Making The Leap - Lessons From My First Year As An Investor

I went back and forth several times about whether I should take the time to write this.  I had to think back to the time when I first became interested in real estate and what caused me to take the leap for myself.  It was  the success stories and listening to or reading about other people who drastically changed the course of their lives through real estate investing.  I am going to share my story with you with the hope that it will motivate one of you to take the leap as well.  

My Story

It has become somewhat cliché to mention the book Rich Dad Poor dad on BiggerPockets. On the surface you could argue that it’s not really that great of a book. It is filled with lots of fluff, and the main points could probably be summarized in just a few pages. But for some reason this book seems to be the one that fundamentally changes peoples mindset towards wealth and money. For me as with many others, it did just that. I don’t remember exactly when I picked that book up, it was roughly a year ago, but when I turned the last page and closed the cover I knew things would never be the same.

I immediately started doing research online, and that research led me straight to BiggerPockets, I was hooked. Over the next 4 months I listened to every  BP Podcast (some of them more than once), I read (or listened to on audible) over 60 books, went to networking events and took every local investor out to lunch that would talk to me.

My First Properties

At this time in my life I had never owned a home before never mind an investment property. I did not want to wait and after reading some of @Brandon Turner ’s articles on house hacking I decided that a duplex would be the perfect first investment to get me started. One thing led to another and 4 months after starting the knowledge quest I pulled the trigger. I found a duplex that was in great shape on one side and a disaster on the other. Of course I rented out the good side and with the help of my girlfriend went to work fixing up the other for myself to live in.

I had used up most of my liquid cash on the down payment and renovation so I started trying to figure out how I could continue to invest without a lot of cash. I remember reading about purchasing houses “subject-to” in the book on investing with low and no money down (thank you Brandon ). I started cold calling for rent and for sale by owners on Craigslist trying to see if I could find someone who would be willing to carry the financing.  A month after closing on the duplex to my surprise I had someone interested. It was intimidating and confusing trying to negotiate this process, but with a little guidance from a local investor I pushed through. A few months later I had the new house renovated (I used a contractor this time to speed things up) and I had my 3rd unit and 2nd rental in less than 2 months.

Re-Evaluating the Plan

At this point I really started thinking about my long term strategy and goals. I set a lofty goal of becoming financially free in 3 years or less and I laid out a step by step plan on how I would accomplish it (how many units I would need, cash-flow per unit, equity gain etc. etc.).  When I first started the journey my initial goal was to put away enough money to acquire  one new property every other year.  I was now less than 2 months in with 3 units.  I was learning new ways to acquire property faster and faster.  In my research I found many people who had managed to acquire enough property to cover their expenses in 3 years or less.  I did not yet know exactly how I would get there, but I wrote down my goal anyway and trusted that I would figure it out.

Every Good Story Needs Some Drama

 Roughly 3 months after my first investment I received some disturbing news from my work that threw a huge wrench into my future plans. I worked for a construction and engineering company, during the early part of my career that meant moving around the country from project to project. For the last 3 years I had been working out of our district office in Kansas City which gave me a great opportunity to invest. I will never forget my manager coming into my office and telling me they would be assigning me to a field project within the coming year. The field assignment would come with long hours, 6 day work weeks and it would relocate me away from my investments. I found myself in a really tough spot. I had put an enormous amount of effort into learning real-estate and there was no way I was going to just stop investing. I briefly considered quitting and trying to flip houses to support myself, after careful consideration I decided that was just too risky. I was very fortunate to have another stroke of good luck. Shortly after a recruiter from a Kansas City based engineering firm reached out to me, I interviewed and I got the job!

The new job turned out to be a blessing in disguise. The job came with a substantial pay bump, a more flexible schedule and it freed up a sizeable chunk of money from my 401k , company stock liquidation and vacation pay out. It was time to buy more houses! 

Partnership

I was fascinated by this BRRR (Buy, Rehab, Rent, Refinance and Repeat)strategy I kept coming across and I found several local investors who were using it successfully. I decided that was where I was going to put my focus. I loved the idea of combining the benefits of house flipping with buy and hold investing. The problem was that I had learned from my last experience that managing a rehab while working full time was not the easiest thing to do. There was only one of me and I could not be two places at once.  I was meeting my contractor over my lunch break and I felt like things would start to interfere with my work if I could not figure out how to get some help. 

I needed a partner, someone who could be there with boots on the ground while I was at work. I met a local full time investor through my REI club Facebook page and we started talking.  It turned out to be a perfect match.  With the help of an attorney, we formed a new 50/50 joint LLC shortly thereafter and closed on two BRRR houses a couple weeks later.  

Building the Dream Team

A lot of people ask me how I am able to invest while also working a full time job. That was another major mindset shift that I had to make. You cannot do everything yourself in this business if you want to grow and scale.  I would argue that holding a full time job has actually benefited me.  I  could not spend a lot of time on the business during the day which forced me to learn how to leverage systems, processes and other people to take things off my plate.  One of the biggest excuses I hear from people is that they don't want to deal with Tenants.  I will be the first to tell you this is not a valid excuse.  When we finish rehabbing a property we immediately turn it over to a property manager.  The PM takes a 10% cut of the rental income to manage the property, but I consider this a small price to pay because it take a lot of responsibility off myself and my team which allows us to continue to grow.  Over the last several months we have built a team of people to support us.  This team includes property managers, contractors, our attorney, CPA, bookkeeper, private investors and most recently some part time help from a stay at home mom to help out with things like bills, utilities insurance and other miscellaneous tasks. 

Where we are Today 

After the first partnership things really began to take off.  We pushed each other to grow and people started to notice the success we were having.  The next phase of the journey was helping others.  I quickly realized that helping others accomplish their own goals was even more rewarding that accomplishing my own.  

Today I have two partners, we are rehabbing 5 properties concurrently and I have ownership in 12 rental units worth a little over a million dollars. It has been less than a year since I purchased my first investment and I believe we will likely hit 15 units or more before the anniversary of that first purchase.

Today we are focusing on the BRRR strategy for our own units. We are also helping new investors build their own portfolios by offering turn-key rental properties and coaching them through the process of acquiring, renovating managing and analyzing income properties. We have big plans to expand the turn-key and coaching side of the business for investors both in and outside of Kansas City (possibly even outside of the country) and help others learn how to generate wealth for themselves and their families through passive income. It is an exiting time.

What I Learned From this Experience

I took some time this week to reflect on where I started, where I am, and where I see myself going. It has truly been an amazing experience. I have met so many inspiring and motivating people through real estate investing. For me the journey has been about much more than just learning how to make money in real estate.  As I have matured I have found myself caring less and less about material possessions.  More than anything I want to live a life of meaning and I want to be satisfied knowing that I made an impact on others while I was alive. 

 I believe many people (myself included) have a great deal of limiting and negative beliefs surrounding money.  For many families it is taboo to even talk about it.  Before I could begin investing I had to tackle many of my own limiting beliefs about self worth, money and confidence.  Many of us grow up in environments where money is scarce, we may view the pursuit of wealth as greedy, some go as far as to call money the root of all evil.  I have come to believe that money is neither good nor bad, but it can be good for the good it can do.  For me it is not about the money, but the lifestyle the money can give me.  I want to be able to travel to amazing places, I want to spend more time with my family and I want the security of knowing that finances will never be part of my worries. 

Today I feel like a kid again, it sounds a bit corny, but it’s true. I have a new-found sense of purpose, motivation and confidence. I am not yet where I want to be, but for the first time in a long time, maybe ever, I feel like I am headed in the right direction. Money problems are one of the leading causes of stress in modern families and relationships.  I feel like I now have a definite purpose in life and it is to help others learn how to build passive income through real estate.  If you have read my story up to this point I am very grateful.  If there is anything I can do to help you please reach out.