How Did We Do It? Part Three

DH at this point had turned the corner on being a landlord, and committed to not to return to work (yay! that was a huge win for me). We needed some clever funding options for our second rental. DH had about $80k in his 401es account with Edward Jones.

DH made an appointment for us to meet with his investment manager. The guy was ex military and the two hit it off. In the end DH was advised to pull out his money, take the 10% hit and buy another rental. I was skeptical, but DH is very stock market adverse and I had a much larger stash in my 401k (AA 80/10) so it made sense to diversify more of our money into rentals and out of the stock market.

We were back to seriously shopping again by February 2013. This time around we were much faster at our responses and an offer was accepted in March. It was older, empty and came with rehab work for DH before it would be rented out (our goal was to add sweat equity which we did not do in rental #1). This property is in a more affluent neighborhood and has old world charm.

One side had been damaged in a fire in the 80s so had hardwoods and gas heat. DH replumbed that side (it was original cast iron) and replaced the furnace. This property cashflows most months around $1k. BUT it has also required alot more maintenance, with one set of bad tenants and 2 sewer issues so overall, though it is a cash cow monthly, it has taken many hits that pull its numbers way down.

We made a tactical error with this property that was a lesson for us. It has an addition with a flat tar roof. The inspector noted that the addition's roof was end of life. Well, three years down the road it bit us and it caused damage in a wall. We had to fix that wall AND replace the roof OUCH!

Don't take chances on significant maintenance like that. I am very glad on our first property we were diligent and rolled the cost of the roof into the purchase. We got lazy and did not do that for number two. The extra damage cost us $1400 to fix!

Back to Part Two or on to Part Four.