How a lawn care business owner got into real estate investing.

Have you ever considered investing some of the money you have made with your lawn care business into real estate? As the old saying goes, when it comes to land, they just aren’t making nay more of it. Maybe you have thought about buying some rental properties and just weren’t sure how to do it of if you should do it? A member of the Gopher Lawn Care Business Forum shared with us his story on getting into real estate investing.

Real estate investing

Real estate investing

I asked him, I think a lot of members would love to expand and get into rental properties the way you have. Why do you feel you invested in rental properties and what has your view on them been so far?

Would you have done anything differently so far with the way you get started and involved with them?

“Rental properties, I love them. Recently I have felt the economic recession. The last apartment I had for rent, took me one month to find a tenant. Before the recession I would have it rented within a week. I invested in rental properties, because that is a secure investment. Plus you can have a constant positive cash flow coming in every month. Right now it is the time to buy properties.

I had a real estate package given to me by my ex-boss at the previous restaurant where I worked, for my 21st birthday. The package discussed how to buy property with no money down. I studied the the whole package and listened to the CD while I was driving. I was very good friends with a few bankers in the town where I live, so they helped me to build my credit, and gave me some tips on what properties to buy or not to buy.

For example, the house that I live in is a two story house, I live downstairs, and I rent the upstairs. My mortgage is $760 for 15 yrs. Out of that I pay $250 per month out of pocket, and my tenant pays the rest. It is cheaper than paying rent.

Then, I built enough home equity and I used that as a down payment to buy another property. When I screen renters, I also ran a promotion. The promotion went, if you pay me the rent for 11 months on time, then on the 12th month you only pay me half of the rent. It works. Plus my tenants have money to spend on Christmas.”

Now for the average lawn care business owner who is reading this, thinking to themselves they would like to buy a rental property, where do you suggest they begin?

How much do they need to save for a down payment? How much can they charge for rent compared with the mortgage of the structure?

It seems like a lot of times, the rent doesn’t always cover the mortgage fully and the owner has to pay the difference.

What’s your view on the types of buildings that are a good first time buy to rent?

“First, they need to make contacts with real estate agents that they trust. Being in landscaping business, most of us, have done business with Real Estate agents. I have worked with several of them. They call me up needing a full clean up of a property they want to sell. Maybe it is a property that has been foreclosed on by the bank, or a property that they bought it an action.

My first property was a commercial property. I had known this real estate agent for years. So when I meet with her, I told her what I wanted to do. I wanted to make money. She recommended a commercial property. The location on this property was within walking distance from shopping centers, from the local city high school, and from the community college where I live. This location enabled me to rent my property quickly.

Another suggestion would be to look in the local newspaper. Look for properties that have been foreclosed on by the city for back taxes, or for defaulting on a loan.

Being in the landscaping business some of us have mowing contract with bankers. You should use those connections and talk to them. Tell them you are interested in investing in rental properties. Ask them how to go about financing the properties. They will help beacuse they need people who can pay.

The commercial property I bought in 2007 was listed for $110,000. I offered $85,000. The previous owner had purchased the property in 2006. I researched the property by going to my state’s government website, looking under the assessment properties section. There you can enter a property address and it will tell you who owns it, how much they bought it for, and in what year. Based on that I was able to determine how much profit he was trying to make on that property. Then I hired a home inspector before I purchased it, to fully inspect the house and the property.

The bank where I got my financing appraised the property at $95,000. The house was in great condition. I put $10,000 down on the property and financed it for 15 yrs. My mortgage payment is $760 per month. I turned the upstairs of the house into a two bedroom apartment. I spend about $5,000 remodeling the apartment and I did most of the remodeling work myself. That saved me about $3,000 worth of expenses that I would have had to pay someone to do it for me.

To figure out how much I could charge for rent, I had to look at the location of the property, and how much other competitors are charging for a two bedroom apartment in the same area. I had to research if they include any utilities?

So before I bought this property, I was paying rent in the same location for a two bedroom apartment $450 per month. That didn’t include any other utilities besides water. My apartment rents for $500 that includes water, and cable. My mortgage is $760. I only pay $250 for my mortgage, where before I was paying rents $450 per month. So I have a positive cash flow of $250 per month. That adds up within a 12 month period.

Sometime you can look in the local newspaper, and see how much the apartments are renting within the location of that apartment.

When you want to buy a property try to buy a house that has two stories, or that has more then one unit. You must have two apartments in that unit or house. Then you can use the rent from one apartment to cover the mortgage and profit the rent from the other apartment. Sometimes when you finance you have to look at the numbers on the mortgage deal. You need to let the banker know, you want to have positive cash flow coming in every month. If the deal on the mortgage doesn’t fit your needs, then don’t do it.

With the recent economic crisis, banks have gotten more strict and some of them have tightened the financing options on purchasing a house. Now they may require a credit score of 700 or higher. When I financed my house before the crises, my credit score was 680. Another suggestion for a first time buyer would be to buy a two story house, and turn the upstairs into a two bedroom apartment. Or buy a lot, where you can put a trailer there and rent that trailer. You can buy trailers for as cheap as $5,000 up to $7,000 cash. Do a lot of research, and shop around. Buying a house isn’t like buying a car, you have to know how the market works and what to look for. Read a lot of books and programs. Talk to people you know who are experts into the real estate market.

I hope this helps. It worked for me. The down payment I used was from my savings I accumulated with the landscaping business. I also work part time as a cook at a country club. I took that job to make contacts. A lot of rich people come there to eat and play golf. There I have made a lot of contacts, from attorney’s to doctors, bankers, etc.”

That is very interesting! What made that property you purchased a commercial property? From the description, it sounds like a residential home. How does it get defined as either residential or commercial?

Can you park your lawn care equipment on that location too?

What do you see as your next real estate investment move? What would be the ideal next step?

“Properties have different zonings. My property is in a B-4 zoning, because of the location. B-4 is considered a commercial property. I have a list of businesses I can operate on my property based on the zoning. That’s why I purchased that property to begin with. The land is worth more then the house.

The property defined by zoning, is a residental house, but the property is a B-4 zoning. On my road, I can walk to McDonald’s, Arby’s, Real Estate offices, shopping centers, and gas stations. Before you purchase a house, it will tell you the type of zoning your property is. You can check the zoning on your state government website under real estate property assesment.

Because of the way it is zoned, I can park my lawn equipment, and put a business sign on my front lawn, without having to apply for a permit. I had put a for rent sign up, and didn’t even have to put an ad in the local paper. Because of the location I had my place rented quickly.

My problem is that I want it all. You can’t have it all. I am a very competitive person. So right now, I plan on paying off my two cars and my motorcycle. Then build more equity on my properties all while generating positive cash flow from rent.”

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