100 Rentals, Success Or Fraud?

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Not sure how we end up where we do, but in 2009 I found myself firmly on my way to shaking hands with the ‘American Dream’. My parents were so proud, I was a college grad and working as an engineer for Chevron. Tasked with simplifying complex data, I spent the next 9 years working crazy hours for the company. Like all the other little worker-bees around me, I thought working my *** off would make me “successful”. And it did, well sort of. Along came pay raises and promotions, awards and acclamations, but none of it managed to satisfy the ‘success’ I had imagined.

One rainy day in 2016, I was busy at my desk when something snapped with the sound of logic breaking and falling into place all at once. When the ringing faded, gone was the droning of office noises, of progress reports, and quarterly goals. In truth, I couldn’t even hear my own thoughts. I looked around at the buzz of suites dancing their office lingo, and realized that sweating away the next 30 years for a corporation was never going to bring true success. So, while still working my 9-5, I began to fill my evenings and weekends in the pursuit of real estate.

Being a data geek, I had a plan. A plan so ingeniously simple it couldn't fail. I would use ‘big data' to find a new spin on an age old industry and give me an edge over the competition. How hard could it be? Very hard, as it turned out. It took a lot of research and a bit of luck, but I eventually landed on two seperate words that changed everything: wholetailing (purchasing a property off market at a discount in order to sell it as-is on the market/MLS) and PPC (paid advertising on sites like Google). True, there was nothing new or magical about either, but that suited me just fine. The goal wasn't to reinvent the wheel, only improve on it. And that's exactly what I did.

I’d figured out a pretty amazing secret. By geofencing the entire country, my keywords could get clicks in major cities for pennies instead of the hundreds of dollars it was costing my competition to target those specific locations. Once I figured that out, I was able to analyze the data and discover a dozen other little tricks. Before long, I was receiving scores of leads a day on a $20 daily budget. I had hit the motherload!

Pretty soon I had to hire a lead manager to assist with the volume. Within a month they were qualifying and processing all the leads for me. I would personally put the quality leads under contract before handing it off to my transaction coordinator. Mind you, this was all being accomplished virtually, and I never had to leave the comfort of my air-conditioned home office. Next, my transaction coordinator would schedule a BPO, inspection, and (on rare occasions) an appraisal. Once I knew the deal was solid, I’d raise private money for the purchase. Before closing, a local realtor would be hired to market and re-sale the property at full market value. This strategy worked great, and within six months I had purchased homes in over 30 states. I had done it! The money was flowing in and I was finally a success. Or so I thought.

The start of 2017 brought changes, and not the kind you share with your In-Laws at Thanksgiving. Google decided to change its PPC algorithm, and my leads began to dry up. Coinciding with this downturn, I had borrowed funds for a few investments that were lingering on the market. The combination felt like a one-two combo to the nuts, and all I could do was watch as the results of almost a year of sleepless nights and time away from my family began circling the drain.

With loans to pay back, I had to figure out something new, and fast. I was still working my corporate job and giving up on real estate had never felt more appealing or easy. I could slink back to the hive, with no one the wiser. Instead, with bull-headed stubbornness, I decided to give real estate one more push.

Success was waiting for me, I just had to keep trying. PPC wasn’t working anymore, so I decided to focus on one city in which to develop a rental portfolio. I went back to the data, and after some lengthy analysis, I chose a city I’d never been to before: Omaha, Nebraska. Folks thoughts I was crazy, but the data was like a flashing arrow pointing to America’s Heartland.

I took all the money I had left and set up shop in Omaha (virtually) in July of 2017, with the goal of buying 100 long-term properties and retiring. Five months later, with 2018 looming large, I abandoned the safety of the corporate hive and delved completely into real estate. For a third time, I returned to the data. This time, I used mass data to develop a software that not only simplified everything but took the guesswork out of finding leads. The software allowed me to obtain deals for hundreds of dollars while my competitors were spending thousands.

The plan was simple: run my marketing software, purchase everything that I could at 70% or less of fair market value, keep the great stuff, wholetail the middle stuff, and wholesale the rest. The wholesale and the wholetail provided the cash I needed for the down payment and rehabs of my rentals. Nothing comes easy though, and for every two steps forward I was forced to take one step back.

I hired a contractor who ended up being a drug addict. He stole all my equipment and supplies. I had a nationwide money lender charge me an extra $18k the day before we were supposed to close because they knew how desperately I needed to close on the deal. I had a property manager embezzle rent money. I had vendors gouge me, houses broken into and vandalized, tenants from hell, houses flood, and issues with local government. I kept waiting for things to get easy, for things to run smoothly. Of course, they never did.

I pushed on despite all the setbacks, and in May of 2019 I proudly reached my goal of 100 amazing cash flowing units. This was it, I would never have to work again. I stopped advertising, sold my remaining wholetail properties, purchased a nice home by the beach and waited for the feeling of success to settle in. But when I took a peek, I found that my definition of success had changed somewhere along the journey. Success had started out as making a lot of money. And why not? After 2018 though, I realized that money was a two-edged sword. What I truly craved was the time and freedom to do what I wanted. Money was just the means to that end. In May though, having achieved my desire, I also achieved emptiness. Don’t get me wrong, money, time, and freedom are wonderful, but I came to understand that true success is something different altogether. If you make success about yourself, you’ll never achieve it. True success is being able to take the lessons life has taught you and use it to help others achieve the success they crave. Throughout my journey, the one constant that always made me feel good was helping buyers, sellers, and most importantly other investors.

The main reason for writing all this was not to share the good things that happened but rather to share some of the lessons I learned, and hopefully help you out on your journey.

My company's core value was: “To make every interaction a success for everyone.” I love the phrase but deep in my heart I never felt that buying a house for $30,000 and selling it the next day for $60,000 was really benefiting the seller. True, the seller always had a pain point that we were able to help them with, but I never woke up in the morning thinking about how awesome a company I had built. I was using my marketing software to purchase lots of discounted properties instead of really figuring out how to truly help the sellers.
Lesson Learned: I learned the hard way that your mission statement shouldn’t be a plack on the wall, it should be the blood that moves your company.

Over the course of 3 years I might have talked with 2 sellers total. I just don’t like negotiating, and so delegated that task from day one. I justified this at the beginning because I had a full-time job. In hindsight, I should have mastered each skill personally before delegating it. Of course, it’s neither necessary or practical to master every skill (like designing the company website), but I should have mastered the key roles before hiring them out. Only then can you set realistic expectations for your employees.
Lesson Learned
: Have the process nailed down and clearly written out in an SOP before hiring someone to perform it for you.

KPIs (Key Performance Indicators). I’m a data guy, and built an entire software to find amazing leads, and still failed to have KPIs in every aspect of my business. I was making money so what did I care if things slipped a little. Looking back I could have easily ended with 20-30% more money in my bank account if I had been living by numbers daily.
Lesson Learned:
Daily update and review KPIs

Don’t overextend. At one point, I was simultaneously flipping homes, doing lease options, wholesaling, wholetailing, buying rentals, buying land, managing properties, hard money lending, and a few other things. Focus on one thing and become the master of it.
Lesson Learned:
Master each niche before trying to take on the next.

    I’ve enjoyed these past months off work because it has taught me something incredibly valuable. Success, fulfillment, and satisfaction don’t come from sitting on the beach, but by helping others. My new mission in life is to help as many individuals as possible to find their own true success. Real estate is where I succeeded financially and it is where I believe that I can help others the most. Real estate investing is hard work and it’s definitely not for everyone, but if you work smart it can prove the most rewarding thing you ever do.

    Wow man! I’m up eating and about to work out and this pumped me up!!!! That’s incredible that you went through all that and push through regardless and ultimately realizing that success is more about others than yourself in the end! Excellent post man!!!! So you have 100 houses? How much do you cashflow monthly?! Do you have an asset manager or do you still manage them all on your own?!

    Hey Josh, I really like your post.  It says so much that is so true, not just about real estate, about life.  We often do things with our own personal goal or goals in mind that start out being self serving.  We aim for this magical destination called success, or financial freedom.  There may be a dollar goal in mind, whether it be monthly or annually.  Along the way, there are so many ups and downs, and diversions while traveling this road and we often begin to realize that other people are affected by everything we do, whether we talk to them directly or not.  We begin to question our motives, and intentions and even upon reaching some of our goals, our happiness. Yet again, what is happiness?  It is different for everyone and while there absolutely nothing wrong with the pursuit of financial goals, success or freedom, we often find that there is so much more than this.  

    I have been in involved in Real Estate investing for almost 20 years, and have multiple rentals, rehab or build multiple houses annually, lend hard money, wholesale at times, coaching and mentoring along the way, and more.  Throughout this process, I have interacted with hundreds if not thousands of others and in one form or fashion, have truly impacted lives.   I have been fairly "successful" though I have still not reached my "goals" and continue the pursuit.  Things have changed for me over the last several years as the money is great, the freedom is simply that I work for myself, out of my home, when and how I want.  The most satisfying and fulfilling part, is when I am helping others to better understand this business and how to best achieve their goals.  I am spending much of my time in this arena now with everything that I do.  

    After all these years and experience, I formally started a coaching and mentoring company for these exact reasons and the fact that there is much hype on real estate investor training and coaching in this country.  There is absolutely no reason that anyone should pay $25-50k to learn about real estate investing. I have met so many people that have spent their last dime that they cannot even begin to start their real estate business. While I cannot afford to do this for free, I can do it cost effectively for anyone, anywhere, that is interested or willing to learn.  I have spent most of my life in the personal development space, taking classes, and seminars, reading books, listening to audio, etc.  I am also sharing all that I have learned there with my clients and students. Investors need to understand about people, communication, finance, business, technology, and the list goes on.  There is more to all this than real estate investing, there is life. There is more than houses and properties, there are human beings.  This is truly what it is all about, not money or property, PEOPLE.  You realize success, freedom, and happiness, is not a destination, it is a JOURNEY.   You are the sum of the amount of people that you have helped along the way.  You realize that if you help others first, everything that you can dream of will come to fruition.  Congratulations for reaching this point along your journey!  We are soul brothers my friend.  There is still so many people to help and so much to learn...

    @Rodney Harris how much I'm cashflowing every month will really only be apparent over time.  I'm stashing away 14% a month for vacancies and repairs and only time will tell if that is adequate or not.  I don't manage them.  I have hired a 3rd party property management company to do that for me.  

    Nice story  .  did you pay cash for the 100 homes ?  or how much leverage did you put on them if any. 

    WE had 350  sfr's at one time.. ton of work.. I got a nice payday when partners bought me out.

    I just wanted to focus on ( like you said on two basic business models that I enjoy far more than SFR middle America rentals).

    It will be intereting to see how your portfolio is doing at year 5.. that tends to be the year when you have full cycles on most.

    And I am thinking Omaha may not have some of the issues some of the other mid west cities have vis a vi tenant base crime etc.

    I worked with a company that did IRA set ups for a time. and their story was the same as yours with google. for years they were killing it then google changed pricing and what was a few grand a month was now 50 to 100k a month.

    @Josh Miller That was great to be able to read a lot of your back story. Even though we have gotten a chance to work together on some of your deals, I didn't know a lot about the behind the scenes that were happening with your company. You and John were always great to work with. Whatever your next endeavor is I am sure you will find success. 

    @Josh Miller  Congratulations on reaching your goal!  I couldn't agree with you more that money is just a means to an end.  I'm really glad to hear that you have found your "end" and are ready to embark on that new journey.  I am working towards my dream of creating a legacy for my family built on real estate.  I would welcome any advise you have to impart especially regarding my hometown - Omaha, NE.

    Originally posted by @Nate O. :

    @Josh Miller thanks for sharing your story! Are you still actively investing in Omaha? Or just holding and optimizing?


    I'm done with investing but happy to help any way I can.  

     

    @Jay Hinrichs I went through the normal cycle.  At first, I was borrowing from friends and family.  Soon I was able to borrow from larger lenders like lima one capital (who screwed me).  After 6 months of asking and building up relationships, I was finally able to borrow from a local bank.  After a year, every local bank in town would gladly lend to me.  Right now I'm 50% leveraged but am aggressively paying off the loans.  

    Originally posted by @Josh Miller :

    @Jay Hinrichs I went through the normal cycle.  At first, I was borrowing from friends and family.  Soon I was able to borrow from larger lenders like lima one capital (who screwed me).  After 6 months of asking and building up relationships, I was finally able to borrow from a local bank.  After a year, every local bank in town would gladly lend to me.  Right now I'm 50% leveraged but am aggressively paying off the loans.  

    that's the ticket if these are basically C class rentals get those suckers paid for that's when you have some real fire power..  Good luck with it. !!

     

    @Josh Miller this is a really great story but it sounds a bit like a sales pitch with a cliff hanger waiting to see what the deal is going to be. Giving back is great, and hope you accomplish great things beyond what you have so far. Looking forward to seeing what that is exactly and where it leads you. 

    @Michael Krupp I'm glad that someone who is mentoring is not looking to charge an arm and a leg to help people understand Real Estate. It does sound like Josh may be headed in that direction as well. I myself have yet to get started with my Real Estate journey but once I do I hope to be able to help others along the way. 

    @Jay Hinrichs is there anything in Real Estate you haven't done? You are like the Real Estate Monk, the one with all the wisdom :) Always enjoy it when you post to a thread. I feel I get just a bit smarter/better when I read something you have contributed to.  

    Originally posted by @James Dickens :

    @Josh Miller this is a really great story but it sounds a bit like a sales pitch with a cliff hanger waiting to see what the deal is going to be. Giving back is great, and hope you accomplish great things beyond what you have so far. Looking forward to seeing what that is exactly and where it leads you. 

    @Michael Krupp I'm glad that someone who is mentoring is not looking to charge an arm and a leg to help people understand Real Estate. It does sound like Josh may be headed in that direction as well. I myself have yet to get started with my Real Estate journey but once I do I hope to be able to help others along the way. 

    @Jay Hinrichs is there anything in Real Estate you haven't done? You are like the Real Estate Monk, the one with all the wisdom :) Always enjoy it when you post to a thread. I feel I get just a bit smarter/better when I read something you have contributed to.  

    I am just old and been doing this since I was 18.. lived through 4 bad cycles and a few good up cycles and a lot of flat line markets. I just changed when the markets changed to stay relevant.. right now rentals are soup de jour.  and Low cost rentals at that. 

     

    Originally posted by @Josh Miller :

    @Jay Hinrichs I went through the normal cycle.  At first, I was borrowing from friends and family.  Soon I was able to borrow from larger lenders like lima one capital (who screwed me).  After 6 months of asking and building up relationships, I was finally able to borrow from a local bank.  After a year, every local bank in town would gladly lend to me.  Right now I'm 50% leveraged but am aggressively paying off the loans.  

    I'm on the process of working with Lima one now. Can you elaborate on what went wrong?  

    I'm curious how you bought those 100 SFHs as well. What percentage of these were normal off market transactions and what percentage were other things like distressed sellers, estate probates, tax sales etc?

    It's interesting how your story's focus is the "why" you invested, yet many of the comments ask you about the "how". My comment to the "why" you invested, and the "reason" you wrote this article is..."well said friend."

    Hi Josh! Thank you so much for sharing your story with such immense detail and profound insights! As a REI newbie, your points will serve me well as I begin my journey. I began looking into REI as a launching pad to my goal to provide reasonably priced rentals for low-to-middle income families while establishing a passive income stream for myself. (I run a 501c3 public charity in NY (primarily Putnam, Dutchess and Northern Westchester Counties) where there is a shortage of such rentals.) I would be interested in any suggestions you may have to make this dream a reality. Thanks so much in advance!

    Excellent post, Josh!  Congratulations on your financial success, and good luck on continuing your journey.

    It was interesting that you narrowed your focus on Omaha.  If you replicated your analysis of the best markets today, would Omaha still win out?  And were there any markets that were a close second?

    Originally posted by @Marina Spor :

    It sounds like you need to market your software to help investors find good leads. Any plans for that?

    Yes

     

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