To Fix or Not to Fix!

That's always the question :)

We got a call today from a renter (a very good renter) in one of our properties.  His lease is up in a few weeks and he wants to resign for 2 years.  He mentioned that there was an issue with the heater and the garage door (the door to the house in the garage, not the actual garage door itself).

Obviously as a landlord we have no choice but to fix any AC/Heating issues, but it will be a few hundred bucks to fix the door.  To save you the details, it's not a real problem but it bothers the renter.  That's basically all it boils down to.  It's definitely something we don't have to fix.  So do we fix it?

It depends.  In our case, we chose yes.  Why?  We have a very good renter and he always pays on time and he wants to sign a new 2-year lease at $1,100/month.  If we don't fix it will he leave?  No idea.  He didn't say either way (and I doubt he would leave but he might not be happy with us and that could lead to property neglect or destruction), but one thing I know for sure.  If we throw a little money at it, he is definitely signing a 2-year lease and potentially staying longer than that.  If we decide not to fix it, there is no telling what might happen.  If it was an unnecessary $5,000 repair I would be posting something very different :).  But it's just a few hundred dollars (probably unnecessary) to fix and ensure a total of $26,400 comes our way over the next 2 years.

We obviously have other options:
-- We say we'll fix it *if* he re-signs the lease
-- We fix it later on
-- We don't fix it at all and just say "learn to live with it"
-- etc, etc, we could get creative

My point of this post is ALWAYS evaluate your decision as a business.  We didn't make the decision to fix because he's a nice guy.  We made the decision to fix because it guarantees a continued cash flow.  He pays on time and doesn't hurt the property.  It was strictly a business decision.  Not having this property rented for just a few months can destroy cash flow for the next 2 years.  If he was a horrible renter and we wanted him out, we may have chosen a different course.

5 houses

It didn't seem so long ago when we started this journey and we now have 5 houses that will be fully rented on October 1st.  With the cash flow + our contributions monthly we're starting to see a real noticeable surge in the bank account each month.  It's nice to be able to see the fruits of your labor come to fruition.  Obviously we still have a long way to go if we want this to be our main source of income but 5 houses is a great start!

A network out of thin air

So I've read many books on real estate.  A common theme I've read is that as you start to invest in real estate a network starts to establish our of thin air.  Let me explain.

Since we started to purchase real estate the following things have happened. Also in italics is  a benefit from each:
-- Real estate agents are calling us now with deals that meet our criteria.  We don't have to spend as much time on base research.
-- The bank is asking us when we're going to buy our next one. If this doesn't guarantee financing I don't know what does.
-- Renters come to us.  For house #5, we had a renter BEFORE we even put in an offer on the house.  Through the "network" we came across a person who asked if we had houses for rent because he was looking to move.  When we found house #5, we showed it to him.  He said he would move in, signed a commitment letter, and we offered, purchased, and he moves in October 1st, 2013.  If this isn't a motivator to keep going in real estate I don't know what is.  I NEVER thought we would find the renter FIRST!

I'm excited to see what other "network" items pop up without us even having to try.....

House #4 and #5 update

So house #4 is now rented.  The renter moved in September 1st.  The management company did a great job finding a renter.

The renter for house #5 is moving in October 1st.  Everything is in place and it's ready for the renter.  We spent about $1,500 getting it in shape (new carpet and such) and we're getting $1,100/month rent for about $350/month cash flow.  We even asked the bank if we could do a 5% down on this property and they agreed.  This time last year I would have thought that was impossible.  Is it a sign of changing times?  I think it's too early to tell but I can guarantee we couldn't have gotten that 1-2 years ago.

So the tally so far will be 5 houses owned and all will be rented as of October 1st, 2013.  We are looking to get 1 more house in 2013 before we're done and re-evaluate our strategy for 2014 (if we change anything at all).