In 2017 I bought my first rental. I set a goal back then to have 5 rentals by 2022 and this week I hit that goal. A year early. And all with $7500. And honestly, it’s all thanks to BiggerPockets. I wanted to share my story. I’m far from being a great investor and learn new things everyday. I love this website though and love reading people’s stories so maybe someone will like this and be motivated.
It started in 2009 but I had no idea what it was. The commercial building I was renting space in was up for sale. It was 2009. Everything was super cheap. I loved where I was and thought it would be great to own the place. But I didn’t have any money.
The building had space for another business and a friend of mine owned a dance studio. Her rent kept going up and up so I went to her and asked her if she wanted to partner with me and move her studio into the building. It would lower her rent and keep it controlled so she was in! She also didn’t have much money.
So we needed a third partner. We brought my brother into the deal and we borrowed the remainder of the down payment from my father in law on a 12 month super low interest note.
We did an SBA owner occupied commercial loan. Purchase price $300,000. 10% down. My brother and I put in $7,500 and our friend put in $15,000. Seller paid closing costs, AND a rent back until her lease was up at her other place. We also somehow negotiated them giving us $10k after close off the books for remodel/build out. 2009. Haha. Buyers market for sure.
I still had no idea about real estate apart from buying and refinancing my own residence. But oh man did I love the negotiation and extremely pain in the *** paperwork and details for that loan.
Fast forward to 2016. We sold our primary residence and bought a new house. My brother wanted his money out of the commercial deal so I bought his share for $10,500 using some of the proceeds from our house sale. Yeah. Bad move on his part.
That same year I helped my mom and her husband buy a place using a VA loan. They're older and not great with technology so I pretty much did all the paperwork and e-signatures and document submission etc. These transactions rekindled the fire in me for paperwork and mortgage stress. I know. I'm weird. I did a rehab myself on her house (floors counters paint appliances etc) and loved it.
In 2017, we decided to refinance the commercial building. We got a lower rate, a lower payment and some cash out. And the joy (for me) of mortgage paperwork and stress. I don’t know why I love it so much but I do. So now I had a little bit of cash but still didn’t know anything about real estate investing. I couldn’t afford anything where I live in Portland, one of the most expensive markets in the country. Then one day a friend invited me and a couple others to lunch and we talked investing the whole time. He had been buying houses in other states. THIS BLEW MY MIND. I don’t know why, but this never seemed like an option.
He told us about turn key properties and researching different markets etc etc. Introduced me to a turn key provider, told us about Bigger Pockets and that’s when it clicked for me. I started reading everything. Listened to every podcast. Talked real estate to anyone and everyone. If I heard you had a rental, I’d talk your ear off. I wanted to learn it all.
I started researching markets and landed on Clarksville, TN. I liked the big Army base there. I liked its proximity to Nashville. The houses were cheap. I liked it was growing fast. I found a 3/2 on MLS for $100k in a neighborhood my agent told me they had a lot of rentals in. Bought it with a conventional loan 20% down. Rented for $925.
I was hooked. Once again I loved the process. I told my wife this was going to be my thing. I set a goal to have 5 rental houses in the next 5 years. I wasn’t exactly sure how I’d do it, but had a bit of a plan.
I’d sit on that one rental for a couple years. In 2019 my partner in the commercial space closed her business. So we found a new tenant. But 9-10 months later they turned out not to be the best tenant and I kicked them out. I put an ad on Craigslist for the space and was contacted by a guy who wanted to open a weed store. Sounded good to me. Those guys have cash. And lots of it. After a couple months of him researching city codes and license requirements we were a go. Except now, he said he wanted to buy the building. With my partner gone and a weed shop moving in I wasn’t sure I wanted my office there anymore anyway, so we worked out a deal for a lease option. He’d pay me 540k with 100k down and rent his space for $3000/mo until the end of 2021 and I’d stay until summer and then move out. We negotiated this between us, no agents getting in the way and taking commissions. It was great.
We signed that contract Feb 29, 2020.
Boy did I luck out on that. COVID shut the world down two weeks later. But weed shops stayed open. And made a killing.
I took my share of the lease option down payment and went shopping for my second property. My agent in Clarksville sent me an off market 3/2 in Oak Grove, KY that was going to be listed for $126k. I made an offer of $118k on March 1. We were about halfway through the loan when covid hit which made things a little tougher at the end but we got it done and it got rented quickly for $1025. Two doors, two states. I’m loving it.
The rest of 2020 is a blur. What a stupid year. Except, house prices skyrocketed. My original house was worth $170k now! In summer of 2021 I did a cash out refi, for a lower rate and same payment, and got all my original investment plus a few thousand more out of it. Time to go shopping. The only problem was houses in Clarksville had skyrocketed in value, but rents haven’t quite kept up. A $170k house was only renting for $1100-$1200. So the numbers just weren’t working. I needed a new market. I talked to another investor friend who had bought a place in Kansas City, so I began researching that market. I liked what I saw and got in touch with his agent/property manager and started looking. We found a nice place in Liberty, MO for $175,000, closed on it Sept 30th and get it rented in a day for $1580.
That same day, we closed the lease option on the commercial building. Time to take those proceeds and find another one!
By now I’ve done two loans with the same lender back to back so doing a third was a breeze. They had my file already and I didn’t have to do much for a pre approval. After losing out of a few offers in a super competitive KC market, a house that had been pending came back on. It was a house my agent had previously managed and he was friends with the listing agent. We immediately made an offer for $179k that was accepted.
Now I was feeling pretty good about my real estate investing and had cash so I wanted to get that fifth house. I had one under contract already so doing two conventional loans at once was going to be a problem. Solution: private money. I had never gone this route before but I’ve wanted to. I’d talked to a private money lender a few times and felt good about it. I was just waiting for the right property. I wanted to start small and I’d been researching the Little Rock market for a while so I talked to a turn key provider there and then hooked up with an agent and their property management team and started looking.
I had made a couple offers but lost and then my agent sent me one that looked great, was super low priced compared to comps and would rent for high. It was $75k. Made an offer and it was accepted immediately. After inspections there were about 5k in repairs that needed to be made. I wasn't really wanting to do a rehab, but, my private money lender told me they'd be able to finance 90% of the acquisition. So we did some market analysis, I had the property manager go over and we figured out a 15k budget for mostly cosmetic fixes. This would give the house an ARV of $120k, after which I could refi for 70% of ARV, and get most of, if not all of my rehab money back and only have about $10k of my own money in the deal. My first BRRRR.
I worked both these deals at the same time, which gave me the stress and paperwork I love on overdrive. Felt like my full time job some days. Which I wish it was.
Both deals closed today and I’m super excited to get the rehab going in Little Rock.
If all goes well, the second KC property will rent for $1500 and the Little Rock one for $1050.
I hit my 5 houses goal a year early and closed 3 in the last 2 months. I’m now in 4 states, which might be crazy but it works for me. All by leveraging my initial $7500 investment in 2009. My next goal is 10 doors by 2027. But I think I’ll be able to get it much much sooner than that.
Thank you BiggerPockets for educating me and providing motivation to meet these goals!
