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Invest and save money through life's ups and downs


Last updated 7/9/2020 at 6:53am

Margaret Singleton

Special to Village News

There is no sure thing in the investment world. This column, which draws directly from my personal experiences, examines the promises and pitfalls of flipping real estate, my primary means of building wealth.

I started this effort by saving enough seed money to get rolling. Next it required tenacity, patience and a sharp eye for seeing value. One must also be prepared for the curve ball that this type of investment can throw.

I’ll start with the advice that my father gave me: save, save, save. He urged me to save a minimum of 10% of any income – even in retirement. If possible, he said, strive for 15%.

Admittedly, it is difficult to save money in our squeezing-every-penny economic times, but savings will be essential to entering the flipping field.

Saving money was hard for me at first. Setting aside my babysitting money in high school was tough when the allure of new clothes, records and books pulled me in opposite directions. I added to my bankroll later when I worked summer jobs and ran errands for people.

My bank account had grown to about $5,000 by the time I got married. My husband and I were college professors, and we moved to Ripon, Wisconsin, a college town to teach and where real estate was affordable. It was there, with my own savings that I decided to use real estate to bootstrap my way into building wealth.

My first foray was buying a rundown house in that community. But first I needed a bank loan to leverage my savings. My ability to save, as well as my employment history, gave the bank the assurances it needed to know that I was a good risk.

My first investment property required a range of improvements that included pouring a concrete foundation over a mud basement. Of course, I did not pour it myself. I hired a contractor. It had a sink in the kitchen and nothing else. I bought a stove and a refrigerator. I hired someone to put in more kitchen cabinets. I painted it.

After four months I sold it for twice what I paid. I repaid the bank loan and still made a tidy profit.

The next house I bought with the profit from selling the first one. I was on a roll now, so I had more money to invest at the front end of the deal. I also bought this house at a low cost, and the house only needed painting. I sold it at a time when demand for housing was high. As you can see, buying, renovating and selling properties, a process known as called “flipping,” can be very profitable. I had the time, expertise and the surplus funds needed to fix up each house.

Following that, I transitioned into apartments. I bought a six-unit complex. I managed the apartments myself. This investment was more hands-on work as I was constantly calling tradespeople to fix plumbing and electrical problems. Refrigerators, washers and dryers frequently wore out.

One tenant who was repeatedly behind in her rent shoved me to the ground. Then I suffered a financial and emotional setback when a toddler pushed through a screen and fell from the second-floor window. I was able to fend off monetary damage from that tragedy, but not the attorney or court costs, when the lawsuit was dismissed because I was not at fault.

I was starting to realize that owning commercial real estate can have its drawbacks. I prided myself on being a pleasant and understanding landlord who kept her apartments in good shape. But human nature has its rough edges, and many emerge in landlord-tenant relationships.

Years later, I sold that building. By that time, I was divorced. I had moved from Wisconsin to Ranch Bernardo with my second husband.

I leveraged the money I had to buy a 16-unit townhouse complex in La Mesa. That complex brought in more income, but also more headaches. I had to hire a manager, which at times brought new strains. I now I had a pool and a large parking lot to repair and maintain.

There were some troublesome tenants. One of them dismantled a motorcycle engine in the living room of his apartment. I finally got tired of the day-to-day hassles and sold the La Mesa complex. I was lucky to sell at the top of the market just before values dipped in the 2008 Great Recession.

Tax laws require that owners reinvest or pay a penalty, circumstances that sent me in search of my next real estate investment.

This time, I went looking for a commercial property that could be rented with a triple-net lease. That lease type means the tenant pays rent, maintains the facility and also pays the property taxes. I found a wonderful investment in 2005. It was a one-story building in northern Virginia that was constructed in 2000 and was rented by a child care provider. It is just south of Quantico, Virginia, a town known for its proximity to a Marine base and the FBI Academy.

The property’s prime location made it a safe and attractive purchase. The difference between the rent payment and the building mortgage has given me the wherewithal to support our household, travel, help relatives and give to our church and other charitable causes.

But then, like many other folks, I got caught in crosshairs of the coronavirus. While one might assume that commercial property owners are immune from the ravages of its financial devastation, that’s far from the case.

The coronavirus hit shortly after the tenant agreed to a 10-year lease extension. Virginia officials, like those in most other states, ordered a shutdown due to COVID-19. Schools and businesses closed, and parents pulled their children out of day care providers.

As a result, the center has been shut down since March. Yet I must continue to pay the mortgage amid the ebbs and flows of the virus and a continuing uncertainty as to when the center will reopen. I have empathy for my tenant’s predicament and its out-of-work parents, but I have had to dig deep into my savings to hold on to the building.

I am still in the black financially, but the passage of time could force me to evict my tenant or try to sell the building in a capricious market.

It seems everyone is in survival mode now. As you can see from my example, flipping real estate can be profitable. But it is not for the faint-hearted.

Margaret Singleton is a retired real estate and business appraiser. She attended Harvard University, received her graduate degree from Yale University and subsequently earned an master’s degree in business administration. She also is a financial planner. She lives in Fallbrook and owns commercial real estate in Virginia. She can be reached at [email protected]


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