Story Time: A Rookie Gets Started in the Pandemic

[Jacob Allen]

Fair warning, this is a long post where I share my REI journey and I'd like to thank all of the BiggerPockets community for the support they have provided along the way!

Hello! My name is Jacob Allen and I wanted to write this post as a thank you to the BiggerPockets community for all their help, and to share my story thus far and some details on my first deal!

I'm going to start this journey with a quick introduction about me, and then we'll jump to post-college and how I fell into REI, I was born and raised in Kansas in a middle-class family. After high school I left for college in Virginia at the Virginia Military Institute. While there I studied Civil Engineering, got involved in Engineers Without Borders, and picked up Rugby as my new favorite sport. I graduated college in 2016 and had a job offer for an engineering firm in Atlanta, GA and left immediately for the "big city" life. Being from Kansas, Atlanta was much more city than I had ever seen before. Additionally as I attended a military college I accepted a commission to serve as an officer in the Army National Guard. So with 2 jobs lined up I headed out to start my careers.

Everything was fine and normal for awhile, I got up, commuted to work, grinded from 9-5, played rugby in the evenings, and drank on the weekends. Pretty average early 20s young professional type life style. On New Years Eve (2016-2017) in a bar in downtown Atlanta I would meet the woman who is now my wife! We would become inseparable, she finished grad school at UGA and moved to Atlanta and got an apartment about a mile away from me. We would continue dating through 2017 and into 2018, and this is where my journey with REI begins.

I also played video games, and I’m very competitive so I played A LOT of video games. If I wasn’t at the gym, at rugby practice, at work, or with my girlfriend, I was almost assuredly playing video games. It got to the point that my girlfriend pointed out that I was playing too many video games. In early-mid 2018 it hit the point that even I had to admit I was playing too many video games. If you know someone who loves their video games, just try to imagine how much they would have to play before they self-identify that they have a problem, I was probably playing close to 30-40 hours per week of video games, almost a full time job.

Once I realized and admitted I had a problem everything changed. One evening I came home and sat down at my computer and really just stopped and thought about what I was doing with my life, and where I wanted to go with my life. Truth be told I really didn’t know where I wanted to go, but I knew that video games wasn’t a big part of it, so I would need to get them out of the picture. In a spur of the moment move, I went through my computer and deleted every video game I had ever owned off of my computer, deleted any games I had off my phone, and deleted every account I had for my games so that even if I wanted to, my accounts were gone and so there was no going back.

I was freed, and it felt amazing. Except I now had a new dilemma, with all this free time what would I do now? In my first evening (I believe this started on a Tuesday afternoon) I deep cleaned my entire apartment and got every chore I could think of around the apartment completed. In my second evening I hit the gym for 3 hours, and then began working my way through the pile of old books I said I would someday read. By Friday I was faced with my next dilemma, I had managed to develop all this free time in my schedule by kicking some bad habits, but what next? I knew video games wouldn’t be a major part of my ideal life, but I still didn’t really know what my ideal life would look like, and so I wasn’t convinced I was making any progress towards reaching my ideal lifestyle.

So I did some soul searching and came up with a sketch of what I wanted my ideal life to look like. It was very vague, and still changes somewhat on about a monthly basis as I tweak and progress towards my goals, but at the time my ideal lifestyle was this:

I want to run my own small business where I can work with my hands. Ideally carpentry, woodworking, etc., anything where I can build and see the tangible fruits of my efforts.

I want to be able to take time off from my work so that I can be able to attend any and all of my future kids sporting events, concerts, etc.

I want to be able to take my future wife on trips and adventures so that we can see the world on our own schedule.

I thought these 3 goals were lofty enough and vague enough that I could grow into them, the question was now, how do I move towards these? At the core of all 3 of these things I realized that a small business is a hefty risk and may not make enough money to support my family, taking the time off to attend all these events probably wouldn’t be possible with a full time engineering job (especially as you move up in roles of responsibility), and traveling the world can be very expensive.

So. I realized that at the core of all 3 of this issues, was this I need more money to build the life style that I want for my family. And then came the search. I still think about this and life at how naïve and lost I was (and still am), but, my verbatim Google Search that sent me down this journey was “How do I make more money?”.

After sifting through a few sites that were clearly pyramid scheme type business opportunities, I stumbled across one link with a video of Josh Dorkin and Brandon Turner where they were breaking down the basics of REI. I didn't really understand it but they broke it down to the point that it had my attention, and I dug deeper. Pretty soon my every evening was spent scouring through BiggerPockets reading everything I could. I went back to Episode 1 of their podcast and began working on watching every episode in order until I was caught up to current day.

At the time I had about $70k in student loans, no credit card debt, I owned my car outright, and I had my monthly rent. I was desperately saving up to by my first deal and had a small amount of money saved. I started a BiggerPockets meetup in Cartersville, GA (North of Atlanta) so I could meet some of the investors in the area and begin networking, and I found a co-worker who also did real estate investing who began to mentor me and show me his properties and talk me through what he was doing and how he did it.

Things were going pretty well actually as far as a rookie could be considered. Until they suddenly weren't. It was at about this time I came across a BiggerPockets podcast where they interviewed either Ken McElroy or Jay Scott (it's been long enough that I can't remember which of them it was). In it they asked them, which would you recommend; getting started in real estate investing, or paying off student loans? Without hesitation the answer was pay off the student loans, hands down, no questions about, you have to pay your loans off first. I was crushed. I had gotten so absorbed that I was saving everything up for the sole mission of getting to the down payment for a SFH for an investment that hearing that I was doing it wrong was a blow to my ego. For a while I wanted to just ignore it, but that podcast had hit me in the chest and my mind kept wandering back to it. Eventually I decided that maybe this guy might know something I don't and that maybe this advice is valid and I should swallow my ego and listen, so I agreed to pay off my student loans before I dove into real estate.

The next day – I’m trying to figure out how to pay off my student loans as fast as possible. Well, almost as if fate was toying with me, a friend of mine messages me and says that there is a group of the Georgia Army National Guard deploying to Afghanistan in a few months, and that as an officer you would make your full salary, tax free, plus combat duty bonus pay, and have effectively no expenses as all your food and housing is covered by the Army. Now, I didn’t pick to go to Afghanistan solely for financial reasons, but more for a sense of mission and duty after attending a military college, training with the Army, and doing my national guard drill weekends. So in a desire to serve my country I volunteered to transfer to this unit and deploy to Afghanistan in 2019.

While overseas, I paid of the remainder of my $70k in student loans, built up another $35k in savings, read every book Biggerpockets had published at the time, accumulated a small library of real estate and business books, and came home with a much greater appreciation for the opportunity and lifestyle that we as Americans enjoy. I came back feeling almost no sympathy for the people that chose to complain and say that they had been dealt a bad hand and that things were not actually their fault and that there was nothing they could do. After seeing how bad other people’s lives can be, there was little room for complaints about reaching success (although my wife will be the first to tell you I still love to complain about the gym and yardwork).

While I was in Afghanistan my girlfriend (now wife) moved to Greenville, SC and I followed her because my company had an office there and allowed me to transfer. I got to Greenville in October 2019 and we were living in an apartment in downtown Greenville with a lease that ended in May of 2020. We got engaged in December 2019 on a trip to St Lucia that I splurged on as my reward for completing the deployment to Afghanistan. 3 months later in March of 2020 the world flipped upside down and everything shutdown because of COVID.

At about this same time my fiance and I were trying to buy our first house together. I had exposed her to the idea of real estate enough that she come around to the idea and I had gotten her to agree that we would look for a duplex that we could house hack. With this in mind we scoured Zillow looking for a deal that would work. I had watched Brandon's video on how to do an analysis on a rental property so many times that I had built my own excel spreadsheet that effectively did all the same calculations as the BiggerPockets one and set it up on the Google Drive so that my fiance and I could plug in the numbers for a house and take a look at it even while we were at work and couldn't really talk about it. That's when my fiance found 2 houses that she liked. Just one problem, they weren't true duplexes. They were a SFH with an in-law suite and the numbers didn't look good for a long term rental. And so Holly suggested, "Well what if we ran at as an Air BnB so we don't have to deal with a roommate?"

I was stunned. This had never even occurred to me, but she nailed it on the head. Without watching any of the podcasts, reading any of the books, or digging into any of the material, she found 2 deals on Zillow that could work. I had to research a good bit on Air BnB to forecast the numbers but after about a week of research I felt comfortable enough to move forward. So we placed an offer on the first house! And got outbid. But then the second house our offer was accepted! So with that I bring you to the numbers of my first deal, which closed on April 10, 2020 as we began a vacation/short term rental property at the beginning of the COVID pandemic!

The Deal at purchase:

Purchase Date: April 10, 2020

Purchase Price: $264,000 - conventional loan

Down Payment: $52,800 (sourced from fiance’s trust fund)

Closing Costs: ~$3,500

PITI: $1,095

House details: 3:2 (Upstairs – 2:1; Downstairs 1:1 w/ separate entrance). The house sits on a ½ acre lot that backs up to a creek in a neighborhood of downtown Greenville, SC. We went with an industrial look for the design as a lot of the house was renovated by the previous owner to have a modern industrial look to it.

Forecast income from Air BnB rentals: ~$1200/mo

It took ~1.5 months to furnish and get the Air BnB ready to rent, so we began renting it out on June 1, 2020. It cost us ~$3200 to furnish the 1:1 Air BnB space.

Pictures of the Air BnB space:

Deal numbers as of 1 year since purchase (April 10, 2021)

Actual monthly income as of April 10, 2021 (1 year of ownership): $1,197/mo (I'm irrationally proud of how close my estimate was, but now I'd like to bump this up as high as possible)

Home value (from Zillow): $287,160 ($23,160 appreciation, 8.7%)

Total maintenance/upkeep for the space: ~$30/mo

Now, that CoC return is probably something to be scoffed at by a more senior investor, but please bring your mindset back to that of a beginner. I'm doing a house hack, I'm covering my mortgage, but not quite the utilities yet, for my current goals, this deal has been a win for me. Now in addition, Air BnB sets your homes pricing lower for your first year so you can drum up plenty of business and build up those reviews. For the first 6 months of running the Air BnB we used Air BnBs forecast because we just didn't know what it could rent for. In the last 4 months (again we started in June, it's now April) we've begun increasing it, and in June of 2021 even Air BnB's automated rates have our listing at a much higher rate. While we met our goal of $1200/mo for the first year, we're already seeing May, June and July booking out and we're forecasting that we're going to start making around $1500-$1700/mo off of this property. Which starts to make this deal really work well for us. With the appreciation in our neighborhood and with how Greenville, SC is growing I have no doubts that this was the right decision.

So with this first property under our belt, we're now looking to move forward. I'm meeting with my realtor this afternoon to go look at a few more properties, while I had convinced myself I was looking to do the traditional rental properties, I'm now fully on board with the STR market. Me and my wife are hoping to purchase our next property in the next 2 months and get our next income property rolling now that we have a much better feel for the neighborhoods, and the Air BnB marketplace. I can't wait to keep this journey rolling, and while I was scared going into the first property and not knowing nearly as much as I would have liked to about Air BnB, I have no doubts now that I made the right decision.

If you’ve made it this far thank you for reading, and I wish you all the best. My main goal for this post was just to share my experience as a means of giving back to the BiggerPockets community for answering my question 3 years ago “How do I make more money?”