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!!

REPLY 

76Reply
464 views

Most Popular Reply

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

169 Replies

Jump to latestLatest
  • Investor · Kansas City, MO · Member since 2015 · 3 posts · 0 votes
    10y

    That is a great story!! I am just starting out and trying to figure out where to get money without using my money, buy cheap and flipp, make a profit!! I know it will take time but I am very anxious! ! You inspire me!!

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

    Hi Joseph,

    I was wondering if you were related to the Quinto boy at my school.  Call me this weekend and we could talk more.

    Swanny

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

    Hi Freda,

    Don't fall for instant gratification, something for nothing, late night flipping garbage.  Save and learn and invest your money in cash flowing property.

    Swanny

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

    Hi Stephen,

    Not interested in selling properties the way you suggest.  I 1031 exchange my properties for higher cash flowing properties.  I am not into speculating anymore.

    Swanny

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

    Hi Donna,

    No question is a dumb question.  My next post here will explain my educational process to get where I am now.

    Swanny

  • Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    @Michael Swan Impressive and congrats! I am curious on this up coming crash and your take. Some fundamentals for San Diego job growth and wage growth look as solid as they come. Anything can happen with RE and usually does but many indicators show nothing coming crash wise. Some point to a more normalized appreciation moving forward vs crash. The elements needed for a crash to happen are absent currently. What is your reason for thinking a crash is coming soon or is it a matter of just the cycles?

    http://journal.firsttuesday.us/san-diego-housing-indicators-2/29246/

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

    Hi Matt,

    Plain and simple, when they start giving loans to people that clearly should remain renting, the end is not far away.  If not this upcoming summer, it may be 2017.  Read Second Chance by Robert Kiyasoki and Rich Dad's Prophesy too.  Eventually people will start saying again, you will never be able to afford a home if you don't invest now.  Look for low credit and low down loans to encourage people that again should be renting and hav no business buying a home.

    It is not if, but when.  I choose to never speculate again and follow my 3 rules. 1. It can't lose money.  2. It must cash flow.  3. I can't get financially free slowly.

    Swanny

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

    The more reading, study, research, listening to LUI Lifestyles Unlimited INC. Podcasts and attending their 2 day seminar in Houston and online, it has evolutionized to what you see in my goals. Also, Bigger Pockets and the forums, blogs, and podcasts have helped a lot too. In order, I first read The richest man in Babelon, Rich Dad Poor Dad and everything written by Robert Kiyosaki. His latest is Second Chance, Think and Grow Rich, Buy It, Rent It, Profit, The Millionaire Real Estate Investor, The Millionaire Next Door, The One Minute Millionaire, Loopholes of Real Estate, Multi-Family Millions, The ABCs of Real Estate Investment, Emerging Real Estate Markets, The 10X Rule, The One Thing, Secrets of the Millionaire Mind, and of course, The Seven Habits of Highly Effective People. Plus the Lifestyles unlimited podcasts while traveling in the car daily and attending that 2 day conference etc... 


    That is the map I followed. I just love this stuff. I figure, why experiment and reinvent the wheel, when I can learn from people who already have thousands of units. I have adopted the philosophy that money comes from other people and to get that money, I need to provide an excellent product, great price, and the best service once they move in. By helping people in this way, the government rewards me for doing so. The government doesn't want to do this and is not capable to do so. That's where real estate investors swoop in and provide this well needed product and are handsomely rewarded.

    If a lowly paid teacher can accomplish this, anybody can. "Whatever the mind can conceive and believe it can achieve." Napolian Hill implied this and I got it after the 4th time I read the book. Sorry about the long winded reply, but all I have done is no secret. It's out there for the masses. 

    Swanny.

  • Investor · Portland, OR · Member since 2015 · 8 posts · 1 vote
    10y

    Hi, this is very cool--where/how can I get the podcast? Would love to hear your story. 

    Thanks, and congratulations!

  • Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    I here ya @Michael Swan. I have not seen too many easy money loans yet in fact it seems just the opposite. I would agree if they did what they did before then we will have a crash. That VA stuff always exisited. I think the income required is still in place. Homes are expensive enough in SoCal the VA stuff is almost entirely entry level and stops there. What other easy loans are out there besides VA or USDA maybe? I get the speculation part of your take although I am not sure recent buying 120k condos in SD is really true speculation historically speaking. That is more smart than speculation perhaps.

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

    I listen to bigger pockets podcasts and daily I listen to lifestyles unlimited podcasts.  Look up lifestyles unlimited on Google.  Again it was the combo of all my research that has lead me to where I am today.

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

    Hi Matt,  

    Another thing I looked at was the return on equity, due to appreciation was only 3% and after all my education, that dead equity sitting in those 10 condos I owned, could be 1031 exchanged for much greater cash flow.  That means, I traded in a condo cash flowing about $4000-$5000 a year for a 10 unit apartment complex cash flowing about $15,000.00 a year.  It was a non brainer to me after all my education.  Maybe San Diego real estate will appreciate 15-20% more.  That is speculation.  I would never buy these properties in San Diego as investment properties at these current valuations.  That's why I 1031 into apartment complexes in Ohio right now.

    Swanny

  • Investor · Los Angeles, CA · Member since 2014 · 28 posts · 7 votes
    10y

    Great post and congratulations. Im also in Southern California and curious, how/why did you invest in Ohio??? 

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

    Hi Peter,

    There is no podcast of my story.  Who knows.  I have been really busy as you can tell.  Maybe someday soon.  I just feel the more people I help to find the truth about financial freedom, especially on Bigger Pockets and the more contacts I make, the more opportunities for all.  I love this stuff!!

    Swanny

  • Sherman Oaks, CA · Member since 2013 · 3k+ posts · 2k+ votes
    10y

    Right on Swanny. I can totally understand the cashing out. I don't totally buy the dead equity stance but I get that too. Equity can be used too...Donald Trump claims he has 10 billion and 9 billion is dead equity. Some call that wealth or net worth. I hope to have as much dead equity as possible sort of speak ) The yields at 3% are tough to swallow I imagine. At some point the equity gain might make that yield easier to digest/sell/refi. Thanks for sharing your awesome experience.

  • Engineer · Carlsbad/San Diego · Member since 2014 · 285 posts · 97 votes
    10y

    @Michael Swan Congrats! And thanks for the motivation. 

    Is Ohio your main out of state destination or do you invest in other states too?  

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

    Hi Robert,

    Anyone you meet could be a connection that opens a door to a great cash flow and hopefully an emerging market that is in a phase 1 buying stage.  That's how I found the market.  A fellow teacher turned me on to the market where I currently hold 41 of my 46 front doors.  This will sooner be about 60 front doors by January.

    Have a great night!!

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

    Hi Hersh,

    Yes. Right now it is my out of state area I currently invest in.

    Swanny

  • Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    10y

    A good story always raises the level of excitement on BP! Location, location, location, in a great market you can do great things. Your philosophy isn't new, but you put it into action recognized the timing and a great location. Also, playing to markets (or more, more is more complicated) is a great way to leverage portfolio performance of different quality investments. 

    One of my mentors was also a school teacher, friend of the family who evolved into a national RE player reaching 9 figures, yes, 9! Some here may have heard of John Q. Hammons, he began his career teaching school in a small town in SW Mo.

    It takes an education for a good foundation to build on, there is no "system" that can be replicated anywhere by anyone that leads to success. The trick is to match your investment philosophy to the market (basic economics). The broader your knowledge is the more tools you have to work with. 

    Shoot for the moon, even if you miss you'll still be a star! :)   

  • Investor · Roanoke, VA · Member since 2012 · 1k+ posts · 374 votes
    10y

    what a great story swanny

  • Lender · Kansas City, MO · Member since 2015 · 103 posts · 28 votes
    10y

    @Michael Swan, congratulations & the 1031 Exchange is an excellent way to go:)

  • Investor · Hays, KS · Member since 2014 · 105 posts · 28 votes
    10y

    Very inspirational and thank you for giving us a detailed look at your journey.

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

    @Michael Swan great list of books and podcasts. I have read several of the books on your list and several are on my list to read, I better get busy.

    I loved the 10x rule also, after I read that I started to understand the principle of thinking BIG and not underestimating your ability. After I read that my goal is $100,000,000 in RE value some day :)

    I started to realize that to get to that point it will take high value properties like multi unit complexes and/or commercial real estate.

  • Investor · Las Vegas and Tulsa · Member since 2014 · 123 posts · 200 votes
    10y

    @Matt R. and @Michael Swan

    While my crystal ball is not always accurate, there are some statistics regarding the San Diego market that are worth keeping an eye on.  First of all, my personal opinion is that real estate values are largely a function of incomes and interest rates; which is reflected in the Affordability Index (i.e. what percentage of the population can afford the average priced house).  Most people will use a percentage of their income to pay for their mortgage.  Real incomes have not risen in California for quite some time.  Therefore, as the median price (in California) has risen from $275K in 2009 to $478K in 2015, the affordability index has gone from 52% down to 30% (25% in San Diego).   I believe the affordability index was down to 15% right before the crash.  Thus, it would appear that the prices could possibly go up a little, but we are getting close to the limit.  At this time, it's worth noting that the market slope tends to be much steeper on the backside than the front...  

    Like Swanny, I came to the conclusion that we are getting close to the top and sold most of my San Diego properties and 1031 exchanged into a cash flowing market.  I'm not a guru or a sage, I'm just a guy looking at the various signals in the market and acting according to how I interpret the signals.  It seems we are very prone to the analysis paralysis when it comes to the economic data, we are analyzing the data until we are absolutely certain before making a move; but often, by the time the signals are absolutely clear and confirmed, it's too late to make a move.

    Swanny, thanks for the tip about the Lifestyles Unlimited podcast, I will check it out.   In return, I enjoy Peter Schiff's podcast for economic updates and Real Estate Investing for Cashflow with Kevin Bupp for real estate information.

    Matt, I find it useful to keep an eye on the ROE (Return on Equity) as a metric. While your ROI will not change with the market, the ROE will. An example is a building I acquired in 2010 on a no-money down lease purchase option, cash flowing about $500/month. My ROI and ROE are both infinite since I had no money invested in the deal- great! By 2014, the building had appreciated and I had paid down a healthy chunk of the principal balance on the loan (which lowered my strike price). The cash flow had increased to $700/month. So, while my ROI is still infinite, since I had no money in the deal, my ROE is very disappointing ($700 month/$300K equity). Looking at the ROE told me it was time to sell the property and roll the equity into something that cash flows better. So, while the equity was not "dead," it was definitely lazy... It's just one metric I like to use to keep track of the performance of a particular property, there are of course other factors to consider so don't think it's the sole determination of when to sell a property.

    Happy investing!

    Erik

  • Investor · Las Vegas, NV · Member since 2012 · 119 posts · 104 votes
    10y

    @Michael Swan great to hear how this has worked out for you. I have heard several So. Cal (My home state BTW) investors tell similar stories. I agree with you and @Erik Nowacki that now is a good time to sell those California assets. 

Join the conversationCreate a free account to reply, vote on answers and follow this thread.