To start with, in this digital age, why still invest in real estate? Well, I love real estate because it’s such a simple business model.
You collect rents and pay expenses, whatever is left is the profit you can pocket.
It is also recession proof if you invest in the right class, and inflation proof because property prices and rents go up with inflation and oftentimes beat inflation.
There is always a demand because people always need a place to live.
Lastly, you can use leverage with a mortgage to invest in an asset that is worth a lot more than the capital you have, and ultimately the debt will be paid off by your tenants, all the while generating cash flow for you.
Because of these reasons, many finance gurus would consider real estate the “king of investments”.
Robert Kiyosaki, the best-selling author of "Rich Dad Poor Dad," asserts, "Real estate investing, even on a very small scale, remains a tried and true means of building an individual's cash flow and wealth."
Grant Cardone, the entrepreneur and real estate mogul, adds, "The real estate you own can be an asset that can provide cash flow in the form of rent or profit from a sale."
Brandon Turner, the former co-host of the BiggerPockets Podcast, emphasizes, "Real estate investing, with its vast array of strategies and opportunities, opens doors for those seeking financial independence."
“90% of all millionaires become so through owning real estate.”
This famous quote from Andrew Carnegie, one of the wealthiest entrepreneurs of all time, is just as relevant today as it was more than a century ago. This adage reflects the reality that real estate has played a pivotal role in countless success stories.
In my mind, real estate is not just a financial vehicle but the best investment vehicle for somebody starting out with limited capital and knowledge about the stock market, offering unparalleled opportunities for wealth creation, financial security, and the fulfillment of lifelong dreams.
In particular, I will walk you through the journey of how I was able to accumulate 22 units of rental properties in less than 10 years, which prepared me to be retirement ready in my mid thirties.
Is a 22 unit portfolio enough to retire on? Honestly, not quite because of the mortgage payments. However, once they are paid off, which will be way before the typical retirement age of 67, they would definitely generate enough cash flow. Or if I decide to move to a low cost area for a location arbitrage, I can retire now.
But there are many reasons why I still chose to live in this high cost area. That’s a long discussion for another post. Short answer is, not everybody wants to retire early. I am working on my next endeavor, which is way more meaningful than retirement.
Without further ado, let me take you on a journey through the world of real estate. I am a first generation immigrant, started out late in investing because my PhD education took a while, and I’ve had demanding professional jobs.
So how did I manage to invest in real estate while raising a family? How did I learn? How did I fund these deals? Sit back and relax, because I am going to share all of that with you in this post.
They say that starting is the most important step. I couldn’t agree more. No matter how grand the plan is, it will turn into nothing if the plan is never started. So what was my humble beginning in the real estate investing journey? The answer is two words - turnkey properties.
My husband and I graduated in 2011/2012, not long after the 2008 great recession. Knowing that jobs may not be secure, we started looking out for ways to invest.
We stumbled upon this company which sells turnkey properties in Indiana and were shocked by how cheap these properties were.
We had to pay a hefty membership fee in order to participate in these deals.
Was it worth it? Yes and no. It got us started but we could’ve easily figured it out on our own. More on that later. Anyway, I don’t regret it because it gave me a valuable lesson.
Our first property is located in the modest neighborhood of East Chicago, Indiana, which was purchased in the fall of 2013, for $53,000 with a 25% down payment. Today, this property is worth about $120,000.
Yes the property price merely doubled, and we could’ve picked another area that had stronger appreciation. However, if you look at the down payment we actually put in, plus the closing costs, which is approximately $20k, it is at least a 3x multiple if you look at the gain vs. the down payment. So not bad for a first deal!
You may ask, how did we fund our first property? Well, that was actually my dowry for our wedding. That’s right, we used it to fund the down payment. We instead paid for the various wedding vendors in installments as we got paid from our jobs. Yeah, so essentially it’s like we borrowed from this dowry but paid it back gradually with our earned income.
At the time, I read the book The Millionaire Next Door, which is a great book that I highly recommend. Our plan was to buy 1 property like this a year, so in 30 years we will be ready to retire with a 30 unit portfolio.
So in the next three years between 2014 and 2016, we purchased three more single families - one in Lake Station Indiana for $60,000 in 2014, one in Hammond Indiana for $69,000 in 2015, and one in Stone Mountain Georgia for $58,200 in 2016.
Note the first three properties were all in Northwest Indiana because that’s where the turnkey company focuses on.
Why Stone Mountain Georgia? Because as we learnt and matured over the years, we figured out that while Indiana is cheap, it is a so-called “stable” market, meaning that property prices are stable and appreciation is very modest. After doing some research, Stone Mountain, which is in the greater Atlanta area, is a so-called “emerging” market, which means appreciation potential is high.
Fast forward to today, the property in Lake Station IN is worth about $85k, the property in Hammond IN is worth about $165k, while the property in Stone Mountain GA is worth about $200k, even though it was the cheapest when we bought it.
We also bought it through another turnkey company, but guess what, no membership fees! We found them through BiggerPockets.
If you don’t know what BiggerPockets is, please go visit their website. Created by Josh Dorkin in 2004, it brings together education, tools, and a community of more than 2+ million members who are interested in real estate, from newbies to seasoned real estate investors. I learned so much from them, and I couldn’t thank them enough. And no, I’m not sponsored by them.
BiggerPockets would play a significant role in our next few acquisitions. After listening to almost all of their podcast episodes, I knew if we really wanted to scale our real estate investing, we needed to get more hands on - finding value-add opportunities instead of turnkey and getting our hands dirty a bit.
Let me explain. Value-add basically means that the property needs work, but because of that, you can buy it at a discount. By rehabbing it, you create value out of blood sweat and tears. Finally you refinance it to take your equity out and repeat it all over again.
Right there, I just explained BRRR - buy, rehab, refinance and repeat. Why go through all the trouble? Well, because the value creation part allows you to recycle your money.
Instead of saving your hard earned income from the W2 jobs, which is what we did with the last three single family properties I just spoke about, you have this separate real estate money to be deployed over and over again. You can still save of course, which will compound the speed of acquisitions. And that’s exactly what we did over the next couple of years.
Equipped with BiggerPockets knowledge, I started focusing on a close-by area in Allentown, Pennsylvania, and started going to local meetups. My goal was to find value-add multifamily units. Such deals were not easy to find because they seemed to be what every seasoned real estate investor was looking for.
Also, by that time, the real estate market had been getting hotter and hotter by the day, finally picking up from the post 2008 recession low. I looked for almost a year by going through MLS listings but nothing quite met my criteria, and eventually BiggerPockets came to my rescue.
I posted a question on the forum asking if any real estate investors locally were looking to sell. And of course, someone with a 400 unit portfolio replied to my post! The property needed some work, but hey, that’s exactly what I was looking for. By that time, I also got to know a wonderful real estate agent who had strong local knowledge and a contractor network, through the power of meetups!
Eventually in January 2018 we closed on a four unit multi family in Allentown, Pennsylvania, for $158,200 with about $40,000 as a down payment.
Since most properties in downtown Allentown are old row homes built in the early 1900’s or earlier, they usually needed work. Upon acquisition, we spent about $10,000 to fix up the property. So for this deal, we put $50,000 or so all in.
A year later, we were able to cash out refinance the property, which was valued at $225,000. Since this local bank we worked with allows an 80% loan to value ratio or LTV ratio, we were able to cash out a little more than $50,000, which is 80% of the forced appreciation (aka increase in equity).
In other words, by doing the rehab work, the value of the property went up from $158,200 to $225,000, an increase of $66,800; and 80% of $66,800 is $53,400.
How did we fund this deal to begin with, you ask? Just plain old savings and 401k loans from both my husband’s and my own jobs.
After experiencing the magic of BRRR, buy refinance rehab repeat, we gotta repeat! Deals were still hard to find on the MLS. I was looking at the MLS every day and analyzing deals every day. We looked at quite a few properties in person and made some offers, but nothing quite met our criteria. Also, foreclosures and short sales were already drying up by this point, and competition was high. So eventually we went back to the same seller, who offered us a bundle deal of 10 units, which consisted of two duplexes and one 6 unit. In particular, the 6 unit was in need of a lot of work, and it would be the biggest acquisition we had made up to that point. Nervous? Yes, a little.
First, we had to figure out how to fund it. The two duplexes were $116,000 each, and the 6 unit apartment building was $254,000. Recall we have $53k from the cash out refinance from the 4-unit we purchased a year or so earlier. That was roughly enough for the down payment for the 6-unit. For the two duplexes though, we convinced the seller to seller finance 10% of the down payment, so we only have to come up with 10% of the down payment ourselves. Around that time, I just left a job, so I have some 401k money lying around. After learning about solo 401k from Bigger Pockets, I created one for myself. One of the many benefits of a solo 401k is that you can borrow from it, unlike IRAs, which is typically what people do when they leave a job. So I borrowed $23,200, which is $116,000 x 10% x 2, from my solo 401k. There were some closing costs needed, and those were funded by my husband’s 401k.
So here comes the hard part. The 6 unit was in need of a lot of work as I mentioned earlier, so how do we do that? We initially approached the bank we typically worked with, hoping we could get a construction loan. However, after a lot of back and forth, the bank wouldn’t lend to us, deeming it too risky. So what did we do?
Well, this is real estate, there is always a solution, as long as the deal is good enough. This 6 unit was priced at $254,000, which is not even $50,000 a unit. Once fixed up, it would be valued at least $600,000. In other words, there was a lot of meat on the bone. The seller being a seasoned investor, of course, introduced us to a private money lender, who would fund the rehab at a very high interest rate of about 10%. Well, it was high back then since a normal bank loan would run at 4 or 5%.
I will skip more than a year of blood sweat and tears to rehab this property in addition to dealing with the financial stress. Quick side note, the way a private money loan works is that you have to fund the rehab first, and then they reimburse you. So we had to use credit cards, HELOC, personal loan, etc. etc. to tide over. Anyway, eventually, right before the pandemic, we were able to finish the rehab and refinance the property valued at a little over $600k. The rehab was way more difficult than we anticipated, since we basically had to gut the whole place, but we learnt A LOT. Definitely another story for another day.
Then the pandemic hit, and also we got so wiped out from rehabbing the 6 unit all the while working our jobs and raising two young children, we decided to take a break.
The last deal I’m going to talk about was actually the easiest, finally! After Covid, property prices shot up all across the nation. We decided to sell one of the duplexes we had, and 1031 exchange into a 6 unit bundle deal. I talked about this 1031 exchange experience in my YouTube video. One of the duplexes, which we purchased at $116,000 in 2019, was sold at $225,000, giving us a gain of approximately $100,000. We already had a 6 unit bundle deal lined up in Northwest Indiana, where deals were still much easier to find compared to Allentown Pennsylvania. The 6 unit was priced at $415,000, so the proceeds from the sale of the duplex was just about enough to cover the down payment and closing costs for the 6 unit. We closed the deal in 2022.
Alright, that brought us to 2022, and in total, from 2013 through 2022, we accumulated 22 units of rental properties. We haven’t purchased any new rental properties since then. As a matter of fact, we started selling some of the single families we acquired during our initial years. It has already been quite a long post, so I’ll explain why I finally decided to sell in the next post.
Whew! I haven’t talked about my whole real estate investing journey like this in one shot. It really jogs a lot of memories - the good, the bad and the ugly. I do want to give myself a pat on the back. I wouldn’t call what I achieved amazing, since so many other investors have done so much better in a similar span of time, but I tried my best. A for effort, right? With this portfolio, I don’t have to do anything else. I can just sit back, relax and wait for the tenants to pay off the mortgage. By the time I’m in my sixties, even at a mere $1000 of cash flow per unit (considering how fast rents are increasing), $20,000+ a month should be a decent income to retire on.
And of course, I am not going to just stop at that. In the end, my journey wasn't just about investments; it was about transforming dreams into reality, one property at a time. I had discovered the power of investing in real estate, and it had unlocked a world of growth, prosperity, and endless possibilities. All that being said, just like the Rich Dad cashflow game, once you graduate the rat race, what’s next? Yes, bigger deals, and they don’t have to be real estate anymore. I’m excited for my next chapter, and you can help me by sharing this post with your friends and family, and following me on social media. I’m on all of them. Thank you so much for reading until the end. Till next time!