hours or less.
I personally don’t stand for that.
24 hours is a long period of time to wait to hear back from your property manager on your property about your concerns. Anything longer that is just unacceptable.
A big red flag for me is when someone tells you that I do something that don’t follow through with it. One property manager in particular did that to me. I asked him if he could cut his leasing fee and a half and he said he would take a day or two to think about it and get back to me.
Well he never did get back to me in the said time but then called me a week later saying that he had heard from me in a while and was touching bases. Apparently completely forgot that he was supposed to looking that or completely dismissed it and was hoping I would not remember.
That is strike two and three for me so he was out.
The company I chose stood out in the area of communication.
Communication with the owner over a number of weeks was very consistent. I felt like I could reach him at any time of the day and get a response back in a short manner of time.
Personality and Compatibility
In business, you need to be able to have a good judge of character and rely on that judgment. There are many property managers that I talked with that I immediately dismissed because of my impression of them.
They could be saying all the right things but there’s just something about how they are saying those things as well as many other factors that go way beyond this blog post.
I learned a long time ago that I do not want to work with anyone that I don’t like. I don’t care how much money I will make, if I don’t like the person I will not work with them.
Life is just too short to waste your time on people that don’t matter to you.
If there are multiple people that fit this criteria, I go with the person I most closely relate to and connect with the best.
Gut Instinct / Intuition
There are things that you can’t put into words that you just have a sense about. Call it whatever you want, sixth sense, feeling in your gut, intuition, etc. This type of decision making is based on your experiences, knowledge, wisdom, and many other things brought together.
This is different than you writing all the pros and con’s down on a piece of paper, or basing your decisions on facts.
Everyone has the ability to use their intuition to make a decision. It only depends how much you trust your intiution and how it has proven to be successful or unsuccessful in the past.
My decision to go with this particular PM is based on my gut feeling this would be a good business relationship.
When I started my business “Downtown Express” (Convenience Store) in downtown Fresno, I learned I needed to trust my gut. I’ll write more about this in the future but the key is that I now listen to my gut feeling rather than facts alone.
If the facts line up with my intuition, I go for it. If my intuition does not align with the facts, I stay away.
After a few weeks of communication with the three property managers, I decided to go with a property management company I felt met all my needs and would be a good fit for my business. After the long search, I connected very well with the owner of the property management company and decided to go with him.
Since my property manager was retiring, I talked him into staying with me until March 2016 to help with the transition to the new property manager. In December 2015, I signed a contract with a new property manager and started the business relationship.
Since I have a number of properties, I didn’t think it be wise to move in one fell swoop all of my properties to the new property manager. Your properties can be in many different phases in the business. An example would be a property that is in the middle of an eviction or just about ready to be leased.
I was not ready to move over all of my properties to the new property manager because there are some that were in a phase that was not currently rented or in the process of being evicted.
I decided to break my properties up into two groups. One group was all the properties that were currently rented. The other group was any properties that were either not rented or in some other state.
The reason why I only moved over some of the properties to him was because the properties I moved over were currently rented and a good standing. It would be easy for him to start the next month with immediately collecting rent from the tenant and not have to deal with any issues.
The other properties that my original property manager continues to manage are in some sort of transition phase. These could be either in the middle of an eviction, rehabbing to get the property ready for a tenant, or even working with the local government to get the property in section 8.
Once these other properties are rented, I will move them over to the new property manager as well.
There are many ways to earn passive income and I am employing many different ones. I do know that the main thing in my business is my rental properties and I am focusing full force on that.
My goal is to have four total rental properties in Houston which make $400-$500 a month in profit before July of 2016.
Having for properties in a Houston will bring me close to $2000 a month in passive income and give me a huge buffer of positive cash flow when I quit my job.
I will acquire these properties with the B.R.R.R.R. method and basically have none of my own money in the properties but will still be making $2000 a month in passive income.
How are you progressing in your goal to quit your job?
Let me know by leaving a comment below.