A tale of two rentals

Calhoun Times - - FRONT PAGE -

started the wa­ter and walked away to let it get hot. How­ever, the wa­ter didn’t get hot. That was is­sue No. 1.

Is­sue two pre­sented it­self when she came back from let­ting the shower warm up. She no­ticed the tub was half full, which means it wasn’t drain­ing. With no hot wa­ter and a clogged drain, she did what any good tenant does: she put some Drano in the tub and checked the wa­ter heater breaker. When that didn’t work, she called her land­lord – like I said, good tenant.

The ten­ants in the Chatsworth house awoke to lots of wa­ter on the laun­dry room floor. Af­ter mak­ing sure it was not their wash­ing ma­chine leak­ing, they called me im­me­di­ately. Over the phone, we de­ter­mined the wa­ter heater was leak­ing. I had them shut off the wa­ter to the wa­ter heater, and made an ap­point­ment to go see them the next day.

When we got there, it was bad. The bot­tom of the wa­ter heater had rusted out, and wa­ter had been seep­ing out onto the floor for a long time. This house was a new ac­qui­si­tion for us when we had in­stalled th­ese ten­ants back in April. We thought the wa­ter heater looked func­tional when we bought the prop­erty. We were wrong.

It had been leak­ing slowly for so long that it weak­ened the sub­floor in the laun­dry area. We had to tear out all the bad sub­floor­ing, re­place it and in­stall a new wa­ter heater and new floor cov­er­ings.

The dif­fer­ence be­tween th­ese two houses is that we own the one in Chatsworth, but we mas­ter lease the Cartersville house. That means all the re­pairs for the Chatsworth house came out of our pock­ets. On the house in Cartersville, we no­ti­fied the own­ers of the is­sues and they paid for their plumber to go fix ev­ery­thing.

Part of the beauty of own­ing rental prop­erty is that you get to write off re­pairs. This year on our rentals, we’ve done three field lines, one roof, lots of air con­di­tion­ing calls and now this re­pair in Chatsworth. That adds up to about $ 30,000, which is a real out- of­pocket ex­pense, not just a pa­per loss.

So, is own­ing rental prop­erty the best way to get out of the rat race and achieve long- term fi­nan­cial suc­cess? Cur­rently, I’m think­ing not. For us, own­ing notes and hav­ing mas­ter leases are what got our pas­sive in­come above our monthly nut. That’s be­cause notes have no ex­penses as­so­ci­ated with them. What comes in is pure cash flow.

Re­pair­ing prop­er­ties that you own can kill your cash flow. On the Cartersville house, be­cause we mas­ter lease it, our cash flow did not change. And hav­ing steady, re­li­able pas­sive in­come is the key to get­ting out of the rat race. Own­er­ship may be over­rated.

Joe and Ash­ley English buy houses and mo­bile homes in North­west Ge­or­gia. For more in­for­ma­tion or to ask a ques­tion, go to www. cash­flowwith­joe. com or call Joe at 678986- 6813.

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