Doing the "stacking" without realizing it

We closed on 10 units this year. This more than doubled our portfolio which we built over the past 6 years. Then it dawned on me - we have been doing the “stacking” without realizing it!

We started out in 2013 by purchasing one Turnkey property per year from a Turnkey provider until 2015. We paid over $10k of “membership” fee to an Australia based Turnkey company just so we can access the list of turnkey properties to buy (I can write a whole other blog post about what not to do when starting out - we also paid $8k for doing a wholesale course that we never used). Anyway it got us started. After buying 3 properties in Indiana from the Turnkey provider, we met the person who was actually on the ground sourcing the properties, fixing them up and selling them to the Turnkey provider. That’s when we got to know BiggerPockets!

Then we realized couple things.

1. Buying Turnkey is a very slow way to accumulate wealth. We were just using our savings so we could only afford to buy one single family per year.

2. The locations we were buying at were areas that have high crime and / or population decline, which explained why they were cheap and cash flowed great “on paper”. We were exactly the type of newbie investors that were convinced to invest in the war zone areas and thought we got a great deal!

3. We missed the boat big time both in terms of not being able to snatch up more properties when it was a great time to buy and because of the locations, realizing little to no appreciation.

So we decided to look elsewhere, still buying Turnkey because a) we had to invest out of state due to the high prices where we lived which made cash flow almost impossible, b) we both work full time and demanding jobs so we thought buying distressed properties and fixing them up is impossible (this was before David Greene’s Long Distance Real Estate Investing was available of course) and c) house-hacking is very difficult - believe me we looked at some horrible multi-family houses, I believe the tenant of one of them described it as “treacherous” - and we were starting a family so didn’t want to compromise the baby’s health and other aspects.

In any case, that turned out to be one of the better decisions we made. In 2016, we bought one single family in the metro Atlanta area close to where we used to live. Because we knew the areas relatively well, we felt comfortable investing there. The property has since appreciated quite a bit - even though we bought it Turnkey we could BRRRR it at this point. It cash flowed ok but managing a single family out of state still proved to be challenging - one big opex item can just wipe out an entire year’s worth of profit.

Right around this time, we finally bought our primary residence, in an area of NJ close to the PA boarder. Because I saw the interstate sign to the closest PA town all the time, I decided to give the area a shot so we could finally invest “locally”. I started going to meetups and did meet a lot of people! That’s definitely the best decision we’ve made so far. Through the meetups, we got to know other investors in the area, including our current property manager / business partner. We closed on our first multifamily - a 4 unit property in Allentown PA - in January 2018. We found the deal - guess what - via BiggerPockets from a local investor who owns approximately 400 units in the area. We were able to BRRRR it at the end of 2018. I did write up the success story. Because it was our first BRRRR we did it very slowly for various other reasons as well.

The market has gotten very hot at this point. As a matter of fact we did not find any other deals that made sense during that year. We were also pregnant with the second child that year and decided to do our first flip.

While my husband was on paternity leave in early 2019, he reached out to the same seller who sold us the 4 unit. (We had reached out to him before but didn’t find deals that met our criteria.) Anyhow, this time he brought us two duplexes that he was trying to offload - which would be able to cash flow but not necessarily BRRRR’able. We then focused our negotiation on the “add-on” deal that we would be able to BRRRR as a condition to buy these two duplexes at the price he wanted. And it worked! We got a 6 unit that he just bought from a wholesaler himself, which has a lot of room to improve. Long story short, we had to use hard money to close on this one - a lot of lessons learned but I’ll save them when it actually becomes a success story.

Couple of key lessons learnt from our experience in the past 6 years:

1. Networking is super important. What made it happen is the people we met through networking, either online or in person.

2. Education and action can really help you accelerate. Since 2015 after our first child was born, I felt very motivated as it finally made me realize how much I wanted financial freedom. That’s when I started listening to podcasts, webinars and audiobooks massively. Also around that time I started following through on the advice learnt from those education resources including going to meetups and analyzing deals.

3. Partnership can be very valuable. The aforementioned partner not only helped manage our properties, he also added tremendous value in providing low cost contractors, sharing his market insight, and bringing in other business opportunities (the first and only flip we’ve done is with him). Partners also serve to hold you accountable, because if you said you were going to do something to your partner, you will feel bad if you don’t!

The moral of this story is that “stacking” is really possible. We went from 1-1-1-1-4-10. It’s pretty clear where the “inflection point” is. Just want to share our story with the new investors out there for encouragement. While this is not an impressive overnight success, our experience perhaps demonstrates the “get rich slow” process. We are hoping the trend can continue and in time we will achieve financial freedom like the many before us.

Happy investing!