ISBN: 9781620957660
Dedication
This book is dedicated to my wife and son, who I could not have been successful without their continued help and support on all the properties.
&
Sharavan Govindan, friend and colleague, who pushed me on a regular basis to write the book and without his persistence it would not have happened.
Purpose of the book:
This introduction will be short because I usually like to jump to the meat of a book and attempt to see if it’s something I’m really interested in or can learn something about. Everything in the book is exactly what my wife and I are currently doing to retire. It is not theory, or guess work, it is our experience in buying very cheap (slumlord) type single family residential properties, doing a quick make ready and renting them to lower income families. The intent of this book is to show others exactly what we have done to prepare for retirement since we lost what little we had in the stock market and recently lost approximately 40% of our 401K, and we bought our home a little late in life to reap any real rewards from the equity. The book is short on purpose as I don’t think it takes a 2”-3” thick 1000 page book to show what we’ve been able to do. I hope to skip as much fluff, as possible just to fill pages. I will discuss in detail with step by step instructions for each property we own and rent. We began with a $20,000, 2 bedroom/2 bath, pier & beam house and now have approximately $900,000 in rental properties. The words of the book are my plain, straightforward sometime Texas vernacular descriptions. There is nothing in here you can’t do if you will only take the first step and just start.
This does not take rocket science or higher levels of education; it is for folks that need to do something that will help give them the kind of retirement they desire. I have a room full of books. Most of them have some good parts that directly or indirectly helped shape our retirement rental portfolio ideas. Once upon a time in my life I sold cars for a short period of time and was much more interested in what people did for a living than selling them a car. Later when I traveled for work, I was very curious about what others did at work and what their interest might be. My radar ears are always up and ready for any opportunity that sounds like it is something we can do. I once sat next to an older fellow on a flight during one of my business sales trips, and after a bit of chit chat, I learned he had hundreds of rental units (far more than we desire) and he actually took the time to email some documents on how to structure the rent houses we had (in an LLC, or Corp or individual houses etc). We did not follow his guidance and generosity in sharing his information in its entirety, I found it interesting and amazing at the same time, how much people are willing to help if you ask. Like a lot of baby boomers, I’ve had a good life so far, recently turned 60 years old and we are quickly approaching the age like many of you who would like to retire from the kind of job where you get up, get dressed and go to work for someone else. I have also constantly talked about or had my mind searching under every rock I could turn over some way we might retire with an income that could possible replace the income we have now as well as be able to pay for higher live cost and higher medical insurance at retirement.
We now believe that we have a plan in place and more importantly we are working on that plan every day. We are so pleased with ourselves that we simply wanted to share and demonstrate what we have done in a step by step guide that you can follow and achieve your retirement goals. It is safe, secure, and you’re in control of your retirement. It can be done in a short period of time, depending on how much effort and willingness to work you may have. We will show how to get started with very little money. By far, the most difficult portion of the entire plan is to begin or simply start NOW! Nothing fancy, nothing difficult, you just got to do it as Nancy Reagan or Nike used to say. Opportunities are out there for everyone and it is your responsibility to act. No one will knock on your door and say come on, I have something I want to give you. You have to swim out to the ship in the water it won’t come in and get you.
I will give a little background about us and where we came from, our skill set or (I should say lack of skill set) and basically explain that if we can do it, anyone with the ability to act, can achieve your goal and you can go as far as you choose, and create as much wealth as you desire. However, I cannot stress enough that the most difficult part is taking action. The world is full of great ideas and good luck comes to those that ACT, not desire, not dream, not wish, nor hope, but put together a target or goal and ACT ON IT. NOW!!! Action begets REACTION. If you do something, something will happen. If you do nothing, nothing will happen. Our goal is neither to be rich nor have a large bank account, although that is certainly possible with this plan. It is simply to have an income stream that will replace our current income when we choose to retire. I may work until I’m 65 or I may work until I’m 68 or longer but whatever decision we make today; we ask ourselves will this help get us what we want when we choose to retire.
A little about who we are: (Randy & Debbie McDaniel)
We are both native Texans and we are both non-college graduates. I was born in Dallas, TX and grew up in government projects in south Dallas. At the age of 7 after my dad was gone (no need to explain the bad stuff), my mom kept my two brothers and sister as best she could and stood in line for powdered milk, and cheese in the mid-fifties. She decided that she was not going to be able to raise the four of us and provide any kind of long term life she had hoped to provide. She made the tough decision to take us to the Methodist Children’s Home in Waco, TX. This turned out to be one of the best things that ever happened to us. I stayed at the home until I turned 18 and then move back to Dallas to get a job, and help my mom get a little better home. When you spend most of your life in a protected environment there are some things you miss. I did not really know how the world operated, and how to manage money. I did not understand checking accounts or borrowing money for an automobile or the importance of paying things on time. After watching many TV commercials at the time about computers, I asked my mom if she would consider borrowing $1500 for me to go to a computer programming school (I had no idea what I was getting in to) but I knew I wanted something better than loading 18 wheelers with milk every day or working at Kip’s Big Boy as a short order cook. These are just a couple of my many low-paying, labor oriented jobs. I was always gainfully employed and put in lots of overtime at each opportunity and most of the time I had two or even three jobs at once. I got my first computer operator job (3rd shift, 11-7) and, at the same time, worked as a short order cook and cleaned up milk racks at grocery stores on the weekend. I continued to pursue better jobs and finally got a chance to move into computer programming. After 4 years of not being a very good programmer (though it did give me a fantastic background with buzz words, acronyms etc), I moved into selling computers and have been involved in that industry ever since (almost 3o years, I hate to say it because it makes me feel old or I should say experienced). It is another topic but I have come to believe that age really is as much a state of mind as anything. If you feel old, look old, act old, you may be old. But if you never quit learning and get out in the world, and stay active, there is a good chance you will not feel, act or be nearly as old. I do know clocks and calendars are all man-made, so age can truly only be the guide we all use for reference, but you are as old as you feel. Enough of that! There is much more to our life stories but perhaps in another book. In a nutshell, we’ve stayed out of trouble and basically worked hard most of our lives.
My wife was also born in Texas and was raised in Prosper, TX where she finished high school, got married, got divorced, and knew every person in town since she was a little girl. She also had a great work ethic like me. Unfortunately neither one of us finished college or traditional higher education. She later moved to Van Alstyne, TX, a small town about 40 miles north of Dallas. We met in a jazz bar, in Dallas, where she had gone out with a 60+ year old female friend. I was there after a day of travel having a drink. I noticed she was being hounded by an older gentleman and she was attempting to be nice and avoid him. I simply went over and ask her if she would like to dance (I could not dance then and still can’t) but she said OK. We went out to eat that night, dated, lived together, & got married, have a son and we are doing well in Texas. Like I said, I want to cut to the chase as much as possible so please forgive the abbreviated background. It’s actually kind of fun reminiscing a bit.
My wife is much more mechanically inclined that I at repairs and has ideas of how something should be fixed primarily come from her. She is much better at taking something apart and making a repair than I will ever be. I don’t know if that’s a good thing or bad thing for most couples but for us it works just fine. One of her several jobs was working for the school district in the transportation department. She worked with the mechanics that repaired buses. She passed some of the tests on repairs, changing oil underneath the bus and more. She later moved over to parts department and chased down needed parts for the group. I seem to be unable to tell a left-handed screw driver from a right handed one. I don’t usually challenge her thoughts on house repairs and make ready. However we both recognize she wants things done right and I want them done, quick, and spend as little as possible. Sometimes I have to walk away and once in awhile she has to walk away so we don’t disagree too loudly. If we do disagree, we normally spend a minute or two discussing it and one of us quickly realizes when the other feels strongly about a particular approach to repair something. So far, it seems to work for us. I do believe this entire approach to retirement works well for us as a team for many reasons. When we started we often used our extra money to repair or improve a property vs. spending it on more stuff, so to speak. A partnership and lots of hard work are keys to our success so far. I think we are both pleased with ourselves if it’s okay to do that.
The great part about finding the right person is you can both explore things you like and don’t mind giving the other one enough room to fall down, get up and work hard so to speak. We have a great relationship, we both work hard, and our son is in a work program after school. He works at a local pizza joint and tells the teachers and others at school that he will manage rental properties, and sell houses we he gets out of school. For him, college will be a very tough road due to his dyslexia and the amount of effort it takes to finish some school activities makes it a very unpleasant experience for him. While I personally would like to see him attend college and give it his best possible effort, he seems to have other plans. He has participated in many of our rental property activities and helps in a wide variety of ways. We do act as a family unit and it’s been an interesting and fun journey. It is also good experience for all of us and it appears it may provide him with at least an alternative to college and he should do very well in real estate rental property. He is in no way afraid of hard work and has a great attitude, which should take him up the ladder of success.
I recently put together some workshop material so I could show others how we have put together our rental property portfolio. As a part of this book I will include several documents that we use as well as a PowerPoint presentation we use to demonstrate our plan to others. This will be included in the back of the book in the appendices. You are welcome to use any of the material or simply use it and/or customize it to fit your needs. The spreadsheets and other material will also be included in a USB flash drive, e-book or website.
The first step will be to describe how we began, what we have been doing, where we are as of today, and where we are headed. I will talk about the good decisions but more important the bad ones as well. We are always eager to learn from someone else and we attend workshops of various types. We also looked at franchises. We have friends that are creative and have started businesses with their talents and skills but none of them were exactly what we were able to do either due to lack of knowledge or skills or money.
We had great difficulty saving money so we joined my company 401K program in 1997 and this was the first time I had ever really saved anything and I was already in my mid forties (This is actually late to begin a retirement program, but I did not have anything else and as all the investment folks say “it’s never too late!). In addition to our 401K, we tried buying a few stocks when the market was going through the roof so it made it appear we were really smart. We took $2000 dollars and it quickly became $20,000 and almost as quickly we lost it.
I was never afraid to try new ventures but due to my age and time left before retirement, I felt like we were running out of time or at least time was growing short. Out of nowhere, a friend of mine called me and asked if I would meet him at Starbucks so he could tell me about his vacation in Isla Mujeres, a small island off the coast of Cancun, Mexico. We both got our usual coffee drink and after visiting for awhile and listening to him reminisce about his vacation and he told me all about the small island with fine white sand and snorkeling. I recalled having a vacation once and felt very much the same way and looked through the local newspaper to see if any jobs meant for me were listed. He was ready to move there, to live, work and play. Off the top my head, I said you need to find one of those snow cone machines, move down there, make some money and live on the beach. That was pretty much the end of the conversation and we both finished our coffee and headed back to our perspective jobs.
However from that simple conversation , out of nowhere I received a call from Steve and he started telling me about a customer he had (Steve worked at a local stock brokerage firm) that happen to own and operate a snow cone business, and had a second trailer for sale. He asked if I might be interested in joining him and starting a business making snow cones on the side. My wife and I knew nothing about snow cones or running a snow cone business but we decided to drive up to Denison, TX and see what she had. We observed her making snow cones, and she invited us inside the stand. We watched for awhile and asked constant questions about how to make snow cones and how much things cost and how she tracked sales, inventory, taxes and how many she sold daily. The lady (I think her name was Debbie also) was more than happy to answer every question, open her books, and offered to help every step of the way. I think we were enjoying how open she seemed to us and how eager she was to help. We left, went home and talked about it for a couple of weeks. The asking price was $6000 for the trailer and all the equipment needed to start.
We continued to talk to Steve and at first he also wanted to move forward with the endeavor. At the last minute or within a couple of days of the actual purchase, Steve began to feel like it was more than he could do at that time. I forget the exact reason but knowing Steve the way I do, I felt if he could join us he would. So Deb and I began talking about how we might buy the snow cone business by ourselves. We finally were able to pull together the $6000 needed to purchase the snow cone stand and we were off the races so to speak. We moved it to our home town of Van Alstyne and selected a spot where we had seen others have a stand. It happened to be at the intersection where you had to drive through in order to reach any of the baseball fields in town or any of the schools in town. We opened Sno-Ball Express as it was and still is called. Half way through the season and were able to make a total of about 6K-8K that first season and this was more extra money than we were accustomed to having at one time. I still had my job and she still had hers and we both worked the stand late in the afternoon and weekend for about 3-4 months. It was extremely hard work in terms of the amount of time it took. 7 days a week, and that’s only at the stand. The work at home at the end of each day made for very long days. I’m surprised we did not argue or give up. I think the extra daily cash helped a lot even though we did not have time to spend any of it anyway.
I only tell this entire story to let you know every step, on every house to get where we are today. We did not have enough money to buy a house when we began or at least we did not think so. The good news is, if you already have $5K-$10K saved up, you can skip this step.
This book is a step by step guide that we took on each and every property as each of them happened with slightly different circumstances. Each property required different amounts of money down, or closing cost or different amounts to make ready, repair etc. So now that you know what you should find in this book (a little about us, and how we made our first small amount of money for a down-payment), here are the steps we took on the first property.
At the end of the book there are several documents that can be used as a guide for many phases of the purchase, evaluation, pricing, and much more. There are several lists of useful websites, for things like where to look for properties, calculators for pricing, rehab pricing guides, tax appraisal district web sites on where to find who owns a property and much, much more. There are many ways to skin a cat but in our case it was much more like trying to herd cats. When you have zero experience, and have never been very good at using carpentry tools, power tools, painting, and hate things like cleaning, things can get spread around and it can seem like herding cats sometimes until you gather a little experience. It did get easier on each property, but each time we have been presented with one or two obstacles we had not encountered in the past. Learning is a good thing, and can require patience, however I do believe lifelong learning is one of life’s greatest pleasures.
One day, when I was not searching for a house and still no idea of what might be in store for our retirement future, I ran into a friend of mine that helped us get started with our real estate rental portfolio. I had no idea, what was in store nor was I looking for a rental property. I would like to stress, that if you’re looking for opportunities they are everywhere, and it is 100% up to you to simply be prepared to ACT when you are presented with an opportunity. We explored a wide variety of opportunities, most of which were not what we could do, or were capable of doing or had the money to do.
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