Hello BiggerPockets Community,
Since I've joined BP I've been addicted to listening to the podcasts, reading forums, reading recommended books, and just learning as much as possible. It's crazy to think that I've been investing in real estate since 2004 yet until recently I had no "real" knowledge of other people's experiences, books, or really anything. To be honest , until recently I did not think that real estate was a viable solution for getting out of the 9-5 rat race. I only wish I opened my eyes earlier to the possibilities. I'm sure I would have made much better financial decisions if so!
So to introduce myself I'm going to give you some insight on what I've done right and what I've done wrong. Then I will let you know what I hope I can gain from this community. So sit back and enjoy!
My Story
I was raised by a poor family. My father dropped out of school at 14 years old and worked as an autobody mechanic for his entire career. When he retires he will still have a mortgage and car payment and the government being his only source of income. My mother never help a job for a long period of time and passed away many years ago. Many people grow up in families like this, that depend on their paycheck to continue to survive and do not take many risks. They work for the man (or woman) and are dependable good employees who retire and take social security.
I grew up making the same mistakes. I wasted my money and although I did very well in school I did not really have any goals or aspirations when it came to a career or my future. Then I joined the Air Force and what I learned was invaluable. I was 20 years old working on multi-million dollar missiles and getting paid $16,000 a year. There were so many others like me who immediately bought nice cars and got themselves in a large amount of debt. I was tempted, and at times I did waste my money on stupid things, but I decided I wanted to make more money.
In 2004, I bought a triplex in Shreveport, LA. There is no way I could afford this house with today's rules and regulations, but at the time banks didn't care how much I made. I believe they called it "robo-signing". Luckily with no money down I was able to buy this property, live in the smallest unit and rent out the other two for positive cash flow. I didn't know about the 1% or 2% rule, or the 50% rule. I only knew that I wanted to make more money so I could buy more things. So that is what I did. For years I lived at that property without really thinking about the goldmine I was sitting on. I never raised the rent on the tenants and was happy with the status quo.
A few years later I left the Military, finished my undergraduate degree, and moved to Columbia, SC. You would think by now with my college education I would realize that I could make more money in real estate...wrong. I made a horrible financial decision. I was now in my mid 20s and everybody I knew was getting married. So I decided what the heck...I'm not married but I'll go ahead and buy my married house. Wow what was I thinking? I bought a large 3br/2bath house in a relatively decent area. It had a lot of issues though and luckily I sold it in 2009 and recouped some costs. Crazy story, a tenant who was previously living there who bailed and didn't pay a couple months rent decided to go and buy it when I was struggling to find a new tenant. Last I heard the house is now in foreclosure but I want nothing to do with it. Too many bad memories.
In 2010 I finally got smart. I took a new job in Charlotte, NC and bought a good property in the down market. The house was being sold as a SFR however it had a guest cottage on the back of the property. I rented out the cottage and lived in the front part of the house. A year later I bought a duplex (good ones are very difficult to find in Charlotte) and completely renovated it and then refinanced it.
I then got married, and I had to make a compromise with my wife...she wanted a new build house so we bought one in Mint Hill. That slowed me down on my goal but happy wife, happy life...i guess. Just recently I bought another duplex which will need a remodel, and I'm gathering quotes now.
My Properties
I still own the first triplex I bought and at this point it is difficult to sell it, even if I wanted to. The other properties are what I would consider Class "A" areas with good schools and relatively expensive areas. It was not intentional to buy in these areas, but because I work a full-time job I wanted as little drama as possible.
Property 1: Shreveport, LA - Duplex
The property was bought for $120K and has been refinanced twice under a VA loan. I currently owe $78K with an interest rate of 2.75%. It would probably appraise for around $150K now. The good news is that I paid zero dollars down.
My current rental income is $1,250 which is extremely low for this area. I have not raised rent on any of my tenants since buying the property but I've also had very little turnover. I know I could probably raise the rent to around $1,700 but I would lose my current tenants and they've lived in the property longer than I've owned it. I've pretty much come to the conclusion that this property is not going to generate a large amount of income for me right now however most of the mortgage payment is now going to principal.
Property 2: Charlotte, NC - Two SFR on one lot
This property was bought for $245K and has been refinanced once under a VA loan. I currently owe 190K with an interest rate of 3.25%. The house would probably appraise for close to $350K now. I paid 5% down.
My current rental income is $2,650 which is normal for the area. I may be able to raise it a little higher but I have good tenants in place. The house is in great condition with only minor repairs needed and the area is booming.
Property 3: Charlotte, NC - Duplex
This property was bought for $255K and has not been refinanced. However I did renovate the property and take out an equity loan against it. After I renovated the property, it appraised for $430K. The money was used to pay down debt and as the down payment for the home I live in now with my wife. I currently owe $190K on the original loan and $130K on the equity loan so I still have a decent amount of equity in the property.
My current rental income is $3,100 which is strong for the area, however because of the two loans I am not making as much as I would like. I'm thinking about refinancing the two into one loan especially since the equity loan is currently 15 years.
Property 4: Charlotte, NC - Duplex
This property was just purchased for $376K and appraised for 400K. I am in the process of receiving quotes for the remodel. I took out an equity line of credit for the down payment (25%) and plan on using my rental income and work income to pay that off as quickly as possible. After the remodel is completed I do want to look into getting a new appraisal to see if the house is worth more and move on to the next deal.
There are currently tenants in place however they are moving out at the end of the year. My goal is to have a rental income around $3,200 to $3,300 if possible.
My Goals
I feel like the strategy I choose is the "slow and steady" version. I read about so many people using the BRRR strategy and buying multiple properties in a year it makes me wonder if what I'm doing is really all that viable. At this point most of my cash is tied up in these properties and I need to regenerate more income through my 9-5 job and through rent before I can move on to the next deal.
Ideally I would like to know if there are others out there in a similar situation as myself and what did you do to keep moving forward? Did you change your strategy and focus on buying cheaper properties for cash and refinancing them? Did you sell off some of your assets so you could have more money? Did you wait and do the "slow and steady" until it worked out?
My goal is to eventually not have to work, but to work because I enjoy it. I would like to have more time to focus on family. I hope you enjoyed this post and got good information from somebody who kind of "winged" it. I hope as I learn more from the BP community that will change for me.
Thanks for reading my story,
Steve
