RE MAKES LOWLY PAID TEACHER MULTIMILLIONAIRE!!!

RE MAKES LOWLY PAID TEACHER MULTIMILLIONAIRE!!!

Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes

I realized in February of 2011 that my ladder was leaning against the wrong financial building. Sooooo, I started to use my savings, refinancing my personal home, and taking out my IRA's and 401K money through the course of a little over a 3 year period and each time I took out that money, I took out enough to put 20% down on cash flowing San Diego single family condos. We averaged between $25,000-$30,000 for each down payment. If you know anything about San Diego Real Estate, it has tremendous appreciation potential. In 2011 when we started investing, we were stealing properties with excellent cash flow by short sales and REO. Our original goal was to replace lost W2 earnings, that I realized was occurring. I simply wanted to replace about $12,000.00 in W2 earnings I was fearful of losing in 2012. We then over the course of a 2-3 year period had accumulated 10 dirt cheap condos. In about the beginning of 2014 something miraculously started to occur. My Condos started to appreciate wildly. Many doubled in value as of today. I being a teacher here in San Diego for a Catholic School and a Community College too, am I life long learner and from 2011-present have soaked up so much information from experts in the area of creating wealth through real estate, realized my return on equity was at a minuscule 3%. That was unacceptable. We also started pooling our money together in my family and started in the beginning of 2015 to buy high cash flowing single family in Ohio. We have 8 right now in Ohio. We loved the cash flow alone.

Then, here is the real kicker. Upon all my learning and investigation, I found out, that all this cash flow was tax deferred and it really blew my mind. Thirty years in the rat race and in a few years if I play this right, I could surpass all W2 earnings with cash flowing rental real estate. Then, I realized if I take one or two pricey San Diego Condos and do a 1031 exchange, I can buy a million dollars worth of Multifamily Apartment complexes, with no money out of pocket. When I realized I can trade $8,000.00 tax deferred cash flow per year in for approximately $30,000-$40,000 per year in Ohio, where I have my other single family, already with a property manager I trust, I was all in. Soooo, now fast forward to Aug 4th of 2015, and yes, I have control of over $4,000,000.00. That includes 2 personal residences valued at over $1,100,000.00 in equity combined, 5 condos in San Diego, valued currently at $1,500,000, 8 single family in Ohio valued at $300,000, those have no mortgages. Also, I have 3 apartment complexes in Ohio valued at $1,600,000 appraised value this month. Soooooo, when adding, I come up with $4,500,000 in total real estate. The 8 Ohio single family properties we paid cash for. That is $300,000 in value for single family in Ohio. $600,000 equity remains in my 5 San Diego Condos, and $450,000.00 down payment money for the three Apartment Complexes in Ohio, Sooooooooo, the total net worth is about $2,000,000,00. My success is primarily due to buying low in San Diego and riding the wave,. The real X factor is moving dead equity into higher cash flowing properties. Specifically, Apartment Complexes. I love the control this gives me to increase NOI.

Thus, the banks say I have increased the NOI, increasing the value of the complex. Two years later, 1031 exchange and use all that appreciation to buy a bigger complex and do this again and again. Defer and increase deferred cash flow. Keep repeating this process until you die and your kid or kids inherit at a stepped up basis.

This all was due to investing in San Diego real estate.  Get this.  It was all before Warren Buffett came out and said, if he had management and systems to match he would buy over 150,000 single family. 

People here thought I was making a big mistake. Why buy when it is sooooooo low. They said property values will never go up like that again. I was buying for cash flow at the time. Appreciation just happened. I recently heard that people with low 600 credit scores and under 600 credit scores are getting loans again. Based on history, California will be the first to have prices Real Estate prices to escalate rapidly and also the first to plunge rapidly. I will sell all my pricey San Diego rental property in the next 12-15 months. We should be at an unsupportable peak at that time. 

That means not enough high paying jobs to support that price level. I see soooooooo many million dollar or greater homes out here it would make your head spin. Those same homes were going for $700,000.00 or less 4 or 5 years ago.

Regardless, without us slowly purging our IRA and 401K, this never would have happened. By January 1st, we should have $144,000 cash flow per year and we still have 5 rental properties in San Diego that we will trade in by 1031 exchange in the next 12-15 months. Right now, I am 1031 exchanging a condo I puchased for $120,000 in 2012, that is currently cash flowing approximately $5000.00 a year for a 12 unit in Euclid, Ohio that should cash flow at least $15,0000 a year. I should be able to increase that to at least $20,000-$25,000 in the next 2-3 years.

The plan is to continue this business strategy and in 7 or 8 years time have approximately $50,000,000.00 in total worth of all Real Estate. Also our net worth will be approximately $16,000,000.  

If you reach for the stars, you may not get there. However you may grab a handful of clouds. Certainly, you won’t grab a handful of mud!!

Swanny

Isn’t life grand!!

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Investor · West Bend, WI · Member since 2014 · 214 posts · 149 votes
10y

wait for it.... wait for it.... a BP podcast is in the very near future for you.... :)

Congratulations.

See this reply in the discussion

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  • Investor · San Diego, CA · Member since 2015 · 3 posts · 4 votes
    10y

    Thanks for that inspirational story!  San Diego has really been great for us too, but your story really makes me want to get off my lazy butt!

  • Karen MargraveBusiness Member
    Moderator
    Realtor, General Contractor, and Developer · Redding, CA · Member since 2009 · 7k+ posts · 4k+ votes
    10y

    WOW! Great story! 

  • Rental Property Investor · Louisville, KY · Member since 2008 · 342 posts · 123 votes
    10y

    Great post and very inspirational @Michael Swan

    Out of curiosity what do you expect solid spendable cash flow to be with 50 mil in RE and 16 mill in Assets?

    When you buy apartments in a remote location do you use PM's? Do you have any suggestions on material to read for how to find and manage good PM's?

  • Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    10y

    Bianca I cashed all those tax deferred instruments in.  I am all in on my new financial freedom plan and it feels great to be in control.  I don't want anyone else planning to fail anymore with my financial future!!

    Swanny

  • Residential Real Estate Broker and Investor · Irvine, CA · Member since 2015 · 90 posts · 28 votes
    10y

    Great post @Michael Swan and it pumps me up to see posts like these.  My wife's a elementary school teacher here in Orange County, CA and I'm going to show her this post haha.   

    I'm currently investing in Ohio as well, so it's great to see another investor having success from California, with investing out-of-state.  

    Keep us posted on your journey. 

  • Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    10y

    Hi Michael,

    I know my goals are set extremely high, but with the right leveraged debt on $50,000,000 in total Real Estate, I am shooting for $1,000,000.00 in passive cash flow.  If I have to pay a little taxes then, so be it.  What a problem to have.  The most I have cleared after taxes, teaching 60 hrs a week is about $45,000 take home, after taxes.  What a no brainer.  Combined, before taxes for both my wife and myself working a w2 job is about $80,000.00.  As you know that is only about $60,000 after taxes if I am lucky.  At $10,000.00 tax deferred cash flow right now, split between two families that have invested, I am at the same take home as our W2 earned income that I have worked for over 25 years, with over 8 years of education and a masters.

    Again, No brainer.

    Luck is opportunity meeting preparation!!  I have prepared and educated myself and built up connections in Northeast Ohio.  It doesn't happen overnight.  Although, after one year I have 8 Single family and 3 going on 4 apartment complexes in North East Ohio. next I will reply with all the education I received and you could follow a similar path if you wish.  If a lowly paid, overeducated teacher can do this, anyone can!!

    Swanny

  • Investor · Corona, CA · Member since 2014 · 746 posts · 372 votes
    10y

    This post is so awesome! I sent it to my mom who is a teacher as well in SoCal and invests in real estate. I always hated keeping money in 401Ks as I know by the time I would need to use it, it will have probably evaporated through the market ponzi scheme.

  • Littleton, CO · Member since 2014 · 195 posts · 72 votes
    10y

    @Michael Swan  Congrats on your RE Success!

    How did you pick your Mulit family properties?  Were they for sale or did you contact the Owners directly?

    Thanks for sharing your well written story.  

  • Rosenberg, TX · Member since 2014 · 25 posts · 6 votes
    10y

    Wow, awesome post! In for updates...

  • Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    10y

    Erik,

    You bet I will be back investing in San Diego when this all starts crashing down. I am selling a Condo, I purchased for $120,000 three years ago for $270,000 right now VA and the buyer has about $2500.00 to his name and he is putting nothing down. It is amazing that he can get a loan and I wonder if he his one problem away from not being able to make that high monthly mortgage along with the water bill and HOA fees. I can't fathom that. It all will come falling down. Will it be this summer or next? It is just a question of when!! For every great market that is priced way too high, there are emerging cash flowing areas that have yet to emerge.

    Can you feel it?

    Swanny

  • Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    10y

    Robert stay tuned.  I will have to respond to you later tonight and also lay out my educational steps I have been traveling to this current Financial Freedom plan!!

  • Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    10y

    Anyone that would like to talk to me in person, check out my profile and give me a call this weekend.  I would love to share all I have learned!!

    Swanny

  • Real Estate Agent · Willoughby, OH · Member since 2014 · 560 posts · 690 votes
    10y

    Congrats Michael on your achievements thus far. I actually live right next to Euclid in Eastlake OH. I am working to obtain my RE license by May so if you have any needs in the future feel free to save me as a local Cleveland contact.  

  • Investor · Gatineau · Member since 2015 · 19 posts · 10 votes
    10y

    Nice work Michael! Inspiring story.

  • Investor · West Bend, WI · Member since 2014 · 214 posts · 149 votes
    10y

    wait for it.... wait for it.... a BP podcast is in the very near future for you.... :)

    Congratulations.

  • Belleville, IL · Member since 2015 · 48 posts · 5 votes
    10y

    very motivating. Thanks for sharing @Michael Swan

  • Tucson, AZ · Member since 2015 · 70 posts · 24 votes
    10y

    Congrats!!  This is a very inspirational post.  Love ready stuff like this!

  • Visalia-Fresno, CA · Member since 2009 · 1k+ posts · 863 votes
    10y

    @Michael Swan

    Good story.  Keep holding the wheel and filtering all the noise.

    Frank

  • Real Estate Investor · San Diego, CA · Member since 2015 · 19 posts · 5 votes
    10y
    @Michael Swan:

    What an awesome story, maybe because I'm a San Diego resident also. I'm sitting on cash hoping that your prediction for the crash is soon, but you make me want to invest now. I've been looking for out-of-state investments as well and Ohio was one of the locations I was analyzing. Hope you don't mind me calling you asking for some good boots on the ground over there.

  • Rental Property Investor · San Diego, CA · Member since 2014 · 1k+ posts · 2k+ votes
    10y

    That crash won't happen in the housing market for at least a year.  It is coming.  Sure give me a call.

    Swanny

  • Pharmacist · The Villages, FL · Member since 2014 · 96 posts · 36 votes
    10y

    Josh and Brandon definitely need to have you as a guest on the podcast. I have a question that may seem dumb, but how do you know where is a good area to invest in? Also you said the market may go down next year or so, so for a new person trying to buy their first property, that is scary because the value will go down on a buy and hold. I realize when the market is down is the time to buy, but I don't want to wait. 

  • Steven S.Pro Member
    Rental Property Investor · Bergen County, NJ · Member since 2014 · 44 posts · 11 votes
    10y

    @Michael Swan - Congratulations on what you have achieved!  You have given plenty of us reason to smile with and for you.    I read your post earlier today and from then until now thinking how I can dump all of my 401k money.   A couple of questions - 

    In the future would you consider offering seller-financing and holding the note on any of the properties you sell?  Perhaps I missed this in the thread - have you created LLCs for these investments? 

  • Investor · Northern California · Member since 2015 · 126 posts · 40 votes
    10y

    Swanny, thanks for sharing your detailed success!  As a fellow educator...I find your story inspirational while continuing my climb up the real estate ladder.  All the best, Lauren

  • Wholesaler · Manning, SC · Member since 2012 · 94 posts · 16 votes
    10y

    Wow very inspiring! Thank you for the detail. I found your story to be rather educational too. Kudos to you and your team Mike! 

  • Real Estate Investor · San Diego, CA · Member since 2015 · 19 posts · 5 votes
    10y
    Originally posted by @Michael Swan:

    That crash won't happen in the housing market for at least a year.  It is coming.  Sure give me a call.

    Swanny

     Wow, small world.  You taught and still teach my niece and nephews.  My brother probably has already contacted you, but we look forward to talking to you soon.

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