This is the story of how I got started investing in the real estate… for the second time. I guess I should back up just a little bit and explain the title of this article. I bought my first piece of real estate when I was in my Mid-twenties. It was duplex and I lived upstairs and rented out a basement apartment. Now they call this ‘house hacking’. After about a year I saved up enough money for the down payment to buy another house and I kept the duplex as a rental. This was around 2004 and the real estate market was on fire. The rent from both units was about $125 less than my mortgage payment. But since real estate prices were going up so fast I looked at it like my house was my piggy bank and I was putting $125 a month in my savings account.
After just a couple of years I sold the duplex (which I bought with 100% financing) for a profit of $101,000. I couldn’t believe it. I was bragging at the bank when I was trying to fill out the deposit slip because they didn’t have enough blanks on the deposit slip to fit all the digits from my check.
I took that money and attempted to do my first flip house. Mind you, now it is 2006. I also bought the flip house with 100% financing, but the interest rate was horrible and the payment was very high. I didn’t care because the market was still going crazy and I was going to make a ton of money when I sold it. I gutted the house and started remodeling it. I paid almost $500K for the house and put in all of my money. I think around $150K. But it took me about 8 months to do the remodel because I was still running my mortgage company and working on the house in the evenings. It was well into 2007 before I was finished, and the market had tanked. I couldn’t sell the house. My payment on this house was around $4000 plus the mortgage on my house was around $2000 plus the mortgage on the commercial building I owned which had my mortgage company that was not making any money because the market was dead was another $1500, plus I rented an office for a second location that was around $1000. I had employees, power bills, water bills
Bummer right? How did I get back on my feet and get going again? Easy… I just did it. That’s what you do. I just put one foot in front of the other and took my first step. That step was into the sand. I moved to the beach. My dream was to try to buy a $1500 hot dog cart and sell hotdogs on the beach. But the beach I moved to didn’t allow hotdog carts… another bummer.
I couldn’t get a job as a waiter, I had no experience. I applied for every job I could find. I was either over qualified or under qualified for everything job I applied for. I worked some crappy jobs and I just survived for a couple of years. I ended up getting kicked out of my beach house I was renting because I couldn’t keep up with the payments after I broke up with the girl I was dating. I was about to be homeless, again. I had just started dating a new girl and I told her I couldn’t afford to stay in the beach town we were living in and I was off to find a new beach to live on. She surprising said, “let’ go”. So we were off on an adventure to find a new beach town. We worked our way through a few Florida beaches until we found a cute little 800 sq foot beach house that was for sale for $100K. She had saved up $30K and I had didn’t have two nickels to rub together. She was not a US citizen and I had the worst credit humanly possible. So we weren’t able to qualify for a loan. But, we convinced the seller to do owner financing with a two-year balloon. We were planning to get married and figured that after we were married, we would go through the process of getting her green card and she would eventually able to get a mortgage. This was a big gamble because we had to put $25K down on the house and if we couldn’t get financing in two years we would have lost that money. But it all worked out.
Because we bought the smallest, cheapest house we could find (but super cute and only 2 blocks from the beach) we were able to save money. We lived on her salary and saved all of the money I made. We live very frugally and saved as much as possible. My original goal was to pay triple payments and get the house paid off in 6 years. After losing all of my properties in foreclosure I wanted something no one could take away from me.
But, after a year we had some money saved up in the bank and came across a duplex that was for sale. And it was a really good deal. I was always looking at real estate and keeping my eye out for a deal. Even though I didn’t really think we could buy anything we called a mortgage broker and found out she could get approved to buy a second property. Again, after losing everything I wanted to be very cautious. I crunched the numbers every which way I could imagine. I figured that even if one side was empty or I had to cut the rents in half of the current market value, I could still afford to pay the mortgage. So, we pulled the trigger. Now with the duplex, the rent from one side paid the mortgage of the duplex, and the other side paid the mortgage of the house we were living in. Now, we could save twice as much money because we were living for free. We stayed in our little 800 sq foot house, continued to live frugally and kept saving money.
I should point out the wife is a school teacher and I had a sales job making around $50K before taxes. So together we were not even making a $100K and now we owned 3 units (2 properties).
I started to jokingly say that we were back on my get rich program that I started in my 20’s. When I was in my twenties, my get rich program was to buy one house a year until I had 10 properties. If each property made a $1000 a month, I’d be making $10K a month and I could retire way before 40. But I screwed up that plan and went broke at 35. Now at
We continued buying one property every year for the next 5 years. I even got laid off of my sales job. With no job, I decided it was a good time to get my real estate license. By the time I got my license and started working for a company and got my first commission check, I had gone almost a year without income. So we were doing all of this on an income of less than $50K a year for a while.
To recap where we started. We had my wife’s $30K in the bank when we started, and we couldn’t have done it without it because we had to put 20% down on the first house because we did owner financing since neither one of us could qualify for a mortgage. But, if you can qualify for a mortgage to buy the first one, there is no reason you can’t get started and do the same thing with much less money. You could get an FHA loan with 3% down. Once we spent that money on the first house it was gone so we were starting over from scratch to buy number two.
I always say there is no grand secret to what I’ve done or how to do it. It just takes the decision to do it. It took some sacrifice for us not to have new cars or fancy things. But my wife is from Spain and we still took a trip to Europe every year, and we still went out to eat and had a pretty damn good quality of life. We sometimes joke that things were easier when we just had one house and a net worth of $30K. But, now that it is five years later, we have a net worth over a million dollars, and we are pretty close to having enough passive income to quit our jobs and start traveling the world full time. So, you can do it too. The hardest part is getting started. We didn’t have any debt when we started. If you are struggling with debt you want to pay off you can get more information on how to get out of debt Click Here. And if you want some tips on how to save money Click Here. Maybe your not ready to buy your first property yet, but if you are here reading this, you’re on the right track. I had no clue what I was doing when I got started. Educating yourself is the best thing you can do in the beginning. But, don’t get analysis paralysis where you keep reading and learning and not taking action.
Let me know in the comments if you already own real estate or if you’re are getting ready to start that journey. I love to hear how your journey is going.
And as always, if this was helpful pleas subscribe. I don’t want to sell you anything. I just want to show you how I did it and how easily you can replicate it.