Ever since my late teens, I’ve harbored the desire to own a rental property. It may sound clichéd, but it is absolutely true. I used to spend my Saturday evenings in my first apartment, surrounded by real estate listings, a highlighter, and a cold beer, visualizing my dream. The idea of bringing it to reality – all by myself, with no external help – was a comforting thought.
I have always been a dreamer. At that time, I couldn’t foresee that I would juggle between work and postgrad studies only to face bankruptcy later. Never did I imagine that such a tumultuous phase would lead to a near-debt-free situation and homeownership in just under four years.
Today, I find myself in a much stronger financial position, enabling me to squirrel away almost all of my monthly income. However, my income fluctuates significantly because I look after my kids and work as a freelance writer. However, my dream to own a rental property – on my own terms and without assistance – remains a strong motivation.
The Road to Rental Property: Mapping the Plan
The dilemma here is how to go about purchasing a rental property when you have substantial savings but a credit history marred by bankruptcy. After much thought, I have devised a two-fold strategy:
1. Tackling Credit Report Issues
I currently only have an active student loan that I make regular payments for. Considering getting a credit card might help build a consistent repayment history, but I’m not sure I want to embark on that journey again. Instead, I’ll continue paying my student loans and vigilantly monitor my credit report until the bankruptcy note is removed.
2. Saving More Than Necessary
Initially, I thought of gathering sufficient funds to purchase the property entirely on my own. In our state, a nice townhouse that would attract young professionals costs around $110,000. This implies saving $1000 a month; it would take nine years to accumulate this sum. However, patience is not one of my strong suits.
I now choose a more flexible approach: saving $1000 per month for the townhouse and applying for a small 10-year home loan to fund the remaining cost once the bankruptcy tag is lifted.
Rent should cover my monthly mortgage payment and leave a significant amount since the loan will be less than the property’s value, thanks to a hefty down payment. Any profit made from the rental, after deducting expenses and taxes, will be saved until there’s a reasonable emergency fund for the property. I want to be prepared for unexpected expenses like a faulty heating unit or a problematic AC.
At the moment, I have saved $1000, so I’m still in the “aspirational” phase. Yet, I firmly believe that I will accomplish this goal before turning 40. I simply have to.
How about you? Do you have long-held financial goals? What are you doing to realize them?
