Episode 2: My Story
Previously, we discussed how "if it was easy, everyone would do it" and you can connect with me at [email protected] I'm interested in networking, helping, and being helped by other investors.
Today, I'm going to share my personal story (adventure) with you. I'm three years into my investing career, I'm married with two kids (5 and 7 years old) with a full-time professorship. My wife is involved in our real estate investing business as both a financial and strategic partner. We wanted to grow our family's wealth to have the experiences life requires and be more giving to our church (plus the community around us).
[2:30] We've thought a lot about our "why." Being working professionals has helped getting established with the bank and taking care of our daily needs. However, growing real wealth required us to change our income or how we were saving. Make decisions based on how they will impact your family. Think up-front about how that will impact your ability to server your family, community, and church.
[4:00] My wife and I married at 19. We bought a brick house in what we thought was a good location in Jackson, Mississippi area. We didn't negotiate, we immediately painted and furnished the house via credit cards. We stayed in that house for a year, but when it came time to sell, it was still worth the money we had dumped into it.
[6:00] We went to Craigslist and found a renter. We didn't have problems with that tenant, moved out of state to Louisiana, and used that rent to pay our mortgage. We found another tenant (a military family), then another tenant. The last tenant we had was the worst, but we still experienced minimal problems. If something went wrong, we had the tenant call a contractor and to send us the bill. We were paying a property off, breaking even, but weren't creating a lot of equity.
[7:20] We bought our Louisiana house at retail, only stayed in it for a couple of years, but didn't know much about flipping houses. We repeated that process, didn't find deals, but realized real estate could be very forgiving. Those first two projects gave us a framework for how to accept money from tenants, communicate with tenants, and how to manage the properties while they lived in them.
[08:45] When we moved to Mississippi a final time, and found a good rental market (high rent and low property prices), with industry coming into the area, we already had a background. We only needed to find good deals, properties that would make us money. My first true investment property was an owner-financed deal. I found a seller on Craigslist trying to sell a 4 bedroom 2 bath house. I texted him, told him I was trying to get into real estate, and he agreed to owner-finance the property for $1500 at his set purchase price. We made a deal with an attorney a few days later.
[11:00] That is one of the properties in our portfolio today that rents for $1200/month, our purchase price was $82,000, and it's performing very well for us. That strategy worked out in other deals, for example, an 8-unit apartment building in Texas that is owner-financed. I found this by contacting the seller, trying to find out why they're selling, and find out if them holding the note (instead of me getting a bank loan) was something they would be willing to do. My first few deals had to be "gettable" (since I had no money) to have the owner carry the paper.
My parents were not extremely wealthy. They were helpful with me, my brother's, and my sister's efforts to grow into adulthood. We are all college graduates, and our parents supported us through school. We didn't have a lot of money. Much of what we earned was through sweat equity -- talking with sellers and making offers on 20 properties a week. That sounds crazy, until it works!
[14:00] Growing up, we didn't have a lot of experience with banks and the credit system. Borrowing money was taboo in our household. It's important that you work on establishing not just a portfolio, but a mindset where you can bust through your mental barriers. Growing fast takes a ton of work. I thought that the only debt was bad debt (furniture, car payments) -- until I realized borrowing money can grow your portfolio. Banks have to lend money to stay in business and you have to look like a good borrower to them.
[16:15] I started my portfolio with $15,000. We are approaching "80 doors" and our goal this year is to reach 100 doors. We've recycled that same $15,000 fifty times to get to 80 doors. If you're willing to work, you can buy a property that costs $15,000, use a $15,000 credit line to fix that property up, and have that property worth $50,000 to $60,000 in the markets that I invest. You can then pull your initial investment out of that property, and rent it for $850/month, cashflowing 200-300 dollars per month on a 15-year repayment schedule. Imagine the cashflow on a 30-year repayment schedule.
[17:40] The first houses, I changed out the flooring and the fixtures. I changed out the electrical outlets, painted the kitchen countertops, cleaned out the trash out of the properties. I did all this with a full-time job. This takes a ton of work, but it is possible. There are ways to grow fast, but it will require work, and will pay off.
[18:45] Find a mentor, find a coach, get educated before you make decisions.
The best way to find deals is to speak directly to sellers, and not go through real estate agents or MLS listings. If I can speak with the owner, we can many times find common ground, and I can have enough equity to hold onto it or sell for a profit. I don't steal properties or try to weasel people out of their properties. I look for a win-win deal, and I've picked up more business from repeat business or referrals from successful deals.
[21:10] Single family house seem to be the best criteria for us. The turnover is easy and we haven't had many problems. We have a few duplexes and tri-plexes. We have a 4-unit, 7-unit, and a couple of 8-units. We have a diverse portfolio. I self-manage my properties with a team. I have a part-time assistant who helps me list properties, pay contractors, and stay organized. A full-time handyman responds to service calls and works on new renovation projects. (We also ring in 1099 for those projects.)
[22:40] Growing fast takes a ton of work, and is not always the thing you have to do, because you can experience money-losing and damaging mistakes along the way. You are allowed to take your time. We're still actively purchasing properties, but not as actively as we used to.
I hope this podcast helped you think about your own story. Please subscribe to the Grab the Map Podcast and continue listening. You can reach me at [email protected]