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Living Vicariously Through Others’ Positive Cash-flow

Peter Giardini
3 min read

I absolutely love success stories.  Especially those stories which demonstrate that it is possible to be successful as a real estate investor, yes even in today’s market, and live the American DREAM!

Let me share one such story with you… a story I hope you are currently aspiring to.

The story goes something like this…

The year is 2005 and a young woman was tired of the rat race and decided that she wanted more control and freedom in her life.  She decided that real estate investing, buying and holding, yes… being a landlord, was how she wanted to get started.

Now for those of you who were active in the market in 2005 you know it was much easier to find money then it was to find truly quality rental properties.  Yet this did not stop this young investor from jumping in.

Starting from scratch and with the guidance of a local mentor she slowly and steady built her portfolio.  While the properties available to her weren’t throwing off large amounts of positive cash-flow, nor did they have large amounts of equity… she was in the game and moving forward.  One property at a time.

I won’t bore you with the dynamics of the market since she got stared in 2005… we all know as time has progressed through to today, finding high quality cash-flowing properties has become extremely easy.  And… with each passing year this intrepid real estate investor added more properties to her rental portfolios.  Each new property added to her portfolio, contributed greater and greater cash-flow to her bottom line due to ever declining property acquisition costs.  A situation that is unlikely to change anytime soon.

I should also mention that this young investor quickly learned that there were riches-in-niches as she made the decision to purchase her rentals in transitional neighborhoods and catered almost entirely to Government Assisted tenants.  And… she discovered that quality rentals attracted quality tenants… even Section 8 tenants.  Her renovations routinely include ceramic tile floors, granite counter tops and stainless appliances.

Oh… and one other thing.  She realized very early on that to be successful as a landlord she needed cash.  Cash for purchases, renovations, reserves… and lots of it.  So… she set out to master the borrowing game and created relationships with private lenders, hard money lenders and even banks.

With each new property she became more experienced, confident and able to successfully manage and grow her real estate empire.  And, as of January 2011 she now owns 32 rental units.

In ending her story she shared the details of three recent purchases.  They looked something like this.

Purchase and renovation costs on each property less then $41,000.00.

Rents averaging between $1,100.00 and $1,400.00 per property per month.

Normal expenses for taxes, management, maintenance, vacancies and of course debt service.

Net positive cash-flow for all three properties combined: just under $2,300.00 per month.

And if that isn’t enough to convince you of her success… consider that her average net positive cash-flow for her entire portfolio is around $300.00 per property per month.

That is what I call SUCCESS!

So… how did she do it?  What did she do to grow her portfolio when others met only with challenges?

Well… here are few insights that I hope will guide you toward success.

1.  She got started!  You read that correctly… she decided that she didn’t like where her life was and she was determined to change her situation.  She chose real estate investing as the vehicle to help change her life, she started moving one step at a time and has never looked back.  How about you!

2.  She knew that getting into real estate investing without proper guidance and support would only lengthen her learning curve and possibly cause her to make costly mistakes.  She found someone who was an experienced landlord and engaged his services to help her build her empire.

3.  She niched into her market… Government assisted housing.  This was an incredibly wise decision as it focused her on specific neighborhoods and allowed her to quickly develop criteria, processes and procedures unique to her market and tenants.   She only had to get good at a couple of things and then execute ruthlessly.

4.  She quickly learned that without access to cash her business would not be able to grow.  So… what did she do?  She created relationships with lenders.  Private, hard and even banks.  And, even as recently as last quarter she has been able to secure 30 year, fixed-rate amortized blanket loans from a small local bank.

5.  She developed a strong team of reliable contractors, tenant acquisition agents, and other vendors.  Her business is close to being on automatic.

6.  She decided early on that no one could manage her portfolio as well as she could.  So… she set out to teach herself to be a successful landlord and now manages her portfolio herself.  

All-in-all a classic success story.  One that should be an inspiration for everyone of us as we move forward in today’s market.

In closing I will leave you with this one thought…

As the housing market continues to struggle to reach a true bottom in terms of property acquisition costs, opportunities for real estate investors to purchase properties that throw off considerable cash-flow abound.  If you aren’t focusing at least a portion of your business on rental property acquisitions perhaps now would be a great time to get started. And who knows, in five years or less you could have achieved similar success the young investor discussed above.

Best of luck!

Photo: Anna Chan

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.