6 years, 4 homes, and financial freedom at age 33

7 Replies

Aspiring real-estate mogul, and self-made millionaire, my story:

At age 27, I bought my first home in Seattle on Feb 2012 at the beginning of the real estate rebound from ‘08. Put 3% down on a beautiful 3 bed 2.5 bath craftsman that was bank owned (REO) priced at $250,000. Had the selling bank pay for my some of my closing costs. Net investment was under $12,000.

I was with a great technology firm and took a promotion soon after that, which brought me down to California, all expenses paid for 6 months. It was a tough decision at the time, but I decided to turn my primary residence into a rental versus selling and turned a small monthly profit immediately.

When the market rebounded a bit I refinanced the loan to get rid of PMI and lower the payments, increasing the cash-flow significantly.

I lived a frugal life and made just over six-figures for a few years, saving at least 40%. In Jan 2016, I purchased another rental down the street from the first in Seattle, but in an even more desirable area and with a larger footprint. The lender made me put down 20% on $370,000 to close the deal on my new 4 bed 3 bath because it was an investment property, no sweat! Total investment was about $90,000. It was rented the very next month and because of the very large down payment, I was able to turn a nice profit out of the gate!

Went through a series of jobs, working on-and-off-again, but the rental streams kept me afloat. Needed to lower my overall expenses to save more and was able to acquire a nice double-wide trailer in Northern California with part of my 401k for very cheap, <50,000, and got my total monthly expenses under 1,000 per month.

Hunkered down for 6 months and with some savvy investments in crypto-currency I was able to nearly triple my meager remaining investment fund from $27,000 to $80,000. Worried I could end up with nothing to show for it, I did what I know best, and in Feb 2018 flipped it all into the purchase of another beautiful home priced at $435,000, this time a 3 bed 2 bath in a very desirable neighborhood. The lender forced me to put down 16% and buy out my PMI payment, for a total investment of 81,000 after closing.

I plan on offsetting my mortgage costs by renting the loft for 1/2 of the mortgage payment, it’s on the rental market now. I am also working on getting a new job in technology, and getting my property management company off of the ground in the next 6 months. This will give me plenty of lines of income to continue saving for the next property.

All said, I now have $1.75M in property and owe just under $800,000 on those mortgages. The rentals provide an amazing $4,300 per month in passive income (above and beyond the properties completely paying for themselves). With the new job and the property management venture, I plan on aggressively saving for another 3 years to start the process over again. I hope to repeat the process every 3 years or so, and possible accelerate the pace if possible. Will report back and add to this post then, below are a couple tidbits I’ve picked up along the way.

Lessons learned:

1. SAVE- Spend less time figuring out what to spend your money and more time investing it. Make a budget and push the boundaries of the amount you think you can save of your total income, my personal goal is 70% now. 

2. You don’t have to sell your primary resdience for ANY reason, turn it into a rental and create a passive income stream. Most people sell to trade up to a bigger place, wait for the mansion until later in life.

3. Beware of property management companies and their fees, I manage all of my own properties because I can do it more effectively and for a greater profit. Similarly beware of investment funds and their fees too, every dollar they take is another dollar you’re not earning compound interest on.

4. If you can put enough down on a property (lenders will usually force you to do at least 20% on an investment property), you can make the rental cash-flow positive out of the gate.

5. Cash-flow properties pay in every way: a rising life-long perpetuity from the rents, equity from the renter paying your mortgage, and rising home prices. Also, they provide a great tax shelter, especially early on!

6.Leverage is a beautiful thing, Given the choice between earning 6% YOY on $400,000 against a home loan + a thousand in profits a month, versus 10% on $80,000 in the stock market, it’s really a no-brainer. Just think, there is always the potential to lose your shirt in the stock market!!!

7. Real estate can be your self-directed 401k and once it’s paid off in 15-20 years the cash-flows are enormous. With just the property I own today, when it’s paid down, I stand to make well over 10,000/ month in passive income, in today’s dollars.

8. Don’t ever make the minimum payment on anything if you can help it,the tax advantages are pennies on the dollar, and by making one extra mortgage payment a year you reduce your time horizon on the loan by about 8 years.

9. Don’t pay attention to equity, it’s just money on paper and the real goal is to turn an income on every property....if you are a successful saver, real estate investor, and landlord, why would you ever need to sell? Start slow, keep adding and building!

10. Even if you’re uber-successful, Keep working whether you NEED to or not, even if you decide to take a lower salary position with less stress. I’ve been experiencing financial freedom for the last 2 years and haven’t really HAD to work, but I realize that it is more fun to keep going, especially while I’m still relatively young and have the passion/drive. 

Nice situation however you are seriously underestimating the value of cash. Opportunity value of your equity reduces the true cash flow on a property it does not increase it. As your equity grows through appreciation and pay down your ROI will diminish to the point of being nearly worthless. This is the mistake cash buyers always make. Real estate is not a suitable vehicle to park cash if your goal is to generate maximum returns.

Question: what percentage of your rental income are you deducting before debt repayment to cover expences. 

Thanks for everyone's interest in the post! Glad that it resonated! 

So the mortgage, taxes/insurance, and all general costs of operations are covered entirely by the renters, PLUS I typically add about $50 a month to the principal payment of each mortgage, which leaves me with $4300 in passive income.

In my opinion, inflation rates are extremely understated, please see these two articles that drive the point home:



Essentially, in times when the dollar is depreciating rapidly, in our situation due to excessive years of "easy money" and quantitative easing by the Fed, low fixed-rate debt is the best tool to combat inflation. The way that I have rationalized it is that, if I can lock in an interest rate (say 4.375%) that is below the real rate of inflation (7.5% minimum), in this case several magnitudes, I can come out way ahead. The CPI has been manipulated to exclude the cost of day-to-day living, and intuitively we know this because we have less buying power year after year, consider the price of any staple you consume. 

Current Prices vs. Historical Prices

Historical inflation charts of common goods and services

Source: https://www.financialsamurai.com/are-you-a-real-mi...

We had the dot-com bubble in the late 90's, followed by the housing crisis (collapse) of 2008, and in my opinion the dollar is the next bubble, see Forbes article below:


The reason that I do not touch equity to purchase additional property is that I have already used leverage in the first place, and pulling on equity to get 2x leverage would essentially put me farther back from my ultimate goal of paying off the mortgages entirely to realize the full rents as passive income within 15-20 years.  

Additionally, if you do agree  that there is a much higher inflation rate than the Fed reports, stashing cash and earning interest below 8% is a LOSING proposition. 

So, my bulletproof investment formula is the following: 

Maintain at least a 40% savings rate, invest your savings at >8% returns to outpace the real rate of inflation, save until you can afford to put a large deposit down, flip that into a low fixed-interest loan, to generate at least a cash-flow neutral investment return on an appreciating asset. 

Hi Sean, I'm inspired by your success! You're a little further ahead of the curve than I am. I'm 26 myself and I bought my first investment property in June 2017 when I first realized the significant IRR good RE deals are capable of producing compared to traditional investment vehicles such as stocks and bonds. After a few months of holding my first SFH just to see the theory realized with my own two eyes; I set myself a goal to acquire $1M in personal RE holdings by the end of 2018. As of last month I'm up to 6 units and counting; with 2 more under contract at the moment. Might even make the benchmark early, before one year's time since my first purchase is up, if I can put together one more good-sized deal in the next few months.

Regarding @Thomas S. 's post; I believe he was not at all advocating for you to pull out cash and hold it, if that was your interpretation.  From what I've come to understand from his posts and a few others on these forums, there are basically two streams of income coming off owned rental properties.  First, there is the output of the property itself; which is divorced from whatever sort of debt structure is being used.  For the sake of example, let's imagine we hold a $300,000 property that produces $25,500 of income after all operating expenses.  And perhaps it's long-term average appreciation rate will give us an estimated $9,000 / year in the next few years.

This return is generated simply by owning the property; irrespective of how much equity is resting in the property.  The less and less personal equity is used to obtain this return, the greater our return is.  At 25% equity [$75,000] we're initially looking at a total return on equity of 46%.  Appreciation is of course an estimate; it could be eliminated from consideration entirely and the integrity of the example would remain intact.

On to number two, many say that less debt equals more cash flow.  Which is only true in the most basic sense.  More or less debt doesn't change the actual efficiency of the property.  The $34,500 referenced above will be produced by the property regardless of the debt structure.  Therefore it is important to note; the more equity that is resting in a property merely reduces the cost of interest you're paying to hold the property.  The additional equity in a property is just purchasing an income stream somewhere around a 5% of return at present by essentially buying down debt, which is a far inferior return to other alternatives, especially more property.

Some will argue that more cash in hand month after month helps with liquidity issues and therefore reduces risk, but even a conservative diversified portfolio of equities and bonds has average returns far above buying down bank debt and at the same time gives more liquidity than equity resting in properties does.

I'm in the camp who agrees that parking equity in properties isn't optimal.  I can see a few valid reasons that would make it the rational decision in some cases, such as reduction of complexity---when an individual gets enough money that they don't mind paying a high premium in opportunity cost for perceived comfort or simplicity.  Perhaps if there is a lack of knowledge/ability on deploying additional capital effectively... or maybe a lack of confidence with properly estimating and maintaining enough liquidity to cover the moderate volatility of owning a rental portfolio.

But aAt the end of the day though one's equity simply won't grow as fast the more it is dissipated into inefficient investment vehicles, and it could be argued that, ironically, leads to greater inability to cover risk and adverse circumstances than the ultra-conservative REI's tenets end up doing.


Thanks for sharing your great story. I am further along - at least in terms of age - than you. I started my career in real estate way back in 1988. I spent a huge chunk of my time guiding investors to great properties and giving them advice that would ultimately pay them great dividends. However, I never took my own advice. I got married in the mid '90's and did not want to take "The Risk". It may have been an excuse - regardless of what it was, I now find myself much further along and I am embracing the old me that was willing to take on those risks. My goal is to get where you are in terms of real estate investment holdings within the next 5 years. I have a vacation rental in Hawaii that is doing great - but now comes building my inventory of properties. So let me just say to all the folks out there that might be closer to my end of the age spectrum - what Sean has done you can do as well. Don't ever assume that your time has passed to take those kinds of actions.



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