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 

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

    Erik thanks for the tip about the podcast you follow.  I will get on that right away.  Also, you have explained the ROE much more succinctly than the way I attempted to do for Matt.  Hopefully, people are reading this and learning a LOT!!!! 

    Great Job!!

    Swanny

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

    Here is a reply that I just sent to someone wondering about investing in passive cash flowing, tax deferred, real estate. He was interested in investing in a self directed IRA. I DON'T LIKE THE IDEA. Read below.

    GET THE MONEY IN YOUR HANDS, BEFORE IT IS TOO LATE!!! Paying the taxes and the measly 10% penalty is the way to go.

    First, Why would you invest using a tax deferred instrument (REAL ESTATE) inside a tax deferred self directed IRA? That makes no sense at all. Take the bite and pay the taxes for whatever you are removing from your IRA for the down payment on Tax deferred real estate and get rid of the middle man (Financial planner, mutual fund managers, expense ratios, 12b fees, and plan administrators).

    Next, guess what? You get to start your way to financial freedom and get cash flow that you can use now. No imaginary date in the future. I don't know about you, but I want to replace all my W2 earnings with passive tax deferred cash flow, that I never have to pay taxes or very little taxes for the rest of my life. 

    When all is said and done, you are creating multigenerational wealth. You kids inherit the real estate at a stepped up basis and if they keep using the power of the 1031 exchange to buy bigger and bigger properties that cash flow more and more with 30% down payments (Leveraged taxed deferred debt), which is good debt. Ultimately, if they don't do a straight sale, they get it all at a stepped up basis and depreciation starts all over again.

    "Reality is merely an illusion, albeit a very persistent one." ALBERT EINSTEIN

    Change your reality and you change your life.  Again, if I can do it, SO CAN YOU!!

    Swanny

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

    Hi Michael J,

    Read and study that info and live it baby!!!  When you stop learning, you stop living!!!

    Swanny

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

    Hi Bianca,

    I believe it was a tax deferred IRA. Just cashed it in when I needed down payment money along the way. Paid taxes and penalty and am done with it.

    Swanny

  • Lanham, MD · Member since 2015 · 18 posts · 2 votes
    10y

    wow  great story and congrats on your success. I always believe that real estate is the best investment tool out there to acquire. As I read your post I see myself doing the same thing in the next couple of years, my desire is to retire at age 50 I'm now 35 and real estate will get me there. I have been listening to a lot of Robert Kiyosaki stuff and like you said change your reality and your life will change. Most people read these success stores but if its not part of your realty you will never achieve such success, as Robert Kiyosaki said money don't make you rich its your desire and mindset.  

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

    So right Adrian,

    I always tell people, if you change the way you look at things, the things you look at change right before your eyes.  I don't know how many times I start talking to people about this stuff and their eyes get all glazed over and it is soooooo far from their reality, that they can't even fathom the concepts.  Their cognitive schema or life long financial ladder has been leaning for soooooo long against the wrong building, they are not able to think on the level I am speaking.  You know what it takes?  It takes a financial catastrophe or significant financial setback for people to look for a different map to financial freedom.

    When I realized my map was getting me to the wrong place real fast, I found a new map!!!

    Swanny

  • Investor · Kaneohe, HI · Member since 2012 · 218 posts · 104 votes
    10y

    @Michael Swan Wow this is probably the best success story I have read.  Something that I was wondering though, maybe I missed it.  How much did you start off with? I saw you said you put $6000/year away and you put about $25-30k down each time.  How much did you buy in your first year?  After that I'm guessing you refi cashed out and used that plus cash flow to purchase the other properties the next couple years or did you go straight to 1031's?

  • Investor · Great Falls, MT · Member since 2014 · 163 posts · 132 votes
    10y

    Great post. It's an example of playing all parts of the real estate cycle. Investing in an appreciation market after a downturn then when prices get high convert over to income producing. When people battle over appreciation VS cash-flow the right answer is "Yes." It's just a matter of timing. 

    The hardest part for most people is that first step, getting that first chunk of equity to invest with and that first property to rise. My story follows a similar path though I started with more than most to boot. So when I get people just starting out at this point in the cycle and they want advice... it's tough to offer up a compelling answer. The best bet is probably to buy a middle of the road long term buy and hold type property and save up some funds for the next downturn. 

    Michael, the next step is to make sure you're liquid/healthy enough to comfortably survive and even thrive in a downturn. That's what I'm focusing on. I'm not totally liquidating though as you don't want to try to perfectly time a market and be waiting in the sidelines too long. 

    Big issue today IMO is finding solid properties worth investing in of any kind. At this point if you're banking on substantial appreciation you're taking a gamble. But solid cash-flow properties are also difficult to come by anymore as a lot of dollars are chasing few investments and cap rates are getting compressed as a result. Personally, I think the best bet forward is to maintain a balanced portfolio, a few long term appreciation plays, a few cash flow plays, and a healthy amount of liquidity and flexibility should another downturn occur. The problem with waiting on the next downturn is you never know how long it might be before we see one. 

  • Real Estate Professional · Carlisle, MA · Member since 2015 · 31 posts · 4 votes
    10y

    This is a fantastic inspiring story.  Thank you so much for sharing!

  • Investor · Elkhart, KS · Member since 2015 · 6 posts · 1 vote
    10y

    @Michael Swan This has been my favorite post so far, by a long shot! Thank you So much for sharing and inspiring the rest of us to change our futures! I am in awe and completely excited!

    LaTrina Clinkingbeard

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

    Your welcome LaTrina.  I'm glad I can help.

    Swanny

  • Professional · Carlsbad, CA · Member since 2012 · 12k+ posts · 1k+ votes
    10y

    @Michael Swan

    Congratulations.

  • Investor · Philadelphia, PA · Member since 2015 · 2 posts · 2 votes
    10y
    Originally posted by @Michael Swan:

    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 

     MOTIVATION

  • Investor/aviation · Amherst, OH · Member since 2015 · 52 posts · 9 votes
    10y

    Inspiring to say the least. Great job and congrats on a new lease  on life in terms of monies and all that it allows....

  • John CasmonPro Member
    Cincinnati, OH · Member since 2013 · 1k+ posts · 1k+ votes
    10y

    @Michael Swan Thanks for sharing your story - very inspiring. Exactly, what I needed to get focused this morning. 

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

    Good points @Erik Nowacki

    My meter is getting a strong reading now, the rockets are about to fire and the siren will start blaring any minute.  

    What's more dangerous than a dumb guru?           A smart one!

    I though my last post on page 4 was a compliment, well wishing and pointing out Swanny's location served him well.

    I think it's odd that a newbie on BP ignores one of the senior members, nicknamed "Guru Killer" (LOL) maybe it was unintentional...... hmmm, maybe not.

    Wonder how many are biting at this system that can be reproduced by anyone, anywhere, anytime, with the right motivation of course........

    I think I'll unplug my BS Meter before it goes off......I hate calibrating it everyday.  :) 

  • Miami Lakes, FL · Member since 2015 · 133 posts · 83 votes
    10y

    @Michael Swan Thanks for the much needed morning motivation. I've been sitting on the fence with about $60k in my IRA basically doing squat. Think it's time to definitely reconsider cashing it out and using it for a down payment for a multifamily unit.

    I have layovers in San Diego's Little Italy (my favorite layover by far!) area; next time I'm in San Diego I'd like to meet up with you.

    Thanks again for the inspiring story. It's helping me stay focused and on-track!

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

    Hi Bill,

    Thank you for adding your wealth of experience to verify the points I have made.  I really appreciate your thoughts here.  

    Have a great day!!

    Swanny

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

    Hi Ken,

    Remember,

    Only purge that retirement account for downpayment on cash flowing real estate.  You will only clear about $40,000, after taxes and penalty etc...  You have to pay taxes anyway, no matter what your age.  Sooooo, $6,000 would be your 10% penalty.  Happy rental property hunting!!!

    Swanny

  • Memphis, TN · Member since 2013 · 969 posts · 524 votes
    10y

    @Michael Swan

    Congratulations!! Excellent story thank you for sharing, It motivates new and seasoned investors a like to continue to reach for the stars and think outside of the box..

    You are Neo from the Matrix!!! LOL!! 

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

    I just had someone contact me and wonder what kind of money I make at my w2 job.  I make, with 8 years of education after high school at my daytime teaching job about $46,000 and my night time adjunct professor job another $15,000.00.  My wife makes $20,000 as a part time special education assistant about $20,000.  A few of you I have talked to make over $100,000.00 and are dead broke.  Your car payments are over $500.00 a month and you need to first get your financial life in line first and get as far away from "0" as you can. I don't believe in instant gratification, something for nothing, basically mentally diseased, GARBAGE!!!  I am not a big fan of Dave Ramsey regarding his take on NO DEBT is good debt.  However,  if you are making over $100,000.00 a year at your w2 jobs, you need to get some help to slash your expenses.  Dave Ramsey is just the guy to help you get far away from Zero.  Again if a guy that only has a family combined income of approximately $80,000 can do this in an extremely pricey area of the country can do this, SO CAN YOU!!!

    Good morning by the way!!

    Swanny

  • Investor · Yokosuka, Japan · Member since 2014 · 631 posts · 184 votes
    10y

    @Michael SwanThank you for the affirmation and inspiration that where there's a will there are many ways.

    I'm a teacher as well and I'm trying to become as smart as you and so many others here on this site.

    Congratulations and thank you for your willingness to candidly share your method and your financials.

    Pyrrha 

  • Rental Property Investor · Milwaukee, WI · Member since 2014 · 63 posts · 16 votes
    10y

    Inspiring story.

  • Real Estate Agent · San Antonio, TX · Member since 2015 · 11 posts · 4 votes
    10y

    Great story.  I looking to do something similar.

  • Realtor · Bedford, TX · Member since 2015 · 172 posts · 55 votes
    10y
    Originally posted by @Michael Swan:

    The more reading, study, research, listening to LUI Lifestyles Unlimited INC. Podcasts and attending their 2 day seminar in Houston and online

    I'm looking for this podcast and only see episodes dating back to this October.  Are there more episodes outside of iTunes?  Also, when did you go to this seminar in Houston?  I'm in DFW and grew up in Houston so, if this seminar is worth it's weight in gold, I'll consider paying to go to the next one.  Thanks!

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