How I Turned My Home into an Investment Property

Hey friends, Leigh Brown here! Today if you’re wondering why I’m in a t-shirt and not in my professional REALTOR® garb, it’s because I want to talk to you incognito. ‘Cause across the street from me is my first rental home. Now, why is that my first rental home? Because frankly, it was my primary residence and at that time I decided I needed to think about real estate as an investment property and not just as somewhere to live. Now, a good rule of thumb in real estate is to keep all the real estate you ever buy. Now, here’s how you do it. I bought that house for a lot of really good reasons that make it a great rental property too. Low tax district, great school area, it was in a great neighborhood with fantastic neighbors, the bedroom and bathroom count was solid. By the way, in North Carolina 3 bedroom 2 bath is kind of what you need at a minimum on a rental house that make your good numbers. And I really enjoyed the house, didn’t really want to let it go. So, what happens is I was ready to move into the next house, because I had gotten married. It was time to move up and get something
different. In that time frame, I was thinking about this house and how did I learn how to keep it. I called a professional property manager. Now, know this I’m a Professional REALTOR®, I’m an educated and experienced person. I don’t manage my own properties. Because I’ll tell you this, property management is a high headache and low margin business and you need somebody that knows the
laws and is strong enough to make people behave. You might be like me, we are pretty tough business people but we get real soft when there’s somebody with a sad, sad story. A property manager protects you from that and they also help you with numbers. Because even REALTORS® get sucked into thinking their house is more special than every other house. It’s like millennials, I think we’re all like millennials. You think everything’s better when it’s ours, huh. I digress, so think about this. You call the property manager and say, “What would this bring for rent?” Now, I take that number. and then I’m gonna factor in how much I pay the property manager in my area, as in many areas. Use a number around 10% of the monthly rent, is what you’re gonna pay them. Now, some of y’all think, “But Leigh that’s a lot of money” No, it’s not. Not when you have a tenant who misbehaves. It’s only a lot of money if you have a
great performing tenant and that happens sometimes but sometimes it doesn’t. So, it averages out over the long haul. So, quit being cheap, hire great people. So, then I’m going to take the rent. I’m subtracting out the property manager fee. Then I’m going to factor in what’s called a vacancy rate. In my numbers and calculations knowing what the markets doing, I use 95% of the annual rent as what I expect to get for rental income. You’re always going to have a little downtime in between people, if you don’t, so much the better. Now, I’m going to factor in my savings account. ‘Cause you need to have a little bit of a slush fund savings account for repairs, for any kind of things that you take care of ’cause you still own the house. Always do your deferred maintenance y’all. Now, take a look at the numbers again. We got our incoming minus those expenses. Now, you’re gonna minus out your house payment, minus out anything you got to pay in the way of landscaping. Pro tip, I have my lawn company come 4x a year to take care of the grass, so that it always looks good. ‘Cause you do not want to have to come back from scratch friends. Now, a tree did fall alone in a few years ago. So I had to spend all of my slush fund. And then some, but it replaced the roof and we got a new front porch it was fine. So, you’re thinking about this. I’ve owned this house now, and well for almost 20 years. Been out of it for 15, which means in those 15 years my tenants have made the mortgage payments on it and it’s pretty close to paid off. Now, I’ll give you another pro tip. When you buy a house it’s generally a 30 year fixed owner-occupant mortgage. That’s gonna to be a better rate than investors get. Talk to your mortgage lender, talk to your bank about refinancing the house into the correct kind of loan. So, that you are being very honest and honorable and that will help you be a good risk for future properties. Now, if you have questions about buying investment properties or how to do this. Hit me up here, make sure you subscribe for more. Because when you’re talking to Leigh Brown, there’s always something to learn.

Leave a Reply

Your email address will not be published. Required fields are marked *