As I go about building up passive income to quit my job with passive income, I post monthly updates sharing what has been going on in my world. The month of July has been another busy month for my businesses. My current plan to quit my job is very close to completion and I am excited to share with you everything that’s been going on!
I HAD AN ARSON FIRE IN ONE OF MY PROPERTIES!!!
See pictures of the damages below.
I had to get that off my chest. So, back to what's going on.
After taking six weeks off from work in June, I went back to work. The six weeks off was a very terrific way for me to actually see what it would be like not having a job. The funny thing is that I worked even more each day then when I actually work at my job. This was because my business depends on me doing the work. If I don’t find that next property, nobody will.
The good thing though was that I was working on my business building passive income not spending my life working for someone else earning an hourly wage.
Those six weeks working on my business have already started paying off big time. I bought three properties and published a book called lasting marriage. So, here is what has been going on in July.
Passive Income Businesses
Rental Real Estate Business
This month I acquired the fourth of the five new properties I plan on buying before I quit my job. This is another property in the city of Akron in Ohio. The price of these properties versus the amount of rent I charge is a great return on my investment.
This fourth property I purchased for $18,500 in a short sell from a bank. There was a small problem with this property that the owner’s brother was living there and was a hoarder.
The property was packed full of his property and it would cost close to $1500 to clean out the property of all of his stuff. Apparently he went into the hospital and is in a coma.
The bank wanted to close quickly which I am ready to do but I wanted the property cleared out with nobody living in it. The owner asked me if we could close quickly considering the bank and rent the property back to them for eight days so they can clean out the property.
Two thoughts came to mind as I am buying this property: First I did not want to buy a property that I had to either ask somebody out of, and second I did not want to pay $1500 to remove all of his junk from the property. These two thoughts came into play as I worked out the offer with the bank.
I told the listing agent they had two options from me if they wanted to close on time. The first option was for the tenant to pay an entire month’s rent and I would credit them for the amount of days after they moved everything out of the property. So if they only occupied the property for 8 days, I would credit them 23 days and give them cash back. The second option was for the bank to give me a credit of $1000 towards the purchase of the property to pay for removal of all the tenants’ belongings.
As it turns out, the bank did not want to give a credit for the removal of the belongings and the owner did not want to pay full months’ rent. So the closing date came and went without my wiring the funds. It took the owner five days and hiring a moving company to move everything out of the property.
Finally, the property was vacated and we were able to close the deal and I now have a property that should rent for around $700 a month.
Purchase Price: $18,500
Monthly Income: $700
Property Management: $70
Total Passive Income: $500
For my final property in Akron before I quit my job, I am waiting to find a good property that I will be able to purchase for around $22,000 and rent for $700 a month. Finding the property is the hardest part if you want to get a good deal and have good cash flow every month.
Having patients in your passive income business is crucial no matter what you do. Passive income builds on itself as long as you keep building it up.
Once I acquired this fourth property I will have a total of 24 single-family homes that bring in a total of $13,500 a month gross profits. Actual income varies from month to month because it expenses.
Right now, I have another investor that is interested in selling his 20 properties. It may be a good deal if I can get the property at a good price. With this, I may just get a loan a few of the properties and acquire 2-3 with the balance of the cash that I have to invest.
Remodeling My Master Bathroom
For my personal residence, I have been remodeling my master bathroom. In 2015 I remodeled my kitchen and increased the appraised value of my property by $50,000. With this bathroom remodel I am hoping to increase the value by another $30,000.
Originally, the master bedroom had a large vanity area that led into the bathroom. The vanity area was just about as big as the bathroom and felt like a waste of space. There was also a closet on the other side of the vanity area that was only used for storage because we had another closet that was a walk-in. By removing to walls and adding a door the master bathroom space doubled and feels like an actual master bathroom.
I moved the shower and doubled its size, added a bathtub, and added two large pantry cabinets. Other than the plumbing and the tile work, I am doing everything myself. This is saving me about $5000 by doing it myself. The way I think of it is, I now have $5000 more to put towards another rental property that will make me money.
Eventually when my wife and I move to Arizona, this property will be a prime rental hopefully earning $2000 a month in rent.
If I sold the property, I would be able to pocket $100,000 which would be a great amount of money. The problem is that I would no longer own the property and it would no longer make me any money. The way around that is to refinance the property and pull the money out of the equity and use that as a way to buy more properties.
I'll post the pictures in the August monthly update when I am done.
The Bad Side of Rental Properties
July was a rough month for my properties in two ways:
- I evicted my Texas tenants.
- Arson in 1 property in Ohio
- Had many repairs/expenses for my current properties
The tenants in my Houston Texas property have been a headache from the very beginning. Even before they moved in they were making me wish I had not taken their security deposit.
To make a long story short, here is a list of things the tenant gave me a headache from:
Application and security deposit: 1/15/2016
Before move in:
- Remove a branch hanging over the house
- Replace the sliding glass door
- Paint the inside of the bathroom cabinet because they looked “ugly”
- Insisted on their personal “handyman” fix $800 worth of work in the house.
- Handyman was completely crooked and tried to rip me off.
Delayed moving in week after week.
Finally moved in April 25th
- Requested a garage door opener installed (not approved)
- Requested the AC to be replaced (not approved) – AC worked fine. They said the upstairs did not cool like it did the downstairs. Crazy, since heat rises…
- Requested the ducting for the AC to be re-done (not approved) Same reason as above
- Sod to be replace/fixed in the yard (approved)
- Wanted me to pay for their car window that got broken (not approved) How do I know if it was on my property that it was broken AND why is that my fault if someone else broke it?
- Said the roof was leaking from the plumbing jacks. 11 replaced (approved) Not actually needed. It was the toilet from the upstairs drain that leaked.
- Repaired upstairs drain (approved)
Here is the time schedule:
Jan 15th: Application and Security Deposit
April 25th: Move In
May 5th: Paid rent
June 5th: Paid rent
July 5th: Non-payment
July 6th: Filed eviction
August 4th: Awarded Judgement
August 8th: Filed writ for constable to remove tenant
There is much more that went on that I did not share but you get the picture. I bent over backwards for this tenant and am now fully glad they are gone.
Lesson learned: If a tenant does not move in on the date they agreed to, get rid of them and find another tenant.
Arson in Youngstown
Some of my properties are in rough areas of the country. One property in particular is located in a rough area with punk kids who vandalize vacant homes.
In July, I get a text from my property manager at 11pm (2am eastern time) that there is a fire in one of my properties with extensive damage.
Apparently, some punk kids broke into the house, spray painted everywhere and set the attic on fire. The fire department was able to put it out but not before it caused thousands of dollars in damages.
Since I bought the home for $6500 6 years ago, I already made my money back and then some. Instead of paying $15000 to fix up the property I decided to donate the property to the county land bank.
This land bank received $2 million to take possession of condemned homes and turn them into a park for the community. They pay for the demolition and removal as well as planting a park for the kids. Hopefully those punk kids will get what’s coming to them on the jungle gym… (J/K)
So, I will get a large write-off on my taxes and not pay any money out for the demolition. Too bad that I lost a property though. Good thing though it was one of my worst properties.
In the transition from my old PM to my new PM, there were a lot of things I found out about my properties.
- There was a lot of deferred maintenance that should have been done to find and keep good tenants.
- He wasn’t the best at pointing out good areas for me to purchase properties in. Actually, the properties he said were good areas were actually rough areas.
- Found bad tenants who would not stay in the properties for longer than 8-12 months.
- Monitored water bill from the city water department (water bill stays with the property, not the tenant… So stupid…)
When the new PM took over, he implemented a lot of sound business practices to make my properties profitable.
- Finding good tenants with background checks
- Fixing up properties to attract better tenants
- Repairing issues in properties that had cosmetic issues
Even though the rental income was average, the expenses were very high. Because of that, this month’s rent check was fractions of what it should have been. This is why I always have 5 months expenses saved in the bank for months like this. There are good months and bad months but year after year, I make lots of money with rental properties.
Book Writing Business
July was the month that I launched my new book “Lasting Marriage”
This book has been a project of mine since February of this year and has been a labor of love to get done. Lot’s of hard work, late nights, effort, and time went into this book.
After months of writing, 4 editors, formatting, design, programming, etc. I now have an actual print book, kindle, and audio book that is for sale on Amazon.com and other online outlets.
On July 24th, I launched my book for sale. To help promote the book, I used Amazon’s KDP select program. This is a program that allows authors special marketing tools if they use Amazon exclusively to sell their book.
I used the KDP Select 5 Free days promotions. This is where your book is given away for free for 5 days to build an audience. The major benefit of this is that possibly thousands of people can get a copy of your book without you even doing any marketing.
The 5 day promotion started on Sunday July 24th and I ended it on the 28th. During the promotion period, I used a lot of different marketing companies to help promote the book during it’s free days. These companies basically have lists of people they tell about your free book and they download it.
Here is the results of the promotion:
#1 in Christian Living / Marriage
#100 overall in the Kindle Free Store
3,361 Total Downloads!!!
Made the “Hot New Release” in Amazon!!
Another huge benefit of the book is getting people to give me their email through my LastingMinistry.com website so I can reach out to them when I write another book or am selling something else.
This is done by having a free workbook download for them if they want it. They go to a link in my book which goes to my site. In order to get the workbook, the need to give me their email address and I send them the link.
Now I have over 200 people in my list from just a few days. As I continue to grow my sales, this list will grow which will help me to grow even more.
In all, I have two books for sale on Amazon.
Right now, they earn me about $500 a month in income. As I continue to grow my number of books for sale, my passive income will increase.