Archive | May, 2014

Saving Money with Do It Yourself Pest Control

6 May

I called an exterminator for one of our duplexes, and inquired about the specific chemicals used because of a tenant’s health concerns. He said they typically apply Phantom – a general pest control product for insects and termites. A quick Google search brought me to a pest control supply website, where I verified it was safe for children and pets, and wouldn’t agitate asthma.

(photo by Kathleen Franklin) Note: this is not the company we used ourselves

The both sides were treated for a total of $150. Having never hired an exterminator before, and I found the experience rather underwhelming. I’m not sure what I was expecting. Something more… scientific? He really just sprayed the chemical around the foundation, nothing particularly skilled.

I didn’t think much more about it until a few weeks later when a tenant at a different property requested pest control and it clicked: we could probably save some money by doing our own pest control treatments instead.

The aptly named DoMyOwnPestControl.com provides customer reviews and an extensive Q&A about product selection and application. Also, there isn’t anything worth knowing that somebody hasn’t already put on YouTube:

Cost Breakdown of Our DIY Pest Control:

Total cost: $77.82 (half the cost of the professional service!)

What’s more, each treatment only uses 3 ounces of the 21 ounce bottle, which means I could get 6 additional treatments at no additional cost. That’s equivalent to $1,050.00 worth of the professional service for $78.00.
pest controlPerhaps we’ll call an expert to handle an infestation, but this will do the trick for seasonal preventive care along the exterior. So far no issues or complaints. Like the duct cleaning, we’ll try to incorporate this into our make ready work moving forward.

Shameless Plug
If you decide to give DIY pest control a try, please use my referral/coupon code (KATH6799) when ordering from DoMyOwnPestControl.com. You’ll get $5 off your first order of $50+ too. Thank you!


“The way to wealth depends on just two words, industry and frugality.”
-Benjamin Franklin

Want to be notified of new posts?

Join 175 other subscribers

Better to Finance Rental Properties or Buy Outright?

2 May

Somebody recently asked, “Wouldn’t you be better off saving up and paying for your rentals in cash?” Conventional wisdom says there’s power in leveraging, but I couldn’t say I had run the numbers to prove it.

sdfsdfsdf

(photo by 401(K) 2012)

Let’s say we’re an ambitious investor with $4,000/month in disposable income. The goal is to eventually live off our rental income, which means a minimum of $5,000 net a month or 5 paid-off properties.

We’ll use the same assumptions:

  • $160,000 purchase price per property
  • $40,000 down payment per property (25%)
  • Financed with 30-year fixed loans at 4.5% interest
  • $400/mo. in positive cash flow per financed property
  • $1,008/mo. in positive cash flow per paid off property

Option 1: Purchase with Cash
By paying in full, the first property takes just over three years to acquire. Each purchase adds $1,008 in additional cash flow, accelerating the savings rate.

  • Month 40 – Purchase Property 1
  • Month 72 – Purchase Property 2
  • Month 99 – Purchase Property 3
  • Month 121 – Purchase Property 4
  • Month 142 – Purchase Property 5

Total Time: 11.8 years

Option 2: Finance with 25% Down Payment & Pay Off
Each property provides an additional $400/month. Since we only need a $40k down payment, the 5 properties are acquired in about a third of the time.

  • Month 10 – Purchase Property 1
  • Month 20 – Purchase Property 2
  • Month 28 – Purchase Property 3
  • Month 36 – Purchase Property 4
  • Month 43 – Purchase Property 5

We now have $6000 a month to put towards the first mortgage (original $4000 + $400 cash flow * 5 properties). We’ll pay them off from newest to oldest; the most recent purchase is paying the most interest because it isn’t as far along in the amortization schedule. Each paid off property frees another $608 a month.

  • Month 62 – Pay Off Property 5
  • Month 78 – Pay Off Property 4
  • Month 93 – Pay Off Property 3
  • Month 106 – Pay Off Property 2
  • Month 118 – Pay Off Property 1

Total Time: 9.8 years (3.6 years to purchase, 6.2 years to pay off)

Option 3: Finance with 25% Down Payment without Paying Off
If we aren’t concerned about mortgage debt, we could also reach our income goal with the cash flow from 13 financed properties ($400 * 13 = $5,200).

  • Month 10 – Purchase Property 1
  • Month 20 – Purchase Property 2
  • Month 28 – Purchase Property 3
  • Month 36 – Purchase Property 4
  • Month 43 – Purchase Property 5
  • Month 50 – Purchase Property 6
  • Month 56 – Purchase Property 7
  • Month 62 – Purchase Property 8
  • Month 67 – Purchase Property 9
  • Month 73 – Purchase Property 10
  • Month 78 – Purchase Property 11
  • Month 83 – Purchase Property 12
  • Month 87 – Purchase Property 13

Total Time: 7.3 years

Epilogue – Is it Better to Get a Mortgage or Pay Cash?
It ultimately depends on what “better” means to you. These calculations have an emphasis on timeline, but perhaps net worth, cash flow, overall return, risk aversion, or the momentum of making progress is more important.

Also, it’s worth noting that you would get different results if there wasn’t positive cash flow when financed – at least enough to offset the mortgages’ interest.

Finally, please don’t get stuck by the exact numbers in my example. The lessons of this post are relative – regardless of how much you can invest, your rental market, or what happens to interest rates.

If you want to input your own variables, I’ve consolidated these calculations in an Excel spreadsheet – which can be downloaded here.

Want to be notified of new posts?

Join 175 other subscribers