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Our Dingbat Retirement Plan
Way back in 1983, after we closed our first few foreclosure deals, we knew we could do it forever. But several more years had to pass before it dawned on us that if we were really going to have it made, and be worry free, we\'d have to create an estate that would produce a solid, SUSTAINABLE, retirement income for ourselves -- an income that would be nearly bulletproof no matter which way the economy dipped and swayed.
We instinctively knew that we didn\'t dare be passive investors. Being at the mercy of any kind of professional manager who calls the shots (stock market, trust deeds, real estate, etc.) is much too risky for us. An invariable element in every horror story we\'ve ever read, where innocent investors get wiped out, is their dependency on some crook or incompetent who managed their retirement funds.
The amount of safety we require for our nest egg and the vigilance we are exercising over it ultimately forced us to take a very close look at income realty, even though we don\'t cotton to the idea of being property managers in our retirement years. What we want when we retire is freedom, and the guarantee that we\'ll have the money to enjoy it -- not a ball and chain.
So, starting out with a bias against rental units (because of negative experiences managing apartment houses) we decided to see if there was any other kind of income property we could stomach. Since we weren\'t committed to any particular type we checked out the pluses and minuses of warehouses, mini storage, office buildings, self-service car washes, RV parks, nursing homes, etc. But none of that more specialized real estate made us feel like we were really in control. We don\'t want to deal with extensive overhead, employees, or be at the mercy of renting special use buildings or space to choosy tenants.
The turning point in our quest occurred when we began to itemize all the elements that a perfect tenant would have to possess to make us happy. We felt that perhaps we had been looking at the problem backwards by focusing on the different types of property rather than on the different types of tenants! If we could define our ideal tenant then it would be a lot easier to see what kind of property we\'d need to buy and rent out to them. Wow, what a revealing process it turned out to be!
We discovered that what we wanted was a quiet, non-aggressive, non-demanding, STABLE, older person with a guaranteed income. We were surprised, for instance, to discover that the most volatile influences affecting tenant turnover are changes in either their family make-up or job situation. It became clear that a retired pensioner was the epitome of our idealized tenant. No kids tearing up the property, no changes in family size that would cause a move to another larger or smaller rental, and no firings or out-of-town promotions or job changes to contend with.
A 65 year old retiree treasures peace and quiet. They are most happy and comfortable occupying a one bedroom, detached house in a predominantly single-family house neighborhood. They don\'t want a big backyard to take care of and most don\'t even require a garage since they don\'t want to deal with the expense and upkeep of a car.
Once we knew the type of tenant we wanted, and the kind of property they wanted to rent, we decided to buy one and try it. Well, in the years since we\'ve discovered that hardly anyone wants to buy a one bedroom dingbat -- especially those without a backyard or a garage. So, with our foreclosure profits, we\'ve been picking them up at bargain prices. We modernize the kitchen and bathroom, and paint and re-carpet the rest of it. On the outside we install modern windows and then doll it up with vinyl siding, newly painted trim and a spruced up yard and fence.
At the time of this writing we have sixteen of these dingbats and plan to have a total of 25 by the time we retire. They are the most trouble-free, dependable type of rental we\'ve ever experienced. Our retirees are rarely late with their monthly rent -- and it seems that the only way they ever move out is feet first. Our low turnover is fantastic.
We favor low income tenants now -- those who receive a monthly rent subsidy from the city or county (via HUD\'s Section 8 Program). That way we get about 80% of the rent directly from the government and 20% from the retiree. And every year the government allows us a rental increase that\'s pegged to the cost-of-living index.
We get very few maintenance calls. And when we do they seem to be the leaky faucet type. So now we\'re gradually replacing our faucets with washerless ones like Moen, etc.
Our foreclosure profits are a key component in our ongoing effort to have all of our little houses paid off -- free and clear before we actually start our retirement lifestyle. That way no matter what economic upheavals occur we\'ll still be able to rent out our properties at a profit. And whenever we want to scale down we can either hire a reliable property management company or sell the houses one-by-one. We plan to get top price whenever we sell since we\'ll find and qualify the buyers and carry back all the financing, secured by 1st trust deeds. In fact, the mortgage cash flow we\'ll receive should amount to much more than the rental income we\'ll be giving up by selling.
Way back in 1983, after we closed our first few foreclosure deals, we knew we could do it forever. But several more years had to pass before it dawned on us that if we were really going to have it made, and be worry free, we\'d have to create an estate that would produce a solid, SUSTAINABLE, retirement income for ourselves -- an income that would be nearly bulletproof no matter which way the economy dipped and swayed.
We instinctively knew that we didn\'t dare be passive investors. Being at the mercy of any kind of professional manager who calls the shots (stock market, trust deeds, real estate, etc.) is much too risky for us. An invariable element in every horror story we\'ve ever read, where innocent investors get wiped out, is their dependency on some crook or incompetent who managed their retirement funds.
The amount of safety we require for our nest egg and the vigilance we are exercising over it ultimately forced us to take a very close look at income realty, even though we don\'t cotton to the idea of being property managers in our retirement years. What we want when we retire is freedom, and the guarantee that we\'ll have the money to enjoy it -- not a ball and chain.
So, starting out with a bias against rental units (because of negative experiences managing apartment houses) we decided to see if there was any other kind of income property we could stomach. Since we weren\'t committed to any particular type we checked out the pluses and minuses of warehouses, mini storage, office buildings, self-service car washes, RV parks, nursing homes, etc. But none of that more specialized real estate made us feel like we were really in control. We don\'t want to deal with extensive overhead, employees, or be at the mercy of renting special use buildings or space to choosy tenants.
The turning point in our quest occurred when we began to itemize all the elements that a perfect tenant would have to possess to make us happy. We felt that perhaps we had been looking at the problem backwards by focusing on the different types of property rather than on the different types of tenants! If we could define our ideal tenant then it would be a lot easier to see what kind of property we\'d need to buy and rent out to them. Wow, what a revealing process it turned out to be!
We discovered that what we wanted was a quiet, non-aggressive, non-demanding, STABLE, older person with a guaranteed income. We were surprised, for instance, to discover that the most volatile influences affecting tenant turnover are changes in either their family make-up or job situation. It became clear that a retired pensioner was the epitome of our idealized tenant. No kids tearing up the property, no changes in family size that would cause a move to another larger or smaller rental, and no firings or out-of-town promotions or job changes to contend with.
A 65 year old retiree treasures peace and quiet. They are most happy and comfortable occupying a one bedroom, detached house in a predominantly single-family house neighborhood. They don\'t want a big backyard to take care of and most don\'t even require a garage since they don\'t want to deal with the expense and upkeep of a car.
Once we knew the type of tenant we wanted, and the kind of property they wanted to rent, we decided to buy one and try it. Well, in the years since we\'ve discovered that hardly anyone wants to buy a one bedroom dingbat -- especially those without a backyard or a garage. So, with our foreclosure profits, we\'ve been picking them up at bargain prices. We modernize the kitchen and bathroom, and paint and re-carpet the rest of it. On the outside we install modern windows and then doll it up with vinyl siding, newly painted trim and a spruced up yard and fence.
At the time of this writing we have sixteen of these dingbats and plan to have a total of 25 by the time we retire. They are the most trouble-free, dependable type of rental we\'ve ever experienced. Our retirees are rarely late with their monthly rent -- and it seems that the only way they ever move out is feet first. Our low turnover is fantastic.
We favor low income tenants now -- those who receive a monthly rent subsidy from the city or county (via HUD\'s Section 8 Program). That way we get about 80% of the rent directly from the government and 20% from the retiree. And every year the government allows us a rental increase that\'s pegged to the cost-of-living index.
We get very few maintenance calls. And when we do they seem to be the leaky faucet type. So now we\'re gradually replacing our faucets with washerless ones like Moen, etc.
Our foreclosure profits are a key component in our ongoing effort to have all of our little houses paid off -- free and clear before we actually start our retirement lifestyle. That way no matter what economic upheavals occur we\'ll still be able to rent out our properties at a profit. And whenever we want to scale down we can either hire a reliable property management company or sell the houses one-by-one. We plan to get top price whenever we sell since we\'ll find and qualify the buyers and carry back all the financing, secured by 1st trust deeds. In fact, the mortgage cash flow we\'ll receive should amount to much more than the rental income we\'ll be giving up by selling.
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