Project: The Rental Property 1 – Meet The One Bedroom Condo

If you have read any of Robert Kiyosaki’s Rich Dad, Poor Dad books (and
there are several flavors out there), you will know that his biggest source of income when he started out was in real estate. He made a lot of great deals with minimal cash. One of his cash cows were properties that he bought at fire sale prices and converted into regularly paying rentals. Part of the money he made from rent paid for the small mortgage and maintenance cost on those properties. The rest of the money he used to reinvest and grow his small real estate empire. Sounds like this is worth a try, eh?

Buying Our First Property

Five years ago when me and my wife were starting to make some money(that is, we finally had a couple hundred dollars left over after bills), we decided to invest in a condo that was in pre-selling. For the real estate market where we invested, 2006 was the beginning of a building boom and for a pair of twenty-somethings, it sounded like a good idea to put some of our leftover money in some real estate.  So we deliberated, visited a few developments, went to a lot of open houses and in the end, we decided that we could afford to buy two small one-bedroom condominiums.  So it was settled.

She bought the condo.

I bought a car.

Haha. Not exactly according to plan huh? Long story. Let’s just say she was not pleased and I know it was not the financially smart thing to do (brand new cars bleed money). Five years later, the condo is now worth about 20 to 30% more and the car’s value is 50% less. Lesson learned. Anyway, I loved the car and all the rides I had in it so it wasn’t a totally bonehead move. Anyway…

Enter The One Bedroom Condo

The condo finished construction two years ago. That is, we or our renters could have moved in two years ago. However, when you buy a new condo, most of the time, it’s delivered to you “unfinished.” What this means is that you get a unit you can move into but the developer has left the finishings (ie the flooring, wall paint, cabinets, etc) to you. And so, this is what we currently have:

Condo

Nice. We have an unfinished property that is currently unlivable. While the value of the property has increased, it only appears on paper. It currently doesn’t do anything to improve the quality of our lives. In fact, it’s actually costing us money in condo fees and the mortgage (which ends this year, thank God). This year, I have finally decided to do something about it. If we’re not going to sell it, we might as well rent it out. I have a dream that this first rental property will be the cash cow that will grow a real estate empire to rival Donald Trump (if you have to dream, why not dream big, right?).

Not All Real Estate Markets Are Equal

I’m not sure how Mr. Kiyosaki’s properties are doing these days. Real estate markets are depressed all over the United States. Large swaths of cities are experiencing some sort of urban decay as people are losing large amounts of money on their property.  In our case, we are fortunate to be in a market that is still booming with hopefully enough demand that we can find someone to sign a lease on our property. If you’re thinking of investing in real estate, do some research first before you take the plunge. With plenty of properties losing value like water in a toilet it’s easy to find yourself with no money and a lemon of a house on your hands.

Anyway, we’ll get back to our property again soon. I think I’ve written enough for today. Let me know what your thoughts are and if you have similar projects.

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