Yesterday was a big day. I got added as a manager to my family’s real estate investment company. This is important because to take care of my mother and sister, I need to generate income, and as it stands, no income is being generated. My father left us a bit of a mess, and this is a big step in cleaning it up.
This past week, we received a call stating that there are roof rats in one of our properties. This is the second major problem that we have had with this property. The first one was when we first bought it, and it needed a completely new bathroom. The estimated cost of getting rid of the roof rats is a quarter of the revenue that this property produces. That means it is time for it to go.
Now, when it comes to saying goodbye to this property, the timing was actually right. We were just under the window to inform the tenants that we are going to sell the place. Now I am not sure we can sell the place immediately or if we have to wait for the tenants to be gone. We definitely have to wait for the roof rats to be gone.
Then the question becomes, what do we do with the money from selling the property? Spend it on exotic cars and fancy watches? No, I’m going to perform a magic trick. We could do a straight 1031 exchange and turn one property into two, or we could do an even bigger magic trick where we take the money from the property and spread it out as downpayments on four to five properties and either get a second mortgage on one of the other properties or finance the new properties. Either way, we will end up with three times the equity than we would on a straight exchange. It is unfair and something I dislike about our society, but when you’ve been given a hammer, swing it.
I have long thought that an average person should be able to walk into a bank and get a loan a lot easier. Multiple types of loans. There are properties, lots of them, that rent for more than their monthly payment, but you can’t just find one of these properties and point them out to the banks and get money. Banks lend only on extremely low risk, especially after 2008, and normal people can’t take advantage of this, but have just a little money, and all of a sudden, you can do a lot more.
Either way. The first step has been taken, and the journey has begun. Now we find out if I am David Copperfield or The Amazing Jonathon.
David Huzzard Writes 