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in Real Estate Investing · September 8, 2020

Everything was going great, then COVID happened

We had it all planned out. Little Mermaid was bought, renovated, and rented within less than 3 weeks of purchasing it, the rehab of the duplexes was finally completed and all units were rented. We were just about ready to begin the refinance process, then COVID happened and it started going downhill real quick. This is why they say, plan for the unexpected.

The lenders we had secured backed out on lending, the tenants we had just moved in lost their job and things were not looking great. 

How COVID affected our Property Financing Process

If you read the individual posts for our property purchases, you know that we purchased our properties with 100% financing via personal loans and high-interest mortgages.

In March, we were in the middle of refinancing Little Mermaid and the Duplexes so that we could pay off the personal loans.

The loan payments for these loans were $3,000 per month. 

Without being able to refinance, we were stuck with these payments in addition to the mortgage payments. 

Every day that we couldn’t refinance meant that our return on investment was diminishing, but we didn’t give up.

We had to change our approach, get creative and settle for less than we initially wanted. 

It was not until June that we were able to finalize the refinance process.

Managing Tenants During the Pandemic

At first, it was just one tenant not paying, then there were two and eventually three. This meant that only 50% of our tenants were not paying. 

In July, we received a call from our Little Mermaid tenant that he had lost his job and was moving out. This was just 3 months after moving in. 

In August, we had one vacant unit and three non-paying tenants. 

Fortunately, we were able to re-rent Little Mermaid within 3 weeks and two of the tenants began catching up. 

We still have one tenant that hasn’t paid and unfortunately will likely not pay because he is incarcerated for domestic violence (a story for another day). Our hands are tied because of the COVID eviction restrictions, so we are working on helping the family get financial assistance. 

How the Pandemic Affected Our Finances

After freaking out (as usual of me), we had to come up with a plan. Reducing our household expenses became our priority which led to the acceleration of our move to Georgia. 

We hoarded all the cash we could and used lines of credit to cover property expenses until we could refinance. 

We were not able to get Forbearance for our home mortgage because that would negatively impact our refinancing changes, however, we were able to skip a payment for the personal loans. 

We rented out our Deerfield house and luckily got paid 3 months in advance which was a huge temporary relief. 

When we moved to Georgia, we were able to skip June’s mortgage, and then when the duplexes were refinanced in mid-June, we were able to breathe a little as it paid off a couple of the personal loans and lines of credits. 

The Impact of COVID on Our Profits

As you would imagine, if tenants are not paying, we are technically losing money. Fortunately, when it comes to evaluating deals I am very conservative and plan for the worst-case scenario. If the numbers still work, then it’s a deal worth pursuing. 

My concern wasn’t so much about our profit losses, but about our ability to pay for all of our obligations if all tenants decided to stop paying. We didn’t and still don’t have that much cash to cover all property expenses. Fortunately, we were able to manage with the partial rents we did receive.

As of the time of this post, we are just reaching a more stable point and I can finally breathe (at least temporarily). Except for that one tenant, all others are paying, but not necessarily on time. 

While we are not banking on lots of money, the properties are currently covering for their expenses which is all that matters at this time. If the property can pay for its mortgage and utilities, we are still making money in our book. We may not be cash flowing much, but the loan principal is getting paid by the tenants. 

This situation sucks, but we can’t do much about it. All we can do is hope that this passes soon and we go back to normal. 

However, note that this didn’t stop us from continuing investing, hence the purchase and renovation of Big Horn. We cannot let this one event ruin all of it for us.

Real Estate is a long-term game and we are all in!

5 Lessons the Pandemic Thought Us

  1. Having cash reserves available to cover unexpected events is a must-have.
  2. Being conservative when analyzing deals so that when a situation like COVID hits, you are not as concerned about profits.
  3. Being more proactive from day one to try to get rental assistance for tenants. 
  4. Having a more strict tenant screening process is key. Good tenants will make every effort to pay their rent.  
  5. Having a low expense ratio helps in situations where more of your money needs to be allocated to investments

Let’s hope for the best 🙂

Also Read Here is the Deal #2 – Purchasing Little Mermaid | How I Bought My First Rental Property With No Money Down… and Barely Made It…

This post may contain affiliate links. I may get commissions for purchases made through links in this blog.

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New Blog Post 🚨 In this week’s blog post I am New Blog Post 🚨 In this week’s blog post I am going over why we bought a short-term rental, our experience so far. Plus what we did prior, during and after purchasing our first short-term rental in March 2022, a Cabin in Blue Ridge, GA.

Check it out at www.beyondjustnumbers.com or link in bio @beyondjustnumbers
I can’t stress this enough. Some investors are l I can’t stress this enough. Some investors are looking to make money from day one, but that’s not always the case. It wasn’t for us and I’ve talked to a lot of rookie investors who have told me “Thank God I have my personal finance situation together.” 

This is just my opinion. Do you agree? Let me know in the comments!

Want to join a free community of like-minded individuals? Join our REI Coffee Chat Community where we talk real estate investing, personal finance and financial freedom, and much more! Link in bio @beyondjustnumbers

Want to learn more about investing in real estate? Read my blog www.beyondjustnumbers.com

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I used to think that investing in real estate was I used to think that investing in real estate was for the rich. I became in love with real estate while working for a real estate investment company that owned hundreds of units. This was back in 2011 and I was 20 years old at the time. I had less than 5 years permanently living the US, so I had no idea about anything. I grew up in Colombia and the only talk of money we ever had was the lack of it. 

The investors I worked for were a wealthy family, so naturally, I thought… Real Estate requires wealth. I don’t have wealth. Therefore, I cannot invest. 

I figured… well shit, I need become wealthy so I can invest in real estate. Eventually, after educating myself I realized how wrong I had it. You can build wealth BY INVESTING in real estate.

Took me a couple of years to figure it all out. Hence, why I didn’t start investing until 2019. I wish I had figured out earlier, but it is what it is. In just 3 years of investing in real estate, I was able to accumulate more wealth than I ever thought possible. 

Just to give you an idea…Did you know you could invest in real estate with as little at 3.5% of the purchase price? For a $150,000, that’s only $5,750. Buy a duplex that needs a little bit of work, fix it up, rent one side and live in the other. This will reduce your monthly expenses significantly, save the money and do it all over again.*

Of course it’s not that simple, but it’s also not that difficult. There are some particular steps and considerations which is  why I recommend doing further reading on the subject. 

Book Recommendation:
✅“The House Hacking Strategy” by Craig Curelop and ✅“Investing in Real Estate with No (and Low) Money Down” by Brandon Turner. 

#realestate #realestateinvesting
🚨 New Blog Post! Continuing the “Getting Star 🚨 New Blog Post! Continuing the “Getting Started in Real Estate Series” 

You’ve found a property either on your own or through a realtor, you’ve run your numbers, you’ve got a lender and now you are ready to make an offer. What’s next?

In this post I want to discuss a few items:

✅Key components of a real estate contract
✅How do you make a compelling offer to ensure you get the property you want
✅The main contract contingencies and how they work
✅Communicating with your realtor

I also provide real examples of what we have done personally. 

Check it out at www.beyondjustnumbers.com

Let me know what you think!
If I listed all of the hats, I’d never end 😂. If I listed all of the hats, I’d never end 😂. Anyone else? Show me the multiple hats you wear and tag me. Let’s have fun with some reels.

Trying to get good at the real game like @investinginyourwealth. How did I do?
The fact that you are not where you want to be doe The fact that you are not where you want to be doesn’t mean you won’t get there. Greatness takes time. Focus on what you control.

And remember, it’s okay to pivot.

#mindset #realestate #firemovement #realestateinvesting #realestateinvestor #rentalpropertyinvestor #rentalproperty #cashflow #motivation #financialfreedom #financialindependence #financialindependenceretireearly
We see a lot of advice around hiring a real estate We see a lot of advice around hiring a real estate friendly CPA. However, when you look up  CPAs that specialize in real estate, they can be pricey.  However, that doesn’t mean that other CPAs or tax professionals aren’t good. They might not be particularly aware of certain items, but they can research and collaborate with theirs peers. Perhaps it may require you to do a little of work to compensate. Things you can do:
✅ listen to The Real Estate CPA podcast or join the Facebook group
✅follow social media accounts of the pricey Real Estate CPA and take notes of what they are saying
✅attend free educational events 
✅read BiggerPocket book on Real Estate taxes 
✅if you know anyone working with a really good Real Estate CPA firm, ask them what they are doing

Then use that to go your CPA or tax professional and be like “Hey, is this something we can do for me?” They’ll probably say, “Let me look into it”. 

If they are good, they are going to research it and/or ask their CPA peer group. (CPAs and tax preparers also have Facebook groups where they collaborate with each other).

Here is a piece of advice, if they tell you “No, we can’t use this loophole or no, you don’t qualify to use this strategy” —> Ask WHY and “How can I qualify in the future?.” This way you confirm they did their homework and aren’t just being lazy. Don’t just take no for an answer. You can then get a second opinion by asking a question in a forum or to your peers.

So don’t panic if you don’t have a real estate CPA or tax professional. 

Next video I’ll be answering the question… “Can I skip the tax professional altogether and do my own taxes?”

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