2019 Year in Review, Nearly doubling my unit count up to 63 units.

I am posting this WAYYYYYY too far into 2020, but last year writing something like this was super helpful for me and I heard it was helpful from a lot of my colleagues so doing it again! We've been growing from here a lot in 2020, but you'll have to wait until 2021 for that full story! Or just reach out and I'm happy to talk about some ways we've grown (hiring our first W2 employee soon). 

Last year I wrote a post reviewing 2018 and my journey to financial independence through mostly real estate (https://www.biggerpockets.com/member-blogs/8534/81329-i-went-from-5-38-units-in-a-year-and-quit-my-w-2-2018-in-review). 2019 was my first year being fully self employed, and overall it was an outstanding success. I experienced a lot of growth as a landlord and even hired my first employee. I’ve definitely had a number of struggles, but nothing so bad that it couldn’t be handled. So hopefully 2020 can bring much of the same.

In any event, if you’re thinking about making the leap from your 9-5 to self employment I can say that it’s not nearly as scary as you think it is. I know that before I quit my day job I was worried that it would be a financial strain, that I’m taking a risk, and that it would be challenging. I found most of those fears to be unfounded and that they did not materialize in actual life. Part of my success in self-employment is because I took a successful side-hustle and turned it into more full time work (I was a real estate agent while I was working my day job for a full year and a half). Now that I’m working full time for myself I’m able to devote more time to continuing to work towards financial independence. The flexibility of being a full time agent, and the daily focus on real estate specifically, has definitely accelerated that path. I can’t say that I want to be on the grind forever (I think hard work is important, but I’m not about hustle culture), but being a Realtor has been the perfect job for me to mix growing towards financial independence through real estate with a high income job that I feel confident in my performance and where I know I am adding value to my customers. The synergies are also wonderful in that the education and learning I get from working on deals as an agent accelerates my learning and confidence in my own deals.

My only word of caution to anyone hoping to do the same is that success in most real estate related jobs requires harder work and persistence than most other jobs I’ve had. Additionally it can take a decent amount of time to build up to where you are generating consistent income to support yourself. So starting off as a side hustle is fantastic, but be prepared for that “side hustle” to take up almost as much time as your main hustle. Being a Realtor isn’t nearly as easy as the public thinks it is, and to be honest it’s some of the most demanding work I’ve ever done if you’re actually trying to make a high income at it. Additionally losing W-2 income can make it more frustrating and difficult to get loans. So definitely take a look at your own financial situation before making the leap. I’m also fairly young (30), am married with a supportive spouse, had a few buildings when I quit (the vast majority of the cash flow stays in the business though), have no kids, and built my life to have a pretty low level of basic income to cover my bills. So my risk level is admittedly very low based on how I’ve built my life.

Well here we go, by the numbers and then followed by my failures/lessons from 2019.

Quarter 1

Units to start Q1 2019: 38 Units

Units to end Q1 2019: 38 Units

Rental Cash Flow (if I was collecting it, my share only): $2,837 (Not Financially Independent (FI) Yet). I have business partners on the buildings. Which let me grow faster, but definitely cuts into how much cash flow I make personally. This year I think I realized that the real wealth in RE is in equity growth and rent appreciation though. So not too worried about sharing with partners. We also work well together and everyone plays a part in the business/has a role.

Buildings Purchase: No buildings purchased this quarter, however we were working to stabilize our purchase from the prior year.

Quarter 2

Units to start Q2 2019: 38 Units

Units to end Q2 2019: 38 Units

Rental Cash Flow (if I was collecting it, my share only): $2,837

Buildings Purchased: This was the quarter that we finally got most of our buildings stabilized. We had one in particular that was quite the saga because the prior landlord didn’t screen the tenants very well AT ALL. One even got in trouble for literally robbing a bank. . . interesting story for another day.

Quarter 3

Units to start Q3 2019: 38 Units

Units to end Q3 2019: 56 Units

Rental Cash Flow (if I was collecting it, my share only): $3,559, we are definitely Lean FI at this point, but I don’t collect the money so it’s not “real” to me yet.

Buildings Purchased:

9 Unit Building, Mixed Use, Commercial Loan 5/25 year ARM. Cash flow around $125 per door. B+ class area improving towards A class. Found through broker connection, off market, but listed within large brokerage.

4 Unit Building, Residential, Commercial Loan 5/20 year ARM. Cash flow around $135 per door. Raised money through capital investor for purchase. B class Area. Found off market through broker connection, deal was brought to us first.

5 Unit Building, residential/storage. 5/20 year ARM. Cash Flow around $100 per door

Quarter 4

Units to start Q1 2019: 56 Units

Units to end Q2 2019: 63 Units

Rental Cash Flow (if I was collecting it, my share only): $3,862. Definitely could be FI if I was collecting this but only because I house hack and my cost of living is so low. I’m not taking any of this money because we reinvest it back into our businesses.

Buildings Purchased:

7 Unit Building, Mixed Use, Commercial Loan 5/25 year ARM. Cash flow around $130 per door. B+ class area improving towards A class. Found through broker connection, on market

Failures/Lessons:

• Didn’t add to my personal portfolio. It’s definitely great to be growing the portfolio with my partners and we have big goals that we hope to accomplish for each partnership. Without them and the basic level of property management that I do I would not be able to have what I have, have an in-house property manager, and be working towards hiring a full-time handyman. That being said splitting the buildings 2 or 3 ways does hurt. I’m thankful for everything and I have great business partners, but I can’t forget to also be building my personal portfolio. So if I would have focused on finding another deal of my own that would have been nice. We are looking to do a few with just my wife and I in 2020 so that should help.
• My wife and I definitely spend too much on eating out and travel. That being said, I’m feeling closer to financial independence now and live a pretty free life while working on my own terms so I’m not going to sweat this too much. I could say I’m basic FI now, but that’s not the goal. I’ve seen too many people over the past year pass away unexpectedly or have big life changes happen without warning. So my advice is that if you feel like your journey to FI is a life full of sacrifice to maybe scale it back. If you cut out the biggest expenses you don’t need to sweat the smaller items. I think we put too much pressure on ourselves to go big or go home. It’s important to have big goals, but it’s also important to keep doing the things you enjoy. Personal advice to myself is to just look at what I’m spending money on and to make sure that it brought me enjoyment. A lot of my spending on food and such was out of laziness and convenience more than it was on enjoyment. That kind of spending is the kind that I think I should cut out.
• I don’t reinvest enough into my real estate agent business. Nothing extensive to describe here. I need to be better about reinvesting into the business to continue to grow the business. I’ve already been making good progress on that, but as a Realtor my business has been steadily growing and I can’t forget to keep feeding it.
• I need to leverage other people more. Hiring an in-house property manager was a game changer for me. It freed me up so much head space wise and time wise, and she does a better job at managing my properties than I ever did. By having my property manager as my own employee I am still able to have the control and oversight that I prefer as an investor that I wouldn’t have if I outsourced management to a third party company. I definitely got lucky with my hire because I will say I didn’t do that much as part of the hiring process, but I’m happy to have a fantastic employee on board. Moving forward I am excited to be hiring an in house handyman. My costs are still running and will run about the same as having a third party manager, but eventually I should see some economy of scale also. We should be able to get to at least 100-130 units this year and with the small scale third party management that I do for my Realtor clients to bring in some consistent revenue I should continue to be able to make payroll. Additionally I will be contracting out my handyman at a market rate to other investors I know well so that should help supplement the cost of labor and benefits.
• I let my health slip as I’ve been growing the business. This taught me that I need better balance. Like I said earlier, I don’t subscribe to hustle culture because too often I see it damage people’s lives more than it brings them up. I saw this personally with myself. I refuse to put my spouse, personal relationships, and my health behind business moving forward. I think I’ve learned that I can be just as productive by making sure that I work focused and efficiently if everything else is in balance. This definitely took a bit of self-reflection, but I learned what’s important to me. Additionally, leveraging employees and hiring out tasks helps to create that balance while not sacrificing performance to customers and without sacrificing growth within my real estate investment portfolio.