Broke Teacher to Successful REI - My $5M Portfolio Story

[Kenneth McKeown]

Hey y'all. Long time BP member here and I figured it was time while I had a slow day to detail my story.

Back in 2016 I was finishing up my Masters in Education at Texas A&M while dating a woman long distance and chose a high school teaching job in San Antonio for the better of that relationship. Well - a week later she called and said she wasn't flying down to see me (the morning of her flight). So I was stuck - in San Antonio... and all of a sudden had way too much time on my hands. I was mindlessly scrolling Facebook shortly after this and saw a friend from HS (who was not the best kid nor the most intelligent) accepting an invite to an event called "How to make $50k in a month" and I figured it was the biggest scam ever. Well - it wasn't... and he was the teacher/speaker. I reached out and wanted to know HOW - as that was my entire YEARS salary. He said two things - Rich Dad Poor Dad & BiggerPockets. Let's just put it this way guys... my life would never be the same.

I went to countless REI meet-ups, watched countless podcasts, read so many books (after going a decade having never read ONE) and I got obsessed. I moved to Dallas at the end of that school year and finished my real estate classes to become a realtor on the side while I was teaching my second year of high school. I had learned so much in San Antonio and failed so many times in acquiring a property that it was less than 60 days in Dallas and I had my first property - a duplex with my VA loan. It may have taken me 5 months to close my first deal - but I wound up closing 6 in the next two months & I knew at the end of the school year it was time to take the jump - to become a realtor full time.

I'll spare you guys the rest of the story but it's been incredible... just some of the feats I've accomplished are:

1. Sold over $100M in real estate & built a team only to tear it all down and be basically solo again.

2. Traveled the world.

3. Accumulated over $400k a year in passive income.

4. Become a multi-millionaire. 

5. Acquired over $5M in real estate - which includes the path of buying a duplex with my VA loan, a SFH 5 months later with a 1% down loan, a 4-plex with my VA loan 2 years later, built a custom dream home with an AirBnB suite, completed a horribly over budget BRRRR SFR, completed another SFR that went way over budget, sold my quad for a 4-unit office commercial space, sold my 4-plex for a luxury cabin in Oklahoma AND most recently bought a brand new home to use part time while visiting my girlfriend/future wife in Florida.

All of this wouldn't have ever happened if my butt didn't get dumped. I can tell you - everything happens, truly, for a reason. But you have to put in the work and absolutely grind & hustle. Make sacrifices. I feel like my consistency and discipline over the past 5 years is truly what has led me to where I am today. 

I'd love to answer any questions - help out the newbies or even educate the well versed. AMA! (ask my anything!) 

[Tomas Valladares]

Quote from @Andrew Postell:

@Tomas Valladares thanks for the post.  Always great to hear from a fellow Texan especially ones that are here locally.  

I love house hacking.  It's how I got started as well.  Super low out of pocket, the best interest rate you can get, lowest closing costs, highest seller contributions, etc, etc.

Keep in mind that house hacking REDUCES my cost of home ownership. You will NOT cash flow on any property that you purchase. I'm not sure if anybody has said anything different to you but I need this to be your expectation. Remember, you are occupying one of the units...it would be impossible to cashflow in that scenario. Ok, maybe if you rented out each room and maybe did everything Short Term or something like that. But if it's long term renting, then you won't cashflow. But it will still allow you to afford a SIGNIFICANTLY higher price point than if you did not house hack.  Even after you move out you won't cashflow either...because you put a low downpayment. That's the benefit of buying a primary home.  So, when you put very little down...you borrow more.  That higher loan amount means your payment is higher.  This is why cashflow doesn't really work in these scenarios.  That doesn't mean you shouldn't do it - but this is the expectation you should have.  House hacking allows me to buy a higher valued home.

So, if real estate appreciates 5% per year, then a $500,000 property will have $138,000 in additional value after 5 years. A $1million home will have $276,000 in value increase after 5 years (using that same 5% appreciation per year). The higher our value, the higher the equity gain is - even if the % of gain is equal between the properties...the dollar amount is higher on the higher valued home because the property is worth more. That's how house hacking helps us gain wealth. We certainly aren't gaining $276,000 with $200 of cashflow. So, don't sweat the "no cashflow" thing. Just focus on purchasing a good home that you feel comfortable with living in. Your commitment is to live in it for 12 months...and then you can do it again and again!

I hope all of that makes sense but feel free to ask anything additional.  Thanks!

Thank you so much for your very detailed response, Andrew. I had made that comment over a year ago and since then I purchased my first house hack. Just as you mentioned, I learned quickly that this would not be a cash-flowing deal in Texas. I bought the nicest house I could, and I have three other roommates who haven't been late on rent for 10 months now. I'm paying about the same to live in my house as I was splitting a 1-bedroom apartment with a roommate, but now I'm seeing that appreciation, sweat equity, and tax benefits you touched on.

I love reading comments and posts like yours to give me a refresher on why I got into a house hack in the first place. Thank you for taking the time.