@Uzma Abdullah
@Uzma Abdullah There have been a bunch of great considerations offered.
I hope you don't mind that I wrote a story describing how your journey could look like from my perspective. For reference, I live in San Diego county and my daughter lives in Orange county, slightly south of Irvine. I mention it to indicate that I am familiar with your situation and the market.
Several people here on BP know that I am a huge fan of turnkey investing, have 10 properties right now and am adding 3 more this year. The strategy I use is called OOS TK SFH
Uzma’s Story
It’s early March 2025. Uzma, her husband everybody calls “Hubby” and a couple from the Toronto area, Bill and Francine, are sitting on a covered patio of a nice house in Irvine, CA, enjoying some wine and crackers.
Bill and Francine came to visit when Uzama invited them, but they were both also really curious how Uzma’s and Hubby’s life had changed so much in the last few years.
Here is how Uzma tells the story of their journey (with some questions from Bill and Francine):
In Feb 2021 we were wondering if we wanted to keep flipping houses in Texas, should we rent here in Irvine, should we buy a place, can we get to financial independence any time in the foreseeable future? Lots of questions. Lots of questions. We posted them on one of those online platforms. It’s called Bigger Pockets and specialized in all things real estate and investing.
The opinions went in many directions. Some people said we should keep flipping in Texas and rent in California, other said we should make our landlord rich and rather buy. One guy introduced us to his OOS TK SFH strategy (yes, it’s a mouthful) and we talked a few times and then decided to apply that model.
As you recall, we had about $500K from some sales in Texas and we also wanted more time for our kids, so working here in Irvine and being constantly involved with the flips wasn’t great.
The OOS in the strategy stands for out of state and the TK stands to turnkey. Texas is out of state, so we were kind of familiar with that but not so much with turnkey. It basically means that you work with a company that finds houses (the ugly ducklings in a nice neighborhood), renovates them, then offers them for sale and when sold, also manages the houses. That includes finding good tenant, collecting rent, taking any calls for maintenance and repairs, advertising the property when a tenant moves out and new one needs to be placed, organizing the refresh in between tenants, all that stuff. We learned that there are a bunch of criteria to find really good turnkey providers but when you do, as we have, it’s a really passive thing.
We also learned a new term. We knew, or thought we knew, what financial independence would be. We also knew that we wanted to get that sometime in the future. That new term is called “Time Freedom Point”. It’s the point or date on the calendar where we make enough passive income to no longer have to exchange time for money. Basically, you don’t need a job. You can still have one, but you have the freedom to decide if you want to do stuff you love regardless if that pays anything or not. I can’t describe the emotions and feelings when you get closer and closer and ultimately get there, but it really is a special type for freedom.
We learned that you pick a number that you think you will need as your passive income from your investments.
Francine asked: “How did you figure that out?”
Well, we looked at the numbers we knew form some of the houses we were considering at the time if we would continue to rent. Remember we weren’t’ sure yet if we should rent or buy. We knew a house we would rent that’s big enough for our family in the right school district and all that stuff would eb about $4500/month + utilities, etc. So, I took $5000/month for the house, then another $5000 for our cars, vacation money, food, memberships in our clubs, money for all the activities for the kids, averages for closing, and so on. We found a great app that allows to track all of that, so we always know where we stand each month.
Bottom line, our Time Freedom Point # was $10K/month. It felt like a huge amount and that it would take us a long time to get there. Basically, a dream goal.
When we checked out the OOS TK SFH strategy we learned another important thing we had never seen or hear before n that way. People always said that success in real estate is all about location, location, location. Today I would say that has some truth but there are two other things that have become more important for us.
They are performance and relationships.
For the properties we own, we looked to get close to, or sometimes even a little above the 1% rule. That means you buy a house that is freshly renovated by a turnkey company for let’s say $125K and you get $1250/month in rent. So, the rent is 1% of the purchase price.
That was an eye opener because we knew that the houses we were considering in early 2021 here in our area would be about $1.2 million to buy. That would have meant if we owned a house like that and wanted to rent it, we would have to get $12500/month in rent.
Look around Francine and Bill. This house here would have been that price at the time. Today it’s probably $1.5 million. We pay a little more than $4500/month. That means the performance for our landlord is about 0.3%.
That realization told us that we would be better off renting here and getting rich as landlords out of state, where we can 1%, or you could say, 3x as much as our landlord here gets out if this house.
Bill asks: “So where are these properties that you bought?”
Good questions, Bill. We initially didn’t know but there are not that many turnkey providers that really meet all the criteria. We also did not want to put all our money in one place, so we have properties in Ohio, in Alabama, in Florida and I think 1 in Mississippi – that’s a special project.
That’s also a good segue to that second aspect – relationships. Yes, the location of the properties is important when it comes to how much rent can you get, how is the economic situation of the area, etc. but it really is equally, if not more important to have a trusting relationship with the turnkey provider. We really wanted things to be passive, so we have time for the kids, and our hobbies, etc. For that to happen we needed to find these really good providers, develop deeper and deeper relationships with them so we can trust them to do the right things and look after our properties.
There was also a funny but important lesson to learn that has to do with human nature. Nobody had been dwelling on that much before we began working with some turnkey expert. See when a turnkey company has a client who owns 6 or 8 properties and keeps telling others, friend and family and colleagues, about the experience, leading to referrals, no company, and no turnkey company wants to lose that client. They treat us really well and anybody we ever send their way said the same thing. If we just one house we bought years ago it would be very different. We really have that nice trusting relationship with each of the few TK companies we work with. It’s a little like extended family. We know them all by first name and exchange Christmas cards, celebrate things together, etc.
Francine says: “So what did you end up doing with the $500k and how come Hubby does not have a job anymore?”
Well, funny you should ask. So we realized that with our $500k and some help we could buy 20 properties that perform well. They cost on average $125K. We calculated $25 for down payment and closing costs, appraisals, etc. for each.
We spread the purchases about equally across the three TK companies we work with. That all happened in 2021.
In the process we learned that Hubby and I can each have 10 government insured mortgages to our name. That’s what we did, using just one lender that works nationwide. That way they could use all our paperwork over and over again and we didn’t need to apply for each house separately.
So it was pretty much perfect. We had 20 golden tickets to our name, and we used them all to buy the properties. It was actually super helpful that Hubby had his job and I had my little side income so we could qualify for all of this.
Each of the 20 houses paid us about $300/month or a total of $6000/month by the end of 2021.
You recall that real estate platform called Bigger Pockets. They have all kinds of advice and calculators to determine if a property is a good deal. Part of that is their suggestion to put about 15% of the rent income aside for reserves, so when we would have to pay to fix something, we would not have to tap into our monthly cash flow.
The TK providers gave us between 3 month and 1 year of warranty on their work and so far, we actually didn’t have much to pay for because the renovations were really extensive for each house before we bought it.
It is probably not that obvious, but that reserve money added up really quickly for us, so we don’t need to even do that anymore.
Francine asked: “What do you mean it added up quickly?”
Well, if you think about it, we took 15% of the $1250 rent each month, so basically about $180 for each house x 20 houses. That is $3600/month and at the end of the first year, we had more than $43000 in that savings account.
The turnkey providers told us that the most expensive thing to fix on a house if it were ever necessary is the roof at about $6000. So, in reality we have basically money for 7 roofs in the bank – and we could fix them all at the same time. We feel that’s really a great cushion and everything small is not a concern for us. We still put a little aside each month, about 3% or so ($50/month for each property)
So when you think of it, at the end of 2021 we had $6000/month in income and we felt we were on our way to our Time Freedom Point. We found this house here and put it on a 5-year lease.
With the money we knew we can easily pay the rent and the utilities and even have a little left. That’s was pretty cool already.
Then, in 2022, when we had reached the reserve level – they call that the “Pivot Point” when you don’t need to add as much to the reserves anymore, our cash flow from each property increased by about $125/month. That increased our monthly cash from $6000 to $8500/month.
Last year, in 2024, Hubby started thinking about slowing down in his work. For a while he tried to work part time, but that didn’t really work so well. The real change happened in the early fall last year when we had our rents adjust the first time. We increased the rent by about $75/month on each property on average. In a few cases we got new tenants and were able to increase the rent a little more in some others it was only $50/month because the tenants love the houses and want to stay as long as they can afford it. It all made sense.
Overall, we now get another $1500/month cash flow due to the additional rent, so we actually celebrated our Time Freedom Point on Christmas 2024. That was so cool.
Hubby had his last day on New Years eve (on vacation naturally) but that closed a chapter.
So yeah, we are making $10k/month now, have this great reserve and could not be happier. We know that there will be more increases in the future, and we are no debating of we should work on paying down the mortgages a little faster than we need to or keep adding more properties.
The most important thing is that we now have about $2.5 - $3 million in assets that the tenants are paying off and as you can probably tell, we have this calm about us. We spend tons of time with the kinds, each time they are out of school we can go and explore new places. It’s actually amazing. I never thought this could be possible in 4 short years.
It was definitely an exciting ride, but we are really glad that we didn’t buy a house here and now never have to worry about having enough money or making an income or stuff like that.
Bill and Francine were looking at Uzma and Hubby for several minutes in stunned silence. Then Francine asked: “Can we do that too?”
Uzma smiled and said: “sure, just get help to avoid mistakes and be disciplined during the journey.
They all raised their glasses to celebrate together.
