Growing Money

I have a rental property located in Philadelphia, PA. It is a rowhouse, 2 stories high, and has a basement. My previous tenants were really good and hardly bothered me. Unfortunately, they moved out during the summer of 2007.

I had new tenants in September 2007, after going through much trouble. I had to hire a real estate agent to find tenants, after lackluster results of trying to do it myself.

My current tenants pay rent every month, but they barely make it by the due date. They have on occassion miss the due date but I have excused them, hoping they would send the next rent payments out earlier in return. They never did.

Recently, my current tenants had been calling me often and reported several issues. There were problems with the house.

Issues:
1. The toilet tank was overflowing nonstop and they had to switch off the water and only switch it on temporarily whenever they use the toilet. The toilet tank needed to be replaced.
2. The front door did not close properly. The door may need to be replaced.
3. The sink pipes in the kitchen were leaking.
4. The sink pipes in the basement were leaking.
5. The pipe connecting to shower head was broken and needed to be fixed.
6. The pressure on the hot water pipes were weak.

I hired a repairman from Philly, referred by a friend to fix all the issues in the house. Since the repairman lives in Philly, we communicated by phone and I mailed him a check.The total bill came out to $930. He was able to fix all the problems.

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In October, my tenants called me up for an issue that were having in the house. They told me that the heater was not generating any heat. Since I live two hours away from Philadelphia, it would be inconvenient for me to look at the problem. Plus, I have no experience in fixing heaters.

I called up my friend, who owns two houses in Philadelphia. He gave me his contact who does repairs. The contractor was able to look at the problem and fixed it on the same day. My tenants were very satisfied and called to thank me.

The repair job cost $250. The handyman responded fast and fixed the heater in less than an hour. I was pretty satisfied, considering that all I had to do was make a phone call.

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My previous tenants had left at the end of July this summer. They had been renting from me for almost 2 years. I was hoping they would stay longer, but the husband had to relocate for his work. They were good tenants and did not give me any issues.

Instead of hiring a real estate agent, I thought I could find new tenants myself. I posted up an ad on Craigslist and the web for my rental property. I received a lot of emails indicating that they are interested in seeing the place. I did some preliminary screening over the phone.

Since Philly was two hours away from New York City, I had to schedule a day for my trip. I went there on a weekend. Two prospects were supposed to show up to see the house. Unfortunately, I waited for five hours and nobody showed up. I called them and one of them told me her car tires broke. The other one didn’t answer the phone. I couldn’t believe how bad these prospects were.

I went home that day very disappointed. I knew it wasn’t so easy to find tenants, despite having so many people interested in the house. Eventually I gave up and called my real estate agent. I told him I was looking for tenants and let him do all the dirty work. In return, he would receive a month’s rent for finding me tenants.

A month later, in September, he found me a tenant with decent credit history. The tenant’s occupation is a mechanic. He collected the security deposit and first month rent for me, deducted his fees and mailed me a check.

The monthly rent for my property is now $900, compared to $950 from my previous tenants. Hopefully these tenants are good and wouldn’t bother me much.

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I made a trip to Philadelphia last Saturday (7/28/07) and went to look at my house. My tenants have completely vacated the area, so I inspected the house for any damages. I checked the rooms, the doors, lights, closets, cabinets, etc to make sure they were in good working order. I did not see anything in particular that needs to be repaired.

I also had two appointments for prospects that wanted to see the house. One was for 3:00pm and one was for 6:30pm. I waited until 6:00pm for the first prospect and called her several times. She finally answered the phone at 5:30pm and with an attitude, told me that her car broke down. The second prospect did not return my calls during the whole day. It was very frustrating to deal with people who do not have any responsibility. I definitely did not want them as tenants.

I left my house at 6:00pm and went to downtown Philly. I spent some time walking around and thinking about the Philly rental investment. Is it worth it to own a house in Philadelphia? The local economy in Philly is weak and there has not been much appreciation, if any, in my house.

Do you own a house in Philly? What do you think of the property appreciation potential in the short term?

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Since my tenants are moving out at the end of July, my house will be available for renting on August 1. I have posted up an ad for my house on Craigslist for rent and have received many inquiries. All of them ask to see the house. I screen the prospects over the phone carefully. Unfortunately, my tenants still live in the house, therefore, it is inconvenient for me to show the house to everyone. My tenants have shown the house to one person so far and she really liked the place and said that she is willing to move in. The prospective tenant has two kids and a stable income and is planning to live in the place for the long term. She seems like a good tenants, but I will do a credit check on her.

Characteristics of my ideal tenants:
1. Always pays rent on time (by the 1st of the month)
2. Maintains the house in a good condition
3. Does not bother me for small issues
4. Plans to rent for long term

I have to find a website that will process background/credit checks for me. if you know of any good sites, please let me know. Also, if you have a house in Philadelphia and are looking for a new tenant, let me know. I have several good prospects who are looking for a house but since I only have one house I can only fill one.

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My current tenants are moving out at the end of July. They have lived in my house for more than a year and have always paid their rent on them. They have been good tenants, never bothered me. I would love to keep them but they are moving back closer home.

I am planning on making a trip to Philly on July 21st. I will be meeting my tenants for the first, but I will need to be there in person to handle several issues:

1. Inspect the house
2. Return security Deposit to tenants
3. Collect the house keys

Now, I need to look for new tenants.

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The New Rich Are Building Bigger

Excerpts:

“In 1998, industrialist Ira Rennert decided to build a 29-bedroom mansion on 110,000 square feet of Long Island waterfront and ended up in the middle of a lawsuit.”

“As the rest of the housing market struggles, the very high end is thriving. The Dallas-based Institute for Luxury Home Marketing estimates that home sales at the $5 million-plus price range rose 11% in 2006, compared to a 8.4% decline in overall housing market sales. Between 1999 and 2005, the institute says, sales of homes for more than $1 million skyrocketed over 500%. Today, there are seven homes on the market priced at $100 million or more. In 2005, there was just one.”

“In the near future, there may even be a billion-dollar home. Almost a decade after the Rennert estate debate, Indian billionaire Mukesh Ambani is causing a stir in Mumbai, where he is building a 60-story, vertical palace that will include three floors of Babylon-inspired hanging gardens and three rooftop helipads. Ambani will reportedly spend $1 billion on the project, which is scheduled for completion in 2008. That’s $1 for almost every citizen of his native India.”

“But some believe Ambani’s desire to express his success as chairman of Reliance Industries (RELI.) with a 500-foot-tall home may be justifiable — and not just because he needs the room for his 168 cars and 600 servants.”

“Self-made millionaires and billionaires in particular are notorious for building or buying over-the-top homes. “It makes them more willing to make a statement,” Goodwin says. “Old money tends not to like to show off as much.” These trophy homes are usually “very large, very interesting, and not necessarily resellable,” in Goodwin’s words. But he wouldn’t call them tasteless. “We always joke about new money being garish, but I think that’s more of the old money being jealous that they can’t let go like that,” he says.”

“As Ambani’s tower home proves, more and more newly superrich foreigners are finding themselves in the ‘flamboyantly wealthy’ class. In 2004, Ambani’s fellow countryman, Arcelor Mittal (NYSE:MT - News) Chief Executive Lakshmi Mittal, spent more than $100 million on a mansion on London’s exclusive Kensington Place. Sheikh Hamad of Qatar recently took nearly $200 million of his petrodollars to London and bought a 20,000-square-foot penthouse overlooking Hyde Park. Canning Fok, managing director of Hong Kong-based holding company Hutchison Whampoa (huwhy.pk.PK), recently handed over $44 million for ‘Hong Kong’s Chateau de Versailles.’ And in the English countryside, Russian oligarch Roman Abramovich owns a modest $34 million, 450-acre property.”

“Today’s big-spending billionaires may have their pick of ultra-luxury properties, including Donald Trump’s $125 million Palm Beach property, a Versailles-inspired $125 million Los Angeles mansion, and a Turkish entrepreneur’s $99 million London creation.”

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My father saw an ad for new condos in Brooklyn. The ad displays one 1600 sq. ft. duplex for $438,000. We went to an open house last Sunday. We found out the sellers misled us. The prices were different (see below). In any case, we looked at all the units for sale. All the units we looked at were on the walk-in floor and were duplexes. The top floor hosted the kitchen, living room, and bedrooms. There was an internal circular staircase that leads to the basement. The 1600 sq. ft. apartments had huge basements. The two bedrooms had two baths. The bathrooms were all titled up, making it easy to clean. The master bedroom had a bathroom with a shower stall instead of a bathtub. The best thing about the condo was the location to mass transportation. It was only a five minute walk to the D train on 71st. My father likes the short walk to the train, but he didn’t like the layouts of the apartments, and that’s the end of the story.
Here are the prices from the sheet they gave us:

The Bay Ridge Condominium
#A - 2 Beds, 2 Baths 1638 sq. ft. $479,000
#B - 2 Beds, 2 Baths 1638 sq. ft. $479,000
#C - 1 Bed, 1 Bath 508 sq. ft. $269,000
#D - 2 Beds, 2 Baths 1638 sq. ft. $479,000
#E - 2 Beds, 2 Baths 1350 sq. ft. $459,000

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I joined my friend in looking at some property in Hackensack, NJ. There was a new development going on Prolifly St. My friend was looking at a 1500 sq ft 2-bedroom apartment, priced at $399K. The condo’s design was loft-style, so it was spacious. It has two baths and a walk-in closet in the master bedroom. The condo comes a reserved parking space on the ground floor. The location of the building was right next to a 24 hour Rite-Aid store. The NJ Transit train and bus were two blocks away. The George Washington Bridge is only 8 minutes away by car.

My friend was looking for an apartment for himself and his girlfriend. The place would be a comfortable living for both of them.

I was looking at it from an investment standpoint. I ran some numbers in my head and figure I would need at least $2500/month in rent to cover the expenses of owning it. Even though the apartment is very spacious and would definitely be a luxury living, I don’t think it would be likely I can rent out the apartment for $2500.

Hackensack is very close to New York City. The property there has a very good chance of appreciation in the next few years. My friend and I predict that the apartment we looked at may hit $600K in two years.

Here is some information on the building:

Ambiance of Hackensack

About Hackensack, New Jersey

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Empty Spaces Inc. said…

just curious, if you’re good at making money in the stock market why not stick
to it?& why would you try RE investing after its already been appreciating
for several years and may be peaking in most areas?

The stock market is unpredictable. No matter how good you are or how well you have done, there’s no guaranteed of future results. Granted, I have done well in the stock market since I have officially started investing and I’m confident I’ll continue to do well, I cannot depend on that to make me rich. Also, my earnings in the stock market is not steady. There are some months I go into the negative zone, and those months are hard to bare even though I have very high tolerance. It’s not good to be constantly picking stocks in the long term. It’s very time-consuming; I’ve spent a lot of time reading up on companies and financial news. Also, studies show that you’ll likely be beaten by the index in the long run. Even if I can match or slightly beat the index in ten years, I would lose in time and opportunity because I’d have spent thousands of hours. An investor in the index would have done nothing but did not sacrifice as much time as I did. Unless I can beat the index by a huge margin year over year for many years, it’s not worth spending hundreds of hours a year.

I admit my view has changed slightly. I’m not against investing in individual stocks, but I advise caution, because many people go in without really understanding the risk. Play with money you can afford to lose.

Real Estate investing is an alternative to stocks trading and in many people’s eyes, it’s less risky. I agree, because real estate property is tangible and with the increasing population, real estate demand is bound to go up. My rental property is in Philly, which is not a hot area like NYC or San Diego. Even though the property value is not skyrocketing, I still have rental income to fall back on. The rental income covers my mortgage and property expenses. Basically, the tenant is paying for my house. Eventually, the mortgage will be paid off and I will own the property. It is a long term investment and property value will go up. So far, my real estate investment has been less stressful than my stocks investment. I get a check every month and my tenants never bothered me. Hopefully, I can be this lucky for every investment property.

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