Rental Property Investor · Member since 2020 · 36 posts · 18 votes
Hi All - Trying to collect facts here (instead of ideas/opinions) from all the people who have achieved Financial Independence. I can believe some are lucky and capable of picking the right move right from the get go but I would assume most of us would find the sweet spot through trial and error, hard work and constant education.
And this is my attempt to collect education -
Which one decision accelerated your growth the most in RE? Was it finding the right team, starting value add projects, finding the right business partners, starting syndication, simply buying a ton of SFRs, getting into lending etc
Investor · Nashville, TN · Member since 2020 · 38 posts · 57 votes
5y
Agree that house hacking is the best way to start. This is friendly on the "live under your means" mindset.
I prefer buy/hold investing in my area. For me - I would add that acquiring the second/third rental properties are important. The obvious reason - it forces you to think about scaling. If you're house hacking you're primary residence to a friend or co worker, you probably don't need to think too much about lease agreements, evictions, etc. BUT if you have 3 properties, doing tenant screening, collecting rent, etc, it forces you to think about 1) what systems/processes do I need place to support this, 2) should I hold these properties in an LLC, 3a) can I afford to hire a property manager, 3b) can I afford NOT to hire a property manager, 4) what am I doing to find my next property?
I love working with my hands and putting in sweat equity, but the reality is me wanting to work IN my business isn't effective for working ON my business. It's valuable to know the 'how', but I'm at a point where I'm more interested in the 'who's to help me operate.
Hope there's something in there that's valuable. Best of luck on your journey!
Real Estate Syndicator · Portland, OR · Member since 2014 · 453 posts · 312 votes
5y
@Felix Stone
For me it was buying the first house. Did a house hack and it clicked. My parents were in real estate and had beat it into me to do it. But it really wasn’t until I realized that my rent payment was only $400 when my mortgage was $2500. If I counted principal reduction I literally lived for free. When you are saving your entire paycheck a month, it ads up quicker than you would think as long as you don’t spend it. Always taught good saving and spending habits so that may be something I’ve overlooked.
Rental Property Investor · Member since 2020 · 36 posts · 18 votes
5y
@AJ Shepard that is amazing. how long ago was that house hack? I wish I could do a house hack in my market in NYC :) also looks like you moved into Syndication since then.
Real Estate Syndicator · Portland, OR · Member since 2014 · 453 posts · 312 votes
5y
@Felix Stone
First house was in 2007. Shortly after the crash started and saw an opportunity to buy more. My brother moved to town and joined me. We bought our first together in 2009, added a bathroom to it, refinanced and pulled all our money out. We have been utilizing that method for the last 12 years. We only wish we had been the ones to coin the BRRRR acronym....
I think there was an interesting inflection point during the journey, after I left my W-2 job and being self employed we went through a couple years of not being able to be financed by the regular institutions which made it a little difficult. But about after we had owned each property for about 6-8 years, we could refinance and pull more cash out to buy more property which had been kind of a snowball effect.
Investor · Nashville, TN · Member since 2020 · 38 posts · 57 votes
5y
Agree that house hacking is the best way to start. This is friendly on the "live under your means" mindset.
I prefer buy/hold investing in my area. For me - I would add that acquiring the second/third rental properties are important. The obvious reason - it forces you to think about scaling. If you're house hacking you're primary residence to a friend or co worker, you probably don't need to think too much about lease agreements, evictions, etc. BUT if you have 3 properties, doing tenant screening, collecting rent, etc, it forces you to think about 1) what systems/processes do I need place to support this, 2) should I hold these properties in an LLC, 3a) can I afford to hire a property manager, 3b) can I afford NOT to hire a property manager, 4) what am I doing to find my next property?
I love working with my hands and putting in sweat equity, but the reality is me wanting to work IN my business isn't effective for working ON my business. It's valuable to know the 'how', but I'm at a point where I'm more interested in the 'who's to help me operate.
Hope there's something in there that's valuable. Best of luck on your journey!
Rental Property Investor · Member since 2020 · 36 posts · 18 votes
5y
@AJ Shepard wow doing BRRRR since 2008....That is incredible.
@Tommy Brant that is exactly the kind of input thats helpful. Essential to know the how but scale needs breadth and knowing when to offload. I sense I am at that transition point myself where I can keep replicating SFRs and 1-4 MFs but whats going to supercharge growth is on my mind and hence this post. Sounds like @Shannon Robnett is also attesting to it. I read that one should know the $$ value of their time and then decide to do it themselves or offload depending on the cost and in most cases answer will be get a professional to do it.
Developer · Boise, ID · Member since 2020 · 173 posts · 198 votes
5y
@Felix Stone when I started my construction career I did build almost every aspect of the house. I did the excavation, the utilities, framing, painted inside and out, build and installed the cabinets, hung the doors cleaned up even held open houses. And doing all this I could build 3 houses a year and in 1996 made $45,000 ($75,000 adjusted to 2020). This year with my team and my investment partners we will develop and build over 650 doors of MF and 100,000 sq ft of industrial flex space because we bring on more partners and share the load.
The end result is less profit per $ spent but many more $'s spent and a much more diverse portfolio of projects thereby dispersing the risk.
Rental Property Investor · Hawthorne, CA · Member since 2018 · 655 posts · 900 votes
5y
@Felix Stone
That is why I call it luck because I grew up in a low income gang infested neighborhood in the 80’s. It was the American dream to even own a home. I could barely afford my starter home in 1994.
The decision to stay instead of keeping up with the Jones worked out great aka LUCK
Warsaw, IN · Member since 2017 · 229 posts · 270 votes
5y
@Felix Stone for me, trying to get a business line of credit is what helped. I had to find a local credit union/bank to break in to the commercial space.
At the time, To get the LOC we had to refinance a duplex in our personal name to the LLC, so the house could be held as collateral. During this process, we independently we found an off market 4 Plex deal, which we also got a commercial loan from the same lender.
25% of that recently opened LOC was used for the down payment, on the 4-plex.
6 months later, the equity in the 4 plex was used to cross collateralize a new purchase- a no money down Triplex.
Knowing a local lender has been great for me, and I recommend you find a local, commercial lender if you don’t have one.
Contractor · Denver, CO · Member since 2014 · 38 posts · 24 votes
5y
@Shannon Robnett
That's amazing. I need to shift my mindset to match yours. How have you reconciled the difference in quality that you can expect of yourself with the quality that you can expect of others? I have a hard time letting go of that quality in the final product.
Rental Property Investor · Member since 2020 · 1k+ posts · 1k+ votes
5y
I don't have financial independence yet but am on the way. The biggest way I am doing it for now though is not paying myself from my rentals. I have a HELOC on my house and all rental profits go to pay it off and when I have enough I buy another and the cycle repeats itself. I am still in a growth phase and only have 3 but I re-invested the last heloc and should buy 3-5 in the next 2 years depending on how some of the other investments go. For me this is a long term play and a way to try to retire early and get extra cashflow later down the line. It would be nice to add the extra money to my current budget but some sacrifice now is going to pay off in the future.
Specialist · Los Angeles, CA · Member since 2018 · 291 posts · 231 votes
5y
@Felix Stone figuring out how to create value the world doesn’t owe you anything. Don’t try to get a bigger slice of the pie make the pie bigger or create a new one.
@Felix Stone. For several years I’d been “about” to sell a bed and breakfast I owned and lived in but hadn’t finished all the necessary upgrades on. I was bleeding money left and right because I wasn’t running it. Then, right next door a duplex came on the market that I knew was overpriced. I offered on it 3 times over the course of 6 months. All the other buyers believed it needed foundation work but my expert said no it was fine and told me it only needed some insulation and a heater. I was able to buy it for $75,000 under the original asking price, got the B&B on the market, renovated one side and rented it to the perfect tenant and moved into the second side. I now collect rent that pays for all my living expenses, including my cable, internet, and heat for the whole building which is important in Northern New Hampshire, and have been able to buy other properties from the proceeds from the sale of the B&B.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
5y
The decision I made early on to live below my means and save at a high rate. Put me in a position to do more as time has gone on and in my opinion wasn’t that big of a sacrifice.
How to use Private Lenders on my BRRRR projects and Flips has helped me along the way. Having the ability to refinance out of the BRRRR projects was key as well. Getting my credit in order was the second key. I am not financially independent. I still have my W-2 and I self manage my properties. I don't spend any of the cash flow as I use it to fund the next deal. My next deal STR in a vacation town will generate 5 times the income of one rental. My rentals are all leveraged with an average of 55% LTV. My goal was always to generate $10K in cash flow. Two years to go to hit my goal.
A lot of things for me no doubt such as savings , mindset, education ..but probably the one factor that put me light years ahead was finding a like minded person locally and partnering up to buy homes . That certainly accelerated my growth rapidly . Trying to do stuff on your own is a slow process
Developer · Boise, ID · Member since 2020 · 173 posts · 198 votes
5y
@Andy Thompson
I got out of building houses because of the same equation. So In Boise
Idaho I can build SFH for $130 a foot but the land is nuts like $100k
per house and I would make about 10%. So average listing in Boise Idaho
is $425,000. I am building brand new MF for about $120 a foot, the
foot print is smaller and the land is 1/5th the price. And it sells for
$210 a foot after cap rate on rents.
So lets walk out the math.
$4,250,000 = 10 homes Profit of $42,000 per house equals a $425,000 annual profit
$4,250,000 = 25 apartments with a $30k per door profit equals a $750,000
And building 25 units for 1 owner, repeating the same plans and
schedules is about as close to the Henry Ford model as you are going to
get in construction.