Ep 276: Early Retirement by Age 35 ($10k/mo) Through Real Estate

[Mindy Jensen]

Why work at a lame job until you’re too old to enjoy the life you’ve been given? If you are looking to get out of the rat race earlier, this is one episode you can’t afford to miss. Today on The BiggerPockets Podcast, we sit down with Bryce Stewart, a former school teacher who was able to quit his job at age 35 through the smart purchases of small multifamily properties. Bryce shares his powerful story on how he was able to build a portfolio of 22 units that give him $10,000 per month in income. Bryce also shares a phenomenal concept he called “vacuuming the truck,” which could change the way you think about real estate (and life) forever.

Listen here or on your favorite podcast app.

[Michael Gansberg]

Awesome podcast. Really loved it- I think much of Bryce's success comes from his can-do and upbeat attitude, something we should all pay attention to. 

One point I disagree with- he mentioned a building with heating costs of $3,000/yr(I think it was oil baseboard, and the owner paid the heating bill.) He ripped out the heating system and put in electric baseboard, putting the burden of the heating payments on the residents. He spent $5,000 doing that, and suggests a return of $3000/$5000 = 60% annually.

This sounds like a great idea- but in practice, I think it would fail miserably. Generally, electric baseboard is much more expensive than oil heat(see link below which allows input of various prices for electricity and oil.) With the default inputs below, electric baseboard is 87% more expensive than oil. If it's lower than that- call it 80% - then the residents would shoulder a burden of $5400/year in heating costs instead of ownership paying $3000/year.  That's not a lossless proposition! 

In my experience, when residents have unexpectedly high heating bills, they gripe about it, their ability to pay rent is reduced(leading to a higher eviction rate,) and they tend to leave the apartment at the end of their lease, dramatically increasing turnover. Turnover is expensive- repainting, cleaning, possibly a month or two of vacancy, paying an agent to rent it(or spending your own time showing it,) and so on.

It's also important to note that an owner can charge more if heating is included. Installing electric baseboard and putting the heat bill on the residents will result in lower rent rates. So I believe the actual return on ripping out the oil and installing electric baseboard is actually negative. 

Loved everything else in the podcast. Michael

https://www.efficiencymaine.com/at-home/home-energy-savings-program/heating-cost-comparison/