How I went from 0-122 units mortgage free. My tips and secrets

100 Replies

I started off as a Police Officer at 22yrs old. While doing that  I purchased my first home at 23yrs old. I bought a double home. Here in Cleveland that consists of an apartment on the bottom and an apartment above that.  I rented the lower unit and it paid my mortgage. I was married by 24 with a child and my wife didn't work. So I would supplement my income by flipping cars. I took auto mechanics in school and after work I would throw transmissions in cars or what ever it took. Police work didn't pay well.  

I then started managing bank owned properties. I made decent money doing so. While I was debt free. Lived for free. Car payment free I was able to focus all my money into purchasing real estate. Here are HUGE moves I made that help me get ahead.

  • Your home is your biggest debt and will hold you back. If your serious sell it and purchase a home where you live rent free or mortgage free. A duplex or double.This a huge tip.
  • Own a car that is paid off. Absolutely no car payment. In my opinion its second biggest expense that holds people back.
  • Sell all of your toys. If your toys are  payments definitely sell them. If they are paid off sell them and use the funds to some how forward you into real estate. SELL THEM
  • I didn't go on vacation's for years. I mean it was years. Save the money from the vacations and apply it towards your real estate ventures.Take one maybe every 4 years. Once your successful you can make up the loss later. When you really can afford it. Now I take at least 3 a year.
  • If you get a return from your tax's save or use that money towards your real estate ventures. I would get at times 7k tax returns. Instead of blowing I would use it for real estate.
  • You better learn how to swing a hammer. Read a book on repairing homes. I knew nothing but I got to the point that I now have serious remodeling skills. You have to cut costs. If you only have one or a couple homes there's no reason you cant fix it .Believe it or not I finally parked my service truck 2yrs ago. I have a box truck with exterior service doors with materials inside that I can roll up on any repair site and fix it. I stopped doing repairs at 80 units. So if I can handle repairs on 80 units and a full time job you can do one or the couple properties. I now pay about 200k a year. But that includes complete rehabs. But you save huge money. I probably should of stopped 4 yrs ago with repairs but I enjoyed it. One last thing. Knowing how to do the repairs educates you on costs. It helps hugely when dealing with contractors
  • Manage your own property. BUT READ YOUR LOCAL LANDLORD TENANT LAWS. I managed and still manage my own properties. At first I did it just me and my wife. It saves you a lot of money and you learn the system until you get big enough to farm it out. You should know the system.
  • Go being realtors backs. If your interested in a property and your gut is saying the relator is holding up the deal. Find the owner and talk to him. About 7yrs ago mixed use loans were impossible to get in this area for properties under 500k. So we were in an owner financed time. If you had a building below that and you were looking to sell you were stuck. Or someone came with cash at a huge discounted price. I bought 6 apartment building. I owner financed all of them for 5yrs each. 4 of them had what I call a speed bump of a realtor. Negotiations weren't working. But I knew that all 4 owners were elderly. If they met me and had a conversation they would love me. I went behind the relators back and found all sellers. I pitched my offer and told them my story and they fell hook line and sinker. I've paid them off and I can remember one owner told me that I was heaven sent. Realtors can hold a deal back. If I didn't do that I would of never got those deals. I paid $385 for all 3 buildings. They appraise now for 1.6m.
  • Be confident in yourself and your plan. My biggest critics were my family. Ignore all negativity. Stay focused. 
  • Find your motivation. Mine was Mother , wife and kids. My wife use to clean rooms at a hotel before we got married and my mother and I were very poor and she was in bad health. My ABSOLUTE FIRE was that my wife will never clean a room or do anything that I feel a queen shouldn't do. My mother I wanted to spoil and treat her to a better life than my abusive step father gave her.
  • Work your *** off. People see where I'm at in life and think I inherited it or just tripped over my position in life. Boy that ticks me off . Now I work about 60hrs a week. I use to work 7 days a week 15 hrs days. Now I feel like 60hrs a week is slacking.
  • Selection of your significant other if huge. If you marry someone that likes to spend your screwed. My wife is from a third world country. She is cheaper than me. I love it. You have to be on the same page and dedicated. My wife use to come to the house I was rehabbing with my kids, That was our family time. She would sweep while my young son would pick up trash. Id be hanging new kitchen cabinets or installing floors. My other two were barley walking and the other in a car seat. 
  • Know when to buy. Now for an entry level investor is hard. To me wait for these prices to fall. I happen to be blessed with timing and the recession was my best times. Prices are too high. If your not a big player. Sit back and wait. What goes up must come down. And Vic versa. Learn to follow Trends. Things can only go so high before they don't make sense. Know when to strike.
  • Be frugal. 
  • Show integrity. It goes a long way.

I hope this information is useful. Good luck with your investments.

Atta BoY  love the NO debt.. there will be refi to you die max debt BP members just rolling their eyes at this.

but for me your who most of these younger folks getting started should aspire to be.

I have one other friend who started in law enforcement and is uber successful. Nick Vertucci.. of course he is a guru so many on this site don't care for those guys.. but I started with Nick funding his first deals for him in Detroit circa 2002 

.. very proud of what my friend Nick has done.. Just like what you have accomplished is to be commended and emulated.

right now going into a cycle were real estate is pausing a bit in some markets.. little to no debt is a very nice feeling.

But most cant do it these days because they must have debt to scale so there is a balance.. 

And also because we love our country and our first responders that's why myself and some fellow BP members start aheroshome.org and we are at least half way toward our goal of gifting a brand new home to a deserving first responder.

and one of my partners in our charity Brian Burke also started in law enforcement now he runs a HUGE syndication company with well over 2,000 doors.. all great things for many great reasons.

I read your story and its almost like im looking at myself in a mirror, that is exactly the kind of hussle i put in every day, im up to 11 units all clear, i see myself owning an apartment complex  with 100 units or more, i dream about it at night and during the day too, i work as many hours as i can to accomplish it, even though i dont know you, i feel proud of you...

@Martin Zavala keep at it. I still think 24/7 about expansion. My goal was 20 properties by 40. I surpassed that. My new goal is 1,000 by 50. Much appreciated keep your corse. Follow trends. You should be holding , ready to strike when prices fall
Originally posted by @Frank Wolter :
@Thomas S. I'm sorry I'm trying to keep up with you. Are you asking me?

 Thomas likes debt and thinks equity is dead money.. its a running tongue and cheek we all have on this site.. 

No I am making the opposite point from Jay. I hate to see cash wasted, and at risk,  by sitting dying a slow death in real estate. Painful considering it is saving you 5% when it could/should be earning it's keep at 10%+.

Just painful for me to see cash underutilized but understandable when a individual has more money than they need or want.  

@Thomas S. I had a mentor in Cleveland. He loved cops. I would go see him once a month for at least 5 yrs and seek advice. His name is Sam Miller. He's a billionaire. An older Jewish man. He told me keep everything paid off. I survived and thrived during the recession. Everyone else that was leveraged failed. I'm open to leveraging partial of my inventory. I applied to leverage 1m. But that's as far as I'll go.

Nice job, certainly not what I would suggest, but I’m glad that worked out for you. 

I totally disagree with several of the points you tried to make. Not only do I strongly believe in leverage, I also believe strongly in property management, long distance investing, and paying contractors to do work for me.

That is not to say that your way is totally wrong, however I believe that there is another way, one where I don’t have to never go on vacation.

It's not silly to accept that many of us, me included, have to risk security in order to grow. I've done the math to figure out how I was to reach my goals without leverage... It wasn't pretty. If I knew a realistic way to do it without leverage, I would do it. I could try, but then my new risk really just a new one (not ever reaching my goals because I was scared to leverage). 

In any event I say congrats, Frank! From what I've read, I love your story. 

Another beginner tip to take things a bit further. Learn how to do simple carpentry things. Kitchen cabinets, drawers, bathroom storage. These things can add up to a lot on remodels and aren't really that difficult. 

Reality is that I am also 100% debt free. Sort of.

I pull all my equity  (as much as possible) and simply invest it elsewhere. Yes my properties are leveraged but dollar for dollar the money is earning a 10%+ on average outside of real estate. I am only leveraged on paper. I believe real estate is too high risk to leave cash sitting at risk.

When I sell I will not reap huge cash rewards but during the life of ownership I have doubled my net worth that I would have had owning real estate free and clear. A 5% return on equity is unacceptable.

All properties also have solid positive cash flow. Win/win

Originally posted by @Frank Wolter :
@Thomas S. I had a mentor in Cleveland. He loved cops. I would go see him once a month for at least 5 yrs and seek advice. His name is Sam Miller. He's a billionaire. An older Jewish man. He told me keep everything paid off. I survived and thrived during the recession. Everyone else that was leveraged failed. I'm open to leveraging partial of my inventory. I applied to leverage 1m. But that's as far as I'll go.

 One of my business partners back in the 2000s was in Garbage.. and he sold to waste management for 65 million.. so not a billionaire but well off .. he paid his tax's had zero debt and the rest was in double tax free munis.. and all of his real estate holdings in and around Napa were paid for as well as his home up at Tahoe and his place in Kona and his hunting ranchs and his duck hunting ranch's etc etc.

with his help I made it through the great recession.. but I am the first to admit I got my butt handed to me.. debt was not my friend and now I am pretty debt adverse other than construction loans that are all 15 months or less.. I mean I have 10 million plus of those but that's inventory and I have a bunch of equity and well I never hold anything .. also coming into a little slower market I just wont get over my ski stips I might build 10 homes on spec in the 400 to 700 range but that's it.. if they don't sell I rent them and suffer a little negative to ride out the market and don't sell if prices are not in our favor.. so to use Thomas leverage ideas I do that a lot.. but just not on long term contingent debt.. I saw too many landlords get plastered when it went bad.. so its either own the rentals with minimum to no debt or be in Notes which we do a lot of and own the debt not be in debt.  or cash.. and scoop the deals when and if that time comes around again. 

but I think its fair to say 08 to 2012 was a very unique set of circumstances and other than a one horse town or one mill town or one main manufacturing town.. were the mill or plant closes and real estate tumbles.. we just never saw such a wide spread loss of values.. 

I mean it was epic.. I was buying foreclosures in Fort Meyers of near brand new homes that sold in 04 ish for 200 to 250 and was picking them up for 25 to 40k each.. then doing my thing flipping for a quick 15 to 20k profit so I could support my cash flow real estate that was suffering because tenants were not paying.

@frankwolter

Thanks for the encouraging and insightful post. I would love to know, how much trading around of properties did you do; or did you just buy and hold almost everything? Will your strategy change during the next time properties go on sale?

I often go back and forth between keeping 70s era 4 plexes and such with long term fixed debt until paid off vs trading up to larger buildings or newer stock, as I'm younger in my journey. Either way, my goal is to own free and clear as the end game goal. 

P.S. can someone tell me how to do the "@xxxx" callout? I can't get those to work; feel free to make fun of me for it :)

@Frank Wolter  

Great example of the American dream i.e. what fruits of your labor can produce. I am on a similar path as you. No debt is absolutely wonderful. There is no doubt that investors with a light debt load will prevail in the upcoming correction. Most investors on BP have not been through a full life cycle of investment that includes a correction. I have seen firsthand where overleveraged investors lost it all. Also, I have seen some bonehead moves on that subject. I have seen an investor pay 8k in closing costs to pull out 20k equity, so he only netted 12k and a $700 a month increase in payment. He lost all of his properties in the last downturn, including his personal home. I know that many of us, including me, started out overleveraged in our early RE careers, but it must quickly be reversed to have long term stability or even long term REI careers. One game changer is reserves. If you are leveraged, one should have adequate reserves.

I can reassure the BP community that Frank is quite genuine. As he has generously offered to help up and coming investors, he has gave me valuable advice. I have seen some other members give him a hard time on some other posts, which gives way to a point that I have brought up before: if we consistently troll or slam successful people on BP, why would they want to stay? I keep seeing the request for more experienced investors here instead of too many newbies. For once, let most of us listen and learn (and maybe ask some quality questions).

Way to go, Frank.  Funny how others take all the success and advice you so truthfully and generously mentioned and only respond that they would do it differently.  LOL

A few of my favorite tips are work hard, budget and marry right.  Nobody will out-earn their own or their spouse's stupidity spending. Luck is hard work meeting opportunity.  We make our own.

I met a new BP colleague at a unit I was turning yesterday.  Work clothes, under a sink with plumbers putty and pipe dope on my hands.  This is where the magic happens I said.  Get a unit, save and get another. Pay them off.  Not too sexy.  I am nothing if not pragmatic and bluntly truthful. Like you outline here in your excellent post.

Congrats to you. You've certainly earned it!

@Jason Powell , to tag someone, type @? and a list of people who have already posted will appear. (Its a scrollable list, for those super long threads.) If you'd like to bring someone into the conversation, you have to be colleagues with them. If you're not, tag me and I can tag anyone with my BiggerPockets Super Powers.

Originally posted by @Frank Wolter :

I started off as a Police Officer at 22yrs old. While doing that  I purchased my first home at 23yrs old. I bought a double home. Here in Cleveland that consists of an apartment on the bottom and an apartment above that.  I rented the lower unit and it paid my mortgage. I was married by 24 with a child and my wife didn't work. So I would supplement my income by flipping cars. I took auto mechanics in school and after work I would throw transmissions in cars or what ever it took. Police work didn't pay well.  

I then started managing bank owned properties. I made decent money doing so. While I was debt free. Lived for free. Car payment free I was able to focus all my money into purchasing real estate. Here are HUGE moves I made that help me get ahead.

  • Your home is your biggest debt and will hold you back. If your serious sell it and purchase a home where you live rent free or mortgage free. A duplex or double.This a huge tip.
  • Own a car that is paid off. Absolutely no car payment. In my opinion its second biggest expense that holds people back.
  • Sell all of your toys. If your toys are  payments definitely sell them. If they are paid off sell them and use the funds to some how forward you into real estate. SELL THEM
  • I didn't go on vacation's for years. I mean it was years. Save the money from the vacations and apply it towards your real estate ventures.Take one maybe every 4 years. Once your successful you can make up the loss later. When you really can afford it. Now I take at least 3 a year.
  • If you get a return from your tax's save or use that money towards your real estate ventures. I would get at times 7k tax returns. Instead of blowing I would use it for real estate.
  • You better learn how to swing a hammer. Read a book on repairing homes. I knew nothing but I got to the point that I now have serious remodeling skills. You have to cut costs. If you only have one or a couple homes there's no reason you cant fix it .Believe it or not I finally parked my service truck 2yrs ago. I have a box truck with exterior service doors with materials inside that I can roll up on any repair site and fix it. I stopped doing repairs at 80 units. So if I can handle repairs on 80 units and a full time job you can do one or the couple properties. I now pay about 200k a year. But that includes complete rehabs. But you save huge money. I probably should of stopped 4 yrs ago with repairs but I enjoyed it. One last thing. Knowing how to do the repairs educates you on costs. It helps hugely when dealing with contractors
  • Manage your own property. BUT READ YOUR LOCAL LANDLORD TENANT LAWS. I managed and still manage my own properties. At first I did it just me and my wife. It saves you a lot of money and you learn the system until you get big enough to farm it out. You should know the system.
  • Go being realtors backs. If your interested in a property and your gut is saying the relator is holding up the deal. Find the owner and talk to him. About 7yrs ago mixed use loans were impossible to get in this area for properties under 500k. So we were in an owner financed time. If you had a building below that and you were looking to sell you were stuck. Or someone came with cash at a huge discounted price. I bought 6 apartment building. I owner financed all of them for 5yrs each. 4 of them had what I call a speed bump of a realtor. Negotiations weren't working. But I knew that all 4 owners were elderly. If they met me and had a conversation they would love me. I went behind the relators back and found all sellers. I pitched my offer and told them my story and they fell hook line and sinker. I've paid them off and I can remember one owner told me that I was heaven sent. Realtors can hold a deal back. If I didn't do that I would of never got those deals. I paid $385 for all 3 buildings. They appraise now for 1.6m.
  • Be confident in yourself and your plan. My biggest critics were my family. Ignore all negativity. Stay focused. 
  • Find your motivation. Mine was Mother , wife and kids. My wife use to clean rooms at a hotel before we got married and my mother and I were very poor and she was in bad health. My ABSOLUTE FIRE was that my wife will never clean a room or do anything that I feel a queen shouldn't do. My mother I wanted to spoil and treat her to a better life than my abusive step father gave her.
  • Work your *** off. People see where I'm at in life and think I inherited it or just tripped over my position in life. Boy that ticks me off . Now I work about 60hrs a week. I use to work 7 days a week 15 hrs days. Now I feel like 60hrs a week is slacking.
  • Selection of your significant other if huge. If you marry someone that likes to spend your screwed. My wife is from a third world country. She is cheaper than me. I love it. You have to be on the same page and dedicated. My wife use to come to the house I was rehabbing with my kids, That was our family time. She would sweep while my young son would pick up trash. Id be hanging new kitchen cabinets or installing floors. My other two were barley walking and the other in a car seat. 
  • Know when to buy. Now for an entry level investor is hard. To me wait for these prices to fall. I happen to be blessed with timing and the recession was my best times. Prices are too high. If your not a big player. Sit back and wait. What goes up must come down. And Vic versa. Learn to follow Trends. Things can only go so high before they don't make sense. Know when to strike.
  • Be frugal. 
  • Show integrity. It goes a long way.

I hope this information is useful. Good luck with your investments.

 Frank,

You are an inspiration.  Congratulations on your success.  

Stephanie

@Frank Wolter did you use leverage when you first started out? I would rather not use leverage and have my properties paid off, but it is my only option at this time, im just starting out. RE in my area is expensive. 

@Frank Wolter

Hi Frank that's really awesome.  Thanks for the post.  Did your work as a Sherriff/Police Officer allow you any differentiated buying opportunities?  I ask because as I understand it, the Sherriff is often the institution that facilitates the 'official' foreclosure auctions.

If so, I'd love to hear more about that. 

If not, I'd love to hear more about your buying strategies.