Planning for the Future

 

Sometimes I wonder why I didn't name my blog differently because it's about so much more than my cat Lilly...

As many of you, I enjoy reading different blogs.  Many times I get creative ideas than I can use. Other times after reading a blog, I'm left puzzled.  Everyone is entitled to his or her ideas as that's what makes it so great.  But, there's always more than one way to accomplish something. 

Case in point, there's a few blogs out there whose premise is to "give people fish instead of teaching them to fish".  We're talking about money here.  A very touchy subject indeed but a very important subject the older you get.

I really wanted to direct this post today to the younger generation; those in their 20's or 30's or even 40's.  It's not too late to start on your path to financial independence.  After I got married, my husband had this idea to be financially independent.  Yes, it was a much different time back then, but we were young and lived in a small agricultural town.  Much of the town had not been developed and we started on our quest with real estate.  Rentals to be exact.

Now, I know a lot of you will immediately say, "we've had rentals and they were a disaster".  Yes, I can totally understand.  But, there is a way to not have a disaster.  It's all about location and screening your potential renters.

We were like any other working couple back then.  We had purchased our first home and two years later we decided to build a home on some property we had bought.  So, we rented the first home. A couple of years later, we sold it for double than what we had paid for it.  We then bought a large parcel of undeveloped land and gradually build multifamily rental units on it.  Little by little, we continued along this path.  We had success during this time because the small community we lived in needed housing and land prices were cheap at that time.

We lived in this community for 22 years before we decided to move across the state to the "big city".  After being in the big city atmosphere a couple of years, we sold all our real estate in our small town.  And, we reinvested this money into new properties in the big city we lived in.

Currently, we've been living in California for almost 8 years now and we just now sold our last property in Washington.  For the past three years, we have been selling off our Washington property and reinvesting in California property.

What I'm trying to say is that real estate can be an extremely good investment in the long term.  It's been good to us as the rental income has always attributed to our monthly income.  But, this is not a "get rich fast" scheme.  It takes years and years to reap the benefits.  Which means, if you start now, chances are you will have a nice little nest egg when and if you decide to retire.

Here's some things to remember:

- Location:  It doesn't matter whether you live in a small town or big city, location is the number one factor as to what kind of renters you will attract.  Good location and nice property makes it much easier to get excellent renters.

- Monthly Rent: There's a lot of landlords out there that want to bleed their renters by increasing the rent at every chance. Weve never been that way. We invested in nice property and have excellent renters. Hence, it's very seldom that we increase the monthly rent. We only increase the rent when necessary to offset the increase in fees that we may experience.

- Money for Rainy Day: It doesn't matter what type of rental property you have, you have to have a little money put back in case of disaster. It can be anything from repairing an applicance to putting on a new roof.  It's imperative that you have money on hand to keep your rental in top condition.  You owe it to your renters to keep it in order.

- Mortgage: You always need to think about the worst case scenario, what is your exposure.  Please do not get an adjustable rate mortgage.  You can't see the future and it could cause you huge problems if the interest rate suddenly increases.  Be safe in your investments.

- Home Equity Loan: If you think the real estate market is hot and you want to jump in and buy, please don't take out a home equity loan.  Again, you can have a disaster; especially if the property you buy drops in value.  Then you are in the negative. Be cautious.

- Stepping Stones: Looking back over these past 40 years, I think real estate worked for us as it was a stepping stone.  We kept our properties and sold them years later at a profit.  We invested those monies into new properties.  We started out with our first home which we paid $17,000.  I know, that's not possible today.  But, there are some deals still out there.

- Negotiate: I live in one of the most over priced real estate markets right now.  At the same time, it's a hot market because of the location.  But, there are still some bargains out there.  Many buyers are wanting to get out of their mortgage and are willing to negotiate.  They can be desperate in that they don't want the property to go into foreclosure. Look for these deals as you can save a lot of money.  Believe me, as my husband and I just purchased one of these properties.

- Screening: Today potential renters complete a rental application whereby the landlord can review and order a credit report on the applicant.  This is very critical; believe me, many times we could have been taken for without getting the credit report.  It's imperative.  And, there are online agencies that you can sign up for to take care of this for you. 

Yesterday, we met with the painter for the property we're buying.  Up until the last few years, I use to paint all the rentals myself.  I enjoy painting and it saved a lot of money.  We managed our own property too as we like to keep a tight ship and control our rental units.  I think this helped us very much.  Now, we have a wonderful real estate professional who takes care of many things for us. At the same time, the final decision making is always left to us.  

What I'm trying to say is we don't know what the future is going to hold.  When my husband lost his job when the sugar company closed many years ago, he was vested but lost his retirement. It was a bad situation. We said never again will we let that happen and we started on our real estate adventure.  Yes, my husband easily obtained another job that he kept for almost 40 years. But, we had our safety net of our real estate which we were in control of ourselves.

Also, please don't forgot about other investment instruments that can add to your retirement such as IRA's, 401k's, and whole life insurance.  It can be a hardship to save when you are young, but believe me, as you get older, you will be so thankful that you've taken this path.  And, for those of you who are young, you can't depend upon Social Security as it may not be around.

My advice  is to look into investing; safe investing that can grow over time and don't be talked into get rich fast. Do your homework and be informed whether you are buying real estate or an investment instrument.  It's your money and you don't want to make a poor investment.  Better to be cautious and not worry.

I hope my rambling on today can help someone out there in blogland.  Thank you dear readers for stopping by today.

With my best wishes,

Pat