Leaping Into Real Estate Investment

My wife and I are about to buy “multi-family housing” as an investment. That’s the property pictured above. I never had any interest in this sort of thing. As in introvert, the thought of interacting with tenants was repellant to me. Besides that, there was the small matter of money. I’ve seriously eschewed debt since I was a teenager. There is no way I would borrow from a bank to buy property. But circumstances and realities change.

The money has come, slow but steady, since the 2002 publication of my chicken plucker plan book, and the Planet Whizbang mail order business that book birthed. It is a relatively modest savings, but much more than I ever thought I would be able to save 23 years ago (the time of a significant Great Depression in my life).

With the accumulation of one’s life savings, and the onset of old age, Marlene and I are faced with the problem of how to responsibly manage our resources for our elder years? How do we ethically, and reliably, and safely put our savings to work so that it generates some income? This is especially challenging in a time of high inflation.

There are, of course, all kinds of ways to invest money. But as a “retail investor” I’m not confident that conventional strategies are best, especially since Marlene and I are late to the investing party.

If we had invested a portion of every paycheck into something like a Vanguard index fund, starting back in our 20s, our financial future would be considerably more secure. But we did not do that (we tried). Those were very lean years for us. Marlene stayed home to be a mother (and homeschool teacher) and we barely kept the bills paid with the money I made doing carpentry and remodeling work.

So our reality is that, at 65 years of age, we need to exercise some intelligent stewardship of our modest savings; to put it to work in a less complicated (easier to understand), more down-to-earth, and tangible way. Owning and renting apartments seems to fit the bill.

It so happens that all of this is now more doable than it ever was because my youngest son, James, bought a 5-unit apartment house last year. It is one street over from the place we are buying. The initiative he took to buy that place impresses me to no end. He’s not even 30, but he’s thinking ahead. He’s a whole lot braver than me when it comes to taking on debt (he didn’t get any money from me). As much as I’m personally against debt, I will concede that there are smart ways to use it.

It helps that James is not an introvert. Not at all. He’s remarkably good with people, and he’s surprisingly savvy about this real estate business. So much so that his mother and I feel confident about paying him to manage our 4-unit apartment.

Our thinking is that James will manage the place and I’ll get involved if there are repairs or improvements that need to be done. As Marlene and I age, James will continue to manage a secure income source for us. When I die (statistically, I’ll be the first to go), he can continue to see that his mother receives the income. When Marlene and I are both gone, the property will go to our three sons. They will then have options for selling or keeping the income ball rolling. That’s the plan.

The place we are buying has been owned by the same local couple for over 30 years. The man was in my class in high school. They have another 4-unit in the village. They are selling because it has become too much to manage the two units (he has some health issues). They have maintained the property very well.

It’s interesting to note that the property James bought was also owned by another couple for over 30 years, and they are friends of our family. When they realized James had an interest in buying, they were helpful in making it happen. They sold because they moved out of the state.

These properties are in a nice area of a small rural village in upstate New York. It is only 6 miles from our home.

Marlene and I saw this property listed on the local Facebook page and both thought the same thing… we needed to check it out! We wasted no time in calling the real estate agent (a local woman we know). I think we (along with James) were the first prospective buyer to look at the place. Other appointments were lined up after us for the next couple days. There was a LOT of interest in the property.

I called the real estate agent a couple hours after seeing the place. I offered full asking price (it seemed like a reasonable amount to me) and explained that we did not need financing. I sensed from the agent that having the cash to buy made a big difference. She told me that she would not schedule any more viewings, but needed to follow through with the viewing appointments already in place. She would call me a couple days later.

I got a text two days later asking if our offer was solid, or would we be willing to pay more? I replied that it was the best we could do. Fifteen minutes later, our offer was accepted.

All of this happened last month. We would be closing this week, but there is one little problem…

One tenant, a young woman, has not paid rent for a long time. I don’t know how long. Just “a long time.” And she won’t leave.

Before viewing the property, James told Marlene and I that we needed to make sure all tenants were current with their rent. If there was a delinquent tenant we needed to not buy the place. Or, we needed to stipulate in the purchase offer that the tenant be out before the purchase is finalized. That’s what we did, and now we are waiting. It could be months before the eviction process plays out.

I’m curious to know if any of you who read this have purchased rental property as an investment and, if so, what has been your experience?