Back by popular demand, QCash has graciously offered to provide more details into his financial life, particularly his investments. This time around, QCash explains his first taste of investing in real estate. For those of you who are new here, QCash retired at the age of 36 with a net worth of over $1.5 million.
When I first stated investing, I figured I would make my millions in real estate a la Donald Trump. However he declared bankruptcy shortly after I purchased my first property with my university roommate (who remains my good friend, he is still a business partner in other ventures and was my best man at my wedding – we have a David Radler/Lord Black partnership without the criminal leanings and backstabbing deals) in 1990 (great time to by real estate by the way) and we watched as the house fell in value to less than we owed over the first five years. However, I did learn an important lesson – Cash Flow is King.
Even though the house was falling in value, the 7 student rooms rented out generated more than enough to cover the costs (and back then our first mortgage was 13% and the second was 18%, we might as well have put it on our Sears Credit card at those rates). I still have that property today (listed as P3 on my list). We did the accelerated mortgage payments and paid the entire house off in 2004. However, since that time we have converted it over time to a duplex (legal non complying) and now only rent to a family of three and a mature student (fewer headaches as neither of us lives in the same city we went to university anymore).
Subsequent to that time, I have owned three other properties and sold them.
Currently, we own our own home (P1), another rental property (P2) and half the original property (P3). In addition, my partner and I formed a corporation and bought a multi-unit property (5 commercial units, 3 residential) in my home town that eventually I hope redevelop in the long run. I am working through the process and trying to figure out the costs. The structure of that corporation involves us both loaning money to the corporation (Q1).
To that end, my direct real estate holdings currently are:
P1 Personal residence:
- purchase price: 2000 – $254,272.35 – current value as of 2007 $480,000
- cash flow: $0.00
P2 Rental property:
- purchase price: 2002 – $181,395.65 – current value as of 2008 $325,000
- cash flow: $900 per month net (split between my wife and myself)
P3 Rental property:
- purchase price: 1990 – $183,266.00 – current value as of 2006 $225 000
- cash flow: $700 per month net (half mine, half my partners)
Q1 Shareholder loan:
- loan amount: $249,600 (interest only at 6%)
- cash flow: $1248 per month interest income
When I give my Net Worth updates, I only list the purchase price of the properties above and even then I only include 50% of P3 as I only own half.
The current values are based on the most recent appraisal and the year is given.
Next time – other ways I own real estate.If you would like to read more articles like this, you can sign up for my free weekly money tips newsletter below (we will never spam you).