“Suppose one of you wants to build a tower. Won’t you first sit down and count the cost to see if you have enough money to complete it?”
Jesus Christ (Luke 14:28)
Shortly after I graduated college, I moved to New York City
Honestly, I was a little scared. All the television shows and movies that had
criminals crushing the common folk were in NYC.
I grew up in NJ, but my parents really never took me into the big city
so I wasn’t sure what to expect. The mafia and gangs could just be waiting for
fresh meat to show up so they could take my lunch money every day. Who knew?
Fortunately, my physical safety was never really
threatened. My issues were more on the
economic side. I wasn’t making much
money; I was in a sales job and wasn’t selling anything. My manager nicknamed me “rowboat”… because I
had no sales (get it?). The lack of cash
inflow was tough.
And the cash outflow required was excruciating. It was the $3.50 for a small apple at the
corner bodega. Then buying a round of 5
drinks after work that ran $90.00 (without tip). I used to joke that it cost me $20.00 to
cross the street. Geez, it was an
expensive place to live!
Good deals were hard to come by. And breakfast at the food cart on the corner
of my street was one of them. $2.00 got
you a large coffee (with milk and sugar) and a huge cinnamon raisin bagel with
butter. It was my go-to meal every
morning that I’d take on the subway into work.
One morning, there was a couple in front of me in line at
the food cart. I could make out parts of
their conversation; it was apparent that they were visiting from the Midwest somewhere.
When the man was placing his order I could see him getting
agitated. Then he said something that
I’ll never forget:
“$1.00 for a cup of
coffee??? I’ve NEVER paid $1.00 for a
cup of coffee in my life!”
That’s when I knew that he was going to absolutely hate this
trip to the big city. I almost felt
obligated to get him in a cab (and pay for it) so he could immediately return
back home. If $1.00 for a cup of Joe was
cause for righteous price indignation, he was due for a heart attack later that
day.
He did not count the cost of what visiting New York City
Unfortunately, the same can be said of being a Charlotte
The investment real estate gurus preach that you will be a
millionaire through rental homes! Buy as
many properties as you can! This is the
way that you build residual income that will last a lifetime for you and your
children’s children!
They just don’t tell you that it is a cash-poor
business. All of the above can be true,
but the trick is the ability to stay solvent for year upon year as things break
and wear out. All the financial models
go out the window when a messy eviction happens or your HVAC unit needs to be
replaced (just happened to me this month- the dreaded $5K phone call…).
Carpet will not last forever and will need to be
replaced. The entire house will need to
be repainted at some point. Appliances
only last so long. The roof too…
Long term real estate investment can be a wonderful,
profitable endeavor (you’ll love your net worth!), but don’t let anyone fool
you- it can and will cost you money. So
before diving in too far, count the cost.
A few miserable days in NYC can be remedied with an early flight home to
your 25 cent coffee vendor. Several
broken-down rental homes saddled with mortgages in a buyer’s market is a little
tougher to navigate out of.
Happy Landlording!
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