My wife and I worked white collar and I had a professional degree with a lot of debt. We had wealthy, close friends, 2 couples who had multiple multi-families. The older was the mentor of the younger.
With 2 well paying jobs and 2 kids, we could not get ahead- but we weren't too far behind and had built up equity in our home. Having discussed things with our friends- we believed rentals would work and were only interested in multi-families. We pulled $100k out of our house and sat on it as we sought any "local" multi-family. 4-plexes near our price range demanded too much work. We put in a couple offers and I thank God to this day that none were accepted- because they never really would have cash flowed.
Duplexes in my market can NEVER cash flow as an investment property. There are too many who are paying cash and believe they are making money on the rent and too many others buying it as a home with a cash offset.
Meanwhile, the older couple divorced and put all their buildings on the market. They all readily sold... except one 5 unit that had a number of issues and wasn't getting looked at. All tenants were rent controlled. He reached out and we worked out an owner financed arrangement and I readily parted with my $100k.
Within a couple days we were pouring a cement floor in the previously dirt basement and setting footings for 26 lally columns so the building wouldn't collapse. I then set about letting the tenants know that there was a new regime- All deposits would have to be brought up to 1 1/2 months rent and terms of all leases would be enforced (because he wasn't).
I saw one tenant outside walking her dogs, she stopped to tell me the rent would be late. I told her she had no pet in her lease and that I still did not get her deposit and that her apartment wreaked of marijuana when I did a walk through (she lived there with her sons). She started to say something and I told her it was unacceptable and that I would be moving forward to evict her and not to forget about the $50 late fee which was heretofore never collected. She gave me notice 2 days later that she would be moving out by the 1st. We immediately set about renovating that apartment.
At this same time another of his buildings deals fell through- a 4 plex, old masonry building... we did a walk through. Horrible tenants, dogs cats and everyone smoked and it needed work but we did not appreciate how much. We had the bug! And wanted another property and it was right next door.
But I was tapped- we worked out owner financing and I pulled a loan from my 401k for a smaller deposit. Over the course of a year we cleared the building out. IT WAS TOUGH. Thankfully I had the younger couple mentoring me on dealing with these types of tenants. And then we came to realize we would effectively have to rebuild it- fortunately we had good connections and did it apartment by apartment. We moved from one "no interest offer card" to another, "to no interest balance transfer"...
During this time- they got rid of rent control on vacancy- we had 5 units in play- awesome for both short and long term!
Brutal handling the terrible tenants- but I learned a lot! A lot of stress on the family. A lot of lost weekends.
Am I wealthy- absolutely, but not necessarily in cash on hand. I am wealthy in family, in opportunity and in personal growth.
During these last 6 years we have been in Italy a couple times, Paris a couple times, Iceland, the Greek Islands, Amsterdam... Drove all over Florida on a family trip. We have 1 foreign apartment and one being built now (NOT FOR RENT!). We have our kids in great private schools who had them in person all of last year and this. I don't have a tremendous amount of cash in the checking accounts, I am mindful of the flow each month- so I am not above concerns. But we max out our 401k's and I divert a heck of a lot of cash to investment accounts- so I don't even see it.
BUT I remember the day that I walked in and bought my son a top of the line carbon fiber Santa Cruz mountain bike. I felt pretty rich that day. And every day I get to spend on the trails with him. Or when my wife bought a couple pairs of Valentino's in Milan. Or this past summer- being one of the first Americans in Paris and the family being treated like royalty in Fendi as my wife picked out a new bag... my boys getting coke after coke delivered to them, my wife sipping champagne as she dragged out the experience. "We have been waiting for the borders to open! Thank God the Americans are back!" said the salesman. And then on to Chanel!
I drive a clunker. I don't eat out a lot. I don't drink, I don't party, I keep things simple. Things begin and end with my family. If you have ever read "The millionaire next door" - I am on that trajectory.
And now... in the last 2 years... rents have gone exponential!
It is a beautiful life!
