Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
My first real estate investment was in 2010. I kept acquiring properties, sometimes using the BRRR strategy. I've been without a day job for 1.5 years looking for more deals and got a couple large portfolios in 2016. That hit our passive income goals but we had to recoup cash buffer.
It's officially official, we are free and neither of us have to work!
Looking forward to living life with my wife and both of us being able to do what we want when we want.
Celebrating with a well aged cigar from the year it all started. And some of my top shelf bourbon.
From someone who is just scratching the surface education, not even investing, congratulations to you and your wife's success both now and in the future. This was certainly an inspiration to read.
Ours were low interest. We just made the minimum payment and extra money went to fund the next investment.
Did you buy a ton of houses then just crush the debt after? Or did you focus on that first? How would you suggest another investor handle that?
Pay off high interest debt like credit cards. But if you can make 15-20%+ CoC return investing, why would you put the money towards paying off stuff that's 5% interest?
Were you and your wife making very strong income in your jobs that you were able to save a ton and use it for down payment? When did you really feel the compounding effect? How many houses did you own yr 1 , yr 2, yr 3. etc..
We decided to live off of my wife's income, then anything I made in business and real estate went back into real estate.
It sounds like it took you 7 years? Can you map out a plan (for me ;) ) that you (or anyone) could do it faster? Could you recreate your result or do you feel like you got lucky - sounds like you were proactive to find the nail in the coffin deal, but other than that?
I could easily recreate it. As Steve Saka said "I may have been lucky, but it wasn't by accident" and Robert Kiyosaki "Luck is when preparation meets opportunity". Luck is an illusion unsuccessful people use to explain why they aren't successful.
What type of equity do you have in your places? Do you OWN them or are you still financing? If financing, do you feel there is a strong risk retiring with potential liabilities of that magnitude?
Still financing everything. No I don't feel there's a risk. I'm invested for cash flow and they cash flow very well at rental rates that I'm not worried about dropping.
How much money in "reserves" do you feel comfortable with? I've heard SO many rules of thumbs, I'd be curious to know what you use.
As I was building the business, I mainly used a LOC for my "reserves" and kept moving along. I didn't feel the need to have actual cash on hand, as long as I had access to enough cash. The amount of cash reserves needed is dependent on the types of properties and how many you have. Once when I had about 15 units, I did have one point where more than $40k ADDITIONAL over my expected expenses happen within 8 months. That was rough. As you grow, you'll need more reserves. But eventually you'll have enough that reserves actually aren't as important. With 107 rental units, it's not much impact when one needs a new HVAC or something else. One major CapEx thing happens almost every month but there's 100 rents coming in that month.
Did you see appreciation from the properties you purchased early on? How much of a role did equity play in ramping up your acquisitions?
Even though 2010 was shortly after the crash I am in the midwest. Things didn't dip too much around here, so didn't have much to rebound. The only equity that came into play was forced equity through remodeling and increasing rents.
Do you self-manage?
No way! That would be way more than a full time job and defeat the purpose for me! Although at one point I did. I started a little company a managed for some other people. I sold that at the end of 2013.
What was your min cash flow per unit to make a deal happen?
I just joined 5 minutes ago, and what a great first article to come across... I'm immediately inspired. Thanks for sharing your story from a 22 year old on the verge of graduation!!!
@Austin Fruechting I should have checked out your blog sooner. I found answers to most of my earlier questions there. 150k total investment to acquire 70 units is a brain teaser and definitely an eye opener! I would have 150+ units if I achieved the same ratio with the capital I've deployed so far. Thanks for getting the creative juices flowing. It's easy to get stuck in the routine of save & buy.
Congrats! Really happy for you both!! How much of your time did your full-time job require? I find it challenging to do this on the side since my job needs 50+ hours per week.
@Aaron Ray - your mechanical engineering education will help a lot. I did 3 years of mechanical/nuclear engineering then switched to business/entrepreneurship. The engineering helped a LOT more. Real estate is a numbers game obviously. Engineering teaches you to see everything as a system, a big equation to systematically break apart and identify variables, etc. Use that!
I love the idea of purchasing a 2-4 unit and living in one unit to get started! I wish I would have started my REI education in college and did that coming out. If I would have I could have achieved the goal even quicker.
Also just think about tradeoffs. Live life and have fun, but a luxury car now could slow your acquisitions by a LOT.
That would be awesome Austin Fruechting . Thanks.
I've been thinking about that magic number and trying to calculate it. I am not all about the rolexs and lambos as those wouldn't provide me happiness. If anything, I would probably be stressed out more by them haha
Congrats on your accomplishment! I wish I had the mind set and finances when I came out of college! Now, 40 yrs later, I am. So I am a slow learner... but your post has given me a shot in the arm! Outstanding!
@Ahmad H. - well the blog isn't even really started up yet. I'm pretty well done tweaking it and have some more content getting ready. I'll start pumping it and officially launching next week. We didn't want to put it out there before my wife put in her resignation.
Yeah man, that 150k number is legit. That's my cash in. Mainly because of using OPM with equity investors, amazing loan packages from my bank, and doing some BRRR.
I had purchased a retail biz right out of college. We also invested some money there to fix it up. Then I had to get it paid off to be able to seller finance it to the current owner. So we've invested more than 150k into entrepreneurship, but only 150k into real estate. The biz didn't make much. I probably could have made more working for someone else, but then I would have been working for someone else!
@Austin Fruechting Did you focus more on appreciation or cash flow? Did the focus change as you progressed through your career? What kinds of returns did you look for?
Would you mind sharing your business structure? Do you have all the properties in their own LLCs etc?
How do you deal with management? Do you work with a property management company or do you do it all yourself?
How many people, besides you and your wife, do you have in your team? For example, a real estate agent, attorneys, etc
Any red flags we should look out for on bad deals? Any tell tale signs besides the numbers?
Thank you for taking the time out to answer the questions you're comfortable with. I appreciate the help.
Edit: Sorry, I didn't see but some of my questions were answered already lol
Hey man, congratulations on your story! I was just reading through your blog posts on your website and wanted some insight/guidance on my first investment property. Ideally, my goals to get started are long term holds with positive monthly cash-flow and gain the power of compound interest. I am currently 21 years old, renting and could see myself house-hacking a multi-family and rent the other units. With an FHA loan, 3.5% Down, I am able to use 75% of the rental income towards qualifying. My issue is, I am a student, graduating in May currently working in the mortgage industry. Since I am a commission based employee, I doubt my income will average enough to qualify. I could go with a hard-money/BRRRR route, but I can not project my income for next year to be able to safely determine refinancing into a conventional loan. I have saved up around 12k for down payment/closing costs. Please let me know your thoughts and advice for my first purchase.
Thank you for taking the time out to answer the questions you're comfortable with. I appreciate the help.
Edit: Sorry, I didn't see but some of my questions were answered already lol
LOL, no problem. I'll go through some of these.
Did you focus more on appreciation or cash flow? Did the focus change as you progressed through your career? What kinds of returns did you look for?
I looked for cash flow, cash flow, and most importantly, cash flow. I always tried to maximize my cash on cash return. Financial freedom in the shortest amount of time possible was our goal. Now that we are there I may consider appreciation plays. Although I would always make sure it cash-flows now, it just wouldn't cash flow as much as I'm used to in exchange for some appreciation.
Would you mind sharing your business structure? Do you have all the properties in their own LLCs etc?
No. Every property in it's own LLC is overkill, unless they're all bigger properties. I have 7 LLC's that hold properties.
How do you deal with management? Do you work with a property management company or do you do it all yourself?
Already answered but heck no I don't manage myself!! That's a job not freedom!
How many people, besides you and your wife, do you have in your team? For example, a real estate agent, attorneys, etc
I have agents I work with, 2 property managers, an AMAZING accountant that does my year end taxes, one of the best attorneys in KC for drafting the partnership operating agreements, my banker (vp now, will be president in a couple years). The only thing I have do is a little monthly bookkeeping and answering questions from property managers. I keep analyzing and looking for more deals just because I love that part of it.
Any red flags we should look out for on bad deals? Any tell tale signs besides the numbers?
It's all a numbers game. I do have a full post on my blog "No Right Price for the Wrong Property" at goodlifeinten
@Austin Fruechting What was your specific strategy for analyzing deals and crunching the numbers particularly when you were just getting started? Do you have any "practice exercises" you would suggest so that one can get really comfortable analyzing and running numbers? Thanks Austin!
Austin Fruechting I just read your blog and all I can say is woooowwww for such amazing accomplishment !!!!
Congratulation Sir !!!! ....still deciding how and when to start, but your story is motivating a lot of new to be real estate investors (investing can be daunting for beginners) that haven't started to pursue their financial goals and dreams yet !!!!
@Austin Fruechting What was your specific strategy for analyzing deals and crunching the numbers particularly when you were just getting started? Do you have any "practice exercises" you would suggest so that one can get really comfortable analyzing and running numbers? Thanks Austin!
Just keep analyzing the deals you see until you are comfortable. If you find yourself guessing or unsure on a specific expense, research it until you have a good idea and are comfortable with it. And when you are actually analyzing to purchase, make sure to run your numbers conservatively! Meaning if your during your research you think this expense will be $100-150, always put $150 in your analysis. Better to end up with an extra $50 a month than your analysis shows than $50 less. Then imagine that across multiple expense types. Always assume on the higher side for all expenses. If it's a still a good deal go for it.