Tycoon in the making
Early on, the 26-year-old Colorado native discovered he would need other income to finance his budding career as a punk-rock drummer with the band Baxter House. (Sky is not a stage name - his father, Jerry Minor,
NEW YORK CNNMoney.com) - For some growing up, their biggest dream was to be a rock star. Most give up ... Sky Minor is keeping at it, with a little support from his real estate investing.
Early on, the 26-year-old Colorado native discovered he would need other income to finance his budding career as a punk-rock drummer with the band Baxter House. (Sky is not a stage name - his father, Jerry Minor, is a commercial pilot.)
"I went on a two-month tour in March 2003 and left my last 'job' ever for $11 an hour as an office monkey," Sky says. "When I got back home, I had depleted my savings to almost nothing."
He had to find a way to sing for his supper, and not surprisingly, he started thinking about the red-hot real estate market in Los Angeles, where he had moved to and was living with girlfriend Rachel Mintz, the band's vocalist who also works with autistic children.
|Sky Minor with Rachel Mintz|
Mortgage refinancing, driven by low interest rates, was going crazy. Minor obtained a mortgage broker's license and joined the frenzy. His University of Colorado background in finance and advertising prepared him, but it still took him several months to, well, drum up business.
Paying to play
After a few months Minor completed a deal. More important, the job acquainted him with the ins and outs of creative financing.
He bought his first income property in spring 2004, a four-plex in South Central, Los Angeles, with a no-money down technique learned from sneaking into a $1,500 investment seminar. The building was in a "war zone," but all the renters had been there at least five years and it was a nice building.
He paid $487,000 and the sellers worked with him on the financing. In the end, he got it with nothing down, and was out-of-pocket just over $900 to buy a cash flowing property.
Minor had another problem to overcome - he knew little about landlording, a point driven home when the band left on tour.
"I placed one of the tenants in charge of maintenance and management," he says. "I was up several nights worrying that the building would be burned down, but I didn't get so much as a call for the five weeks I was on the road. I returned and found nothing had gone wrong and all my rent checks were in the mailbox. Nice."
The property isn't tremendously profitable, but it does throw off some cash, perhaps $600 to $700 a month after expenses. Its biggest positive has been explosive price appreciation of about 59 percent to what Minor figures is $775,000.
No-money-down purchases like these can be risky. If tenants stop paying rent or vacancies crop up, owners must pay many of the expenses, including mortgage payments, out of their own pockets.
Minor was lucky on two counts: His rents kept pouring in and the L.A. market continued its upward trend. That price appreciation has now furnished him with considerable equity in the property. Not every real estate investor has had such a happy experience with no-down deals.
"The rental market is cyclical, like the housing market," said mortgage broker Bob Moulton founder of Americana Mortgage Group. "If values drop or if he gets vacancies, there's exposure there."
When Minor was ready for more, there was little chance of finding anything in Los Angeles that made any financial sense; everything was way overpriced. A friend, however, told him of a house for sale in Victorville, California, an hour east.
It was a single family, a little beat up and not in a great neighborhood. But it was structurally sound and at $117,000, the right price.
He bought well, but he didn't rent well. He spent several thousand on renovations but his tenants didn't have much respect for his investment.
"They swore they would take good care of it," he says. "They didn't, and they didn't pay rent. Finally they agreed to leave. I drove out and the moving truck was there but the doors to the house were closed and none of their furniture had been moved out. The matriarch of the tenants, a big, cigar-chomping woman told me, 'We're just having a hard time. Can we wait until tomorrow?' I insisted they leave as agreed. She faked a heart attack right on the floor, her lit cigar burning yet another hole in the carpet. I didn't buy her act and a few minutes later she was up and smoking another cigar."
The upshot: Those tenants cleared out and he managed to find more reliable ones.
After that, Minor did what every good Southern California real estate investor does - he brought his act to Arizona. With a friend scouting and managing the properties, Minor acquired three duplexes and three single-family houses in Casa Grande, south of Phoenix. Everybody else was buying in Phoenix itself but Minor drove through town one evening and didn't like the vibe.
"All these tract houses were dark," he says. They were being bought for investment but there were too many vacancies. Driving through Casa Grande, however, he saw lots of lights. And, prices were lower. He paid just $45,000 for a house last November and he sold it this June for $90,000.
In the future, Minor hopes to minimize hassles by consolidating his real estate interests into a single, multi-unit building of 20 to 30 apartments. Even easier, he thinks, would be a storage facility.
"It has the cash flow of residentials without the problems," he says. "Someone doesn't pay the rent, you change the locks and auction off the contents."
Meantime, Rachel and he have started a mortgage brokerage. Just a few months old, the business has already taken off and he is beginning to hire others to work for him. The business produces about 85 percent of his income, he estimates and he's considering hiring on more brokers.
Minor's ultimate goal is to retire by age 30 - but not from music, which he wants to continue. Not that he has high expectations of making it big. "There's a very real chance the band will never make money," he says.
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