I want to share with you where we are at right now. We bought our first rental property and it is actively making us a passive income. My next blog post will outline the story of how we rented it. It is also one of my introductory posts to the Bigger Pockets forums. I am not affiliated with them, I am just super excited about that community and talking with like-minded individuals.
After such a big break on the blog, how the heck did we get here? Well, let me give you some of the background and a sneak peak into the next post. I have always wanted to invest in real estate. At least for over 10 years. I bought my first house when I was 21 (ok closed after my 22nd birthday) when I was a Petty Officer Second Class (E5) in the Navy. This was in 2007. Well what happened in 2008, 2009? Yeah, you guessed it. The housing crisis…
I transferred from my command in 2009, I was unable to sell the house. It was on the market for 9 months before I became an accidental landlord and rented it to a very close friend. I was eating a loss every month because the rent prices for the area were so low. When my friend transferred in 2012, I was unable to keep up with everything and had to short sell the home. It was a very tough experience. I bought that house with a VA loan and thought I would lose my VA loan eligibility forever.
Well, luck was on my side. The lender filed the paperwork after the cutoff date for the short sale and was unable to keep my VA guarantee. Phew. Well, needless to say, a short sale will TANK your credit score. We weren’t buying a house for a while after that… I rented for a few years and moved into base housing after I commissioned because the house was right by my job.
When I received orders to Hawaii, my wife and I knew we were ready to buy again. We also knew this market was really tough and if you weren’t offering full asking price plus closing costs, there is no way you were getting a home. We lost the first 4 homes we tried to buy in bidding wars. Finally, after living in Hawaii for two months, looking at about 97 homes, putting offers on 5 of them, we purchased our second home. At the time the rate was 4.65% on an $800k home. Yes, that mortgage payment was rough. Very glad we saved a lot of money up and became debt free before moving to Hawaii.
About a year later, we refinanced with an VA Interest Rate Reduction Loan (VAIRRL) and got our rate down to 3.5%. This was significant savings. We lowered our monthly mortgage payment significantly. Rates are so low right now that we are actually doing it again (will discuss in the next post). Remember the debt free thing I mentioned before moving to Hawaii? Yeah, it didn’t last that long…
So, about the debt… Shortly after purchasing our home in Hawaii, we were plagued with issues. We wanted to do some updates to the kitchen. It was a big job that became even bigger. We wanted to replace the cabinets, countertops, and appliances. We did! However, while doing the renovations and ripping out the old cabinets, countertops, and sink, we found black mold! A LOT of it! Now we had to rip out all the drywall and treat the beams. Not only did that happen, but the contractor that was ripping out the countertops dropped the old countertops on my tile floor and cracked in in several spots. We couldn’t find that exact tile so we had to now replace the entire floor. It was a fight and they wouldn’t pay for the new tile. We did however get the company to pay for installation… Sheesh!
Then the contractors we hired to work on our downstairs bathroom started getting really slow with their work. I was paying them by the hour They finished the bathroom and then started working the backsplash in my kitchen. Not only was the job starting off sloppy, but with how slow he was going, he had to go. We fired him and hired a new tile guy. The new guy came in with a much cheaper rate and had to rip out what these other guys started. He did a great job so we hired him to tile our upstairs guest bathroom. He tiled the floor and the walls, it was awesome! But overall, the cost was not so awesome. We went from having $15k in the bank (left over from the home purchase) to a $25k loan and about $10k in credit card debt.
Why did I give you this wall of text about what we went through with our homes)? To show you where some of our fear stemmed from.
Like I said earlier, I have wanted to invest in real estate for a long time. My wife was not onboard with the experience we had with our first home as well as all of the additional costs we took on with our new home. A very good friend of mine saw what I was doing with the 3 different websites I built and products I was selling. He said he saw how much of an entrepreneur I was and suggested I look into real estate investing. I told him that he is speaking my language, but I am not the one to convince, I need my other half onboard. So, my friends invited us over for lunch to show us their real estate portfolio and how they were doing it.
Of course, pregaming this, I was already trying to get my wife onboard. She was actually really excited and started searching for properties herself. She found two awesome deals and we brought those with us to ask my friend’s opinion. When she saw what they were doing as well as the encouragement we received from the deals we found, our wavelengths synced up. This was the beginning of something new and exciting for us. Something we would do together and something that will create a passive income.
My next blog post will go into the details of our first deal.
