As I’ve shared in the last two posts, I’ve been on a real estate journey for the last 17 years or so. This last post will be about the last five years.
From 2016 through the middle of 2019, Rob and I bought, renovated, and sold several homes together. In that time I learned so much about identifying good deals, making budgets, negotiating contracts, securing financing, hiring good subs, making design decisions, and navigating a project to completion. The majority of of the homes we bought during those years were in my neighborhood. It was a privilege to be able to restore these beautiful 100 year old homes, and it was great to be able to play a role in selecting my new neighbors!
If you’d like to see some of the work that we’ve done, feel free to check out our website.
In the spring of 2019 I heard a term that would completely change our strategy. The term is BRRRR, and it stands for Buy, Rehab, Rent, Refinance, Repeat. Prior to this we were buying houses, fixing them up, and then selling them. And then paying a lot of taxes. Soon after hearing about the BRRRR strategy we had the opportunity to buy two houses next to each other in an area that we believed would appreciate over the next 5-10 years. So instead of buying, rehabbing and selling, we ended up renovating them, getting them rented and then refinancing them, getting all of our money back in the process.
Now when we start a project, we treat it as if we were going to sell it, but then at the end of the renovation, we run numbers to see if it could work as a long-term rental. The great thing about flipping houses is that at the end of the process, we get a nice check. But then we’re done. We’re not really building wealth. Long-term rentals help us to build wealth.
I retired from vocational ministry at the end of 2018, and since that time I’ve been able to give more time to my business. In that time I’ve grown my personal rental portfolio from seven properties to fifteen.
I mentioned Thatch Nguyen in a previous post. In that post I shared about a statement he had made that has made a big impact on me. A few weeks after this I heard him say something else that has made another big impact on me. He said that there are two phases of real estate investment. There’s the Accumulation phase, in which you, yes, accumulate properties, and then there is the Payoff phase, in which you (again, confusing I know) pay off your properties. The idea is that at some point you want free and clear properties that generate monthly cash flow.
After hearing this I decided to play around with some numbers. I wondered when we could have everything paid off, and what it would look like for us financially when it was paid off. Having learned about the debt snowball over twenty years ago from Dave Ramsey, I found this online debt snowball calculator and I began to input all of my numbers.
With the debt snowball, you take your loans and order them from smallest to largest. Then you take a certain amount of extra money and apply it to the smallest loan so that you can pay it off early. Once that one is paid off, you take everything you were paying there and apply it to the next smallest. And so on and so on.
I wondered how much extra it would take to pay everything off in 10 years. I plugged in certain numbers, and finally discovered that an additional $400 applied towards my smallest loan would do the trick. I was pretty blown away by that. One of the main reasons this worked is that I had just refinanced my two loans with longer terms (25yr and 30yr) to 15 years.
So now I have a vision of what life could look like for us a decade from now. There are of course lots of things that could cause us to course correct. Another 2008 could happen. One of us could get sick. But as of today I’m glad that we have a plan, and I feel really good about it.
If you have questions or want to chat, hit me up. I love talking real estate, and I’d be happy to help you if I can.