9-unit medical office building with $537 down

The story is yet another example of the power of real estate ownership over time.

In the fall of 2020, as we discussed our family goals for the coming year, we dreamed again (as we had often) about owning a lake house. I grew up in an environment where the idea of owning a vacation home was not common or even real to me - it was something I'd heard about, but something for other people. Anyway, we decided we wanted one, and we didn't have a clue as to how we'd work that out. We didn't have the cash on hand to put down, nor the monthly budget to support an additional mortgage payment.

That's how big goals work, though - at the moment you set your mind to it, you can't see the path yet. It is in that decision that you begin to think differently; your mind starts looking for ways to make it happen. And eventually the idea came to me: Due to the modest appreciation of the homes I'd acquired in 2012, and the steady process of paying down the mortgages using the rental income, we finally had some equity in them. And if we could sell not one but TWO of them, at the same time, AND use a 1031 exchange to combine the equity from both, AND make the vacation home a short-term rental... we could make it work.

A house of cards, right?

Well, I love me a house of cards, and long story short, we made it happen. The tenant in one of the homes, on Lakeshore Dr in the neighborhood where I grew up in Richton Park (Lakewood shoutout), wanted to buy it. Her timeline was pretty close to the expiration of the lease on one of the other rentals, on Arquilla Dr in the same neighborhood, but the Arquilla tenant wasn't ready to buy yet. I worked out the Lakeshore contract while putting the Arquilla home on the market.

Meanwhile, we got to discussing and researching areas to buy the lake house, and after much review we settled on South Haven. It had the best environment for short term rentals at the time, and it also happens to be where I proposed to Kelly in 2013 (conditionally, of course on Bella's approval when we returned home)! Despite having a double-sale contingency (we could only close the purchase if BOTH of the Richton Park sales closed) and being up against SIX other offers, we won a great house in South Haven. The Lakeshore tenant bought her house, the Arquilla house sold with a month still to go on the tenant's lease, and after that month I moved the tenant into one of my other homes that unexpectedly vacated during the process. In July 2021 we bought the South Haven house.

The full story of owning that home is one for another time. I'll at least say we learned a ton and made some great family memories there. Earlier this spring, as we wrapped up our last visit to the home before the rental season started again, we decided it was time to close that chapter. The STR market had matured, the management was very time-intensive, and too much of our intended relaxation time at the home ended up being spent working on the house. If it had been highly stressful and highly profitable, or low-stress and low-profit, maybe we'd have kept it. But high-stress and low-profit, that's gonna be a no from us, dawg. I knew I could find another opportunity to invest that equity - which had grown nicely - into something else with more profit and less noise.

We listed the house and had 6 offers within 48hrs ranging up to I think $85k over list price, including all the furnishings and the STR license. The sale went smoothly, the new owners took over the stays, and before it closed I had a contract on the next commercial property.

This one is a 9-unit, 21k sq ft medical office building across the street from St. Joseph Hospital in Joliet - actually right around the corner from the strip center I bought last year. All but one unit are rented, with no leases expiring in the next 5 years. It's a step up in complexity for me, with a few elements I haven't managed before such as triplet net leases, an elevator, and way more common area space and services. I've definitely been learning some new things, as I like to on each purchase.

This building will net more cash flow than any four of our other rentals combined (excluding the strip center). Once a tenant is placed in the vacant unit the cash flow will exceed ALL of our residential rentals combined. The scheduled rent increases already in place, plus the opportunity for me to reduce operating costs and add value in other ways, mean the building's income-based value will start going up right away. Literally on Day One the value is already higher due to some changes in contracted services that lowered the operating expenses.

Perhaps most notably, thanks to those two little rental homes in my old neighborhood, and the Michigan house in between, and our blood, sweat and tears that went into all of them over the course of nearly 13 years of ownership... all I brought with me to the closing was a check for $537.90. (PS That doesn't include the seller-paid commission I also negotiated for myself which ended up being the largest I've had.)

While there was, as I mentioned, a lot of blood, sweat, and tears that went into making this happen, it's further proof of two things I preach all the time:

1. If you're willing to be creative and take calculated risks, you don't have to start out with a ton of money to build wealth through real estate ownership.

2. In this game, there is no replacement for time. Start now. You're not going to get rich quick, but practically ANYONE can get wealthy slow.

Consider: If you were to take action today, what story could you be writing 13 years from now?