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Tycoons in the making
The Bouquet family is planning on real estate profits to provide big income for retirement.
February 4, 2005: 1:00 PM EST
By Les Christie, CNN/Money staff writer
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NEW YORK (CNN/Money) - The Bouquets have a nice income, and they intend to keep it that way. After they retire, they want to be bringing in six figures, and they're counting on the proceeds of their real estate holdings as one of the pillars of that plan.

Dan is an aerospace engineer with Lockheed Martin. Anne is a stay-at-home mom who also manages the couple's real estate empire in the suburbs of Atlanta.

That empire was founded before the two even met. When they married, in 1995, the pair owned three houses between them, his, hers, and her rental. He moved in with her, they rented out his, and quickly looked to start building a family -- and adding properties.

A bargain to start

Daughter Tiffany was born in 1996, and they adopted David, who's now 14.

Soon after Tiffany arrived, Dan and Anne found a house they wanted for a rental, but the seller actually had three for sale at once.

Dan thought they could make a better deal if they took all three. He figured the houses, at $70,000 each for three beds and two baths, were already under market value by about five percent and that he could get another five percent off in a package.

After crunching some numbers they found they couldn't really afford all three, but they plunged ahead anyway. They talked a friend into coming in with them; he bought one of the houses.

Then they cashed in an IRA, giving them a 90-day window before it had to be rolled over; after that they would suffer severe penalties. But they knew they had a tax refund coming, which they could use to replenish the IRA. If necessary, they could even use credit cards to bridge any gap.

The seller agreed to allow them to do quick fix-ups on the houses and arrange to rent them out before the closing all at their own risk. If the deal didn't go through they were out expenses. The transaction was a nail biter. "We sweated it out for six months," says Dan, but the deal closed, the refund came through, the tenants were in place, and the Bouquets on their way.

The couple knew they could manage properties because Dan is capable of, and willing to, maintain the buildings himself, only calling on professional contractors for major jobs. "We make so much more money if we do the work ourselves," says Dan."

And Anne had acted as landlord before; "I already knew where the pitfalls were from the mistakes I had made with the first house."

Minimizing mistakes

Anne says the worst mistakes is not getting the right tenant, not charging enough to cover repairs, and not keeping up on late rental payments.

"Now, I'm on the phone right away saying, 'Where's my check?'"

The family devotes an average of about two or three hours per house per month on the 12 properties they own. That's on top of the day-to-day management that Anne does and Dan's busy work-week. It does take away a bit from family life. "My daughter asks, 'Why can't we be like normal families?'' says Anne.

"It is a pain in the butt," says Dan. "Especially when a pipe bursts on a Sunday night."

Plus, he reports that he's fallen off ladders three different times. "I'm rethinking the risk-to-benefit ratio of some of this maintenance," he says.

And the couple has taken a wrong turn or two. At one point they thought there were some good opportunities in buying some low-cost rental units. These proved more trouble then they were worth. "It was horrible," says Dan. "We had to pick up garbage, do more maintenance."

They sold those after only 10 months. "We've gone back to high end properties," Dan says.

Keys to the kingdom

The Bouquets find buying at the right price is the key to success, and liquidity is often critical to getting good deals. They heard of one house that was on the market and appraised for $95,000. The seller, a builder, had a problem with his business partner. He took the Bouquet's $80,000 bid without negotiating. "It turns out he needed the cash desperately and he took our offer because he could get it in less than 30 days," says Dan.

Although the properties have appreciated steadily at a rate of seven or eight percent a year, the couple does not count on capital gains. They intend to hold on to the houses for income.

The rent rolls total about $10,000 a month and expenses, about $9,600. (That includes their own residence.)

As they pay off each property four are free and clear already profits expand. Rents are growing faster than expenses because, while out-go such as taxes and insurance do go up, the loan payments stay the same. (All are on 15-year fixed rate mortgages and the couple pays against principal whenever they have extra cash.)

One big drain is the condo the couple owns in Florida; their monthly nut there is $2,200. However, they do get rental income and they also vacation there a couple of weeks a year. Plus, Gulf of Mexico shore properties are exploding in value. Last year, they figure, theirs gained about $140,000.

The couple's goal is for Dan to retire at age 55 and they figure they need a net worth of about $3 million to have the lifestyle they want at that time. They are well on their way, with pension accounts and savings approaching a half million dollars and home equity of about a million.

After retirement, they'll keep busy with travel, tennis, and, oh yes, managing their real estate.  Top of page

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