Juli Doty - Real Estate, Real Advice

Tenants Buy Real Estate for Landlords

What an awesome position to be in.

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I began my adult life as a seventeen year old unwed Mom-to-be. I was a pretty enough waitress balancing steaming plates of food on my distended belly. Tips were great. I wasn't worried. I knew I could do absolutely anything I set my mind to. (I still can - and so can you!)

I married a US Navy recruit, moved from my home town of 1200 people in Brewster Washington to Chicago with my tiny, premature son. He looked like a perfect china doll sleeping in his dresser drawer. In 1974 we paid $400 per month rent on a nasty little apartment where dirt was imbedded in the paint of every window sill. I wished I was the owner of that building, smart enough to convince fools like me to purchase real estate for the landlord! That thought, and others nagged at me as I grew through life.

I worked 6 days a week as a maid and waitress in Chicago to pay for that dingy apartment. I moved from Chicago, to San Diego, to Long Beach California, to Wenatchee Washington, to Eugene Oregon...... always paying rent!

At an average of $400 per month rent, I spent $19,200 from 1973, when I rented my first apartment, until 1978 when I purchased my first home. I was 22.

My first husband decided he wanted to buy a used manufactured home. That single wide home, according to the contract we both signed, would be paid off in 54 years and 4 months. I have learned a lot since then.

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Hopefully you have never signed crooked paperwork. Hopefully you know everything about real estate. But if you do not, then here is a primer on rentals.

I consider rentals to be a great investment for growing your potential and real estate expertise.

• DUPLEX: This is a great way to get started. Buy a duplex, live in one side, rent out the other. Choose your tenant carefully. You want someone who will take excellent care of your property and pay their rent in full, on time.
• TRIPLEX: As you increase up to 3 units a vacancy only decreases the monthly income by one third. You now have 2 other people assisting with your property payment. Set your rents at the going rate in your market. Purchase properties where the rent will pay the mortgage, insurance, taxes, maintenance, and utilities. Look for buildings where where rents are low because maintenance has been poor. You will gain the benefit of increased rents and increased property value as you do improvements.
• APARTMENTS: Typically four or more units are referred to as an apartment building. If there is more than one building it is an apartment complex. Prior to purchasing any rental you must assess the expenses of operating with diligence. In some cities, for example, every unit is charged water and sewer as if it were a single family home. Go beyond the tax reports of the current owner and investigate the facts yourself.
• MINI STORAGE: A lovely little money tree that when nurtured that will fill your wallet with fruit (and the occasional nut). I love to see investors build their own storage units.
• COMMERCIAL UNITS: Usually commercial units come with a higher up front cost than apartments, but more profitable operations with less maintenance. Make sure you use a quality lease.
• YOUR GARAGE OR BASEMENT: Converting a portion of your home into a rental can get you out of a financial bind and into a personal crisis. Sharing a home is a bit like a marriage so any person you move into your home should be well researched.

Tenants purchase real estate for you. Rentals are a fast and relatively simple path towards wealth. Everything you need can be learned in my seminar on Successful Ownership of Rental Real Estate.

Beware of family members and people who live in tents. The reason they may be desperate for a rental is that they can not consistently pay rent. As a landlord you must learn to allow people to own their own problems.