How I started my REI business

A recent message asked many questions about how *I* started my REI business.  I answered them, then decided to build this post out of the answers.  Perhaps this can help others - let me know if this helped you (in the comments below)

Q: Did you jump in with both feet on real estate investing or did you keep your primary job while starting?

This is my second (2nd) serious attempt at starting a Real Estate Investing business.  The FIRST time was in Feb. 2007  in the HCOL Seattle housing market (and was a disaster).  The 2nd time I started having done a LOT more reading ahead of time, and decided to start investing as via "Long-Distance Real Estate Investing". I'm investing in a Moderate Cost of Living Area with lots of stable working class jobs.  So far things are working out much better.  I kept my primary job for the first four months until the rents began coming in regularly.  I funneled wages from my primary job into down payments for my first 3 properties.

Q: How much time (hours a week or month) did you spend building your business?

I read A LOT, and after meeting a very successful fellow investor at a conference, I learned about his success, and read as many books as I could - starting with the "Guides" and "Ultimate Guides" on BiggerPockets.  I read SO MANY books, but the 2 that spoke to me the best were "The Millionaire Real Estate Investor", and "Landlording on AutoPilot".  As for actual 'work', I started at around around 8 hours per week, and reading in my spare time in the evenings.  After the first 4-5 months, I dropped my hours back to fewer per week - only working as needed.

Q: What are some things you would do differently if you had to start over? Would you start over?

As mentioned before, the first time I started, I was living in the High Cost Of Living Seattle housing market.  I tried to make a business there, but I managed to start at EXACTLY the wrong time - just when the 2008 housing collapse was in-our-faces.  

So I *DID* have to "start over".  So Yes, I would.  I would start over in a reasonably priced blue-collar market town.

Other things I would do differently:  as mentioned, I would READ A LOT.  I would look for other books like BiggerPockets "Real Estate Rewind" where long-time REI's give their best advice.  I would buy my first place for cash (if possible), live in it while repairing to bring it up to my standard of living, and adding things like USB electrical outlets, metered water service for all sides of duplexes, etc. 

Regarding books:  Most books on REI are similar, but once in a while you'll come across 1-2 pages that standout.  Brandon Turner's yellow book ("The Book on Managing Rental Properties") was a really good middle-of-the-road book in Managing Rental Properties... there were some advice there I'd read elsewhere... until p. 277(?) gave HANDS DOWN - THE BEST suggestion - I started using then, and continue to use today:  
"Use the categories shown on IRS Schedule E to sort your expenses".
WOW!  If you create a spreadsheet with those columns, and Track your business Income, and Expenses using these categories, you'll be ahead of 90% of the other investors at tax time:
Schedule E by line# -
Income: 
3. Rents received,
4. Royalties received,
Expenses: 
5. Advertising,
6. Auto and travel (see instructions),
7. Cleaning and maintenance,
8. Commissions,
9. Insurance,
10. Legal and other professional fees,
11. Management fees,
12. Mortgage interest paid to banks, etc. (see instructions),
13. Other interest,
14. Repairs,
15. Supplies,
16. Taxes,
17. Utilities,
18. Depreciation expense or depletion,
19. Other (list)

Q: How many homes did it take for you to achieve FI, meaning you could support your lifestyle through rental income?

One (1)!!  Ok, okay... that's a little unfair.  But it's true.  I reached my FI number in April 2018.  I did it by saving like crazy, and purchasing a home in the Seattle area in 2014 that DOUBLED IN VALUE between 2014 and 2018.  I lived in the house, refinished the hardwood floors, and renovated the kitchen.  Sold in Dec 2018, I invested in SFH & multi-family rental properties in Indianapolis (initially as a Long-Distance Investor).  I haven't yet touched my retirement savings so technically I'm fine as is, but I'd like to maintain a cushion of cash such that I can continue to ADD to my retirement accounts AND ADD Properties to my housing portfolio.  If the math works out, I should be able to more than cover my FI expenses with 7-to-8 rentals.  So technically, everything I've saved to date ends up being a HUGE emergency fund that I never expect to touch.

May your results be as good, and may you NOT make the same mistake I did by saving up TOO MUCH before you start investing in RE where your recurring income can cover all your monthly expenses, and then some.  

Best of luck being a Landlord On FIRE!