The Real Estate Antihero
I would love to tell you about the quick, staggering wealth I have made in real estate. The glory of fixing up properties and how I now live on a beach and drive an Italian exotic supercar.
But that is not my experience. I have been involved in real estate for almost a decade. I have learned by making some solid investments, but learned more from making mistakes.
Bragging about success has never fit me. I think it is because I have learned more from the down times. Real success is also built over the long haul, and in my eyes I am just getting started.
So if you are looking for some real talk about creating wealth in real estate, I am here to give you my experience (so far).
If you want to talk to the person with the sportscar, you can find them online too. Just know that the car might be rented. And their “wealth” could be a facade as well.
This is my story of failing forward, going back to the drawing board, and ultimately why you should plan to become free by buying real estate.
Real Estate is a Party (Hat)
I was homeschooled as a kid. I did have a tasks on a curriculum, which I worked through as quickly as possible in the morning.
The rest of the day was spent either 1) playing sports outside or 2) on the web….until I got told to go back to the first activity by my parents.
It was online I learned about markets, appreciation and investing.
I admit to being a bit of a nerd. I spend many nights and some weekends playing a massive multiplayer online game.
In the game, you could make and buy swords, food, armor and other cool medieval stuff. You could also go and battle other players, which is great. But beside my point.
There were a handful of items that could not be made by other players.
These were fun items and included, of all things, colorful crown looking hats known as party hats.
However, something happened as time went on. Items that could be made by players became plentiful. However these hats became rare.
As more players joined and the economy grew, they became a status symbol.
My first successful investment was predicting that this would happen. I bought tons of hats when they were first available. Party hats became my main focus for the better part of a year.
I became insanely rich (in the pretend world). This also translated to some real money transactions, and made a large amount for a young teen.
Unfortunately one deal went bad due to no fault of mine, and my account got banned for life. Bummer. Back outside.
This was my first lesson in investing. I learned to spend all my time and money on things that would increase in value. Perhaps the even more valuable lesson was to jump at opportunity.
20 years later, I am still obsessed with investing. I just have traded in fake party hats for real estate.
Putting in the Work
Growing up, my parents were not afraid of a fixer upper. A lot of the work on their homes, they did themselves.
I was often handed a shovel, hammer and given other (non-technical) tasks to help fix up our homes.
They did two complete remodels, contracting some of the work out and completing some themselves.
One home was more cosmetic work , the other was almost a full tear down and rebuild.
These were just primary residences, and we called them home and fixed them up for better function and enjoyment. They did not have any interest in investing.
I became fascinated with how you could turn something ugly into something amazing.
These homes were dated. Like really dated, something that your friends just say “ohhhh, wow” when you show them around.
When they were done, they were amazing. I did not know how at the time, but I knew that I would one day do some remodeling of my own.
The Real Estate Investment Bug
I have always had the head and heart of an investor. I used to put my lawn mowing money into the stock market.
That was fun, but I also felt like I did not really own something. It didn’t feel like it was actually mine.
Fast forward to young adulthood, I found what I was looking for. It came in the form of a book, “Rich Dad, Poor Dad” by Robert Kiyosaki.
Now, that book has been the subject of some controversy, which I will not get into here. Let’s just say the merit of the story and lack of substance have been challenged.
And it is actually rather basic looking back on it now. But one thing it did for me that I will be forever grateful : it gave me a dream.
Real estate could be my ticket to passive income. To living whatever kind of life that I want to live, where I want to live it and when.
Real estate became my focus.
Becoming An Expert
You do not need to be a full time real estate professional to be a great real estate investor.
But after looking online at homes I could afford in my area (I live and work in Northern VA, a suburb of Washington DC), I realized that I did not have any money, and I also did not know the basics of buying a home. Both of which are pretty important in the investment world.
I was working at the time as a mental health counselor. I liked the work, but it did not really excite me the way that real estate was starting to.
A few months after looking into investing, I got my real estate license, and dove in full time with no plan b. I left my job as a counselor and started to help clients with real estate transactions.
Since then I have been involved in over 100 transactions, helping families, investors, builders and other individuals buy and sell real estate.
I also purchased 2 homes that have generated rental income for me, and will continue to do so for years to come.
However, I also almost went completely broke and nearly had to start over. The lessons from both experiences were priceless.
Here is a rundown of the first 2 properties I have purchased.
Property #1: The Townhome
The first home I bought was after 18 months selling real estate as an agent. I bought it from a past client turned friend. This seller wanted to stop being a landlord. I wanted to start. Perfect.
It was a townhome built in the 1970s. It had all tan brick siding, 3 bedrooms and 2 full bathrooms upstairs, and was just under 2,000 square feet on 3 levels.
Although it was a townhome, it had just enough unique features added by the builder and the location that gave it some character and charm.
I love this house. I plan to own it until I die, and if my kids ever read this, I hope they keep it as long as possible. Rent it out for life, kiddos.
The price of the home was a good price for both parties. It was a good deal, but the home also needed work. It was not dilapidated, but had not been updated for a very long time.
I inherited very good tenants, and signed a long term lease with them. I got financing from the seller (owner financing).
Financing was a big deal since it was very difficult to get a loan as a contractor with less than 2 years of work history.
I also was able to put down 10% instead of the 20% required for investment properties with a conventional loan.
I saw the home briefly for about 15 minutes before I wrote up the contract. The brief “inspection” was done by me at that walkthrough. I did not want to disturb the tenants.
I talk more about becoming a landlord before having my primary residence in this article.
Below is a synopsis of how it went.
Being A Landlord
Being a landlord was so easy with my tenants, I forgot sometimes I owned the home.
Every month, I would walk out to the mailbox where I was living and got a check in the mail from them. The check for my mortgage went out of my account automatically.
My interest, principal, taxes and insurance payments were basically covered by the rent. I made a tiny bit of cash every month (known as “cash flow”) but it was less than $100.
Basically, my mortgage was paid and every month the principal amount went down a bit and my equity went up.
I was living in a basement that I rented from a friend, fairly cheaply so I was able to save up some money.
Every once in awhile, the tenants would call and something would need to be repaired. I had a network of contractors so I would send someone to fix it.
It was really that simple. My maintenance costs were low (more on that soon). And I built up equity, got some tax benefits of owning a rental and the townhome also appreciated because the market was good (circa 2015).
After a few years, I made a quick and fairly bad decision. I decided that it was time for me to move into the home, and do a full remodel.
The lease was about to be up and I jumped at the chance to make the home a real stunner.
Renovation #1 : How Not To Renovate
I always told myself I was good with money. And to some level, that was true. Instinctually since I was a kid I would find strategic ways to get income, invest it and make more.
But I had a fatal flaw. I did not track. I knew some of the basics, how much I made, how much cash I had, etc. But thinking about keeping a budget gave me a feeling of anxiety.
Budgeting and tracking money that intensely just seemed too rigid. I relied on instinct alone. It had gotten me this far.
I decided I would save money by doing some work myself. I had some barbaric remodeling skills from being a teenager working with my parents.
The first day that the tenants moved out I worked 14 hours on the home. I tore out carpet, took out old fixtures, baseboard the whole works.
Decisions about how much demo to do had to be made. The home had old parquet floors that I did not care for. It also had a very old kitchen.
I had anticipated just refreshing the kitchen but realized it would not make sense to put new counters on the cabinets I was staring at.
I just went for it. Why not? I wanted it to look good. And for a few months, my greed of “wanting a nice house” replaced my original plan of wanting to build passive income through real estate.
I tore out the kitchen. I tore out the parquet. New flooring, new cabinets and new counters were ordered. I was buying tools as I went. I got what seemed like 100 gallons of paint (probably more like 10 or so).
Quickly it was obvious that my skill set was not good enough to put the place back together.
I had to hire a contractor.
Hitting a Wall
I had a tight feeling in my gut every day that went by, trying to tell me something. What the feeling was trying to tell me was “check the money situation”. I ignored it as long as I could.
The renovation project was taking my focus away from helping other clients. Which meant I had less income. And every time I turned around, something else had to be done with the home.
When it came time for me to hire a contractor, I couldn’t stick my head in the sand anymore. That night, I got out a notebook and pen, got some pizza and started to write.
I wrote and wrote and wrote, checked my accounts, and wrote some more. I put down every dollar I had, what I would earn in the next 3 months, and what my liabilities were in the next 3 months.
The grand total of cash I would have in the next 3 months was…. -$16,000. Yes, that is negative. Mistake, I thought. Ran it again. Same number. I wondered if I could return the pizza.
I panicked. My expenses were already pretty unavoidable. I tried to run bare bones expenses. -$14,000 would be my cash on hand in three months. Yes, that means I would have less than no cash. In other words, a large problem.
Clawing Out, Asking For Help
That glaring number did not include a contractor to finish the work. Fortunately, I already had almost all of the materials. And I was willing to work to get it done. But I badly needed a carpenter.
I went to work hard on the money issue. I started to move everything onto credit cards, I applied for loans, I hustled to close more deals.
Then, I talked to a friend of mine who I had not talked to for awhile. Turns out, he is a hell of a carpenter. He was willing to come help me finish at a good price.
My carpenter friend has skills. He is the best contractor I have ever worked with, and he honestly saved me from having to sell the house, and start back at square one.
As silly as this sounds, I choke up when I think of him coming to the house, me wide eyed covered in paint, him laughing at whatever I was trying to do, and then going to work. Effortlessly he got things done. He was like a superhero to me.
Cash Rules Everything Around Me
Now that I had the house moving in the right direction, I had to fix the second problem that I had. I would soon be completely out of money, and moving into negative territory.
I ended up going on a hardcore budget, every dollar I accounted for. But that would not be enough, and I needed more leverage.
I decided a short term personal loan was best. I got one from a mentor of mine, someone who I have known for most my life. This allowed me to pay my bills. I told them it would be repaid in full within twelve months with interest. And it was. It was the where every spare dollar went until it was paid back.
Looking back, I should have seen all of this coming. I should have had a pulse on how much cash I had available versus how much my expenses were coming.
I could have taken a loan against my equity before starting construction, however it is hard to get a second lien on a property when there is no floors or kitchen.
Even better would have been spending less money on frivolous things and had more of a padding.
But the most memorable lessons are learned the hardest possible way. I learned. Cash is what allows you to stay in the game.
If you run out of cash, you are forced to sell assets or take more debt against them.
Moving In, Renting Out
I worked very hard for the next couple of years. First, I worked hard on finishing the home. Second, I worked hard on getting more income.
Our townhome is nice, and I do enjoy it. I moved in after the renovation was done. I started my family in the townhome.
But the plan for my financial life is to always maximize passive income.
So with my plan in mind, I am currently remodeling the basement area to prepare to rent out to a tenant.
Would I like a basement rec room for the family? Yes. But sometimes maximizing your own (or your family’s) cash flow means giving up some comfort for now.
I know what I will gain later will be worth it.
Property 2: The Single Family Home
Many real estate investors buy properties at a rapid rate when they start. That was not me.
The first property I purchased was in 2014. The second was in 2020. A six year gap.
Why so long? Well if you read about my experience with the first, that definitely had something to do with it.
The other reason was I missed some opportunities. Between the first and second property I purchased, I wrote probably 5-6 offers on other homes.
For one reason or another, I missed those chances. Negotiations too far apart, seller circumstances changed, properties were foreclosed on, etc.
But eventually, in late 2019. I wrote an offer that was accepted.
The property was a single family home, with about a third of an acre with the most extensive landscaping I had ever seen.
I purchased the home with an LLC, instead of in my personal name. I had a couple of partners who owned minority stakes as well.
This home needed extensive work, before it could even be rented. This was unlike the first property, which was definitely a bit drab, but liveable.
The deal was an estate sale, and a win win: I got a good price on the house, and agreed to help clear out the house and get the belongings sold, donated, etc.
Don’t ask me why, but alternative financing (as opposed to just a good old conventional loan) seems to just find me. For this one, I got a commercial construction loan.
25% of the total project as down payment, and I would have a “draw” as the renovations went to fund them.
Renovation #2: Bringing In The Pros
I love hard, physical labor. I might be in the minority there. Clearing out the house was actually pretty fun and satisfying for me.
But this renovation was going to be completely different than the last. For several reasons. First, it needed to be fast. The sooner it was done the sooner the property could make money.
Secondly, we had to have a contractor to get permits. The jurisdiction I was in would not let an LLC owner pull permits unless it was a primary residence. My state (VA) requires a licensed contractor to pull permits and then tradesmen to pull electrical and plumbing under the building permit.
Finally, I wanted it to look good. A home that has modern updates with good finishes rents quickly and for more money.
For these reasons, I brought in a professional contractor.
Finding A Contractor
This was a journey in and of itself. First of all, I had to give a detailed draw schedule to the bank, outlining when work would be done, what it would cost, etc.
So I had a budget to stick to, as well a timeline. I had a goal of getting it rented within 60 days of closing. The bank had a requirement it be rented within a timeline as well, which was slightly longer. But all parties involved wanted it leased ASAP.
I ended up interviewing 4 contractors. One was out of budget, so was disqualified immediately. One was going to take too long, another easy nix.
That left 2 within the budget. Both were good and seemed trustworthy. This is how the choice was made: first, the materials, particularly the finishes (the “bling” materials, if you will) were going to look better. Secondly, I got to see a nearly finished project the contractor was already doing. And it looked good.
This one contractor had the job of renovating the kitchen including removing a wall, redoing 3 bathrooms, refinishing/replacing flooring, paint, all trim and other various repairs and maintenance items.
Compared to the first renovation, this went smoothly. They worked quick, it came mostly as promised and the place was put together smoothly.
During the process, I checked up on the house regularly. This assured that the work was progressing and also a good job was being done.
Along the way, there were some speed bumps. Delays with permit inspections slowed some aspects down. There was some more work that needed to be done once they got going.
There was also a global pandemic, that had potential to shut down the permit office and some supplies became harder to come by. I have discovered that during any given real estate deal some stress is part of the process.
The renovation took a total of 5 weeks start to finish. I did some landscaping with the help of some friends, along with a couple of other various jobs.
After this, it was ready to rent.
This part would usually be fairly straightforward, as I have helped many clients fill rental properties in the past.
But the pandemic of 2020 was just starting to boil up when the home when on the market in late March. It seemed like nobody was moving.
I eventually was able to find one single person who liked the house. They went out and found 3 more people to live with. This was after dozens of phone calls and several virtual showings.
Getting it rented was a huge relief and I got some great tenants in there as well.
The Future of the Property
I anticipate that this property will be another great investment for as long as I can possibly hold onto it. The tenants love it, it is in a great location and now the house is fixed up it has a lot of charm.
Another reason I jumped at this one: it is in a neighborhood where they are turning over the original homes with new construction homes. This boosts land values and makes the neighborhood more sought after to buyers long term.
I learn from every transaction I do, both as an agent and investor. I learned a ton from this one. It also got me excited for whatever comes next.
What Am I Building?
Investing in real estate is not easy. It can be difficult. Sometimes, it can be downright frustrating. It can also be fun. And rewarding.
But to really want to build wealth this way, you have to know what you want out of it.
I have driven an old car since the day I started as a young real estate agent. At the time, it was all I could afford. Now, I still drive the same old car 8 years later. I plan to drive it until it won’t go any further. After that I will buy another used car.
I rarely buy clothes. When I do they are off-season and on sale. I dress in style, but not flashy.
I do not really buy many “toys”, never have. Gadgets do not interest me.
I have been criticized for not dressing “nicer”, driving a luxury vehicle and for generally pinching pennies. Even my family will tell you that I am cheap.
But there is a plan behind it all.
Money, Time and Wealth
So what do I spend money on? Well I have spent a large portion of my earnings on investing in real estate and remodeling, in case that was not obvious yet.
I also do splurge from time to time. The gym I go to is almost $200/month. I buy nice hiking gear. These activities keep me in shape, my mind sharp and my stress levels low.
I also eat out weekly and I like to plan family trips to far away places.
But why do I really invest in real estate?
It buys me time. Time I can spend with my wife and daughter. I can travel for weeks at a time and not worry about what my boss would think. Meditation retreats. Going hiking on a weekday. Being there to help friends and family when needed.
For me, real wealth means I have the freedom to use my time how I want. That is why I invest in real estate.
For you, it may different. Some people really are into exotic cars. There is no wrong answer for what drives you to take on a real estate deal.
But figure out why you want to do it, and make sure it is a good reason.
Then go for it.
This is just the beginning of my journey as an investor. I am always on the search for another investment property.
The lessons I have learned along the way, people I have met and the passive income I am generating have been the highlights.
Here are some of the biggest things I have learned on my first two real estate investments.
• Budget and track. This was much more simple than I thought. There are many apps that automatically track bank account spending to categorize. When analyzing a real estate investment, I kick it old school with a pen and paper.
• Cash and equity are lifelines. When you run out of both, you are at extremely high risk. Having cash on hand or the ability to get quick cash make you able to seize an opportunity. Equity in your properties can also be used to obtain more cash if needed.
• Creating Systems. I am now setup so when another investment comes along, I am ready. From what to offer, where to get financing and partnerships (if desired), I can move quickly.
• The contractor team is essential. Finding professionals who do good work at a good price was more difficult than I imagined. Getting the right contractor at a good price is much easier said than done. Keep in touch with your contractors, and get ready to plug in another one if one gets busy, moves, etc.
• Give up what I cannot control. I do the best that I can as an investor. But in real estate there are a lot of moving parts like other professionals, inspectors, title attorneys contractors, etc. Letting go of things I that I can do nothing about helps me stay sane.
• Spend time enjoying life. Sometimes, I get so caught up in real estate I forget why I am doing it. That is when I take a step back. I go on a weekend trip, I go see friends, I play with my daughter. Real estate is not life. It is just a means to get more time to live life.
If you are just starting your journey into real estate, welcome. Feel free to connect with me. This is just the first chapter of my journey and I hope our paths cross soon.