Officially Financially Free at 32 !! - Exciting Day!
Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes
Officially Financially Free at 32 !! - Exciting Day!
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Suisun City, CA · Member since 2017 · 2 posts · 8 votes
9yFrom 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.
255 Replies
- Investor · Orange County, CA · Member since 2015 · 2k+ posts · 3k+ votes9y
Originally posted by @Austin Fruechting:
Originally posted by @Mat Smith:
Congratulations Austin!
Do you have a long term plan for your properties when they start to get older and require more to maintain? Will you start to sell properties over time?
The main thing I'm wondering about is how your cash flow will last until the end of your life time.
Thank you.
I'm not concerned at all
1) My properties are already old and I have big cap-ex all the time. My numbers factor a very high expense ratio that is representative of that. So my expenses should only go up along with inflation.
2) Inflation also helps. Say it's year 18 of the 20 year mortgage. My rents are now whatever 18 years of inflation puts them at. My payment is still the same as when I started.
3) 20 years from now: not only have I had inflation to increase the rents, all mortgages would be paid off. You can imagine how much I pay the bank every month.
So I don't see a concern at all given those things. Even if all that weren't enough, I've stated a few times in this thread that I will continue to search for deals because I enjoy that. So I'll have more anyways, but it wouldn't be needed IMA (in my analysis - lol)
You may be right on 3, but I would not necessarily assume that rents and prices will keep up with inflation. There are many examples of markets where this has not happened over long periods of time, many where they keep up with inflation on average (with slight variation above and below with the cycles), and a few rare markets where rents and prices regularly outpace inflation. One big "tell" is if the retail comps are priced below replacement costs. For example, say it costs ~$150/SF to build a new house ... if the comps in the neighborhoods of your rentals regularly sell below that then guess what, they're values are NOT keeping up with inflation because even with a worthless lot you could not replace them and recoup your money and I doubt that the rents are either in that case. I can however guarantee you that CapEx will keep up with inflation, and CapEx is nothing more than you the landlord paying replacement cost to rebuild the property one system at a time. If this is the case, it means you are losing purchasing power on the property every year you hold it ... doesn't mean you can't make money, but it would be a business model more like owning a "Hertz rent-a-car" than buy and hold REI and definitely something to consider. This may not be the case in your market or properties, and sorry if this is a "buzz kill" for an otherwise happy post, but wanted to mention since most folks don't consider this when buying and holding since they assume that as long as it is cash flow positive day one then that is all they have to care about, and appreciation should be ignored (even if it is negative), which is not the case IMO.
- Chandler, AZ · Member since 2016 · 109 posts · 56 votes9y
Congrats!! inspiring for those of us starting out
- Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes9y
Originally posted by @Austin Fruechting:
To everyone I didn't tag, thank you for the congrats! If anyone has any questions about anything let me know. REI is awesome! We didn't have any leg up and only graduated college with some student debt. I want to help in any way I can because I know anyone can do it if they study, have a big enough "why" and keep plugging!
HI Austin,
First of all congrats.
What do you plan to do after quitting the J-O-B, will you still invest in new projects and work on more deals ?
Can you also shed some light on these unique portfolio loan options that you were able to customize with local community/commercial banks? Like what the products or structure/rate looked like when you started and how it evolved into more and more creative portfolio products/blanket loans/or other along the way?
- Real Estate Agent · Kennesaw, GA · Member since 2015 · 24 posts · 12 votes9y
Way to go! Very inspiring.
- Real Estate Agent · Annapolis, MD · Member since 2017 · 110 posts · 82 votes9y
Congrats @Austin Fruechting, I've been reading through your blog as well and I agree knowing your "why" is absolutely essential. Out of curiosity, what is your ultimate goal and what do you spend most of your days on?
What attracts me most to real estate, beyond the financial freedom it can afford, is the opportunity to help others, change lives by offering housing to families in need. Some RE projects are designed for pure cashflow, others are social experiments. After all, when you've got all the money you need on auto pilot, why work on getting MORE money if it does not get put to good use?
My offer on a small SFH was just accepted yesterday, my first deal is shaping up!
Best of success to you and your wife!
- Indianapolis, IN · Member since 2017 · 1 post · 0 votes9y
Hello & CONGRATULATIONS! Question how did you purchase your first property. Did you have a private lender?
- Missouri City, TX · Member since 2017 · 4 posts · 0 votes9y
Congrats. This is so inspiring and necessary for everyone to hear. Thank you for sharing. Hopefully we can all learn something from you.
- Beloit, WI · Member since 2016 · 100 posts · 40 votes9y
Congratulations on your success @Austin Fruechting! Very inspirational...going to show this to my husband to show him that it's possible.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
@David Faulkner - even if the rents and prices don't quite keep up inflation, it won't be too far off. I'm not in over inflated markets, most of my properties rent in the $700-1000 range. And even if I weren't going to keep looking for deals... if ten years down the road they aren't keeping up, capture equity and buy more!
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
@Albert Bui - I've been without a job since August 2015. I hit the gym, read, hike, work on the blog to help others, hang out with people. Trying to help people here too. As much as I've written on this post I've done the same in responding to messages.... With my wife leaving, we'll do a lot more exploring and traveling. I'm building out a truck to be overland ready (essentially makes it a small RV that can off-road).
So at the beginning it was typical 25% down. They go always to ARMs adjustable after 1, 3, or 5 years on a 20 year amortization. At this point the amortization is the same, but they'll lend me 70% LTV, so long as I put minimum 10% down. That can include closing costs too as long as their loan doesn't exceed 70% LTV. So if I buy right, I can don't have to put much down.
That same 70/10 loan applies if I'm rehabbing something. In that case they will appraise it as if the work is complete, lend me up to 70% of that value, as long as I put 10% of all costs down. Let's say that I'm going to rehab an apartment building. They appraise as if all the work is done and say it will be worth be $1mil. They'll lend me up to 70% of that ($700k). I still have to put at minimum 10% of everything in. So if I buy a property for 470k, and it will take 300k in rehab/closing/carry that's 770K I only have to put $77k down and they'll lend $693k
If I buy many properties from one seller as I did, they can all be under one loan with the same terms
Once they had 3 homes they had foreclosed on. They sold to me dirt cheap, but they all needed work. I had to put 20% down and do the work myself, but then they didn't charge anything for me to refinance. Since they were the seller and the lender, they needed to do things by the books on the front end, so they helped me out on the back end.
It took a while to get there and build that relationship. I'm only one of 3 to 5 total people they do these loans for. It's not their normal practice, but if you prove yourself to not be a normal investor, they won't treat you like one.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
My take away is your ability to secure local financing with a bank that has taken a liking to you and your business model.. one cannot stress enough that simply shopping for lowest rates is short sided thinking when trying to acquire banking relationships.. its as much about a relationship as the pricing and the relationship is far more important than pricing.. IE trying to save half a point or 1% interest rate.
Is it your plan to keep growing or are you just going to let it grow organically like when someone calls or you can grab the low hanging fruit..
when you get the truck up and running come explore the mountains of the west.. pretty awesome open spaces out here if you have never been.. !
- Lender · Bellevue WA & Orange County, CA · Member since 2013 · 2k+ posts · 1k+ votes9y
Originally posted by @Austin Fruechting:
@Albert Bui - I've been without a job since August 2015. I hit the gym, read, hike, work on the blog to help others, hang out with people. Trying to help people here too. As much as I've written on this post I've done the same in responding to messages.... With my wife leaving, we'll do a lot more exploring and traveling. I'm building out a truck to be overland ready (essentially makes it a small RV that can off-road).
So at the beginning it was typical 25% down. They go always to ARMs adjustable after 1, 3, or 5 years on a 20 year amortization. At this point the amortization is the same, but they'll lend me 70% LTV, so long as I put minimum 10% down. That can include closing costs too as long as their loan doesn't exceed 70% LTV. So if I buy right, I can don't have to put much down.
That same 70/10 loan applies if I'm rehabbing something. In that case they will appraise it as if the work is complete, lend me up to 70% of that value, as long as I put 10% of all costs down. Let's say that I'm going to rehab an apartment building. They appraise as if all the work is done and say it will be worth be $1mil. They'll lend me up to 70% of that ($700k). I still have to put at minimum 10% of everything in. So if I buy a property for 470k, and it will take 300k in rehab/closing/carry that's 770K I only have to put $77k down and they'll lend $693k
If I buy many properties from one seller as I did, they can all be under one loan with the same terms
Once they had 3 homes they had foreclosed on. They sold to me dirt cheap, but they all needed work. I had to put 20% down and do the work myself, but then they didn't charge anything for me to refinance. Since they were the seller and the lender, they needed to do things by the books on the front end, so they helped me out on the back end.
It took a while to get there and build that relationship. I'm only one of 3 to 5 total people they do these loans for. It's not their normal practice, but if you prove yourself to not be a normal investor, they won't treat you like one.
Very Cool Austin,
of the 49, how many are multi-family or small multi's (2-4 units)?
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
@Marylin OShea - Thanks for checking out the blog! Yea the "why" is crucial. I've been without a day job for while. I get to work out regularly, read and/or research anything that is of interest to me, spend time with friends, and a LOT of time over the past few months has gone to the blog.
And I still look for and analyze deals that come my way. I will continue in real estate because I enjoy doing it. I'm free so I'm not going to do anything I don't enjoy! But we don't need the money so it will go to good causes. I think it would be cool to buy land, put up a bunch of tiny homes, and rent them out at cost, or below cost, or even free to help homeless vets get back on their feet. Or something like that. A lot of good causes out there we'd like to support more too.
Congrats on your first deal! Keep plugging along and know your "why"!!
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Austin Fruechting just curious were would you be if rents dropped 20 to 30% or if you had 20 to 30% cronic vacancy like what happened prior to you buying your portfolio..
do you accelerate your paydowns with the hope to get this stuff paid for.. or just keep max leverage and live on the cash flow so you don't have to have a day job.???
I know there is two schools of thought on this.. Many I know would not feel they are done or secure unless their debt was also retired.
@David Faulkner where would your portfolio be if this happened.. ?? I know most of the younger crowd here started after the GFC so they only know wine and roses and cigars LOL I just wonder how they will handle a crash.. if they don't have a job and their cash flow stops.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
@Jay Hinrichs - I'll keep growing, but more organically. I have people that call me with potential deals for off market stuff and MLS alerts set up for the on market. That's actually all I've ever used.
And yes, the banking relationship was crucial. Not only the deals, but I learned a lot from the VP (soon to be president) that I work with. That was super valuable too.
I've been to the redwoods on a road trip and that's the closest. But the pacific northwest is towards the top of our list. My wife loves Bend OR area. She's been a couple times for work.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
Originally posted by @Jay Hinrichs:
@Austin Fruechting just curious were would you be if rents dropped 20 to 30% or if you had 20 to 30% cronic vacancy like what happened prior to you buying your portfolio..
do you accelerate your paydowns with the hope to get this stuff paid for.. or just keep max leverage and live on the cash flow so you don't have to have a day job.???
I know there is two schools of thought on this.. Many I know would not feel they are done or secure unless their debt was also retired.
@David Faulkner where would your portfolio be if this happened.. ?? I know most of the younger crowd here started after the GFC so they only know wine and roses and cigars LOL I just wonder how they will handle a crash.. if they don't have a job and their cash flow stops.
If things drop: First off, we calculated our budget with a 20-30% buffer, so if that drop happened we should be back right at what we calculated. Secondly; the midwest is very different than coast areas. The market didn't even move much with the 08 crash here.
No I will not accelerate pay downs. We're going to live off the cash flow, but I'll still buy properties. In fact just a bit ago I had a contract on a 42-unit complex with an investor but we had to back out in due diligence.
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Austin Fruechting and it would be great for the audience here to talk about how you got that banking relationship.
I will take a stab
1. great credit, No BK's no child support show's responsible borrowing if any.
2. great jobs with provable income to support the debt you were taking on.
3. meaningful time with your contact probably lunch's probably took him to your props and walked him through showed him first hand what your doing.
4. Meaningful deposit relationship.. IE all your accounts.. and more than 10 or 20k in the bank.
This is the most important part for younger to newer investors to learn and understand.. I think you got it.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
Originally posted by @Albert Bui:
Originally posted by @Austin Fruechting:
@Albert Bui - I've been without a job since August 2015. I hit the gym, read, hike, work on the blog to help others, hang out with people. Trying to help people here too. As much as I've written on this post I've done the same in responding to messages.... With my wife leaving, we'll do a lot more exploring and traveling. I'm building out a truck to be overland ready (essentially makes it a small RV that can off-road).
So at the beginning it was typical 25% down. They go always to ARMs adjustable after 1, 3, or 5 years on a 20 year amortization. At this point the amortization is the same, but they'll lend me 70% LTV, so long as I put minimum 10% down. That can include closing costs too as long as their loan doesn't exceed 70% LTV. So if I buy right, I can don't have to put much down.
That same 70/10 loan applies if I'm rehabbing something. In that case they will appraise it as if the work is complete, lend me up to 70% of that value, as long as I put 10% of all costs down. Let's say that I'm going to rehab an apartment building. They appraise as if all the work is done and say it will be worth be $1mil. They'll lend me up to 70% of that ($700k). I still have to put at minimum 10% of everything in. So if I buy a property for 470k, and it will take 300k in rehab/closing/carry that's 770K I only have to put $77k down and they'll lend $693k
If I buy many properties from one seller as I did, they can all be under one loan with the same terms
Once they had 3 homes they had foreclosed on. They sold to me dirt cheap, but they all needed work. I had to put 20% down and do the work myself, but then they didn't charge anything for me to refinance. Since they were the seller and the lender, they needed to do things by the books on the front end, so they helped me out on the back end.
It took a while to get there and build that relationship. I'm only one of 3 to 5 total people they do these loans for. It's not their normal practice, but if you prove yourself to not be a normal investor, they won't treat you like one.
Very Cool Austin,
of the 49, how many are multi-family or small multi's (2-4 units)?
Looks like 14 duplexes, 2 four-unit, 1 five unit, 2 six-unit... 2x12units and the rest single family
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Austin Fruechting:
Originally posted by @Jay Hinrichs:
@Austin Fruechting just curious were would you be if rents dropped 20 to 30% or if you had 20 to 30% cronic vacancy like what happened prior to you buying your portfolio..
do you accelerate your paydowns with the hope to get this stuff paid for.. or just keep max leverage and live on the cash flow so you don't have to have a day job.???
I know there is two schools of thought on this.. Many I know would not feel they are done or secure unless their debt was also retired.
@David Faulkner where would your portfolio be if this happened.. ?? I know most of the younger crowd here started after the GFC so they only know wine and roses and cigars LOL I just wonder how they will handle a crash.. if they don't have a job and their cash flow stops.
If things drop: First off, we calculated our budget with a 20-30% buffer, so if that drop happened we should be back right at what we calculated. Secondly; the midwest is very different than coast areas. The market didn't even move much with the 08 crash here.
No I will not accelerate pay downs. We're going to live off the cash flow, but I'll still buy properties. In fact just a bit ago I had a contract on a 42-unit complex with an investor but we had to back out in due diligence.
so your model is max debt refi till you die.. no aspirations to own real estate free and clear.. except maybe your personal RESI.
Portlandia market held pretty good through the GFC
the markets that got hammered were
FLA Atlanta VEGAS PHX Central CA.
but there is always burnt out landlord syndrome in any and all mid west markets.. you mitigate that somewhat by living there of course and keeping a close watch..
Any way great job.. enjoy your time and when you come this way ping me I will take you to lunch.. and if its a nice day will take you flying you can see half the state in about 1 hour.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
Originally posted by @Jay Hinrichs:
@Austin Fruechting and it would be great for the audience here to talk about how you got that banking relationship.
I will take a stab
1. great credit, No BK's no child support show's responsible borrowing if any.
2. great jobs with provable income to support the debt you were taking on.
3. meaningful time with your contact probably lunch's probably took him to your props and walked him through showed him first hand what your doing.
4. Meaningful deposit relationship.. IE all your accounts.. and more than 10 or 20k in the bank.
This is the most important part for younger to newer investors to learn and understand.. I think you got it.
Good idea.
#1 - yes
#2 - kind of. My wife had decent income W-2. I had bought a retail business right out of college and was barely over a year into that when we bought our first property.
#3 - not really. I'm a terrible relationship builder.
#4 - None of my personal accounts were or are at the bank.
What actually did it: The person (VP) that does the investment lending really knows his stuff. He saw that I really knew my stuff. It was all because I had taken the time to fully educate myself. Then I proved by doing things successfully. Then the doors started opening up.
GaryVee says something to the affect of; You can't trick a winner. If you haven't spent enough time educating yourself, you may be able to fool average joe you're an expert, but you'll never trick a winner. There would have been no tricking this banker.
- Investor · Kansas City, MO · Member since 2017 · 791 posts · 1k+ votes9y
Originally posted by @Jay Hinrichs:
Originally posted by @Austin Fruechting:
Originally posted by @Jay Hinrichs:
@Austin Fruechting just curious were would you be if rents dropped 20 to 30% or if you had 20 to 30% cronic vacancy like what happened prior to you buying your portfolio..
do you accelerate your paydowns with the hope to get this stuff paid for.. or just keep max leverage and live on the cash flow so you don't have to have a day job.???
I know there is two schools of thought on this.. Many I know would not feel they are done or secure unless their debt was also retired.
@David Faulkner where would your portfolio be if this happened.. ?? I know most of the younger crowd here started after the GFC so they only know wine and roses and cigars LOL I just wonder how they will handle a crash.. if they don't have a job and their cash flow stops.
If things drop: First off, we calculated our budget with a 20-30% buffer, so if that drop happened we should be back right at what we calculated. Secondly; the midwest is very different than coast areas. The market didn't even move much with the 08 crash here.
No I will not accelerate pay downs. We're going to live off the cash flow, but I'll still buy properties. In fact just a bit ago I had a contract on a 42-unit complex with an investor but we had to back out in due diligence.
so your model is max debt refi till you die.. no aspirations to own real estate free and clear.. except maybe your personal RESI.
Portlandia market held pretty good through the GFC
the markets that got hammered were
FLA Atlanta VEGAS PHX Central CA.
but there is always burnt out landlord syndrome in any and all mid west markets.. you mitigate that somewhat by living there of course and keeping a close watch..
Any way great job.. enjoy your time and when you come this way ping me I will take you to lunch.. and if its a nice day will take you flying you can see half the state in about 1 hour.
No, not max debt till I die. I probably won't refi any of these properties unless I had too or to recoup investor capital if they wanted to. I just plan to pay these off as scheduled. I'll add to my holding along the way too.
And I'd love to get lunch and you can check our the adventure-mobile in person when it's done!
- 9yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
@Austin Fruechting WOW that is unique to not have a banking relationship with your lender..
you had to build some reporte' other wise this does not happen.. at least for most.
anyway.. good job.. look me up if your out this way .. if your here in the summer can take you for a scenic ride we can go from the ocean to bend in 35 mintues LOL.. I am always looking for Victims EH passengers to go flying with LOL.
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