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Acquiring 20 Long-Distance Rental Homes (on a Military Salary!) with Rich Carey

The BiggerPockets Podcast
66 min read
Acquiring 20 Long-Distance Rental Homes (on a Military Salary!) with Rich Carey

Many people feel that because their local market isn’t great for rental property cash flow, they can’t invest. Don’t tell that to today’s guest, who for the past decade has been doing just that—even while working full-time in the U.S. Military! Today’s guest is Rich Carey, who shares with us his strategy of buying rentals in one location, despite living in many different places across the world. Rich also discusses his strategy of NOT using leverage, instead choosing to buy properties with cash instead, which has allowed him to maximize his cash flow and has given him true financial independence. Rich’s story is inspiring and highly educational, so set aside time today to listen to the whole interview. We think you will really like this one!

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Read the Transcript Here

Mindy This is the BiggerPockets podcast Show 268.

“One thing I wanted to explain about my properties being paid off is like, when I had six properties that were paid off, it didn’t take too long. It might have been a year, like it took a year for those six properties—I think it was a year, maybe longer, 14 months—to purchase a seventh. So six cash flow properties can purchase a seventh. But now, when you have 20, it only takes five months for 20 properties to purchase a 21st property. So there is definitely a huge snowball effect that happens. It’s kind of like almost the same as compound interest but with houses”.

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Brandon: What is going on, everyone? This is Brandon and—

Mindy: Mindy.

Brandon: Host of the BiggerPockets podcast, you like that? I changed that. Now, we’re equals today. Anyway, here with—

Mindy: Thank you, Brandon.

Brandon: Here with nobody. How’s it going, Mindy? That good?

Mindy: Oh, my goodness. That was terrible.

Brandon: It was amazing. So today on the BiggerPockets podcast, we’ve got kind of a cool interview with a guy named Rich. We’ll introduce you to Rich here in just a minute, everybody. But it’s a cool show. Rich is pretty awesome. Before we get to that, Mindy, what’s new in your life? We haven’t talked in a while.

Mindy: Well, I don’t know if you know this but BiggerPockets has a new podcast called BiggerPockets Money.

Brandon: I’ve heard.

Mindy: Where we do kind of the same thing but we focus on money instead of real estate. Although, in the—I think we’ve recorded ten episodes now. Like six of them have real estate ties because real estate is just a really great investment.

Brandon: Real estate in a good investment. Well, cool.

Mindy: So you can find us on all of your favorite podcast players and also at BiggerPockets.com/MoneyShow. That’s what I’ve been doing.

Brandon: That sounded like the Quick Tip but it’s not the Quick Tip. The actual Quick Tip—Quick Tip today is very, very quick. If you’ve not yet done a new member introduction on the BiggerPockets forum, in other words, introduce yourself to everyone, go to BiggerPockets.com/newmember right now. BiggerPockets.com/newmember, and fill out your introduction. Let us know who you are and what you’re looking to do in real estate. It’s a great way to network and to get your name out there. So, BiggerPockets.com/newmember. You like that? That is a Quick Tip.

Mindy: That is a great tip. And kind of piggybacking on this is post a picture of yourself. This is a professional networking site. We hosted a huge Meetup in Denver last year and it was so nice to see people and they would come in and like, you’re L. Williamson from Leading Landlord, because I recognized his name, his picture, and because he has a logo in his pro membership signature. So put a picture on your site of you. I know there’s a lot of privacy issues and whatever but people just come here because they want to talk about real estate. So share who you are.

Brandon: All right, that was a good second Quick Tip. Quick Tip! I like it.

Mindy: Quick Tip Two.

Brandon: All right. Mindy, you want to feel really bad about yourself right now?

Mindy: I want to feel really bad about myself.

Brandon: Because you’re in Denver and it’s really cold. You want to see how good life is right here? Yeah, that’s right. Look at that.

Mindy: Brandon, where am I talking to you from? That looks like palm trees. They don’t have palm trees in Washington.

Brandon: I know. I finally made it to Hawaii. I just had to brag about that. I’m at the Disney Alani resort right now. We’re just here for four days and then I’m going to be staying over in Kailua for a few months so that’ll be fun.

Mindy: Aloha.

Brandon: I’ll be reporting live from Kailua the next few months of the podcast so that’ll be fun.

Mindy: Jealous. Yeah, I’m jealous. Although I will say today it’s 65 degrees in Denver.

Brandon: Okay, fine. Yeah, I actually can see behind you and it looks pretty nice. With that though, we’ve got to get on with the show. A quick word from today’s sponsor.

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All right, thanks to our show sponsor as always. Now, let’s bring in Rich. I think that’s a good time to do it. Actually, before I do that, I want to say this. I’m kind of excited. This is nothing related to real estate whatsoever but Mindy, remember the song I put out recently?

Mindy: I do.

Brandon: Remember the baby one?

Mindy: I do remember the baby song, which made me cry, thank you.

Brandon: Good, good, good. So quick backstory and then we’re going to get on with this. So, Seth Moseley, which we had here on the podcast back in episode 2—I don’t know. In the 200s somewhere. He’s a Grammy-winning music producer guy that is also an amazing real estate investor. Anyways, Seth actually invited me out to his studio in Nashville and he recorded a song that we wrote together and recorded and it was for my little girl, Rosie, or about Rosie. So anyway, I thought it’d be fun, I’m actually going to throw it at the end of today’s podcast. So after the music at the end, I’m going to give it to our editor, Dave, and he’s going to upload it there. So if you want to hear the song that I wrote, it’s kind of cheesy but you might like it.

Mindy: It’s not cheesy. It’s beautiful. And also just NSFW, because you’re going to cry. Brandon, it’s such a sweet song. And also, Seth Moseley was on BiggerPockets episode show 230. So that’s BiggerPockets.com/Show230.

Brandon: All right, well, thanks. Anyways, so yeah. Let’s go there. I just thought it’d be kind of fun to share what I’ve been working on, kind of a mutual thing with me and Seth.

Mindy: That’s very nice.

Brandon: All right so, enough about that.

Mindy: Enough about you. Let’s talk about today’s guest.

Brandon: Yes, today’s guest is awesome also. Today’s guest is Rich Carey. He is an awesome dude I’ve met a couple times through the FinCon conference that I go to every year. Rich, actually, when I met him, he told me that he owned like 20 houses and he owns them kind of in a unique way that most people don’t in that he has no mortgages. He’s not like a multi—he works a very steady, normal job called the U.S. military.

And today, he talks about how is he able to buy 20 houses on a military budget, so to speak. Very, very cool stuff. Very applicable for anybody who doesn’t make hundreds of thousands of dollars a year. Just your average American. Oh, and he invests entirely, not just out-of-state, out-of-country. So, so much good stuff.

Mindy: Yeah, long distance real estate investing for sure.

Brandon: Yeah, like, long distance.

Mindy: He’s currently in Korea. That’s if you look at a globe, we are like literally halfway across the globe from Korea. That’s where.

Brandon: And he’s buying and managing and owning all these things so very, very cool stuff. So without further ado, let’s bring him in.

All right, Rich. Welcome to the BiggerPockets podcast. Good to have you here.

Rich: Man, it’s awesome to be here.

Brandon: Yeah, this should be fun. I don’t know a whole lot about your story but we did get to connect, what is it, in Dallas?

Rich: You were in Dallas, yep. FinCon.

Mindy: And San Diego.

Rich: And San Diego. That was my second FinCon for me, yep.

Brandon: There we go. So you do real estate. That’s the word.

Rich: I do real estate, yeah. For a while here. Yep.

Mindy: Wait, wait, wait. Aren’t you stationed in another part of the world? You can’t invest in real estate long distance.

Rich: It is a little bit harder. So I’m in the military so I’ve been in the military for the past 18 years. And currently, I’m in Korea. So I’m in South Korea right now.

Mindy: You can’t invest in real estate if you’re in the military. You can’t invest in real estate if you’re in Korea. That’s the end of this show.

Rich: Fair enough.

Brandon: See ya’ll later.

Rich: Fair enough.

Mindy: Okay, thanks, Rich.

Brandon: What time is it if you’re in Korea right now? What time is it there?

Rich: 5:42AM. These are kind of my first words spoken and I’m just trying to wake up here.

Mindy: And is it Wednesday today?

Rich: It is Wednesday, yeah.

Mindy: Wow, we’re talking to you from yesterday.

Rich: That’s right.

Brandon: No, it’s not the future.

Rich: Tomorrow. I’m in the future.

Brandon: We’re yesterday.

Mindy: We’re yesterday.

Brandon: Yeah, weird. All right, so. From the future, tell us what it’s like. What’s the weather like in the future? All right, so let’s talk about your real estate.

Rich: It’s freezing in the future, yes.

Brandon: All right, so how did you get into real estate? Let’s talk about your very first deal.

Rich: Okay, so I was in the military and my first assignment was actually in Guam, like most people have never heard of but some small island like out in the middle of nowhere in the Pacific. And I was very eager to get into real estate but Guam is a place that has typhoons and earthquakes all the time so I decided not to buy. So that was in 2000.

In 2002, I eventually ended up moving to Washington, D.C. and I bought a townhouse in Alexandria, Virginia. And that was just going to be my primary residence. It was like the first house I ever moved into and it was $280,000 for a townhouse and I for sure thought it was the worst decision in my whole life. To me, that was like way, way, way too much money. I didn’t sleep. It was like crazy. I thought for sure I was ruining my life but I bought the house.

Mindy: Did you buy it with a traditional loan? Were you in the military at the time?

Rich: Yeah, it was pretty typical. I had enough money saved up to put 10% down and then I financed 10% at 7% and the rest was a 5.5 30-year fixed.

Mindy: Okay.

Brandon: So you bought this first house.

Rich: Yep, I bought that first house and then I ended up moving away in two years and ended up turning that into a rental and that rental, I rented out for about $2000 a month. I had that house for a long time. I sold it in 2016. But I rented out between $2000 and $2400 a month. But you know from the 1% rule, it’s not like amazing numbers but it was a decent rental and a way to get my, sort of, feet wet. It was a start.

I think the thing that sort of got things going for me, though, was when I bought in 2003 thinking that it was the worst mistake of my life, it was only about a year later that I guess the net worth of the house, or the prices in the area shot up. So it was worth about $400K-$450K two years later and I realized very quickly, I’ve got to go out and buy more houses like this. I’m making money. So I kept trying to go out and buy more houses.

I felt like they were rising so quickly in price that I didn’t but I ended up getting into a couple of other things we could probably talk about. I ended up flipping new construction which turned out to be an interesting experience and later on ended up flipping houses while living in Japan.

Brandon: Okay, I want to go over both those things.

Mindy: There’s like a thousand things I want to talk about. I want to do the new construction one first because I read that in your application, what did that look like? Why would you flip, I’m assuming you flipped a new build. Did you go in and renovate it?

Rich: Okay, so I don’t know how often you guys have ran into flipping new construction.

Mindy: Never.

Rich: It’s not—okay, it’s not something I hear a lot. The way that flipping new construction works is first of all, and I’ll say it right off the bat, I don’t think is a great idea. It’s one of those things that everybody does when the markets are skyrocketing and everybody’s making money so they’re kind of like, oh look, everyone’s making money so I’m going to do that. What happens is you go to pretty much this massive, empty lot where the houses aren’t built yet and there’s like just a trailer there. And you go to that trailer and it’s like got a little model of what this area is going to look like once everything is built.

And you go in and you buy the house before they started construction on it but you just put a deposit down. You bought the house at a set price before they’ve broken ground yet. And in my case, I was able to buy one of the first townhouses, and this is near Alexandria, Virginia, in attractive homes that was going to have like 150 homes. So I’m like number six out of 100something. And I’m also an end unit which was also desirable.

You pick all your amenities. You know how you buy a new house and you get to like pick all the cool sound systems and you ran it and do all that fun stuff and the expensive extra paint and vault ceilings and all of these other kinds of things. So you do that and then the idea is, you’ve locked in your price. A year later, it’s finished and since things are still appreciating, by the time it comes to market, you just turned around and sell this new construction to the next guy and you just take that large profit. So you never move into it.

Mindy: Okay, and you’re not rehabbing it.

Rich: No, no, no.

Mindy: Okay. So I heard about this in Florida like around the same timeframe like people were buying these condo buildings that were just going crazy and then they had issues in 2008-2009, they were just walking away from them, and entire condo buildings were built but nothing.

Rich: Yep.

Mindy: So how much money did you make on that?

Rich: So let’s see, I think I did this in 2005 and a lot of people had already made money doing this so I should have known better but I didn’t. And what happened was by the time it was done, what I realized was the price had not gone up. They had stayed about the same. And I was very nervous. I was like, uh oh. And so, I did two things. I put my house up for sale and put it up for rent. I’m going to try to make money somehow or at least not get in trouble somehow.

The problem with putting it up for rent, there was no takers. I couldn’t get anywhere near covering the rent except for a couple of offers for Section 8. And the people that wanted to rent from me that were Section 8, they had plenty of money, actually. They had a lot more kids than I wanted to live in the house. There was like, they had a lot more children than I felt comfortable moving in. But they were going to have plenty of money and it’s something that I looked into. I actually ended up meeting the family and not feeling very comfortable with that particular family and decided not to do that.

And then what I ended up doing was getting with my real estate agent and offering like a bonus to a seller—I think it was a $3000 extra bonus to the seller and I said, look, please help me unload this. I’ll take a loss. I’ll break even. Because my original plan was to make $50,000 or make more. I said, I’ll do anything. Just get me out of this.

They got me out of it and they made about $10,000 but what ended up happening to the rest of the houses in that attractive homes, there wasn’t one person in attractive homes that was planning on living there. Every single person was flipping new construction. Most of them ended up being foreclosed on and most people got into a lot of trouble there. So I was lucky. I was lucky to get out of that. And it was a good lesson.

Mindy: Did you go back and buy any foreclosures?

Rich: No. I mean, that would have been smart. I was moving on. I moved to Monterrey, California, which was my next assignment. And what I did in Monterrey, though, and what I almost did, I almost got myself in trouble again. I wasn’t—I mean, I couldn’t tell that the bubble was bursting. I just knew that that particular purchase didn’t work out that well and I was still kind of riding high from how much money I made on my first property when it came to appreciation.

So I wanted to buy another house. I wanted to find a way to make money in real estate. I didn’t really know any other real estate investors yet. I don’t know if BiggerPockets even existed at that time, I don’t know, 2005-2006 timeframe. Probably not.

Mindy: It did, but not in the current iteration.

Rich: Very small? Okay. And you know, I hadn’t met other investors and I hadn’t met this world on the internet or anything. So I was in Monterrey and it was the top of the market for sure, and I went to buy or rent a house and I was close to buying and they had convinced me that I found a good deal on Monterrey, California. $900,000 for a two-bedroom, one bath, right next to the ocean.

Mindy: Oh, right next to the ocean, though.

Rich: Right next to the ocean. And I was this close to buying it, kind of pulled out at the last second. I was starting to get money from friends and family and finding a way to make the down payment work and decided not to do it. Now, a lot of people while I was at that assignment, I was there for three years, ended up buying a house. Maybe not right by the beach like me but maybe inland, maybe 30 minutes or an hour.

There were a lot of military members who otherwise had very good credit that ended up walking away from their homes or ended up being in a lot of trouble. Some people bought in a city called Salinas, ended up buying, and then two or three years, it was worth almost half by the time they left. So that was just a very bad time for the market.

Mindy: Yeah, that was right around the very top.

Rich: Yeah, it was.

Brandon: Can I ask you real quick, people who are listening to this might be in the military, maybe who just move often. The strategy where you move to an area, you buy a house, and then you get shipped to another—you buy a house there. That’s worked really well for some people. Do you recommend that or not? Because you would have been in trouble there. Or was it because you were just looking for the million dollar house on the beach? What was that that would have gotten you in trouble?

Rich: I’m really glad you asked that question because I think it’s the biggest mistake that people in the military make. I think that everybody in the military knows somebody who has made a lot of money by buying a house at every location that they’ve lived, or most locations that they’ve lived. Because they probably won’t buy one when they’re in Guantanamo or something. But most locations they’ve lived and then—

Brandon: They could. That would be fun.

Mindy: I’d love a place in Cuba.

Rich: That’d be great. And then they retire, and maybe the timing was right and the appreciation was right, and they tell everybody they know. Hey, did you hear about so-and-so that made a fortune because they bought a house at every station? But I believe that that’s a rare case. I believe that luck’s involved and more than not, you’re going to see people that got themselves in trouble doing that.

I’m somebody who believes that you don’t buy a home at a certain location and I’m the kind of person that doesn’t buy a home in the military, especially—this is the case—you don’t buy a home unless the numbers look right for that house to be a rental when you move away. And that’s how I evaluate home sales. So I’m looking at first at the 1% rule and then I’m kind of using the 50% rule and running the numbers, at least at the beginning, am I even going to be close to buying a house around here?

And I can get to this later but when I moved to Montgomery, Alabama later in my career, I rented a house in Montgomery, Alabama but I ended up buying six different houses while I was there as investment properties even though I was renting the house that I was living in. And the one I was renting, that wouldn’t have made a good investment property. The numbers weren’t right.

Brandon: Yeah, that’s fascinating. Because you know like, I think people oftentimes think that you have to own a house before you start investing in real estate. In fact, I get that question quite often from people saying, well, I’m renting right now. Should I buy a house for myself first and then buy investment properties? You could go that route but there is no rule. There’s no law. There’s not even like, at the goal, for logical reasons to do it one way or another.

You know, we actually had that argument with Grant Cardone back a few months ago here on the show when he was saying, don’t buy a house period. Just rent. And then buy rental properties. And I don’t think that’s horrible advice. I think there’s a strong case to be made there.

Rich: Yeah, it’s true. So that’s kind of how I feel. I mean, it might be different if you’re not in the military and you have a chance of staying at a certain location five or ten years. But if you’re in the military, my advice to everybody is going to be, don’t buy a house unless you’re living in a house that you’ve already ran the numbers on and already determined that that house is going to be a great rental once you leave. Like, you’ve bought it to be a rental.

Brandon: That’s fantastic advice for anybody looking to buy a house. Unless you’re rich enough to not care and if you lose a bunch of money, who cares or whatever but like, generally speaking, if you’re going to buy a house, every house I’ve purchased, I’ve looked at it and said, could I rent this out and at least break even if not make some money as a rental? Because I know that I’m not going to stay there forever. I don’t think I’ve ever stayed in a house more than three years. And if the market sucks, I’m going to have to rent it. I’m not going to sell it and that’s how it is. So, good advice.

Mindy: Yeah, that’s an excellent piece of advice. So you’re not—I want to clarify. You’re not saying don’t buy property. You’re saying don’t buy property until you have run the numbers as a rental. Don’t get stuck with a house that isn’t going to work as a rental. That’s really, really great advice. I love that.

You mentioned that you flipped houses in Japan? From Japan. The houses weren’t located in Japan.

Rich: No.

Mindy: Okay. How do you do that?

Brandon: Tell us about that.

Rich: So, the way I did this—first of all, I’m not handy. I don’t walk into houses and know how to tear things down and remodel and all that. So I was a partner in this deal. I was the, I guess the money. The financing behind the deal. When I was in Alexandria, kind of one of my neighbors there, he was my neighbor and ended up becoming my sort of property manager for the Alexandria, Virginia house that I owned. And he was a real estate agent and we ended up partnering up. I used to drive—he used to kind of drive me around when I was visiting Alexandria, Virginia.

For me, it was the hopes of finding another investment property in D.C. to purchase. And he was a real estate agent. And eventually, I couldn’t find a deal that I was happy with and he said, Rich, I flip houses like with partners. But like, I’m like tapped out financially. But I have more deals than I know what to do with. He says, if you want, I mean I’ll flip the house. I just need you to put the house in your name and you know, we’re just going to split everything 50/50.

And he said, what I’m doing is I’m flipping houses in our neighborhood, where our townhouse is. He lived across the street from the townhouse that I owned and he says, I’m keeping the property values up in our own neighborhood. Like, I’m buying the worst houses, the foreclosures, and we’re fixing them up to make them the best houses in the neighborhood and then we’re selling them. And I really liked that idea. And actually, so did everybody else in the neighborhood.

But I’ll admit, though, scared to death. I was scared to death that this guy was going to take my money and somehow move to the Philippines—I didn’t know what was going to happen. I mean, I knew him but being in Japan and having to have somebody like go into your house and gut it and you see all these bills coming back and forth and e-mails and sign this, sign that. I was scared to death.

I liked him. We worked together on a lot of things. I knew him from the neighborhood. He had a great reputation so we flipped a house together. I think a lot of the details on my flips are on my website but I believe the first house that we flipped made about $18,000 profit. I didn’t do anything. All I did was buy the house, wait a few months, and sell the house and take a check. That’s like all the work I did.

And we did that, I think, six times over the course of a few years. I made good money doing it. It ended up being a very good partnership. But I’ll admit though, that’s like, I mean I looked at the deals with him and we talked about them, but really, it was his expertise and my money. And I’ll also caveat this by saying, made a decent amount of money. It put some money in my pocket to do future things in real estate. It’s pretty speculative. I mean, I made money but I could have lost money just as easy. I stopped doing it because I was happy with the amount of my money I was making and some of my deals lost money. I didn’t want to start losing money and I didn’t want to lose big.

Because he felt like he was stepping up, and I think he’s doing $3-4 million dollar deals now. He was stepping up and I wasn’t ready to step up with him because I wasn’t there and I wasn’t that comfortable not being involved more deeply in the deal when there was that much money at stake.

I eventually found a new opportunity in Montgomery, Alabama, where I was purchasing houses there that I felt had good cash flow and I kind of wanted to take my money and move it to that opportunity instead. So that’s my experience flipping houses.

Mindy: So how did you write your partnership so that you were protected? Did you have a first-position lien or you said you had the property in your name?

Rich: First of all, I guess, I didn’t necessarily like, we didn’t have a lawyer do anything fancy. I don’t really know if he was that protected but what happened was I owned the house. So the house was always in my name. So I guess, if you look at it kind of logically, I don’t think that I was ever not really protected. I owned it in my name and then he used all of his own money to pay for the construction, to pay for the remodel so he had his own money into it.

I guess what could have happened is, I suppose that I could have sold it and not paid him back. I suppose that would have been a possibility. I went over lots of different possibilities in my head and it didn’t seem like, to be honest, that there were that many ways that we could screw each other over.

Mindy: You’d be surprised.

Rich: Okay.

Brandon: I think this is—what I like about how you set this up, and a lot of people don’t look at partnerships this way—you were both invested in the deal really well. You both had skin in the game. A lot of people come to the deal and they’re like, okay, I want you, a partner, to buy the deal and I want you to fund the deal and I want it to be in your name and I want you to do all this stuff and I have no risk on my part. You’re going to do everything. That’s a scary thing.

Mindy: And I get 50% of the deal. I saw, there was a thread yesterday in the forums—I want 68% of the deal for literally doing just what you said. I found the deal and I need somebody to bring everything in. No, that doesn’t work that way.

Brandon: Yeah, I mean you might get lucky and find somebody who is willing to do it, who trusts you enough because they’re investing in you as a person, as a character. But like that’s really hard. You’ve got to figure out what you bring to the table. Even if that means you’re the guy in there swinging the hammer. That’s what I did. I had other people bring in the money but I swung the hammer. Now, today, I bring other people in but I’m running other parts of it. I’m managing the property or whatever but to me, people just want their cake and to eat it, too. It’s tough.

Rich: Right.

Mindy: Yeah. So let’s move to those Mobile, Alabama properties. You said you bought six there? How many do you currently own in Mobile?

Rich: Okay, so it’s actually Montgomery, Alabama.

Mindy: Oh, Montgomery. I’m sorry.

Rich: Yep, it’s Montgomery, Alabama and I bought six in the ten months that I lived there. And then I moved away and lived in Stutgaard, Germany, for the following three years. And then I purchased—I can’t do the math—I purchased enough to have 20, right? So what is that, 14?

Mindy: 14 more?

Rich: 14 more. Yep. I purchased 14 more. And then to clarify what I have exactly, I have 20 but I have two in my wife’s IRA and I have two in my IRA. And then the rest exists in an LLC that we have. So that’s how we own all of them.

Brandon: Are they all there in Alabama?

Rich: All of my houses are in Montgomery, Alabama, yes.

Mindy: Okay. And do you have any other ties there, besides you just moved there once?

Brandon: Yeah, I was going to ask the same thing.

Rich: Yeah, so what happened was, I don’t have any other ties there. I had one assignment there. I was there just for a military school that a lot of Air Force officers end up going to. And I was there for ten months and while I was there, I just ended up meeting another military officer who had been there for a few years already and he said he had already owned four properties and they were cash flowing well, and at this rate, he was going to be able to retire early.

And it really like struck a chord with me, like wait a second, what are you talking about? Because I just had the one rental property just in Alexandria, Virginia that wasn’t really cash flowing that well. And I was still looking very hard for another opportunity. And so I kind of was very excited that he said he had found something in Montgomery, Alabama because I did not move to Montgomery, Alabama thinking that that was going to be the place where I was going to buy houses.

Mindy: Alabama’s an affordable place. What are you paying for these—or what did you pay for these properties?

Rich: I was paying, the first property I bought, and I’ve heard you guys talk about this on the show a lot—their first property’s their throwaway property or you know, your learning property. My first property, I paid $30,000 for it and I think the first six properties, which were by far my best purchases, just because of the timing—between $30,000 and $45,000 for those first six. And then the remaining ones, I’ve paid between probably $40,000 and $60,000 for all the remaining ones.

Mindy: You paid between $30,000 and $40,000 for the first six properties and then between $40,000 and $60,000 for the remaining 14? Is that because they were appreciating or were you buying at a different neighborhood?

Rich: I think that the time period I was there, that year that I was there when I bought six happened to be just an amazing time to buy. So they were appreciating. Once I left, they were going up in value. And I think it was one of those things where it was a too good to be true thing. And while I was there, I was hesitant to buy faster. I mean, I could have bought ten. I could have bought probably 15.

And we haven’t gotten into this yet, but I was paying cash for these. I wasn’t using loans. I mean, I could have bought a lot more. But I was worried. I mean, I was kind of like, what if the tenants are going to crash the place? What if the market dies here? What if the military base closes? What if things just don’t work out? Like, I did not know what to expect. I was new to all of this.

So once I left and I had like an income coming for about a year, I realized that I was making a lot of money from these rentals and that I should have bought a lot more. And then I just kept buying.

Brandon: So I’m going to jump in here real quick. I’m wondering about the military base fear, before we go any further. So I’m looking at a deal right now actually that’s in a military town in Arizona. I’m putting together a deal. It’s in an area where the primary employer is the military. And so that’s the biggest fear I have with it. What if the military leaves? What if the government shuts down spending? How do you overcome that fear or do you overcome it? How do people look at that kind of situation? Again, totally selfish question. But the military’s all over. You’ve got to look at it.

Rich: First of all, again we haven’t gotten into the side of things yet. I’m sure we’re going to talk about it soon because I believe that it is unusual that I don’t use any debt and that all my houses are paid off. And that people are always telling me like, what’s wrong with you? You’re going to make more money if you use debt, and in the long run, you’d have a bigger net worth if you did.

I could tell you one thing though is if I have all my houses paid off in Montgomery, Alabama, and there are two military bases there—if those bases were to shut down, if they were just to come out on the list of bases that were closing, that would be really bad for anybody who owned 20 houses there.

In my case, I’ll just be guessing but I’m guessing that rents would go down, I don’t know, 30%, as a guess. And I think that my vacancies would go up a lot, too. They’d go up like I don’t know, 8-10% to like 20%. In my case though, that would not be catastrophic. I would not default. I would not lose my homes. I would be annoyed. It would be less money for me each month. It would bother me. Now, if I was highly leveraged, if I had used one property to finance the next and pulled the money out and be highly leveraged in the deals, I could lose it all with the military moving out of my own.

And of course, you could be somewhere in the middle. You could have a certain amount of equity and have a certain cushion where you could absorb something like that. It’s almost like when the market fell out, right? In 2008. Could people absorb that or not? I think if your military base moved away, you would be experiencing something like that only in your town and you’ll have to be able to absorb that and you’d have to have enough equity to do so, and cash reserves to do so. I think that’s how I would look at it.

And hopefully you have friends in the military, right? That are just sitting on the right committees at the Pentagon and you have a heads up on something like that. So I don’t know. I’ll check for you.

Brandon: I do have that. I have a lot of friends that are running the military, you know.

Rich: Good.

Mindy: So this question comes up in the forums a lot.

Rich: I hope that’s a helpful answer. At least that’s my two cents.

Brandon: It was very helpful. Be more conservative. That’s a great answer.

Mindy: Yeah, and this question comes up a lot in the forums. Should I highly leverage or should I pay off all my properties? And I think it comes down to what makes you comfortable. If you are leveraged to the hilt and you can’t sleep at night, then that’s not a good investment. If you are totally cash paid off, how much money do you need to live? Do you need a billion dollars every month coming in? No. So if you know your numbers and you know what you need to make this work, pay off what you want and leverage what you want. It’s what you can sleep with at night.

Rich: Yeah, true. I think for me, I’ve got 20 houses that are paid off. And I’m planning on retiring. There’s a good chance I’ll retire at the 20-year point, which is just two years away for me. I’m going to have a retirement that’s roughly an extra $3500 a month after taxes on top of the income that I’m getting for my rental properties. That’s enough for most people.

Mindy: Should be.

Rich: It’s plenty, right?

Brandon: I don’t know for me.

Rich: If I want to stay at a Disney resort in Oahu every time I go, though, I might need to start leveraging property.

Brandon: You might need to, yeah.

Rich: And to be quite honest with you, I’m considering doing that. I mean, I have no debt. I have zero debt of any kind and I’m around a group of people now, and I’ve been around these people for a while now, who are doing bigger deals and better deals and more complicated deals. And of course, everybody’s using debt to do this.

When I’m back in the States, I don’t even have to be in the States to do this but I think I’ll just feel better when I am, I may put a little more time into this. I may decide, even though I’ve quit my normal 9:00 to 5:00 paycheck job, I may decide that I want to get into using debt to get into some of these bigger deals and increase my cash flow. But for now, I’m very happy where I am.

Mindy: And that’s where you need to be.

Brandon: I think that makes a lot of sense.

Mindy: Yeah.

Brandon: It is and I think like Mindy says, it’s a lot about can you sleep at night but I would even expand it. Back in ’07, everyone thought they were sleeping great because in their heads, the market was always going back up in ’06-’07, right? So everyone was like, I’m getting so rich. It never goes down. You know, the way I look at the leverage thing, not that you asked my opinion, but I’ll give it anyways.

Like, I want to be conservative in everything that I do. That’s why I do what I call BRRR investing which is where I buy fixer-uppers and I want to build a mass amount of equity, usually 20-30—at least 20 but hopefully 30% equity in any property. That way, I have that cushion in case something goes wrong. At least a 30% cushion. If the market dropped 30%, I’d be all right. Even if it went under, every property I buy has to have cash flow as well. It’s a requirement. I want good cash flow.

So that’s how I look at it. Some people, that’s not conservative enough. Some people, that’s way more conservative. They’re buying stuff at a breakeven point because they think the market is going to keep going. Who knows. But I would rather make less money in my future but be more secure than be the guy that leveraged the hilt and made more money with a 30% risk of losing it all.

Mindy: Yeah. Can you sleep at night, Brandon? Except when your baby falls out of the bed?

Brandon: Yeah, except for when the baby falls out of the bed. So true story, I told Mindy and Rich about this before we recorded but yeah, this morning, so we’re at the Disney Alani Resort on Oahu right now and my—they have two queen beds.

I hate hotel rooms that have two queen beds because then like, I don’t know, it’s weird. Where do you put the baby? So she’s in the bed, right? She’s 18 months old. So anyway, we woke up at 4:55 this morning with a thud and then wailing and screaming as Rosie woke up very rudely with meeting the floor with her face. But you know. No permanent damage that I can see.

Mindy: I’m sorry, I’m not laughing at her. I’m thinking of the many times that my kids fell out of the bed and woke us all up with a big thud. Let’s get back to Rich because this is not the Mindy and Brandon Show. This is the Rich Show.

Brandon: It could be.

Mindy: It could be but it’s not. It’s the Rich Show. Rich, you said you’re not financing these. How are you getting $30,000 to put down on these houses? And $40,000 and $60,000 and—this is another question people have.

Brandon: Last I checked, the military doesn’t pay a million dollars a year.

Mindy: It’s not the most lucrative career choice. And I’ve got a lot of these people in the forums. That sounds rude—there are many members in the forums who asked this same question—how do I get started investing with no money? Well, if you don’t have money, how do you get money? So Rich, how do you get money?

Rich: Okay, so you guys have had Doug Nordman on the show, right? Doug Nordman, he’s in the military.

Brandon: We have not, actually.

Mindy: We have not and I would like to get Doug on.

Rich: I thought you’ve had Doug on—you haven’t? Okay.

Mindy: No, I’ve asked him.

Brandon: We should though because he’s got a real estate deal. He’s my surfing guru.

Rich: Oh, so you haven’t had him yet. So, anyway, I’m kind of a member of this whole like FIRE community and you choose FI, the whole like, be frugal and save your money and put it in index funds.

Mindy: I know what you’re talking about.

Rich: Right, okay.

Mindy: Not everybody in this conversation.

Brandon: What does FIRE stand for, by the way? Can you, for those who don’t know?

Rich: Financial Independence Retire Early, right? So sort of on top of being a real estate person, I’m also kind of a finance nerd. Before I came into the military, I also work for Fidelity Investments as a stock broker. Interestingly enough, I technically still work for them. I’m on a military leave of absence.

Mindy: For 18 years?

Rich: Stretched out a little bit longer than they expected. They call me every two or three years and ask me what’s going on and I send them my new military orders and they’re kind of like okay. So anyway, so I’m in the FIRE community and I’ve been very frugal my entire career. I’ve been a big saver and a big investor and the things that I invest in are pretty basic. I mean, I put my money in the S&P 500 Index Fund, right? That’s what I do. I don’t play with stocks. I don’t play the games with charts and craziness or anything like that.

I’ve always been very frugal and another thing that I do or did that is unusual is I paid off my primary mortgage on that $280,000 townhouse in Alexandria, Virginia. I paid that off in six years. So I had you know, that paid free and clear, which also brought in additional cash flow once it was paid off.

Mindy: How did you pay that off in six years?

Rich: That’s a good question because that’s what everybody would ask. First of all, the money from flipping the houses was going into paying that off. But also, let me think about that. No, it was paid off before. It was paid off before I flipped houses. What I did with that was, again, putting money into the index funds. That money was growing at the time and it was making good money.

And I was just like taking all of my extra money—again, people in the FIRE community, the Financial Independence Retire Early community, a lot of times they’ll try to live off of less than 50% of what they’re making and we were definitely doing that. We were living on quite a bit less and put all the rest into investments. And in my case, we weren’t investing yet. We were just paying off our mortgage.

So we’re the kind of people that don’t buy new cars, don’t take fancy vacations, don’t buy fancy, nice furniture, don’t buy Gucci bags. We don’t do what our friends are doing. We don’t go out to fancy dinners that often. We don’t go out drinking. When we go to restaurants, which is rare, we don’t get appetizers, we don’t get dessert, we don’t get alcohol.

All of this money is going into paying my mortgage off. All of it is. And then my wife was working an extra job, too. When she was in D.C., she was working as well. We just paid it off. I mean, people don’t think it’s possible. It is. You can pay off a mortgage pretty fast when you sort of put all your effort into that.

Mindy: Right. And you’re making additional principal payments?

Rich: Yeah.

Mindy: So for people who don’t know what that means, your mortgage payment is constructed of principal, taxes, and insurance, and you’re making additional principal payments, which reduces the amount of interest that you owe, which is a great way to pay it off if you are of the pay it off mindset. I am not. I like having a loan on my house because I have all that money to then play with. And we’re actually refinancing to take more money out so we can play with it. But again, it’s something that makes me sleep at night. I can cover my mortgage payments so it’s not a big deal.

Rich: Right. So I paid this loan off and that gave me, I mean I own the house free and clear. And then after I had it paid off, I have more money coming in every month. I had a larger portion. I wasn’t making very much money on this rental with the mortgage of $1600 a month because I was only getting about $2400. But once it’s paid off, I’m making a lot more.

And then I’m also putting my money into investments now. By the time I get to Montgomery, Alabama, I’ve got a decent amount of money in investments and money saved and money from flips so I was able to buy those six houses in cash with that money. And then when I realized how well this was going financially for me and how great a market this was for rentals, I decided to double down on it and that I’m just going to repeat doing this.

So even though I was moving away, I was setting up a system so that when I left, no matter where I moved in the world, I’d be able to keep buying here and I put my house on the market in D.C. so that I could have all of that cash to keep buying there. That’s what I did.

Mindy: Okay. $260,000 will get you a lot of houses at $40,000.

Rich: Well no, it was $400,000 at that point.

Mindy: Oh, right. You said that. That gives you even more houses at $40,000. That’s like ten houses right there.

Rich: Exactly. It’s ten. Now, the other thing, too, that I’d like to note is when I first bought that house in Alexandria, Virginia, it shot up to about $450,000 in less than two years and I felt like the smartest guy in the whole world, right? I was brilliant. I’m a brilliant real estate investor. But if you think about—I’m a genius.

But if you think about it, I sold that house, I don’t know how many years later—2003 to 2016—for $400,000. I sold it in 2016. If you do the math, I didn’t really make that much money. In that period of time, from $280,000 to $400,000, the fact that it didn’t really grow again after that two year jump, I mean the appreciation wasn’t really that great when you spread it out over that timeframe.

So appreciation can be pretty amazing in those spurts if you know that that’s when you should sell but over the long-term, it turned out not being that great. That amount of money in the market would have done a lot better. Now, you could also that that amount of money with leverage would have done better as well.

Brandon: Yeah. Well, what I love about this whole thing is like, I mean, I’m a big Dave Ramsey fan. I like Dave Ramsey a lot for a lot of things but he’s militant against debt in real estate and I tend to go a lot more in leverage. But generally speaking, especially my budget standpoint, when you live conservatively and you don’t go and spend lavishly,

I mean, I’m always amazed at people who make $20,000 a year and they’re broke, and then they make $40,000 and they’re broke, and then they make $80,000 a year and they’re broke. Almost every American lives paycheck to paycheck no matter how much you make, $20,000-$100,000 a year. I mean, I know a guy that’s making $250,000 or $280,000 or something like that last year and he’s broke. Like, he’s consistently broke and doesn’t have money and lives paycheck to paycheck.

And I wonder why and I go out to dinner with him, and he bought like a $400 bottle of wine for dinner. And I’m like, that’s crazy to me, you know? But then people look at me and I’m sitting at the Disney resort where I paid $400 a night for this hotel for four nights, right? People think that’s crazy for me, right? But most people live to their limit. I love the fact that you said, no, I’m not going to do that. This is where I’m going to draw that line.

To put a couple of plugs in here real quick—first of all, Dave Ramsey’s book Total Money Makeover, no affiliation with it. I think it was fantastic. It completely changed my mindset about money and finances and budgeting. It’s amazing what you can live on, like a small amount when you focus on it, right? You’ve seen that.

Mindy: Right. It’s amazing what you don’t miss when you give it up. Oh, I could never live without—fill in the blank—and then you try to live without it and you’re like, oh, I don’t really miss that so much. I mean, there’s obviously food.

Brandon: Who needs food? Scott Trench wrote a book called Set for Life which is also very much in that FIRE community sort of thing, like how do you live on half your income or even less, and Scott talks about a lot of different strategies in there. So if you guys want to pick up that, go to BiggerPockets.com/SetforLife and then I don’t know, there was something else in there.

Oh, David Greene, yeah. He wrote a book recently on long distance investing. It’s called Long Distance Real Estate Investing. Mindy’s got a picture of it on the screen. That has all tons of tips and tactics for how to invest at a long distance, things that I’m sure Rich has done which I want to get into here next.

But the last thing I want to point out is, you did not buy 20 houses free and clear in a year or in two years. Like, this is a career that you’ve built over time. I think people often times will listen to a show like this and go, 20 houses free and clear, there’s no way I could do that. But like, it started with one purchase. It’s with that $280,000 house and then being consistent about it.

Rich: It did. And even though I think the 20 houses I bought, I think they might have been purchased in a period of two years, that wouldn’t have been possible without having bought the $280,000 house in the beginning and the paying it off and then having that cash to use later. So that’s kind of what made that possible.

And then all the experience that I got along the way. I flipped the new construction which didn’t go that well. I flipped houses which I made money on but I lost money on sometimes. And on my first property in Montgomery, Alabama, I had like a lot of—from my perspective—I’ve heard worse stories on your podcast, but I had like a lot of really bad things happen to me on that house that some people would have said, forget this. I’m not investing anymore.

Mindy: I want to know about what bad things happened to you. I mean, I don’t—I’m not gleefully delighted in your tragedy but you know, what I’ve heard a lot is having these mistakes shared really helps you learn. I mean, every real estate investor I know has gone through the school of hard-knocks and everybody again is going to go through the school of hard-knocks. But what did—like, what’s the worst thing that happened?

Rich: So I guess when I compare it to what’s happened to other people, they’re not that bad. But when it’s happening to you and it’s like your money—

Mindy: It’s the end of the world.

Rich: It’s like, oh my God. So when I bought that first house, again, I’m not experienced. And the people that were sort of, they were kind of helping me. There were other people that were kind of holding my hand through this process, kind of like, they helped me find the real estate agent that I should use and the property manager and kind of like, when I was, I don’t know who to use to fix the AC, oh, I can try this guy.

But I still kind of felt on my own at times. And I was buying the first house, did the walkthrough. The guy that I used for the inspection, you know, he came in and inspected the house and I got like the report and I looked through it and we closed and when we start and I walked in and we started cleaning up and looking around, there was a big pile of trash in the middle of one of the rooms. Just a big pile of trash in the middle of like kind of an add-on room.

And I’m like, huh, it’s kind of weird that they left this trash in the middle of the room but I’ll clean it up. And when I moved it, what I realized was there was a huge bump in the floor, okay? Like, two feet high. Somehow they had put the trash there to cover up the fact that there was a huge protrusion on the floor and the carpet had come up like almost two feet in the middle of the room. And this wasn’t caught by the inspector.

Mindy: Because the trash was there. They won’t move anything.

Rich: It was like a—I remember it was a Christmas tree just like laying down on top of it or something and it was like July or something. And like just some random trash. So yeah, there’s a large kind of like camel’s hump in the middle of the room and nobody knows why. And to say that I was freaked out was, I’m just like, okay—what’s going on with this house? What did I buy? What is this going to cost to fix? $10,000? $20,000? I had no idea. I bought the house for $30,000. I had no idea what it costs to fix.

And I think the hard part was over maybe the course of the next two weeks, having different people come over. Lots of different people, and getting numbers between $5,000-$20,000 of the estimate to fix whatever’s wrong with this. And the tricky part was like nobody is going in and like figuring out what was wrong. They were just like, guessing what was wrong and giving me random estimates.

Eventually, somebody came along, took out a sledgehammer, peeled back the carpet, smashed it, I mean just like right in front of me. Just like smashed it and start like pulling back concrete and it’s like pulling back some large root and he’s like, oh, it’s a root from a tree. And he’s like, I’ll repour the concrete and do this and that and it’s like $1000 and we should be good. And I’m like, $1000. I can live with that. But that was like a two-week process.

What also happened later was the house was vacant for a while once it was finished. It took a little while to rent out. Again, this was due to inexperience. When somebody, when the tenants finally moved in and they went to turn the water on, I got a phone call that the water was running into the front yard and that something was wrong and there’s no water running in the house. And so I sent the plumber over and the plumber called me up and said, somebody came and stole all of the copper plumbing out from under the house.

Mindy: Oh no.

Rich: So I think that was about a $2500 fix. So it was $2500 to rewire all the plumbing out from under the house. So this was my start to real estate investing. I think I also spent $2000—this was a cat lady house. And so the house smelled like cat piss and it had like these hardwood floors under the carpet that I thought would look really nice. Get rid of the carpet and like let’s make the hardwood floors look nice. But I kind of overdid it. I spent $2200 kind of like refinishing the hardwood floors and it ended up looking like the governor’s mansion, right?

Like I didn’t need to do that. I found out later you could spend like $200 bucks doing this. I had like six coats of wax on it or something. I didn’t know what I was doing. I spent way too much money getting this house—I think I spent something like $15,000 putting into it instead of probably the $5000 I could have put into this house. So that was my first house.

And there were a few other small things but I remember my wife saying, well, I guess that’s it. You’re probably done investing. And I’m like, no. We’re going to put two more offers in. I want to buy two more right now. And she’s like, seriously? We’re going to keep going? And I’m like, yeah. And both of the next two houses ended up being excellent buys.

Mindy: To make up for that copper pipe thing. That is soul-crushing. I had copper—actually, my husband walked in on the guy who was stealing the coppers so he only got a small amount. So he walked in and the guy was in the basement stealing copper and he ran out the basement door and then Carl was like, why is there water on the floor of the basement? Like, we had moved out and we were getting ready to sell it and that is soul-crushing, even if you get like four pipes gone. I feel so violated that somebody was in my house, even though it’s not my house anymore because I’m moving. So yeah, I can imagine. Kudos to you for recovering from that because that is really, like I just bought this house and somebody stole all the copper, that is a big deal.

Rich: Yep. And you’re like, you’re worried about trying to make the numbers work and these mistakes you’re making keep piling up and you’re like, you know, geez, what am I doing? I’m no good at this. I’ll never make it. I’ll never make it as an investor. And you’re doubting yourself and you’re also thinking like if this happens now and this happens every time I buy a house, how am I going to make money? Well guess what, it hasn’t happened to every house. Those have been the exceptions.

I had a problem with squirrels once. Like squirrels got into the house and that ended up being kind of expensive, getting rid of the squirrels. But stuff like that has been kind of the exception and not the rule. And even with evictions—more the exception than the rule.

Brandon: What I find is that it kind of averages out. Like if you own one rental property, you might just get the luck of the draw and you get a really crappy one. Or you might have a big problem like they steal copper pipes. But when you have 10, 20, 30 properties, they kind of just average out. You have a few problems here and there, but mostly they work all right. It’s actually a really good reason why a person should go bigger and not just put all their eggs into just one rental property. If you can buy a bunch, it averages out and it’s not too bad. I think people hear the horror stories oftentimes but they’re fun to tell but they don’t happen that often.

Rich: No, it’s true. I think what you said about having several properties, it’s very true. I found that to be important for vacancies. I mean, if you have all your eggs in one basket, you have one property, right? And it’s got like a mortgage on it and you have a very small cash flow, if that happens to be vacant for four or five months, that could be very painful for you. You’re coming out of pocket to pay that mortgage for four or five months in a row. If you’ve got 20 properties, there is almost zero chance that 20 properties are going to be vacant at the same time for four or five months. And if they are, you’re in big trouble. So yeah, that’s something I like about having several properties.

Mindy: The one thing that makes me sad about your story is that you didn’t have a place to go where you could discuss this with other real estate investors who had this experience who could have given you some encouragement. It’s too bad a place doesn’t exist like that.

Rich: I wish there was one and I can’t think of any off the top of my head right now, except for the actual forum I’m speaking in at the moment, I guess, which is BiggerPockets.com.

Mindy: Yes. Thanks for the plug.

Brandon: I’ve heard of that site. Good job. All right, so I want to know before we get out of here and get to the Fire Round, I want to know like, how are you currently managing your properties? I’m assuming you have a property manager, right?

Rich: Yes.

Brandon: So how do you—and I’m talking because this is a selfish question. Like, I’ve got out-of-state properties now. So how much do you do with this? How much interaction? How often do you call your property manager? How much do you let it ride? How much do you just rely on the computer printout that you get from whatever their management software is? Kind of, can you just walk through your current management?

Rich: Yeah, so I’m managing from out-of-state, right? And in my case, from out-of-country. And I knew I was going to do that. In my case, it’s a little more unique because I lived in the place. I lived in the place for a short time where I had the properties but then I knew I was leaving. And then I also knew I was going to add a bunch more properties. So I kind of set up my management company for that situation.

And what I mean by that is, I spoke to my management company about adding properties to my existing six and what I told them that I needed from them, which is unusual, is that I said you know what would really help, is that I’d like you guys to be involved in the make-ready. I mean, the make-ready is like just usually painting and getting it ready for the next move-in.

I said, I want to keep adding properties and these properties are going to need work. I want to buy properties that I can add value to, maybe they might have termite damage or maybe they are tore up by the last tenant or whatever it may be. Maybe a remodel of the kitchen and the bathrooms. But that’s going to require some supervision and a decent amount of construction and remodeling. I need you guys to be involved in that. I need you guys to supervise that work and be involved in that.

And they were like well, we don’t do that. That’s not what we do. We want to get this stuff from you move-in ready. And I said, I know. But I’m going to buy like a bunch more properties and you know, if you can do this for me, I’m going to go from like six to at least ten, maybe more, and this is my plan, to make this like a lot bigger. And they were very reluctant so I said, let’s just try one and see how it goes and I kind of talked them into that.

So that’s been very helpful. I was gone. I was in Germany and I ended up buying some houses that needed a lot of work. They ended up supervising the work. They have all their contacts. They have contractors that work for them, I think very cheap and they just add on 10% onto that price and pass it onto me. I’m totally happy with that and that’s kind of how we worked everything. They acted in that role for me in addition to being my property manager.

And also, I built up a lot of trust with them in the time that I was there with them, just realizing that they’re a very good property management company that’s trustworthy and cares about saving money and not ripping me off and all that. So that relationship with the property manager, me being gone, is extremely important. And the trust is kind of what’s key, I guess I would say. Does that answer your question or do you want me to clarify anything else?

Brandon: It does. No, that’s good.

Mindy: Yeah, trust is key.

Brandon: It is. And I like that you have them managing your rehab stuff. I actually found similar, the property managers that I’ve known tend to have better contacts with the contractors, better relationships with the contact, better prices than I can get. I mean, most contractors in my area now or telling me $50, $60, $70 an hour. But like brand-new handyman. I’m like, I’m not going to pay you $70 an hour. But like, they’re still doing $25 an hour or whatever for my property manager. And so I’m finding they’re way cheaper going through my property manager, even with that fee. Anyways, that’s a good point.

Rich: If you don’t mind, one more thing I wanted to bring up, too, is if you’re trying to do this from afar and you’re having problems with your property manager, problems with your real estate agents—I fire property managers. I fired two property managers, not in Montgomery, Alabama, but in Alexandria, Virginia. And I’ve fired real estate agents. I think that’s something you have to do as a real estate investor is you have to, when you start seeing problems with the service you’re getting from a real estate agent who you’re trying to use to buy properties for you. Or from a property manager.

If you’re not seeing the numbers that you should be seeing or if you’re not getting, they’re not answering their phone or they’re taking too long to rent properties out. Like any of those things, you need to have like really good communication with them, let them know what the problem is, and give them a chance to correct it. And if they’re not correcting it, you need to figure out—take your business somewhere else or you know, I mean that’s probably what you have to do.

Take your business somewhere else. You’ve got to fix the problem. Don’t be afraid to tell people what you need from them. They’re making money off of you. Don’t be afraid to fire them and like move onto somebody else. Because like, this is your business. This is your livelihood. You can’t afford to waste time.

Mindy: Exactly. Yeah, give them to opportunity to make the change and if they’re not making the change, they don’t want your business so don’t give it to them.

Brandon: There you go. All right well, actually, last question before we move to the Fire Round. What do you see in your future? You mentioned something about retiring maybe in a few years. Do you plan on buying more? Wait until the market crashes? What’s your thought?

Rich: All right, so I totally don’t believe in the wait until the market crashes thing that everybody likes to talk about. I mean, I’m just going to keep investing as it makes sense based on what I see around me. If the market crashes and I can—I think that’s hard to see when you’re like actually in the market crash. It’s hard to know where you are in the crash until you’re several years away from it and you’re like, oh. If I would have bought then, I’d be rich. But if I can see that, I guess based on my experience and having been through a few cycles of life, if we’re in a crash and it’s seeable, if that’s a word, I suppose I’ll try to get in and do some purchases.

But I think I sort of brought it up earlier. I’m at the point now where I was very comfortable with these paid-off properties and I kind of felt like, yeah, this is enough. But as I get more exposed to other real estate investors, I kind of have this feeling that after retirement, what I want to do, I want to do more with real estate. I have my 20 paid off properties and it’s enough to live off of. I’ll be comfortable, but I want to scale up. I want to find a way to invest. I’ll probably find a way to invest out-of-state and get into some bigger deals. Find a way to do multi-family. Find a way to partner up with some people. That’s in my future. And I want to do all of this part-time.

Brandon: How much of that is for money and how much of that is because it’s fun to be in real estate?

Rich: I would say it’s probably 90% of the fact that it’s just fun. I mean, I love this and I’ve loved this since I was a kid. My grandfather was a general superintendent. He was in charge of these large jobs of homes. He would build them all. He wasn’t the guy that like owned them but he was the guy that was in charge of building all of them. And I loved walking these attractive homes with him when I was a kid.

Even when I was older, I just loved it. And I remember thinking as like, a ten-year-old, I remember thinking in California as a ten-year-old, boy, I wish I could buy a house right now. Because imagine what it would be worth if I was 18-years-old. And that’s what I thought as a kid. I just loved real estate. This stuff is fun for me.

Mindy: Well, neither of us know what you’re talking about.

Brandon: No, I would say, I mean, I’ve always said no matter what, I will buy real estate. Because I just enjoy it. I think it’s a fun thing. So very cool. Actually, one of these questions that you talked about relates to the first Fire Round question I’m going to ask you in a minute, so let’s get to the world famous Fire Round.

It’s time for the Fire Round.

Today’s episode is brought to you by our friends at RealtyShares.com. I love these guys. RealtyShares is a real estate crowdfunding platform that allows accredited investors to invest in pre-vetted real estate deals online. So investors can browse and then invest in both residential and commercial properties that yield returns 8-16% annually. As a Realty Shares member, you can passively invest in professionally managed real estate investments in a variety of asset types and geographies for as little as $5,000, all from the convenience of your living room. So to learn more and to get started with a free account, just go to BiggerPockets.com/RealtyShares. That’s BiggerPockets.com/RealtyShares.

All right, today’s Fire Round questions come direct from the BiggerPockets forums, as always. You can get to the forums by going to BiggerPockets.com/forums. They’re fantastic. I owe all of my success to them or at least a good chunk of them.

So let’s help out some people from the forums, Rich. Number one, somebody said, and this is actually very related to what you said. They said, I want to wait for the next big buying opportunity. I don’t think I’m going to have to wait more than a couple of years. Am I just being pessimistic? What do you think? I shortened that question, it was a long one.

Rich: Yeah, they want to wait for the next buying opportunity. All right. I’ll tell you that, and this is me as a real estate investor and it’s also me as an investor in the sense that I’m a stockbroker and someone who’s read all those books as well. I just don’t believe in that mentality. I don’t believe that you wait for things to crash and then go in and invest everything. There’s deals to be had all the time. Just look at your investments right now. You don’t have to go somewhere else. I’ll go ahead and plug like that other book for you. Where is it? Where’s that other book?

Brandon: The Long Distance Real Estate Investor. There you go.

Rich: I listened to that podcast and there’s a lot of similarities between what me and him do, the way that he leverages the different people on his team. You don’t need to wait until things drop in your area to buy. Find out where prices are good. Find people you trust in that area. And like, make it happen. Buy a house there and go for it. That’s my advice.

Mindy: Okay, I love talking about leases. We are in the middle of getting—I’ve been reading leases for all 50 states and Washington, D.C. because we are starting to make these available to our members. We sell leases at BiggerPockets.com/LLForms.

Brandon: Mindy, was that a plug? Awesome.

Mindy: No, Brandon, that was a recommendation if you need a lease, I can help you out.

Brandon: Wow. Way to plug. We don’t plug on this show, Mindy.

Mindy: I’m sorry. I’m sorry.

Brandon: LLForms. Okay.

Mindy: LLForms. What are your favorite add-ons to add to your lease? Do you have an addendum to your standard residential lease?

Rich: Okay. So luckily, I mean I have a management company so they pretty much handle all the lease stuff. And I guess one of the things about leases that I think is important to me is like, I’m not a huge fan of pets. So for me, pets like, I’m willing to maybe wait longer to not have pets in the house. But I mean this is kind of a personal thing. But there’s been a lot of cases where—and again, this goes with the benefit of having a management company that you like trust and know.

A lot of times they’ll come to me and I’ll say, and this goes to many different addendums, they’ll say look, in this particular case, we think that you should let this family have a dog. They have this type of dog and we think it’s fine and we’re going to put that into the lease and sign it. I’m going off of this management company’s 10-15 years’ experience and make an exception to something that I normally don’t feel comfortable with but I guess my point is, I tend to go with my management company’s experience in cases like that. Not knowing a lot about leases myself.

Mindy: Okay, that’s fair.

Brandon: All right, cool. Next one comes from Garyl King. He says, hey everyone, I’ve been pulling my hair out, not literally, trying to figure out where to get started with building my business. I’m based in L.A., originally from Bakersfield, which I visit often. My biggest problem right now is choosing a market and being able to afford the marketing costs.

I’ve been researching in here and doing so many things—some say get a website, business card. The other ones say don’t waste your time on that. Go focus on deals. What I’ve heard, direct mail is a good way to get started but it’s expensive because it takes such a massive volume. I’ve got a budget of $500 a month. Anyone in L.A. or other big cities have a device or input towards what’s working for them? What do you think he should do?

Rich: So, he’s talking about getting started and doing something in real estate?

Brandon: Yeah, exactly. Expensive market, not a lot of budget for advertising. Need to find some deals but it’s an expensive market so it’s hard to find them.

Rich: Well, I can tell you that I’ve been successful with direct marketing myself. And the way that I did it was I did the mailing. We did the mailings ourselves at home. I’ve got an 11 and a 7-year-old. I did up the letter myself and signed them all myself. Folded it up, put them in envelopes, mailed them out to the people. And I just like used a website where I just kind of like pulled all the three-bedrooms, two baths in the areas that I like in Montgomery, Alabama, got the address list, handwrote them on, which I believe that helps like people want to open up the letter.

We handwrote the address, put like the normal stamp on it. It came from like a normal person and we sent that out five or six times. I’ve bought a few houses that way. And I just kind of explained who I was. This is like Rich and I used to live in the area. I was in the military. And it was very effective. And I think it was very cheap and I got some really good deals doing that.

Brandon: Perfect. I like it.

Mindy: I do, too.

Brandon: All right, last question, Mindy? I started and then you and then me.

Mindy: Yes, last question. I am new to BiggerPockets. My question is that I’m starting out with no investments anywhere. Should I get a loan for a home to house hack or should my first investment be in a rental?

Rich: Okay, so house hacking or straight rental. I love house hacking. I think house hacking is great. I wish I could have done it myself. I mean, I think you can do it if you have a family but if you can pull off a house hack, that is the way to go. I know even for people that are in the military, I believe that with a VA loan, which is available to people in the military, you’re able to get a multi-unit property with your VA loan. So you can get a duplex. I think you could even get a three or a four-plex with a VA loan, and turn that into an awesome house hack.

But if you can find a way to do that conventionally or whatever your personal situation is, house hacking as the way to start off where you’re there to manage the second or third or fourth property kind of next door to you is absolutely the way to go. Isn’t that what—isn’t his name Scott Trench? Isn’t that what he did?

Mindy: That’s what he does.

Rich: Yep, that’s awesome stuff.

Brandon: It is.

Mindy: You just build so much equity so quickly if you are into paying off your property. You build so much money. Scott paid nothing to live. He was getting, I think his mortgage, and in the place he was in, I think he had an FHA loan. His first payment was $1500 and he was bringing in $1850 or $2000 or something. So it wasn’t super cash flowing but he was paying nothing. He was living for free.

Rich: I think Paula Pant is kind of a popular real estate blogger who’s done house hacking and she did very well, kind of the same thing. If you do it right, you live for free. But even if you don’t quite get the numbers that great, you’re still subsidizing what you’re living for. And you’re living on-site to take care of things. So I love it.

Mindy: Yeah, it’s a great investment choice.

Brandon: My very first rental was a duplex and I moved out and kept it as a rental. I still have it today. And actually I paid that property off recently because I wanted—in fact, I’ve paid off three properties.

Rich: Cool, people paying things off.

Brandon: So it does happen. Yeah, I didn’t go into it there but yeah, basically, I am paying my properties off right now. I am actively trying to pay my properties off and kind of following the Dave Ramsey debt snowball. As I pay off more properties, now I have more cash flow which I can then pay off more properties which then I get more cash flow. And I’m trying to knock out everything over the next ten years. So by the time I’m 40, roughly, I’ll have a hundred units—I have almost a hundred units right now. I’ll have everything paid off ten years from now is kind of my plan. And a hundred units paid off should be plenty to survive well.

Rich: One thing I wanted to explain about my properties being paid off is like, when I had six properties that were paid off, it didn’t take too long—it might have been a year—it took a year for those six properties—I think it was a year, maybe longer, 14 months—to purchase a seventh. So six cash flow properties can purchase a seventh. But now, when you have 20, it only takes five months for 20 properties to purchase a 21st property. So there is definitely a huge snowball effect that happens. It’s kind of like almost the same as compound interest but with houses.

Brandon: Yep, I love it.

Mindy: Yeah, compound cash flow.

Brandon: Someone should write a book called Real Estate Snowball. That’s a good idea. I’m going to do it. No, Rich, you can do it. Rich, write it down. Real Estate Snowball.

All right, let’s get out of here and get over to the last segment of the show which we lovingly refer to as our Famous Four.

These are the same four questions we ask every guest every week. Let’s see what you gotta say. Number one, what is your favorite real estate related book?

Rich: Real estate related. It’s a huge copout but because I think it was the first—it was the first book to talk about it, Rich Dad, Poor Dad, right? And it’s because it wasn’t just real estate. It’s because it was a mindset for money and a way to think about you shouldn’t work for money, money should work for you. That applies to investments but that also applies to real estate. And that’s why I love that book.

Brandon: Me too.

Mindy: What is that, it’s the most recommended book on our podcast. I’m sorry, on your podcast.

Rich: Which made me not want to pick it but that’s my favorite.

Mindy: If it’s your favorite, it’s your favorite. It is the most recommended book for a reason.

Rich: Yeah. I’ve got another one that I’m curious how much you guys have heard so ask away.

Mindy: Okay, is it a real estate book?

Rich: No, no, no. I’m talking about the next question you’re going to ask.

Mindy: Oh, okay. What is your favorite business book?

Rich: Fooled by Randomness by Nassim Taleb.

Brandon: I have heard of it but I have not read it.

Rich: Okay.

Mindy: Fooled by Random—

Rich: Fooled by Randomness. And really, it’s just about chance and how I think kind of people overestimate the role of chance in our lives and I think his whole premise has a lot to do with—like, Wall Street, the fact that people in Wall Street, they make their money predicting what the market is going to do. And the fact that a lot of people will pay people money to invest their money for them.

And I think he would pretty much argue that all of that is totally useless. Nobody can predict where the market’s going. Nobody can tell which direction stocks are going in. But he doesn’t apply it just to that, he applies it to many different facets of life. It’s the most fascinating book I’ve ever read and it had a large influence in the way that I look at money.

Mindy: Oh, great.

Brandon: Super cool.

Mindy: Yeah, I’ve got to check that book out.

Rich: Highly recommend it, yeah.

Mindy: What are your hobbies? What do you like to do when you are not doing real estate?

Rich: So when I moved to Japan, and my son turned five, I taught myself—I already could ski but I taught myself and my son how to snowboard and I kind of haven’t stopped with that. We just keep snowboarding. Unfortunately, when he was about nine, he surpassed me in skill, which is kind of scary.

We moved to Germany, again, the benefits of being in the military. We moved to Germany and got to do some really cool snowboarding there like in the Swiss Alps and in Italy and Germany, and we’re going to try that out here pretty soon in Korea. So that’s a big hobby of mine. I’m a big runner. I love watching movies, love reading books, love real estate.

I kind of love this whole FinCon community which I think you’re both involved in. That’s something that kind of came into my life about two years ago. And I started up like a little blog and that’s kind of become a hobby for me as well.

Mindy: I think it’s not fair that your name is Rich when you talk about money. What’s the name of your blog?

Rich: So my blog’s name is RichonMoney.com. Which I think, I’m happy with that nam.

Mindy: That’s fun. That’s a great name.

Rich: I have fun with it. I was worried about finding a name and happy when I found it.

Brandon: That’s awesome. So my last question of the day, what do you believe sets apart successful real estate investors from all those who give up, they fail, or they never get started?

Rich: I think I told my story that I kind of wanted to tell to illustrate the point, I think. And that was, it’s getting past fear. You’ve got to work through the fear that you have. You’ve got to not let it stop you from continuing. That sort of fear of failure and then recognizing that you’re going to see—tough things are going to come up. You’re going to have things that scare you. You’re going to have things that are unexpected and instead of letting that cripple you and stop you, you need to have this attitude of, I have so many resources out there. Like, I’m going to plug BiggerPockets. You’ve got BiggerPockets. You’ve got friends. You’ve got websites. You’ve got books. Figure it out. Get past it and get onto your next deal.

Brandon: Love it. Love it.

Mindy: Yeah, that’s great. Where can people find out more about you?

Rich: So I think you kind of helped me plug my website, which I appreciate. www.RichonMoney.com. And then I’ll just give out my e-mail address, [email protected] is also where you can reach me by e-mail. I just have a blog where I blog about what I’m doing with real estate and it’s a hobby. And come take a look at it.

Mindy: Awesome, thank you.

Brandon: All right, well Rich, this was fantastic. I don’t know, there’s a ton of good stuff in here so thank you very, very much for coming on here and I look forward to seeing the next phase of your life because you do some fun real estate.

Rich: Hey, thanks for having me on. This was huge for me. This is an amazing podcast so I really appreciate you guys having me on. Thank you so much.

Mindy: Thank you, Rich. Okay, we’ll talk to you soon.

Rich: All right, see you.

Mindy: Okay, bye.

Rich: Bye.

Brandon: All right, that was our interview with Rich Carey. That was awesome. I really, really like that guy a lot. Every time I talk to him, I feel like I learn and I am inspired to go do a better job with my real estate because he’s a good investor.

Mindy: He’s a good investor and he’s a genuinely nice person.

Brandon: He is. I agree.

Mindy: He’s not snarky at all and that was a great show. Unlike some people.

Brandon: Yeah, like I’ve been telling you about how I pay off a few properties. He’s actually one of the inspirations for that when I was talking to him at FinCon. I was talking to him and I just kept thinking like how nice that sounds not to have a bunch of mortgages. Even though yeah, I know mathematically, you make more return when you have leverage and I get all that completely. But just like the peace of mind to have them paid off, I’m thinking ten years from now, if I can have them all paid off and be 40, well 42, and have them all paid off, that sounds pretty nice. So anyways.

Mindy: That would be really nice.

Brandon: Thank you, Rich, for inspiring me to tackle some of that mortgage debt. Yeah.

Mindy: Like I said earlier, that’s a big question in the forums.

Brandon: It is a big question.

Mindy: It’s what you’re comfortable with. There is no right or wrong answer.

Brandon: There is no right or wrong answer.

Mindy: Okay, well, huge thanks to Rich for coming on and sharing his story with us.

Brandon: Yeah. Well, let’s get out of here. I’ve got to go do some beach stuff because you know, Hawaii.

Mindy: Okay, well I’m going to go do some work stuff because you know, job. But you enjoy your life, Brandon. You do you.

Brandon: I will have you know, I was up at 5:00AM this morning writing because people at BiggerPockets need to know the truth about real estate so I write the truth. So.

Mindy: Thank you for saving the world, Brandon.

Brandon: This is actually the beauty of living temporarily anyways, in Hawaii. By noon, it’s like 3:00 o’clock Denver time. 5:00 o’clock East Coast time. Is that right?

Mindy: Yep.

Brandon: So it’s like crazy. I can be done by like noon and the rest of the world is kind of retiring anyways so it’s like 12:15 right now. I’m going to go hang out on the beach.

Mindy: Well, it’s 3:15 so I am going to say, for BiggerPockets.com, this is Mindy Jensen, signing off.

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In This Episode We Cover:

  • How he bought his first property while assigned in Guam
  • Tips for flipping new construction
  • Why you should consider switching investing style after a flop
  • Why you shouldn’t buy a house, unless…
  • Advice on long-distance house flipping
  • What you should know about partnerships and trust
  • His experience investing in properties in military bases
  • A discussion on leveraging properties
  • The importance of having a frugal lifestyle
  • Hiccups on his first property and valuable lessons from it
  • How he manages his properties out-of-state
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Fire Round Questions

Tweetable Topics:

  • “You can pay off a mortgage pretty fast when you put your effort into that.” (Tweet This!)
  • “I don’t believe that you have to wait for things to crash then invest everything.” (Tweet This!)

Connect with Rich

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