Making it Happen: Mad Money Monster

Mad Money Monster Bio

 

Mr. & Mrs. MMM

Mr. & Mrs. Mad Money Monster

Mad Money Monster is a personal finance blog chronicling one family’s journey from doing money all wrong to doing it all right. Lisa, also known as Mrs. Mad Money Monster, is the creator and resident blogger. They pride themselves as being Gen-Xers who have turned it all around and are now charting a course towards financial independence. Their traditional path to wealth consists of frugal living, index fund investing, and rental property ownership. They love inspiring others just like them to take control of their financial future and realize it’s not too late!

Getting Started

 

I always knew I wanted to own rental properties. Interestingly, I started by accident. The year was 2007, yes, the height of the real estate bubble, and my mom and dad were living in an apartment with their dog – a cute little Boston Terrier named Ace. Unfortunately, Ace wasn’t as nice as it was cute.

One morning my mom had him out for a walk and he ended up biting someone’s sneaker. He put a hole through the top of the sneaker. As luck would have it, he bit the manager of the apartment. Despite there not being any injury or real damage, he was evicted.

I was unable to take him at the time, so the next best thing to do was to buy my parents a house where they could live with Ace. Did I mention Ace was actually my dog? That’s true. So, I obviously had a vested interest in keeping him in the family.

Fortunately, I had always wanted to get into rental properties, and this seemed like as good of an excuse as any. So, I started scouring Realtor.com. Inventory was sparse and prices were high; unfortunately I didn’t have the luxury of time. I ultimately ended up settling on a house that needed upgrades. At the time, I wasn’t aware that real estate investors make their money in real estate at the time of purchase. I bought the house for close to list price in 2007. That says it all.

Related: One House, Two House, Red House, Blue House

Why Real Estate And How Many Properties?

 

rental house

Our rental property

For me, I’ve always been enamored with real estate. I grew up poor and we lived in a trailer. As a kid, all I ever wanted was a real house. After reaching adulthood, I decided real estate investing would be a perfect fit for me. I really enjoy transforming a property into a shining gem.

So far, Mr. Mad Money Monster and I have only one property. We are currently charting a path towards total debt elimination on our way to financial independence. In our world, total debt elimination means eliminating our mortgage debt, including our rental mortgage debt. That is currently the last debt we have on our plates. After that, our plan is to acquire more properties, paying cash.

Of course we know the power of leveraged money. It’s a personal preference for us to be cash only real estate investors. That being said, as long as the numbers work, there certainly isn’t anything wrong with financing a property that will cash flow.

Related: How I Almost Committed Financial Suicide

Positive Impact

 

As noted earlier, I love transforming a home into something spectacular. Something called sweat equity has definitely paid off with our property. We also love driving by our tangible asset – something you don’t get to do when you only invest in the market. Stocks go up and stocks go down, but people will always need a place to live.

It has also been a great lesson for our daughter. She knows we have another house that people pay us money to live in. She also knows that we take care of that house just like our own, because people pay us money to live there.

Related: How We Almost Committed Financial Suicide – Again

Lessons Learned

 

Being that I purchased my property at the height of the real estate bubble, near list price, means I did NOT make my money on the front end of the deal. Thankfully, I have no intention of selling the property anytime soon, so hopefully, I’ll make my money through passive income and on the back end when I eventually do sell it.

Goals

 

Our ultimate goal for real estate rentals is passive income generation and diversification. We prefer having fewer paid off properties over more leveraged properties yielding the same income. Fewer properties = fewer problems. Period.

Advice For The Virgin Investor

 

Do your up front homework, make connections within the field by attending local REIA (Real Estate Investors Association) meetings, and avoid analysis paralysis. All the upfront work, planning, and saving for a property won’t do any good if you’re too scared to pull the trigger.

Decide the type of property you want to invest in. Single family homes typically have lower vacancy rates and are easier to sell if you decide the life of a landlord isn’t up your alley. On the other hand, multi-family properties have multiple income streams; thereby, lessening the blow of a vacancy. You also have multiple tenants sharing one building. And that equals less overall maintenance.

Analyze what type of neighborhood you want to invest in. Go too expensive and you might have a hard time making money. Go too cheap and you might find yourself in a dangerous neighborhood.

I would also caution a virgin investor against not using a property manager. Yes, I know the argument for not using one – everyone wants to keep more of their profits. But, one must consider how involved they want to be with their property. A good property manager means you’ll be able to relax a bit knowing the legal aspects of your real estate venture are handled. A property manager can take care of everything or very little, depending on the preferences of the property owner. But make no mistake, a good manager is worth his or her weight in gold! Besides, you’re getting into real estate to earn passive income, not to give yourself a second job.

Oftentimes, professional investors calculate property management fees into the deal when they’re determining whether or not a property is worth purchasing.

Property managers can take care of things like…

  • Leases
  • Tenant Background Checks
  • Borough/City/Township Requirements
  • Inspections
  • Routine Maintenance
  • Unexpected Repairs
  • Difficult Tenants
  • Evictions
  • Court Hearings

Lastly, make sure you have a good umbrella liability policy. They’re cheap and they can cover your butt in the event a tenant decides to sue you for that cracked sidewalk they tripped over last week. It’s not probable, but it is possible. Cover your bases and your experience as a landlord will be a positive one that also puts cash in your pocket. Everybody Win.

Are you thinking of getting into real estate investing? What’s holding you back? If you’re already an investor, what is your #1 piece of advice for a newbie?

One thought on “Making it Happen: Mad Money Monster

  1. So interesting to see the difference in approach to RE! I admire you for doing cash only deals. I’m way too impatient to do that! If I did cash only it’d take me forever to get in, even though I live in the Midwest and things are cheaper here.

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