I got my first payment from Hard Money loan #6 today. I also got copies of the paperwork - mortgage, loan servicing agreement, etc. One thing that is slightly different about this loan is the payment due date and overdue dates. Normally, payments are due on the first of the month and overdue if not received by the 15th. This loan however, has payments due on the 7th of the month and overdue if not received by the 17th. No big deal. Just a bit different. Note that this setup actually gives the borrower less time before a payment is overdue - 10 days versus 15. Not that I expect any late payments.
In reviewing the paperwork, I noticed one other thing different than I mentioned before. I originally said the property was bought at auction for $272,000 and the lender was owed $488,000. Turns out, the lender was owed $524,000. That doesn't really matter, as the important figure is what the house is worth now - which still is around $300,000 to $350,000.
Full Disclosure
I have a confession to make. I have not been fully honest with you. When I said this was the reason I wanted passive income, that isn't the only reason. There is another reason: I have multiple sclerosis. The majority of the time, you would never be able to tell. I typically have no symptoms. Occasionally, however, I will have a flare-up, or "exacerbation," as they are called, where symptoms appear for a while and then eventually go away. This is known as the relapsing-remitting form of MS. The bad thing about MS, apart from the fact that there is no cure, is that it is a very unpredictable disease. I have had no flare-ups for over 2 years, but a couple weeks ago I started having some, probably brought on by the stress of being laid off. Currently, I have little fine motor skill in my left hand. Since I am left-handed, I cannot handwrite, my printing looks like my five year old daughter's printing, and typing is a bit of a chore. On the plus side, it gets me out of doing the Christmas cards his year. I am currently on a 2 week course of steroids, which should return functionality to me.
I was originally diagnosed back in 1999 or 2000. I was on a business trip and gradually started losing all vision in my right eye. When I returned home, I saw an ophthalmologist (although not in stereo vision - ha ha, a little humor for you) and was told I had optical neuritis, which is a typical symptom of MS. My vision mostly returned, although it is not 100% in that eye and probably never will be. I had some other episodes where I felt numb on parts of my body, again typical MS symptoms. After meeting with a neurologist and a battery of tests, I was diagnosed.
So why do I mention this? Because last March, Crystal left a comment on my blog saying she was in Section 8 housing because she had MS (and presumably it was affecting her ability to work). Since I saw that comment, I've been meaning to bring up my situation here, but there never seemed to be a good time. I've realized there probably never will be a good time.
Because MS is so unpredictable, I have no way of knowing how long I will be able to work. Hopefully, a very long time. However, I am attempting to plan for the possbility that someday I may be forced into not working, and to prepare for that, I want passive income.
Most people try to obtain passive income to get out of the "rat race," their nine to five job. To do so, you need your passive income to be greater than your expenses. For me, my passive income needs will be higher than most. If I did not have insurance, my medicine for controlling MS would be almost $2,400 a month. This is on top of my mortgage and other living expenses. And when my wife and I retire, assuming no cure has been found by then, I will need to buy my own medical insurance, which will probably cost more than that. So passive income is something of a necessity for me if I want to retain the standard of living I am accustomed to.
Crystal, if you still read this blog, I hope things are going well for you, both in your housing situation and with MS. You've always been on my mind these past nine months. Sorry it took so long for me to write this.
I was originally diagnosed back in 1999 or 2000. I was on a business trip and gradually started losing all vision in my right eye. When I returned home, I saw an ophthalmologist (although not in stereo vision - ha ha, a little humor for you) and was told I had optical neuritis, which is a typical symptom of MS. My vision mostly returned, although it is not 100% in that eye and probably never will be. I had some other episodes where I felt numb on parts of my body, again typical MS symptoms. After meeting with a neurologist and a battery of tests, I was diagnosed.
So why do I mention this? Because last March, Crystal left a comment on my blog saying she was in Section 8 housing because she had MS (and presumably it was affecting her ability to work). Since I saw that comment, I've been meaning to bring up my situation here, but there never seemed to be a good time. I've realized there probably never will be a good time.
Because MS is so unpredictable, I have no way of knowing how long I will be able to work. Hopefully, a very long time. However, I am attempting to plan for the possbility that someday I may be forced into not working, and to prepare for that, I want passive income.
Most people try to obtain passive income to get out of the "rat race," their nine to five job. To do so, you need your passive income to be greater than your expenses. For me, my passive income needs will be higher than most. If I did not have insurance, my medicine for controlling MS would be almost $2,400 a month. This is on top of my mortgage and other living expenses. And when my wife and I retire, assuming no cure has been found by then, I will need to buy my own medical insurance, which will probably cost more than that. So passive income is something of a necessity for me if I want to retain the standard of living I am accustomed to.
Crystal, if you still read this blog, I hope things are going well for you, both in your housing situation and with MS. You've always been on my mind these past nine months. Sorry it took so long for me to write this.
Working On A New Project
I have had some more free time since I was laid off from my day job, so I've started work on something that was suggested to me back in 2005: write an ebook. I'm taking two of the rehab projects I've detailed here (House #3 and House #11, on this blog, although they were labeled as such before I was using tags to mark the entries and before I switched to a new numbering system) and adding some additional comments to them, based on what I have learned since or from those projects. I'll be sure to let you know when the ebook is finished.
Multi #1 Monthly Udate
I just received the latest monthly update for my investment in the apartment complex in Houston. Believe it or not, occupancy has increased AGAIN and is now at 97%. This is phenomenal and beyond my expectations. It surely cannot be maintained!
Total revenue has increased to over $195,000 last month, which is the highest revenue figure yet. As mentioned last month, rent concessions are down, which resulted in rental income increasing by about $7,000.
Some areas still ran over budget - admin expenses and landscaping. The increase in admin costs was due to one time charges for setting up check scanning direct deposit services. Landscaping was higher due to seasonal planting. Apartment turnover costs increased (but were still under budget) due to the increase in occupancy.
Net income for the property for the month was almost $25,000. A very nice month indeed!
Total revenue has increased to over $195,000 last month, which is the highest revenue figure yet. As mentioned last month, rent concessions are down, which resulted in rental income increasing by about $7,000.
Some areas still ran over budget - admin expenses and landscaping. The increase in admin costs was due to one time charges for setting up check scanning direct deposit services. Landscaping was higher due to seasonal planting. Apartment turnover costs increased (but were still under budget) due to the increase in occupancy.
Net income for the property for the month was almost $25,000. A very nice month indeed!
This Is Why I Want Passive Income
A week ago today, I was laid off from my day job of over 3 years. No warning, of course. I did survive two previous rounds of layoffs, so I suppose I can't ask that my luck hold out much longer. I did get a decent severance package and I already have a couple of interviews lined up. However, I don't like the idea that my income can be taken away at a moment's notice. Hence, my quest to get multiple streams of passive income.
Luckily, another opportunity came my way not long after I was laid off - call this one Hard Money #6. This is another mortgage lending deal that will earn me a 10% ROI. The property is in Livermore, California and was bought at auction by an investor who owns 10 properties in the area and knows the location well. He's already rehabbed 12 houses this year and netted about $500K of profits. His purchase price was $272K. The mortgage, of which I am a partial investor, is for $210K. The lender was owed $488K. Current market value of the property is about $350K. A conservative estimate would be the low $300Ks. So using a conservative value of $300K, we're at a 70% loan to value ratio. The property is a 3 bed / 2 bath, 1,125 square foot house built in 1955. The mortgage is interest only for 1 year with a ballon payment of the entire principle due at the end of the term. We expect the loan will be paid off via refininacing or a sale in 6 months.
I'm not going to replace my day job with income from this loan, but it is nice to have some extra funds coming in. And it's nice to know I have some options out there for generating income.
On another note, I'm starting to see more professional investors return to buying properties at auction lately. Maybe things are going to be turning around soon for real estate.
Luckily, another opportunity came my way not long after I was laid off - call this one Hard Money #6. This is another mortgage lending deal that will earn me a 10% ROI. The property is in Livermore, California and was bought at auction by an investor who owns 10 properties in the area and knows the location well. He's already rehabbed 12 houses this year and netted about $500K of profits. His purchase price was $272K. The mortgage, of which I am a partial investor, is for $210K. The lender was owed $488K. Current market value of the property is about $350K. A conservative estimate would be the low $300Ks. So using a conservative value of $300K, we're at a 70% loan to value ratio. The property is a 3 bed / 2 bath, 1,125 square foot house built in 1955. The mortgage is interest only for 1 year with a ballon payment of the entire principle due at the end of the term. We expect the loan will be paid off via refininacing or a sale in 6 months.
I'm not going to replace my day job with income from this loan, but it is nice to have some extra funds coming in. And it's nice to know I have some options out there for generating income.
On another note, I'm starting to see more professional investors return to buying properties at auction lately. Maybe things are going to be turning around soon for real estate.
