16 Years Working High Income Job VS 4 Years Investing In RE...Why They Don't Tell Us

[Andrew McGuire]

The market is going to crash and I am going to lose everything by trying to get into Real Estate Investing. Didn't you know that RE Investing is only for those who have money, connections and experience. This is the advice I received when I told my friends and family about my ambitions of investing in Real Estate and I proclaimed that I was going to shed the current path I was on take a path far less traveled on the way to early retirement. Even worse this is what I told myself, that I was going to buy my first investment property and immediately that the market was going to crash since RE had been appreciating since shortly after the last actual crash in 2007 & 2008. These self limiting thoughts along with what I was told from others got magnified by the onset of the Covid 19 Pandemic in the first quarter of 2020. See I had just closed on my 2nd investment property and spent literally down to my families last $5,000 in savings. 

I'll get into this another day but to acquire these savings I sold my families primary residence and then  I quit the job of the company where I had been successfully working and climbing for 16 years. All of this just so I could get my hands on my 401K, paying taxes on and paying the 10% penalty as well. Now that I had chewed my own arm off to escape what was a prison (working at a job a disliked with a passion until I was 65), I had all my chips stacked on the table in front of me and here covid comes, a pandemic that essentially changed life as we know it in this country. I remember thinking only I could spend all of my families savings on a risky rental  property the week before a pandemic like we have not seen in my life comes along, real estate is going to get buried and myself along with it. That was followed by many sleepless and sweaty nights which until the last year or so continued.  

What happened instead with the onset of the Covid 19 pandemic is we saw prices of Real Estate skyrocket like we have never seen, especially in Phoenix. Like other areas of the county Phoenix was seeing insanely high appreciation well into the double digits, ending up over 20% appreciation in 2020 and 2021. Only recently in Summer of 2022 did we see prices go down and now in the beginning of 2023 starting to rise again. Not that it was all rosy, I was cutting my teeth on rental properties having to learn quickly as the properties I had bought it what I believed to be a great discount, I found were discounted for a reason. These properties were in bad areas and riddled with problems, it seemed like daily or nightly in some cases I was getting interrupted with problems involving the properties. At this point I still had a scarcity mindset and thought that I needed to handle all the issues myself to squeeze every last penny out of these properties instead of doing what I should have done, which is hire a good property manager. Another topic for down the road but if you make a decent income hire a property manager right away. Along with prices rents were skyrocketing just as fast, so much so that these properties would now cashflow as long term rentals as opposed to when I  them I purchased them and had to manage as Short Term Rentals with no property manager. 

The paragraph above is my story but I hear this almost weekly from new investors who are yet to acquire a property get excited to speak and then a  or so down the road when we reconnect, they tell me the timing is not right and that in some cases the market is going to or already is in the middle of a crash. I empathize with this line of thinking as I mention in the first paragraph, that is actually how I thought as early as I discovered the Bigger Pockets Podcast in 2015. Now wishing I could go back and invest when I first got the idea in my head in 2015, how far ahead in Real Estate Investing could I be? I don't know but when given the chance to have an open dialogue about concerns of the market crashing I tell of my own experience. How I worked my butt of for 16 years at a good job and all I had to show for it was $98K that I had saved in a 401K that I ended up paying taxes and penalties on. Luckily my family had also purchased a primary home in 2016 that had went up before we sold in 2018 about 65K and net after selling was $103K. The sum of these default savings was just over $200K. A few years later and now with 7 rental properties and 12 units held I realize what a mistake it would have been to stay on the steady career path. 

Each of the first 4 properties that were held up went up in value over $300K with the last three averaging over $100K appreciation all while Cash flowing, giving me depreciation against my earned income and equity by pay down. What took me 16 years to acquire working diligently at a W2 ($200K) was surpassed 7X in just 4 years of RE Investing. If I could speak to my younger self or anyone who cares to listen I would say as clearly as possible, buy and hold RE in good areas that at minimum have a 1:1 debt service coverage ratio. Ideally you find cashflow but you will win simply by having RE that pays for itself, let time do the heavy lifting for you. If you buy and manage right the price of your Real Estate will go up quicker than most of us can save by working a job, not to mention rents will go up in almost any market with time and your investment will become more profitable with time. You will also have the option for the first properties to buy you more property, that is when investing seems to get really fun.