Establishing Purpose – Setting Priority – Creating Success
Following my fifth birthday, I counted my $130 of birthday loot countless times. I would neatly organize the beautiful bills and carefully place them in my Detroit Red Wings tri-fold Velcro wallet. The day after my birthday party my mom, grandma and I went out for Chinese dinner. In the parking lot my mom suggested she should hold my wallet and cash for safe keepings. I thought that made sense so I handed my wallet over. Long story short…she lost my wallet and that was the last time anyone every managed or controlled my money.
Since that traumatic learning experience, I have been fascinated with saving money, making money and investing money. My parents would routinely come to me for a loan if they needed cash to pay for delivery pizza or money for my siblings to go out with friends. I was always thinking of ways to generate revenue which led me down several paths: when I was 7, I sold my toys and clothes at a garage sale which worked out well; the following year I setup a food and beverage stand at the garage sale which made more money than my entire family’s sales combined; I ran that stand for a few more years and employed my older siblings to work for me; when I was 9, my buddy and I attended a five day four-night University of Michigan hockey camp and sold all of the snacks our parents sent us with to make $150 each (I sold a half-eaten snack size bag of Doritos and used cheese dip for $5) ; we went again the following year and convinced our parents to shop at Costco before the camp so we were completely stocked up with inventory, needless to say we made a killing; I started a lawn mowing business during middle school and ran it profitably for several years until I finished high school.
During high school I took both finance classes that were offered and became a teacher’s assistant so I could be in a finance class again. During those classes, I learned the importance of tracking income and expenses so I created an excel tracker which I use to this day to track my monthly income and expenses to the penny. When I graduated, my high school established a new award that was created just for me. The award was called “The Warren Buffet Investment Award” which I won for beating over 1,000 students plus teachers in a 10-week stock market simulation game (I turned $10,000 into just over $21,000 in 10 weeks). While I was in high school I opened a personal brokerage account to start investing in the stock market. I put my business venture proceeds to work versus spending my hard earned money on junk (I still have the account today).
I knew from an early age that finance and real estate would be my path however I got distracted from my purpose by going to college. I majored in Finance, graduated with honors and took a job with a large consulting firm (I still have a full time consulting job to this day). I was having fun traveling for my new job and working overseas on a project in the United Arab Emirates. By taking the overseas assignment I eliminated my entire cost of living expense (I did not have a car or apartment in the U.S.) so I put my entire annual salary into my stock account which made me about 12% annual return. When I returned to the U.S. I was ripe with cash and ready to spend. I took every available liquid dollar (I kept my 401-K untouched but used some funds from my Roth IRA) to buy my first primary residence, a 3 bedroom 3 bath condo in the San Francisco Bay Area for $475,000. I put a craigslist ad up and before long I had two tenants living with me and paying for almost my entire cost of living plus homeownership (I paid about $450 monthly – good luck finding a rental for $450 in the Bay Area). Over the next year and half, life went on; I worked, traveled, played and I didn't think much about real estate investing.
During one of my trips around the world, my life changed. I’ve a had few defining moments throughout my life but this was big. I met a girl on a boat in Ha Long Bay, Vietnam who happened to be from San Francisco but we didn’t know each other. We hung out for the day, had dinner together with our two friends and parted ways in the morning when the boat docked. Long story short…she ignited my obsession and purpose which focused me on real estate investing to build the lifestyle we want (we are now engaged and getting married in the Fall of 2017).
In early 2016, my now fiancé and I were having serious discussions about what kind of life we want to have. We decided that investing in real estate was very important because it’s a tool we can use to build the lifestyle that we want. After owning my primary residence for two years (tax free gains) I put it on the market and sold it for $585,000. Between my down payment, savings from my job plus house hacking with my tenants, and the profits from my condo sale I was ripe with cash once again!
We (my fiancé and I) decided quickly that the Bay Area real estate market was not for us based on capital requirements plus the returns that investment properties produce. We set our sights on Charleston, SC because the real estate market is growing (we evaluated many markets before selecting Charleston) and we have family in the area. We packed up her car (I still don't have one – they are a waste of money) and drove across the country during the late Summer of 2016. We arrived in Charleston on Friday afternoon and had a somewhat distressed primary residence under contract by Sunday (we found it on Zillow during our drive). We spent some of the cash we had to close on the primary residence, do some work to the place and buy furniture. We had a fair amount of cash still available but I opened a HELOC to have extra funds to be ready if we needed it.
During the Fall of 2016 we took a trip to Italy to recharge from the cross country move and set written goals for our new lifestyle. One goal that we wrote in Italy was to purchase an investment property before December 31, 2016 that produced a minimum of $5,000 in monthly cash flow. When we got back in early October, I was obsessed to achieve this goal. We took all our remaining cash available and close on our first investment property purchase on December 20, 2016 (2 – three-unit commercial office buildings for $1M). The asset produces $5,400 of monthly income for us ($3,500 cash flow plus $1,900 principle pay down).
As I write the article today, we just closed on our second investment property purchase on February 17, 2017 (four-unit commercial office building $1M). We found the deal, controlled negotiations to get it under contract, raised $192,000 from investors to fund the down payment and own more than half of the asset plus monthly cash distributions without using any of our money. We are closing on our third investment property on February 27, 2017 (SFR flip basically in our backyard $290,000 purchase + renovation with an ARV of $410,000) with another deal in the pipeline to close in March or early April (100-unit apartment complex $1.25M purchase + renovation with an ARV of $2.5M). The last few months have not been easy but we have a purpose that guides our priority so the most important thing gets done.
We are going to have a great 2017 and we hope you will too.
