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<\/p>\nSpoiler alert: Drew and Scott Hoefler still work today.<\/p>\n
Except now it\u2019s by choice.<\/p>\n
Now in their early 30s, the twins live and invest in the Twin Cities, and a decade ago never even considered a career in real estate. After five years of investing in real estate, they successfully reached financial independence.<\/p>\n
Here\u2019s their story, complete with the mistakes they made along the way.<\/p>\n
In 2013, the twins were single 20-somethings working for agricultural giant Land-O-Lakes, looking to buy their first home. They planned to buy a home with a few bedrooms together, move in, and bring on a roommate or two if the house were big enough.<\/p>\n
Then, over dinner with their parents one night, their mom offered a better idea: \u201cWhy don\u2019t you buy a two-flat?\u201d (That\u2019s Midwest for \u201cduplex,\u201d FYI.)<\/p>\n
Teenagers may sneer at every idea their parents have, but in your 20s, you start paying attention once more to your parents\u2019 advice. \u201cWe quickly realized that we could live in one side, rent out the other side and cover our mortgage\u2026 we were all-in.\u201d<\/p>\n
The hunt for the perfect duplex was on!<\/p>\n
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After touring some duds, the twins came across a gem in the Arts District in northeast Minneapolis. They described it as an \u201cup and coming\u201d neighborhood, which was not a euphemism\u2014the neighborhood was gentrifying with a fun and funky craft beer scene.<\/p>\n
Then came the first stumbling block. \u201cAt first look, Drew and I had trouble seeing the lower unit because of issues with the renters. We put our offer in based upon seeing the upstairs unit only.\u201d<\/p>\n
You know where this is going.<\/p>\n
The downstairs unit needed work, which they discovered after putting the duplex under contract. Luckily, the work was cosmetic, nothing structural or mechanical. Upon buying the property, they non-renewed the tenants, made updates such as removing the drop ceiling, and moved in.<\/p>\n
\u201cThe purchase price was $208,000. Our financing was an “American Dream” program that was an owner-occupied conventional loan financed by U.S. Bank. Great program. We rented the upstairs unit out for $1,300 from day one.\u201d<\/p>\n
That proved enough to cover their mortgage payment. A successful house hack<\/a>.<\/p>\n Nowadays, with further gentrification in the neighborhood, they charge $1,700 for that upstairs unit. When you use owner-occupied financing, you have to live in the property for at least one year. So that\u2019s exactly what the Hoefler twins did.<\/p>\n Seeing how easy it was to house hack and generate rental income<\/a>, the twins knew they were onto something. They wanted to expand their portfolio.<\/p>\n The first thing they did was look for other ways to lower their expenses, so they could put more of their income aside for their next property. If you\u2019ve ever read a single sentence about FIRE (financial independence, retiring early), you know that the first rule of FIRE is maximizing your savings and investments. (FIRE Challenge: Start by brainstorming ways to live on half your income<\/a>!)<\/p>\n As they neared the end of their first year of house hacking, they set out to find another multifamily to house hack. They successfully rinsed and repeated this process for several years, living in the property for a year then buying a new multifamily and moving in, with owner-occupied financing.<\/p>\n Which is a great way to start, but not a viable long-term strategy.<\/p>\n First, it\u2019s slow. It limits you to a maximum of one property per year.<\/p>\n Another problem is that at a certain point, conventional lenders stop lending to you. Most conventional lenders allow a maximum of four mortgages on your credit report.<\/p>\n Then there\u2019s the fact that you have to move every\u2026 single\u2026 year. That gets old, even when you\u2019re in your 20s\u2014especially when you get married, and your wife isn\u2019t keen to live with your twin brother for the rest of your lives. Which, of course, is exactly what happened. It was around this point that Scott married Jennifer, and this whole hopscotch-investing plan started showing its limitations.<\/p>\n Fortunately for the Hoefler twins, Jennifer instantly saw the appeal of the twins\u2019 vision. She looked into the FIRE and liked what she saw.<\/p>\n With her contributing a third income and the rapidly accruing income from their rentals, Team Hoefler set their sights on 20%-down rental property loans.<\/p>\n They picked up two single-family rentals. The first was rented for $1,350, which they bought for $107,000\u2014a straightforward enough deal.<\/p>\n The second was a small one-bedroom home they picked up for $65,000. \u201cInitially, we planned to rent it conventionally at around $900, but while we were doing the turnover updates, we listened to a BiggerPockets episode about Airbnb. Halfway through the hour-long episode I decided to make it into an Urban Cottage and make well over $900\/month using the vacation rental platform.\u201d<\/p>\n \u201cMost of the properties we buy need heavy cosmetic work: paint, cabinets, floors, bathrooms, light fixtures, and so on. We do most of the work ourselves.\u201d<\/p>\n It helps to be handy!<\/p>\n The Hoeflers have also tried their hand at full renovations, though those haven\u2019t always been smooth (more on that shortly). But typically the Hoeflers follow the BRRRR strategy: buy, renovate, rent, refinance, repeat<\/a>. They use hard money to finance the acquisition and renovations, then refinance to a 30-year fixed rental property mortgage.<\/p>\n \u201cOur business model is to find properties that are undervalued from a rental perspective and do heavy cosmetic work to push market value. Or find complete remodels where we can capitalize on the potential ARV (after-repair value).\u201d<\/p>\n The result? They average around $350-400 monthly net cash flow from each door. \u201cOur first full remodel was a bust.<\/p>\n \u201cWe had issues with contractors, blew our budget and eventually ended up with an overpriced home that wasn\u2019t even completed. We still own the home today, as a rental with minimal cash flow.\u201d<\/p>\n The good news?<\/p>\n \u201cOur saving grace is that we went into the project with plenty of backdoor options. The property is in a fantastic neighborhood, which has been seeing solid growth. We knew that the rental market would be strong enough to at least break even.\u201d<\/p>\n I asked the Hoeflers about what they learned from the experience.<\/p>\n \u201cThe main lesson (among many others) is \u2018Do not make decisions based on need<\/em>.\u2019 At a certain point we realized we were in over our heads, and we failed to think through our options and the long-term consequences of our decisions. We were making emotional decisions based on our current sense of need.\u201d<\/p>\n \u201cThe stability that real estate investing has brought to our lives meant we have been free to change careers, build businesses, travel, and ultimately give back in ways we never thought possible.\u201d<\/p>\n The twins quit their day jobs, but they found they loved investing in real estate enough to keep going. Today, they sell small multifamily properties to other investors in the Twin Cities, through a company called The Duplex Doctors<\/a>.<\/p>\n Why retire when you\u2019re having so much fun making money?<\/p>\n \u201cAltogether, along with my wife Jenny and my brother Drew, we own eight total properties with 14 doors. We are about to close on another four properties with seven doors.\u201d<\/p>\n I asked Scott about his final words of advice for anyone looking to reach FIRE through rental properties. \u201cSit down and think through your \u2018why\u2019 for purchasing real estate.<\/p>\n \u201cEveryone says \u2018money\u2019 at first. But to be truly successful in this industry, you need a deeper reason than just the desire to make money.\u201d<\/p>\n So? What\u2019s your \u201cwhy,\u201d Scott?<\/p>\n \u201cFor me, my time is my most valuable resource. My hope is that real estate will allow me the capacity to give back to this world in ways a standard 9-5 job can\u2019t.\u201d<\/p>\n It\u2019s hard to argue with that.<\/p>\n
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\nRelated:<\/strong> Are Your Children Stopping You From Achieving Financial Freedom?<\/a><\/em><\/p>\nRinsing & Repeating the House Hack<\/h2>\n
Transitions<\/h2>\n
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<\/p>\nScaling & Strategy<\/h2>\n
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\nRelated: <\/strong>Why Financial Freedom Can Be Highly Overrated\u2014And Not Necessarily Lead to Happiness<\/a><\/em><\/p>\nMissteps Along the Way<\/h2>\n
Reaching FIRE & The Ever-After<\/h2>\n
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