Our 10x strategy, and why we (kind of) stopped investing.
I remember reading this article when longtime pillar of the BP community, Brandon Hall wrote it a few years ago. I'll let the article speak for itself, but if I were to distill it down to a sentence: When it comes to wealth building, focusing on real estate is majoring in the minors.
I didn't take this advice seriously, my wife and I started investing in real estate a little after that article was released. We bought a duplex as a house hack, preceded by a handful of other SFH's in our neighborhood. We were early on the mid-term furnished rental wave, starting our first one in 2021, which helped boost our income.
During this same time period my wife and I both quit our jobs and started a dog-walking company. While investing in real estate we grew the dog walking company from just us to 25 employees walking about 100 dogs a day. Almost exactly a year ago today we sold that company for $400,000.
This wasn't a huge exit, of course. But it was the first realization that maybe real estate was not the best use of our focus. This small business allowed us to quit our jobs for a more flexible lifestyle and supported us for about 5 years. But not only that, just like real estate, we were creating equity out of nothing. No start-up capital, no reliance on banks, no particular expertise required (initially at least, we had still had to learn a lot along the way!).
And this is when I came full circle back to that Brandon Hall article. We didn't build some sexy software application in silicon valley. We spent $30 on a few leashes and flyers. Even so we generated more cash-flow and built equity faster than any real estate investment we made, or even all of them together. And that's including some very lucky breaks where we bought properties with sub 3% lending before the pricing jumps in 2021 and 2022. It finally hit me how quickly you can build an income, equity, wealth, etc through building a business.
Now that we've sold the first business my wife coaches other dog-walking business across the country (and some in Canada) how we did what we did. Within less than a year she's built triple the cash flow of our dog walking business and real estate combined, and seven figures in equity. Just like in real estate, business building can and does compound on itself.
But with that being said, our initial investment in that house hack did something for us: It took our housing expense, most people's biggest monthly expense, down (or at least close) to zero. And that gave us a feeling of security that allowed us to take "riskier" bets. Were the bets actually risky? I don't think so. Did we need that housing expense covered to build a business? No. But your own psychology and mindset does matter, and investing in real estate, while not making us wealthy, did give us this back-up plan where we knew we'd always have a roof over our heads and enough of a financial buffer we could figure something else out. And with the five investments we made in good parts of our town, that even if all our efforts in the business didn't pay off, in 20 years we'd still have a nest egg of equity we could fall back on. So it would be OK if we weren't paying into a 401k or the S&P.
Additionally our real estate investments have given us new opportunities that is making this next stage of our wealth building journey easier.
1. This year we've used 1 of our furnished rentals for my wife's clients who travel into town for weekend intensives. We can offer "free" housing at a 5 star airbnb, which feels like a huge perk to them. And instead of making $400 in a weekend, we make $4000.
2. We have multiple buildings we can use as office space as we look towards continuing to expand the coaching business and hiring employees.
3. We have built up some equity in our real estate investments. We're selling off a couple, keeping the easiest to manage, and using that capital to throw gas on our other fire.
After all that I'm sure it sounds like I'm anti real-estate. Real estate has definitely been a part of our journey of learning what it means to run a business, build a product, stand out in a crowded market place, (especially running airbnbs). My mindset has just shifted from using real estate as a wealth building tool to a wealth maintaining tool. Probably not the most common opinion around here, certainly not the sexiest.
Just a final thought I'm not sure actually fits in here but wanted to say: I have my real estate license. I've been working exclusively with other investors and have my license hung at an awesome investor friendly brokerage (shout out to Wayfinder) with lots of great brokers who all have different expertise. When I consult others investors, usually first time investors, I start by asking them what they're goals are. Most of them are some version of "I want to replace my income and quit my job." I always encourage them to house hack, or at the very least move into the property they're buying if it's SFH to get a lower interest rate and lower down payment. 9 times out of 10 I get the response of "I can't do that for X Y Z reason" Which always can be boiled down to some version of "I like my current lifestyle, I don't want to change my status quo." Which can be boiled down even further to, "That sounds hard."
This is just one persons opinion coming from my personal experience: The challenge I'd like to leave for anyone who wants to break your golden handcuffs of a 9 to 5: If you want a different outcome, you have to put in different inputs. It sounds simple, but if you aren't willing to change your life, your life won't change. Building any kind of wealth takes a lot of discomfort. And the faster you want to try and make that happen, the more willing you should be to embrace that discomfort. If you're starting from close to zero, you need to be flexible, scrappy and willing to sacrifice your current lifestyle in the short term for the better lifestyle in the long term. That's investing. Whether it's business or real estate.