How We Built Our House To Triple Our Net Worth to Begin Investing

[Adam Summers]

Over the past couple of years of being a BP member I have benefitted from reading other people's real estate stories so I thought that it was only right for me to share my story in order to possibly provide some benefit for the other BP members.

From the time I was a child I always wanted to build my house. And when I say build my house I don’t mean be the general contractor and hire subcontractors to build my house. I mean build my house with my own hands just like my dad. I saw the financial benefits of this as a child. My dad owns a small woodworking shop and never made more than a modest income. He saved up his money while in his 20’s and at the age of 31 he used that money to build a 1,800 sf three bedroom ranch house. He built his house without borrowing any money and lived mortgage free from the time he was 32. By doing this, he was able to provide for his family on a modest income and allow my mom to stay at home and raise me and my brothers. My dad always stressed the importance of living below your means and that living mortgage free can free up money to allow you to do what you want in life.

My wife and I got married after graduating from college and moved into a small home we had purchased. We had a goal of building our own house in five years. We developed a budget that would allow us to save enough money for a down payment on a construction loan at the end of the five years. We lived frugally during our first years of marriage and we didn’t go out to eat often, we packed our lunch for work each day, and we drove the same cars we had since high school. I will admit that it was difficult at first to set money aside because all throughout college we barely had enough money to pay our bills and now we both had good jobs and had a significant amount of additional income. But we had a goal in mind and we knew that the temporary sacrifice now would pay off later. We had a savings goal of $50,000 and once we had that amount saved we would begin construction on our house. After the first few months of setting money aside it became a habit and it was easy to save money. We treated our savings as a bill and paid it every month. Through our frugal lifestyle and habitual savings we were able to reach our $50,000 goal in less than three years. So, at 25 years old, we began building our own house.

My wife and I both work in Roanoke, VA so it made sense to build in Roanoke. We began our search for land in a more rural portion of the county in the best school district. After about 3 months of searching, we found a nice 1 acre lot in a very nice neighborhood. In order to get a construction loan, we had to purchase the lot in cash and put that up as collateral on the construction loan. Over the next ten months we spent every weekend building the house. It was a very busy time but it was also a very enjoyable experience .My dad came to Roanoke every weekend and helped me build the house so I got to spend a lot of quality time with him and learn a lot about construction in the process. My dad and I did all of the framing, windows, hardwood flooring, tile, cabinets, and trim work. My wife and mom painted the interior of the house. We hired subcontractors to do the roofing, siding, electrical, plumbing, and drywall. The house building experience taught me a lot about working with contractors, negotiating, and project management that I would later use in my real estate investing.

When we closed on the mortgage for our new house, we had the house appraised and we were shocked when house appraised at over $150,000 more that we had invested into the house. In the span of less than a year we had tripled our net worth!

After a little time to relax and enjoy our new house, we decided to begin real estate investing. We took out a home equity line of credit on our house and used that to purchase two rental houses. We bought the houses (one through hudhomestore.com and one through auction.com) with the home equity loan, rehabbed the houses, rented them, and refinanced them after one year in order to get back the money we had invested. A strategy I now know as BRRR thanks to BiggerPockets. After that year, we had two rental properties that each cashflowed $200 per month and we didn't have a single dime of our own money invested. Now that we had our HELOC replenished we began searching for another property to invest in and we found a house that was ideal for a flip. We purchased a newer three bedroom house through auction.com. We hired a contractor and he rehabbed the house in less than one month. After a month of being on the market we sold the property and made a nice profit. My wife and I have recently purchased another property to flip and are in the process of rehabbing it.

All of the real estate investing that we have done has been accomplished by using the equity we have created by building our own house. Building our own house increased our net worth rapidly and has allowed us to begin making investments in real estate. We recently finished paying off our house and increased our HELOC limit to allow us to pursue more investments. We are committed to flipping several houses per year and growing our rental portfolio significantly over the next few years. We have a goal of replacing my wife's income in the next couple of years and replacing my income in the next ten years.