The beginning of a Buy and Hold Investor

2 Replies

I first got started in Real Estate in late 2011. A friend of mine (20 years my elder; I was 23 at the time) wanted to talk to me about doing some work for him. I was coming off a serious arm injury and did not have the desire to get surgery and recover again. My baseball career was over and I wanted to move forward. I did not know what my friend did, how he made money or even what work he was talking about! But, I did know that he was pretty well off and I was interested in learning. 

I sat down at his desk and realized that his family owned property. They were tardy on mortgage payments, had overdrawn back accounts, and let their properties' tax bills become delinquent. We were talking and I told him I do not see any ordinary income. What did he do for work? He told me he managed the properties. I said, I understand. But, those are your investments. What do you actually do from 9-5? He said I manage my properties. In that moment I realized what I wanted to do with my life.

Over the next three years we turned his RE Business around completely. It was losing six digits annually when I came aboard and is now profitable. 

2014 has been the most successful year of my life. Everything came together for me. I have worked 70 to 80 hours a week for the past three years. I have read over thirty Real Estate Investment books in the past three years. I believed in my goal and in what I was doing every day. I did not have any cash or properties until 2014 and I took every extra minute that I had to prepare myself for the time when I did have the opportunity to purchase multi-family properties. In 2014 I purchased two SFHs, a 4 unit, and a 7 unit apartment complex. This is my entire portfolio. 2014 was when everything really came together for me. I knew I was going to do this since late 2011, I just didn't know when. I had a goal, believed, and worked very, very hard to accomplish it. I purchased two vacant land properties for $20,000 and sold them one year later for $40,000, I saved 75% of my income. I leased out apartments, mowed lawns and trimmed palm trees (and got stung by many bees), did exterior and interior painting, took on property management contracts for friends, managed my older friend's 16 properties, managed my parents' 55-unit storage facility, worked most Friday and Saturday nights and got my Real Estate License and have done around 10 deals.  I do not have partners in any of the properties and the entire portfolio (2 SFHs and 11 Apartment Units) was purchased with my money or with private money and I have not had to get banks involved yet. My next goal is to purchase a large apartment complex in two years with commercial financing. 

I feel very blessed and fortunate that I was able to achieve my goals. I have had a lot of help along the way and could not have done it without the support of friends and family. It almost seems surreal. 3 years ago I had $14,000 that I saved from working at a Hyatt in college. Now, I have three properties that I purchased for either a great price or fantastic terms. The properties are appraised for a total of $750,000 and my equity is approximately $275,000 and they cash flow $30,000 a year (After mortgages and expenses). As long as you keep believing and keep working hard anything is possible. I can really contribute four things to my success so far. 

1) Hang out and Associate with people who are doing what you want to ultimately be doing RIGHT NOW. Life is not long. Do what you ultimately want to do today. Success will come as long as there is joy and motivation in what you are doing so you might as well be doing what you envision yourself doing for the rest of your life.

2) Be Flexible. I had a friend who was trying to get started and she had a check list full of requirements for her first property. She had no money yet was trying to find this perfect deal. Two SFHs detached (she did not want to be in an attached duplex), plenty of yard for her dogs, and she had to get 95% owner financing. I still do not understand this mode of thinking. I would have lived in a 200 square foot studio for a year or two if the deal makes sense. When you are starting out you need to find GREAT deals and adapt to the deals. Do not make deals adapt to your life. It is not a successful way of thinking. She is no longer in Real Estate...

3) Become educated. I consider myself an expert in my city now. Before, I did not know anything. I did not understand demographics, subdivisions, cap rates, or development. I did not grow up with parents in Real Estate. They always had 1 house and never talked about rental property. Education is the key to finding great deals in Real Estate. You have to know and understand what you are buying to be able to property assess it's current value and future (predicted) value. 

4) Don't become satisfied. Don't revel in achieved success. Focus on the future.

Congratulations @Daniel Miller ! It's great to see when people persevere and find success.

Is there anything you can share about why your older friend's rental business got in trouble and how you guys turned it around?

Did his portfolio consist of anything other than 16 single family houses? I think there are enough of us on BP focusing just on SFH that it would be instructive to hear about some mistakes to avoid and what you did to turn it around.

Wishing you continued success!

It's kind of complicated. His Dad was a land speculator. So, half of his properties were vacant pieces of commercial land. He also had two warehouses, a couple apartment buildings, and 3 single family houses. He got in trouble in the recession. Rents went low, his spending stayed up, and commercial land and warehouses were vacant. Real Estate taxes were very high and he got hammered. We have sold a few pieces of land and invested in multi-family. He had two SFHs that were purchased in 2006 and he was paying mortgages on properties that were not worth what he paid. He had a hard time accepting this but ultimately sided with me and stopped paying the mortgage payments and gave the properties back to the bank. There was no other option. It's been a long process but divesting into multi-family properties where the risk of not reaching obligated payments and expenses is much lower than vacant land, is the path we decided to take.

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