Case Study of my journey

[Adam Treece]

In an effort to share my story and offer some encouragement, I wanted to share my story from the beginning with a look back at where and how I first became interested in real estate.  I will give a brief description of how it all started, and then I will share my goals as I originally laid them out as compared with how things actually turned out.  Hopefully this will provide some inspiration and show that many of us all start in the same way, and share many of the same struggles.

So now with where it all began...much like many of you on here (I would guess), started with reading the "Rich Dad Poor Dad" book.  I was introduced to this book by a friend of mine who has already been investing for several years, and saw the potential that I had with my W2 earnings that I just wasn't putting to good use.  After a lot of talking, and him seeing my willingness to learn, he suggested that I start my education process with reading a few books; they were "Rich Dad Poor Dad", "The Cashflow Quadrant", "The ABCs of Real Estate Investing", and "Real Estate Riches".  All of these books were great reads which was the spark that lit the fire...and it hasn't stopped since.  Not only did my friend get me going with these books, but he also introduced me to Bigger Pockets, were I started reading the forums, I read the Ultimate Beginners Guide, as well as posted my own introduction.  Needless to say, I was hooked and wanted to learn as much as possible about investing in real estate, and with that...the rest is history.  This all started around August 2015 and has continued since.  I will now begin with taking a look back from my goals from then and how everything has turned out up to now.

Everything following is my original investment plan outlying all of my goals.  I will provide commentary in bold to reflect my current sentiments or actual situation as it applies.

Mission Statement

In an effort to get out of the rat race and become a B/I instead of an employee, I have decided to invest in real estate. The initial investments will focus exclusively on multi-family properties until further experience is gained. The purpose of this “business” plan is to map out my way to financial freedom, so that after retirement from the military I will no longer HAVE to work another day in my life, as my money will work for me.

This is all still true, but my main purpose is really to provide my family with a stable financial future, something that I never had as a child.  I want to be able to fund my daughter's education, as well as set her up financially for when I am gone.  Through all of this, I hope to provide her with a solid financial education by including her in as much as possible from an early age.  Lastly I want to actually be able to retire when I do retire and enjoy life, and not have any financial worries.

Goals

Long Term

1.By the time I retire in 10yrs from the military the primary goal will be to have over $100k in residual income from my investments, thus allowing me not to have to “work” ever again.

I know this is rather ambitious, but I would like to have 50 units by then with a goal of $200 cashflow per door.  I know it is doable, but of course there will be obstacles..but thats my goal and I am going to shoot for it.

2.Learn about other facets of real estate investing and branch out from just multi-unit rentals

Still learning, still will be learning, but hopefully I will be into some commercial investments by this time.

3.Eventually get into commercial real estate

More than just a quad...potentially bigger apartment bldgs, or even some other commercial unit I can lease out.

4.Consider building a business

I would like to be able to provide financial education to young adults, as well as having a venture capital firm.

Short Term

1.Initially start investing in multifamily homes with a goal of improving my real estate knowledge and learn how to create/find better deals.

This is where I am at today, about to close on my first deal.  It is a multifamily and I have learned a ton along the way.  Also enrolled in the GA Real Estate Agent course for my education.  Looking to finish that by March.

2.Within 1yr from Aug 2015 I want to have purchased my first rental property (duplex/3-plex/or 4-plex)

Seeing that it is now 1 Jan 17, I can tell you that I did not make this goal.  It was not for lack of trying, although there were times when I could have been more aggressively looking.  If you see under my market area below, you will see that I have been working this while living in Japan.  It has been difficult at times, but not impossible.  I would say that the biggest challenge has been the market, and the competitiveness of the market and class of property I chose to invest in.  Finding the right deal took some time, but with patience and perseverance, it is finally paying off.  I will be closing on my first Quad this week in Decatur GA.

3.On my first investment I would like to gain at least $10k income from the property annually.

We will see how things stabilize out once I take over the property, but as of right now I think I will come in a little shy of that.  I am expecting to get around $670/month in cashflow, but once again I need to see that stabilize over time to bank on it.  That would bring to about $8k annually, missing the mark just a little bit.

4.Create multiple contacts spanning across at least 2 markets

Looking back on this, I think this was overly ambitious...Really focusing on the one area has proved difficult enough, and I think actually doing that would have set me back.  I think more experience would be required to make this goal.

5.Continue to read at least 2 books per month on investing

I have not stopped reading! Although, not all of the books are about investing I must admit.  They all however have been useful in some shape or form with regards to investing and I have learned much along the way through reading.

Strategy

Look to build passive income through investments in small (2-4-plex) multi-family homes. Through strategic research invest in up and coming markets with foreseeable upside in the future. Also through thorough review of the numbers, make sure every investment makes money UP FRONT. The strategy will also require an exit strategy for each property before committing to a purchase. Preferably each investment will have a minimum of 2 exit strategies.

I think I chose my market well with choosing the greater Atlanta area.  There is much to talk about there, but I continue to see a lot of growth for the area in the future. 

As far as my investment is concerned, I am purchasing a quad @$200k, with 25% down, about an 8.7% CAP and as previously mentioned about $670/month in cashflow; this brings my CoC to about 14.5%.  This property definitely is a good buy with value up front.

As far as exit strategies are concerned, my goal is to execute the BRRRR strategy, with little rehab actually required. Or if need be I could sell, but why would I, I want to keep my money here for as long as I can.  

Timeline

Starting now and continuing through the next 10 yrs until reaching retirement And beyond!

Market

As I am currently living in Japan, my market will of course be away from my home area. I will have to rely on building relationships and finding experts whenever I am in a perspective market. As of now through comprehensive research and mentorship, the target market is Southeast United States. As this is an up and coming area with a plethora of investment opportunities, I will look to further narrow down my market from there. As it stands, the three perspective markets are Raleigh, Atlanta and Nashville. As the market climate shifts, so will my targets. I will continue to become smart on certain market areas through continuous research. 

Atlanta

Criteria

Do not become emotionally attached to the property, but rather the deal. My initial investment should not exceed a loan value of $200k. This puts my initial investment of cash upfront of no more than $50k with a total purchase price of $250k max. The target CAP rate will be anything greater than 7%, with a target ROI of 10%. This should put the Cash on Cash per month at or around $400 or greater. Ideally there should be less than $2000 of rehab amount. Lastly I would like to be able to close on the house within a month of starting the process.

Loan value of $200K would put me at $66k upfront at a 25% downpayment, but hey you learn. What I should have said is a LOAN value of no more than $150k which would have been more accurate.  At any rate, I am in at $150k loan/25% for $50k and about $5k more in closing costs, appraisal, and inspection, etc. 

I am at about 8.7% CAP with about 14.5% ROI and $670/month in cashflow.  There will probably be about $2k in repairs upfront, with some CAPEX looming on the horizon in the next couple of years.  Good thing I planned for the CAPEX in running my number's! 

Team

Investing Real Estate Broker - I found a great Commercial Agent through Bigger Pockets! I introduced myself with some of my goals, and he reached out and made the connection.  It has been great working with him and I look forward to continue to do so in the future.  There is true power in networking by using Bigger Pockets!

Mortgage Broker - Found through a reference from my Agent...also been very helpful and easy to work with.

Property Managing Company - Once again through referral from my agent (He referred several and told me I needed to do my own due diligence to find the right fit). Which I did on all accounts.

Contractor (repairs) - TBD, but probably will start with working through PM.

Other investors in market area (mentors) - Met several other investors through my Agent (who is also an investor).

Insurance Agent - Once again through referral from my agent (He referred several and told me I needed to do my own due diligence to find the right fit).

Everything is starting to fall into place, and its been a fun journey the whole way.  I would say that it has been slower than I would have liked, but my persistence is paying off.  From knowing absolutely nothing about investing in Real Estate, to soon being a first time property owner, bigger pockets was an integral part of my journey, so I wanted to share the story with the community.  I hope someone will find this somewhat useful, or perhaps even find a bit of inspiration and know that they can achieve the same for themselves.

Questions, Comments, Concerns?  I will take them all.  I look forward to meeting more of you in the future.