Sunday used to be my least favorite day of the week. Every Sunday, I used to wake up with a life draining feeling of the weekend being almost over, dreading the inevitably approaching Monday. I loved my job but it consumed me. I knew I was a workaholic.
Every Monday I had a one-on-one with my boss to walk her through the weekly report, which she'd be presenting to the CEO and other executives at 9 am. I'd be on standby during the executive meeting to answer questions. Our CEO always had questions. I spent most of my Saturdays preparing the report and most of my Sundays worrying about the upcoming CEO quiz...
This Sunday Was Different
Sunday, Apr 30 2014 was different. My husband and I were now with Robert Kiyosaki's Rich Dad coaching program. 5 weeks ago per our coach's instruction, I wrote down our goal:
"I am beginning on my road to real estate riches March 20, 2014. In 5 years I will reach my Real Estate Passive Income Goal of $10,000 / month."
Our first rental income property was already scheduled to close on May 7th, 2014. I was determined to find our second property. We had mortgage pre-approval and enough room on a credit line to cover the down payment.
After putting kids to bed, I was looking through Kijiji ads trying to find a property with existing tenants and positive cash flow of no less than $200 per month. And here it was!
Grasping An Opportunity
My husband and I are interested in purchasing an income property in Barrie. If this property is still available, could you please send us some additional information regarding rental income and expenses that will need to be covered by us?
We will be able to provide pre-approval.
12:40 AM: The current rental income is 1200 per month and the tenants cover the utilities.
12:50 AM: Can we please make an appointment to see the place? We are open Sat. May 3rd, preferably in the morning and also Mon - Thu. evenings next week, starting 7:30 pm.
8:12 AM: Sure, what time Saturday works for you?
8:18 AM: Good morning! How about 10 am? If this doesn't work, any time will be good!
8:22 AM: Good morning, 10am works for me too.
I plugged in the numbers into my Excel template and realized the house was cash flowing at the asking price exactly the way I needed:
- $100 insurance
- $200 tax
- $600 mortgage
- $100 miscellaneous
= $200 positive cash flow.
$200 / month net cash flow was our criterion for getting new properties.
Morning of the Showing
Now I knew we should be ready to make an offer, if the property looked good. I started googling for a Purchase and Sale Agreement template. Found it.
I started filling out the template on my computer, but realized that there was no time to do it properly before the meeting. My mother-in-law noticed that I was in panic mode. She always gave good advice. She suggested to print a couple of blank templates and take a copy of our P&S agreement from our first rental house purchase, so we could fill out an offer by hand, if we liked the property.
The House Looked Great!
The house looked good based on our gut feeling.
It wasn't shiny, but it was solid. We'd already heard some landlord/tenant horror stories from friends and family, who thought our 50-Doors plan was crazy. So we were prepared to be non-judgmental and open minded about tenants and their ways of living. All rooms seemed just fine to us: a little messy with no doors on the closets, but livable.
We met the tenant. She was nice.
We loved the seller. She was friendly and very approachable. We said we'd like to make an offer. The seller asked us if it would be okay if she invited her friend who had some real estate experience to help her out during negotiations. Sure we said! and agreed to meet in the nearby Wendy's restaurant in about half an hour.
My husband and I filled out two copies of P&S agreement by hand. We copied all the terms from our first deal. Price 80K (10K below asking).
Seller reviewed and asked for 85K. We agreed!
Closing was set for May 30th. Here is a page from our hand written offer: