Real Estate Journey 3 Years In

[Jeff Gagnon]

Introduction:

Hello Everyone. My name is Jeff and I started real estate investing about 3 years ago in the DFW area where I live. I am 27 and have been working for a big 4 consulting firm in the area for about 6 years that requires me to travel outside DFW almost every week.I have logged onto bigger pockets over the years occasionally, but never posted anything until today. I figured I would finally reach out and share a little bit of my journey to date.

Starting Out in REI

I started looking to go into REI after about three years of working out of college.I was putting a good amount of my salary away into my 401K, but was eventually overtime (many years) starting to accumulate enough money to either buy some stock or put down a deposit on a house in our area (Purchase Price $200,000).After talking to people that had success with renting and reading all the popular real estate books I could find.I ended up buying my first single family home rental property.Being decently tech and business savvy prior to buying the home I created a business and a website as I wanted to have something to show off.(Buying a rental property is actually very boring in a lot of aspects unlike buying a new car that you can show off to your friends.)So I put a website together that I could showcase the properties or send people. I also decided that I would handle all of the property management aspects of the properties I am buying.I don't do any of the physical work, but I do find the tenants, find contractors, etc. (I am useless when it comes to any type of home labor besides landscaping) My thought was that I could maximize my profits this way, and all the books I read seemed to provide assurance that I could do it.

What I noticed was that my biggest impediment to get started was capital.I was by no means broke, and by most people’s accounts was living an above average quality of life compared to others my age.I however; did not have the savings to put $40,000 down payment on a $200,000 house.I read a lot of different books about creative financing and low money down types of investing.I am by no means saying that these strategies do not work, but they were not for me.Working full time I was very limited in the real estate strategies, and didn’t have the time or handiness to flip houses.

Patience and Focus are really tough qualities to acquire especially when you’re motivated to take action.It took me working 3-4 years at a good company straight out of college to save up enough money for the down payment to purchase my first rental property.Throughout those two years I would check my bank account probably no less than 2 times a week keeping track of my savings.I however kept focus on saving and made sure to limit my spending.I am not talking about completely limiting your spending and not having fun or going out to eat.It is important to enjoy yourself and spend some money sometimes or else you will never be able to keep your focus.

Patient and Focus actually transformed me from being a complete novice real estate investor into an intermediately knowledgeable real estate investor prior to even buying my first house.Because I had to wait three years I had ample time to evaluate housing deals and find out trends and housing demand in my local market.It’s tough to do these evaluations knowing that you cannot actually makes offers on any of the houses you are doing the analysis on.What I later learned however; is this practice helped me in making a very educated first rental property purchase that has turned into a success.I continue to do market research and deal analysis while I am saving up for the next rental property.

For my job I fly out of town Monday through Thursday and work full time so it is possible to manage a property and not be in town all the time.

Properties Acquired:

I am doing a very simple 30 year fixed rate mortgage with 20% down.These houses are in good neighborhoods and school districts and seem to appreciate or minimally hold good value.I only allow quality tenants and my time management is extremely minimal.For some the returns may seem small, but it's a nice amount of passive income I am starting to receive in now while slowly increasing my equity.Compared to my 401K returns even with-out considering the appreciation the REI seems to fair well.

1st Home: Purchase Price $189,000, Cash-flow: $350/month, Equity $250/month

2nd Home (9 months after 1st House): Purchase Price $183,000, Cash-flow: $400/month, Equity $235/month

3rd Home (11 months after 2nd House): Purchase Price $180,000, Cash-flow: $450/month, Equity $235/month

4th Home (10 months after 3rd House): Purchase Price $197,500, Cash-flow: $350/month, Equity $250/month

Future Strategy:

For now I think I will continue to keep the same very simple model as I don't have the time for flipping or managing a condo/apartment complex. (Plus finding these really cheap or discounted houses don't seem to exist in my area) Eventually, I would love to have the REI supplement my full-time job or at least give me an exit strategy.Although, quite boring I am finding that a slow growth of properties isn't always the worst strategy as I feel your safer by not leveraging as much right up front. My goal will now be to buy 2-3 properties for the next couple of years and then re-assess my priorities then.