Tycoons in the making -- Ron and Yvette Godwin
This Virginia family does all their real estate investing "by the book."
NEW YORK (CNNMoney.com) - For many people there's book learning and life lessons -- Ron and Yvette Godwin have used both to become successful real estate investors.
The Chesapeake, Virginia couple, who married in 1993, started researching how to invest in real estate about eight years ago. They read and listened for a long time before they actually felt confident enough to take the plunge.
Ron, who is a Norfolk police officer (Yvette is a manager for a broad-band communication company), cites a couple of books as particularly helpful: "Landlording: A Handy Manual for Scrupulous Landlords and Landladies Who Do It Themselves," by Leigh Robinson, David Patton, Nancy Robinson, and Jan Brown, and "Property Management for Dummies."
In addition, Ron talked to police officer friends who had also gotten the real estate bug. All told, they studied for more than a year before they bought their first investment home.
Ron must always have had an affinity for buying real property, however; he was only 23 when he bought a house to live in, a three bedroom in Norfolk. That was in 1986. At the time, he was married to his first wife and working in security at Montgomery Ward, which he did for seven years. Later, an older brother in law enforcement persuaded Ron to join him on the job.
After a divorce in 1990, Ron bought out his wife's share of the house. Then, when he met Yvette and they married in 1992, the pair lived there for a few years.
But they were looking to trade up. In early 1993, the Godwins had picked out and purchased a lake-front lot in Chesapeake, Virginia. "We wanted to build a house for ourselves on it," says Ron, "but the builder said that we couldn't afford the kind of house we should on that property, which was surrounded by expensive homes."
They put construction on hold and paid off the lot in just under four years. In 1996, when they could afford to spend more, they started looking for a custom home builder. Once they began construction, they sold their first home and lived with Yvette's folks for several months.
In 1997 they moved into the all-brick, split-level, four-bedroom home, which they are very proud of. One feature they particularly relish is the downstairs master suite.
"When I was growing up, my mom was always telling me to go upstairs to her room to get something for her," says Ron. "Yvette's mom did that to her too. We decided we wanted our bedroom on the first floor."
The house cost about $180,000, including the lot, and, with prices skyrocketing in the area the past few years, they figure it's worth somewhere around $475,000 today.
For investment purposes only
By 1999 the Godwins started to seriously look for investment homes. "It took us a year or 18 months to find the first place," says Ron. "Yvette wanted to be very careful; she kept us on our toes."
They finally settled on a two-family in Norfolk. "Rule number one in the 'Landlording' book was to start off with multiple-unit properties," says Ron. "That way, if one tenant doesn't work out, at least one should be paying rent."
Another tip from the book really paid off on this property. The woman they bought it from was living in one unit and renting out the second. Ron says, "The book suggested that we try to stipulate in the contract that we could show the owner's apartment before the closing; she agreed. We were able to close on a Friday, she moved out Saturday and we had a new tenant in on Sunday."
The book also advised that landlords try to maintain the property themselves during the first year or two. Not only does that save on contractor bills during those difficult early years, but it familiarizes landlords with the time and effort required to do the jobs. Then, when they hire others, they have an idea of how much they should have to pay to unclog a toilet or fix a water heater.
The Godwins were looking for both cash flow and appreciation out of their investment; they got both. They still have the original tenants, who have been very reliable, and the house has gained in value.
They did it again a year later, paying $114,000 for another, bigger duplex. Then, in 2002, they stepped up to a four-plex. To finance the down payments for all these purchases, they obtained a home equity line of credit on their primary residence.
One of a landlord's biggest challenges is to find good tenants. According to Ron, advertising an apartment turns up 30 or 40 potential renters, but, "only three or four of them are ones you would want to show the apartment to."
The Godwins, again following a prescription from the book, screen tenants with a seven or eight question application. The form asks possible tenants things like whether they have ever been evicted and whether they smoke. They also, of course, insist on a credit report from any prospective tenant. There have been instances, however, when impatience in getting an apartment rented has caused them to make mistakes.
As for future investments, Ron says maybe. "We thought about doing more, but the prices are too high. That may be changing."
If prices plateau – or dip – the couple might go back into the market. Otherwise they'll be content to operate their little real estate empire and use the income to help fund their retirements. The 43-year old Ron plans to work another nine years for the police department; he will retire a few months after their home mortgage is scheduled to be paid off. Then he'll do volunteer work for his church.