They all said: You can’t do that any more, page 5

We elected to mortgage the house instead of selling it.

A $30,000 mortgage on it gave us our $21,000 investment ($15,000 purchase and $6,000 fix up) back plus $9,000 cash.

The cash flow was $50 a month, after collecting the rent and paying expenses and mortgage payment.

Back to the MLS and on to more searching. Try Realty Trac, it can help you do what we did. We went on to purchase three more places, two duplexes and another house. Total rental income on these eight units worth $182,000, was $3,370 pr month. The total debt of $161,000 cost a total of $1,346 pr month.

Looking at this you are probable thinking “that’s good, but not great even if it only took ten months”.

But this was not to be the end to all. We increased our holdings to more than thirty-six rental units and then looked at small apartment complexes.

The first one we bought was a fifty-nine unit complex owned by a Bank. A broker we had met was brokering the property for the Bank and the previous two offers on the property had fallen through and it had been off and on the market for over two years.

Asking price was $1,320,000 and we went and looked at it.

For those of you that have never done this I would like to mention that we had never gone for any thing this big before either.

We met the broker and were told to pretend we were insurance inspectors so that we would not upset the tenants or the manager. After houses and duplexes this four building complex seemed huge. The fact sheet showed that we were getting more rent from our duplexes and houses and the tenants were of the same economic range. All we had to do was raise the rent and we would make money. The bank offered a no recourse loan and only 10% down, a real good deal so we signed a purchase agreement and started our ten days of due diligence on the property.

Wow, in our unit-by-unit inspection, that the broker said most buyers don’t do, we found three units to be totally uninhabitable.

Filled with junk and old appliances, ruined carpet and missing doors and in one case even the toilet bowl was completely missing. Instead of one listed as vacant and ready to rent we found five empty units and they appeared far from ready to rent. They were dirty and needed all sorts of repairs and painting was a necessity. We also found two bedroom units that had so many people staying in them we could not even count them and of course we had the expected, after what we had seen so far, two young men occupying an apartment with only a boom box and a pair of cell phones, plus a view of the parking lot.

For those of you, who don’t know? Say ‘Drug dealers’.

Over all maintenance showed neglect and we took pictures at every opportunity.

We didn’t wait the ten days but went back to the bank and said we need to renegotiate the deal.

We presented a list of what needed to be done and what it would cost. Empty apartments are negative income, plus the pictures of the worst things we had seen.

Realty Trac Page 6