I went from 5 to 38 units in a year and quit my W-2. 2018 in review

2018 kicked my butt. That picture is me after I sledgehammered out a cast iron tub....note to reader, use a grinder first. And cast iron is heavy...... And use proper PPE (Personal Protective Equipment) that ceramic coating flies when you smash it. 

I promise it beat me up in a great way, but I have to say that I needed the holidays as a break. This year I went from 5 units to 38 all in my hometown of Pittsburgh. Still self-managing, but hopefully 2019 will end with me doubling the unit count and hiring some in house employees for management and handyman type work. I also finally made the jump to quit my 9-5 job to do entirely real estate related work. I wanted to share my story because I used other people’s stories as motivation to get where I am today. So here we go. 

Where the year began

This year began with two duplexes that I owned with my now wife (got married in October 2018) and a single-family home that I bought with a client turned business partner from Hawaii! I lived in one unit of my first duplex (house-hacking for the win) and was saving a ton of money while working 40+ hours/week as a Realtor and 40+ hours/week in Quality Control for a local pharmaceutical company (made around 45k there). I’d say that I definitely had a plan, but was growing tired of that two full time job grind. I sold 20 houses as a Realtor in 2017 so I was starting to work fairly hard to get my footing. My goals for 2018 were to quit my day job to be an agent full time and to buy one or two rental properties. Towards the end of 2017 I had a conversation with two other Realtor clients of mine that ended with us deciding to partner together and start looking into buying small commercial multifamily.

Numbers:

• 5 Units
  • 2 Duplexes house hacked, owner occupant 30-year notes, 10% down through primary mortgage with local bank. Cash flow around 150 per unit factoring in a management cost. I self-manage so that’s an invisible expense (opportunity cost). Both off MLS. Both B+ area
  • 1 Single Family Home, Partner provided cash for purchase. I did the labor and funded renovation. Off market deal through a real estate friend. We refinanced most of the money out (left $5000 in) and now make around 175 total per month after the refi. Financed commercial note 5/15-year ARM. B- area
• Jobs: 2
  • W2 yearly income doubled Realtor Income year to date at this time.
  • Jobs I liked: 1
  • Jobs I would do if money was no object: 0, ok I’d just be more selective about my clients as a Realtor, because I love working with most people! I’d definitely not work 80+ hours a week though if I had reached Financial Independence (FI) by now.
• Monthly Living Expenses: $4,000, we live fairly lean, but could cut this down.
• Personal Monthly Cash Flow (projected at FI): $387.50 not enough to retire on ☹

End Quarter 1

Quarter 1 was an exciting time on this journey. By this time, I had closed on my third house hack duplex with my wife, was already on pace to triple my 2017 production as a Realtor, and was really building up some traction with my commercial business partners. We used an FHA loan this time for the house-hack and because I collected a commission as a Realtor and used max seller assist, I was actually able to make money buying my own house! My partner from Hawaii and I went under contract on another single-family home that we were planning on fixing up and refinancing and things were going smoothly. At this time, I worked up the confidence to put in my resignation at my day job (I actually wrote a post the same day I quit to capture my emotions/thoughts, I’ll post that at some point). I had just recently read the 4 Hour Work Week though so I used it as an opportunity to negotiate remote work. They granted my request! It was crazy to me because at the time we didn’t really have any remote employees, but I was able to stay employed and work from home for 3 months or so after I put in my “notice”. This was key because my year was really about to pick up.

Numbers:

• 7 Units
• Newly Added:
  • Duplex, owner occupant, 30-year note, FHA, Full 6% seller assist, 3% commission. No cash in. Cash flows $200/month (assuming no tenant) B+ area. On MLS
• Jobs: 2
  • Realtor Income = W2 Income
  • Jobs I liked: 1
  • Jobs I would do if money was no object: 0, ok I’d just be more selective about my clients as a Realtor, because I love working with most people! I’d definitely not work 80+ hours a week though if I had reached Financial Independence (FI) by now.
• Monthly Living Expenses: $4,000, we live fairly lean, but could cut this down.
• Personal Monthly Cash Flow (projected at FI): $587.50 not enough to retire on ☹

End of Quarter 2

So here I am chugging along working remotely and picking up Realtor production a lot! I was able to equal my yearly W2 salary in commissions by the end of June! So, by the end of June I told my W2 company that enough was enough and that I was finally going to quit for good. Great feeling, but also somewhat anxious. AS it turns out the world doesn’t explode and you don’t immediately go to zero dollars in your bank account when you leave a W2 job……fears were unfounded.

At this time though I identified a 10-unit building in a C class area for $200,000 with partial seller finance that had the potential to bring in $7,500 in monthly rent! WOW! Catch was that it was currently only bringing in $4,000……. still not too shabby. Found this through a person I used to work with at my old job. He was tired of being a landlord. So, my partner from Hawaii and I put off renovating the single-family home we bought and put more money into this building. We’ve been churning units as leases come due and getting up to that 7500 figure. When done we should make somewhere between 200 and 300 per unit depending on where expenses stabilize. Units aren’t too bad, but need cosmetic work.

In addition to that the fruits of our labor from the other partnership were finally coming around. We had sent direct mail to a TON of multifamily owners and were starting to hear back. In addition, we started building relationships with other commercial brokers. (note to other agents, just be clear that you aren’t out to steal their business if you are also licensed, if you are an ethical person your reputation precedes you and you’ll get an inside track on some leads). We were able to land a 5-unit building in a B+ class area through a broker that we had a good relationship with thanks to my partner. We bought this one at $220,000 and will be able to pull in about $4,000 per month in rental income once repositioned. Currently at around $3,800. It’s already worth well north of $220,000 at purchase so that’s the power of finding motivated sellers. Cash flow once repositioned should be 150 per unit.

Numbers:

• 23 Units
• Newly Added:
  • 10 Unit Building, Seller Finance/Commercial Loan, 5/15-year ARM. Cash Flow around 200-300 per door once repositioned. Currently around 100 per door. C class area. Off Market through Networking.
  • 5 Unit Building, Commercial Loan 5/20-year ARM. Cash Flow around 150 per unit. B+ class Area. Off Market through broker.
  • 1 Single Family House. $65,000. Off market through wholesaler. B class area. Generates $900/mo in rent. Put on new roof. Will renovate when 10 unit project calms down and either sell for over 130 or keep and rent for $1,100-1,200
• Jobs: 1
  • Income only from Realtor work.
  • Jobs I liked: 1
  • Jobs I would do if money was no object: 0, ok I’d just be more selective about my clients as a Realtor, because I love working with most people! I’d definitely not work 80+ hours a week though if I had reached Financial Independence (FI) by now.
• Monthly Living Expenses: $3,500 Cut out a lot of senseless expenses.
• Personal Monthly Cash Flow (projected at FI): $2,087.50 not enough to retire on ☹

End of Quarter 3

First quarter with no W2 was an interesting one. I started working on being completely self-dependent for income, which is still a process with sticking to a defined schedule. I find scheduling to be one of the most difficult parts since the day is entirely flexible and I say yes to too many things. That being said it’s been great at this point. I was on pace to more than double my old W2 as a Realtor and we identified and closed our first commercial property from the mailers! We found a landlord looking to sell a 5-unit building in a B+ class area because he was looking to exchange the property. I’ve learned so much this year it’s incredible. It wasn’t as good of a deal as the others, but it still cash flows and was mostly turnkey. We bought it at $350,000 and it brings in $4,950 per month in rent. It’s also a tremendous location so it’s value should stay strong. This was also a big step because it was the first unit that I started outsourcing some property management tasks for. I added a buyer’s agent as a Realtor and gave him some units to lease in addition to some sales so that he could start to make a decent income. He did a great job on leasing and has also started to sell a lot as an agent! So, one step closer to a successful Real Estate Team and not just an agent.

Numbers:

• 28 Units
• Newly Added:
  • 5 Unit Building, Commercial Loan 5/20-year ARM. Cash Flow around 100 per unit. B+ class Area. Off Market through direct mail.
• Jobs: 1
  • Income only from Realtor work.
  • Jobs I would do if money was no object: 1
• Monthly Living Expenses: $3,500.
• Personal Monthly Cash Flow (projected at FI): $2,254.16 not enough to retire on ☹

End of Quarter 4

Here we are at years end. What a trip. In December my partners and I closed on another off-market property through out direct mail campaign. We were able to buy a 10-unit building for $300,000 that generates around $6000 per month in income depending on laundry income. After all expenses this one should be around $175 per month in cash flow. Again, bought from a tired landlord. This time he’s moving to Florida. Every place I buy feels like a passing of the guard. Someone 30 years plus my age sells to me. More motivation to outsource tasks because this business wears you down if you work in the business and not on the business.

Realtor production was pretty good, but my wedding in October, the holidays, and all of these acquisitions really slowed me down a bit. Still ended the year with over 40 transactions as a Realtor and the most volume in my office. That being said I learned that I need to find balance. The other areas of my life suffered a bit so 2019 will be an exercise in finding balance between health, business, and relationships. So happy to have a supportive spouse and family (which was thankfully never an issue for me), but I think I’ve gained as many pounds as I have units!

Here’s to a successful 2019 for everyone! I’m happy to talk to anyone looking to grow and hope that you find some helpful tips in my write-up. For me partnerships and finding a job without an income ceiling were the key to accelerating. To your success!

Numbers:

• 38 Units
• Newly Added:
  • 10 Unit Building, Commercial Loan 5/20-year ARM. Cash Flow around 175 per unit. C class Area. Off Market through direct mail.
• Jobs: 1
  • Income only from Realtor work.
  • Jobs I would do if money was no object: 1
• Monthly Living Expenses: $3,500.
• Personal Monthly Cash Flow (projected at FI): $2,837.49 not enough to retire on ☹