I have a goal to be financially free and I will do everything it takes to get there in the fastest way possible. Years ago I developed a passion for investing in real estate back when I bought my first investment property. From there I realized that the fastest way to reach my goal of financial freedom will come from investing in real estate. How you ask? Well it’s pretty simple, if purchased properly, you can make very good passive income from buying and holding real estate. That’s right folks, I am talking about rental properties. It’s tangible, it appreciates, it provides tax benefits and most importantly, its provides some good old-fashioned cash flow. Cash flow is the name of the game and cash flow is what I am looking for.
I haven’t written a passive income report in a few months but if you take a look at the last one I wrote, you will see that I am making over $2,000 in passive income just from my rental properties each month. That is the amount of cash I have left over after paying for mortgage payments/taxes and insurance each month. It does not account for future repairs and vacancy though so although on a good month, I am clearing that much, I do know that some months it could be less. A lot less if something bad happens to any of my properties.
It is important to understand that when you have cash flowing rental properties like I do, it is not always going to be fine and dandy. Yes I just said “fine and dandy” which is weird because I never say that when I talk. I don’t think I have ever uttered those words before to be honest but it just came to me while I was writing so I did it. Ha! Okay sorry for rambling there, I tend to do that sometimes. Back to my point, I think that if you are going to invest in real estate properties, it is very important that you keep sufficient cash reserves in hand to be able to handle any bad months/tenants or emergency repairs.
What most people probably don’t know is that the last 4 rental properties I bought were all purchased within a 10 month time frame. I bought 4 rental properties in 10 months and that is insane now that I look back. When I tell people about that, they automatically assume I have a ton of money and that I am rich but that is not the case. I am just building a foundation to early retirement and I don’t even see any of that passive income to be honest. You will see why below.
Here is the time line and additional information on each of the properties I purchased:
Rental Property Purchase Time Line and Details:
Rental Property #1 <—– Click for more details and exact numbers
Purchase Date: December 2014
Location: Indianapolis, IN
Purchase Price: $49,775
Current Mortgage Payment: $338.62
Current Rent Received: $825
Rental Property #2 <—– Click for more details and exact numbers
Purchase Date: April 2015
Location: Indianapolis, IN
Purchase Price: $55,000
Current Mortgage Payment: $347.40
Current Rent Received: $935
Rental Property #3 <—– Click for more details and exact numbers
Purchase Date: June 2015
Location: Indianapolis, IN
Purchase Price: $67,000
Current Mortgage Payment: $352.39
Current Rent Received: $1050
Rental Property #4 <—– Click for more details and exact numbers
Purchase Date: October 2015
Location: Independence, MO (Kansas City suburb)
Purchase Price: $44,000
Current Mortgage Payment: $281.88
Current Rent Received: $700
What I am going to break down for you now is how I was able to purchase these four rental properties in a 10 month span.
How I Bought Four Rental Properties in 10 Months
1) I Bought Cheap Properties
- Did you notice that every single one of those four properties were $67k or cheaper? That is what I would consider a dirt cheap property. Where I live in Austin, Texas it is impossible to find any house under $100k, even for a broken down tiny house. Cheap properties can be found in the mid western united states and they cash flow great. I currently only buy in Indianapolis and Kansas City because those two cities were the only ones that fit my current criteria for an out of state rental property. Now just because these properties are cheap does NOT mean they are in bad areas which is probably what you are thinking. These properties are all in what I would consider a class C neighborhood with low crime. Students and blue-collar workers are my primary tenants for these rental properties and that is great for me. I properly vetted each and every single one of these houses as well as personally approved the tenants. Cheaper houses also mean smaller down payments. These small down payments made buying these a whole lot easier and coupled with the awesome lender I have, I am able to get up to 10 conventional mortgages on these dirt cheap properties. That is a win in my book!
2) Aggressive Saving
- I made it a mission to save every last penny I could from my job income as well as the passive income made by my other investment properties. Prior to purchasing these 4 investment properties, I already had 2 existing investment properties locally here in Austin and I made sure to not use a single penny of that money on anything other than purchasing more rental properties. I also made it an effort to be super frugal during this time. No more buying items I don’t need. This also meant cutting out all the crap bills I had. Most people pay monthly fees on junk and stuff they don’t need and this is one of the first things you need to clean up. Cleaning up your bills is by far one of the easiest ways to increase your monthly cash flow.
3) Sold/Sell Stock
- I was lucky enough to have been granted thousands of stock options from my current day job and this was what helped me purchase property #3. I sold $15k worth of stock options and used that money to completely purchase property #3 from above. To date, I still have plenty of stock options left and could do this again if I wanted to but I am holding tight on the stock because it is trading pretty low right now. I was lucky enough to have sold at an opportune time.
4) Cash out your 401k
- Yes I did this and I don’t regret it one bit. However, I do not recommend for you to do this at all. At least not without you knowing exactly what you are doing. This was a big decision that I made and I believe it was the best decision for me. Here is why. My company does not match my 401k contributions and I really dislike the idea of a 401k. Any investment that would penalize me for taking out my own money is ludicrous to me. It is my money and I can and should be able to do whatever I want with it. I would much rather use my money and invest it in something I have more control over. Like real estate! Not to mention, the crappy 6% return I was making on that 401k was not appealing to me and I knew I could make way better returns by investing in rental properties. Not to mention, it was less than $10k that I cashed out. I did not have much in this 401k to begin with and by cashing out, I was able to use this money to help purchase rental property #3.
So all four of those reasons above is what allowed me to be able to buy so many rental properties in a short amount of time. I don’t make a ton of money you guys, I am just an average Joe trying to set my future up and I will not stop until I am financially free. I am highly motivated and very determined to increase my net worth and build more passive income. I doubt I will be able to purchase that many properties this year but believe me when I say that I am going to try. I just have to be very smart about it. I need to make sure I always keep sufficient cash reserves and more importantly, I need to make sure I pick more winning properties. It is not easy at all to find good cheap properties in low crime areas and to be able to secure good tenants.
Do you think I am moving too fast? I would love to hear your thoughts on this. Investing can be risky and I am willing to take some risk to reach my goals faster. Calculated risks that is!
If you are interested in the Indianapolis market, you can search all Indianapolis homes for sale here.
I challenge that you are moving to slow. Take it as a fun challenge. Figure out what is holding you back from buying more properties at a quicker rate and then solve that problem. Down payment money? Use private lenders, partner or creative real estate deals. Max mortgages? Find portfolio lenders, use partners or private lenders. You see where I’m headed.
Keep creating your own luck.
Jason
Jason you are my hero! Exactly what I wanted to hear. Thanks for the words of encouragement and motivation to get my butt moving!
My main concern for this year is paying for a wedding and honeymoon but like you said, if I get creative, I can find a way. Thanks! I will start figuring out how to do this creatively.
Just read through the replies. 7-8 years? Why not sooner? If you plan on 7-8 years you will take smaller steps that will get you there. If you plan on a shorter time frame(2-3 years for example), how does that change the steps you must take? Some decent books to open your mind would be “10x Rule” by Grant Cardone and “The One Thing” by Gary Keller (from Keller and Williams).
Anyway, I love your progress, its very motivating.
Jason
Honestly, i kind of just threw that number out there. I defintely want it to be sooner but I want to be conservative about it because I know that probably next year, the kids will start popping out and I am sure that will slow me down a bit. I think, i dont know. I just need to see what happens.
Don’t get me wrong though, the way I see it is right now I am in growth mode and I just want to keep buying! You know I have never read those books but I am glad you mention them, Ill purchase them and check them out. Thanks for the feedback, really appreciate it!
You mentioned that you were able to get conventional mortgages on these properties. Does that mean that you only put down a standard 5% down payment, or were you still required to put 20% down like most investment properties?
Hey Kyle!
I put down 20% down payment on my first 4 purchases and I have been doing 25% on my last 3. So 3 of those above were purchased with 25% down and 1 of them with 20% down. Since the properties are so cheap the average all in cash I have used is anywhere from 15k to 19k max. With fees, expenses and everything.
Awesome sauce (never say this when I talk)!
You’re an inspiration for lots of folks on the fence on turnkeys. Thanks for being such a great resource.
Hahah! Awesome sauce! Good one! That is definitely something I would write and not ever speak it. LOL
Thanks man I really appreciate the feedback. It helps me more then you think when I hear this kind of stuff. You rock!
Fellow ATX resident. I am currently in NC where my family lives to buy some 35,000-55,000 SFH. There are duplexes for 89,000. I realized its quicker, easier and apart of my longterm plan to invest in North Carolina. Thank you so much for posting this, between you and lisa philips preaching to the masses about buying lower cost homes.
Hi Ericka,
I love NC, its a great place to live. I was in Charlotte last year for a little and really enjoyed it there. Yep I am all about the lower cost homes! 🙂 I think you can make a killing in NC with those kinds of numbers. I actually havent heard of Lisa Philipps but ill look her up now. Now I am curious.
Great blog and great information. I’m going for my first turnkey by Springtime! Posts like this inspire me to keep going. Keep up the great work both on the blog and your investing!
Thanks Todd! Really appreciate the feedback. Im hoping I can get my next one by March the latest. We’ll see if I can find a really good property. I am super picky! Let me know how yours turns out in the springtime, would love to hear about it.
You are moving fast, but I think its fine and dandy. (sorry couldn’t resist.) I like that fact that the four properties total $215,775, that’s less then my single home mortgage. What’s you e-fund looking like? I think that would be my only concern if you did have enough cash for repairs or vacant for an extended period of time.
Haha, nice! Really like how you threw that in there. 🙂
It is mind boggling how low cost these properties are. I completely agree with you. I only wish it was like that here where I live. Right now I have about 35k in emergency funds which is way more then enough. Im going to use some of that to purchase another rental property but for future reference, I am going to want about 20k, maybe a little less for emergency funds.
Alex man! Stop buying houses, let some for the rest of the people! hahahaha
Good stuff man! I couldn’t believe houses in Indianapolis can be so cheap and rents that high, it seems you found the right city =)
Here in UK (Cambridge) I’m struggling to buy my first house which is gonna be around £300,000 for a 2-3 bedroom house (around $450,000), insane! right?
Great post!
Hey Francisco! LOL I wish I could buy up all the houses, I would be set for life with that kind of passive income! 😉
Thanks bud, I appreciate the feedback. That is absolutely insane how much the houses cost there in the UK. I feel your pain!
Find some houses in the us and hire a management company. ?
You have made nice progress and are on your way to early FI. Real estate is definitely the way to go IMO to reach early FI. The return for paper assets are just too low (4% rule, et al). I was a little surprised to find a comment by you that $8,000 to $10,000 per month is your sweet spot for FI. $5,000 month in reliable net rental income is equivalent to $100,000 in gross income from a W2 job (or close to it). In my case I just became FI as soon as financially possible because personal freedom to me meant much more than higher lifestyle.
Early FI is a dream for me! Hopefully I can achieve it in the next 7 or 8 years. Sooner if I really step up my game. Yeah now that you mention it, I definitely do have high expectations for my FI number. Its mostly because I really want to continue travelling and in order to do that, I will need more passive income then just to get by.
If I really wanted to though like you said, I could hit FI when I get to $5k per month.
There is no wrong answer and obviously the higher the passive income the better. I just know in my case I was not willing to continue working for someone else when I could logically quit. The trade off of continuing to work and build up more cash flow at that point was not worth it to me.
Too fast? I’d say no, since it’s working for you.
With my very young family, I’m not looking to have remote rental property, but I’m looking forward to moving to a lower cost of living area and reinvesting my Silicon Valley real estate equity into multiple properties for passive cash flow.
Editor note: your link to property #4 is broken (extra v’s appended). Feel free to delete this note from the comment.
Hi Jack, Thanks for the note on the broken link, not sure how those v’s got into it but I just fixed it! 🙂
I think its a great idea to move to a lower cost of living and if you start getting cash flow positive rentals, you are going to drastically improve your life I think. Thanks for the comment!
Yes, this is great stuff! I know some real estate gurus like to dismiss turnkey properties, but I think that is another reason why you were able to do this. 5) Excellent turnkey providers. Otherwise you would have likely needed more capital and it would have taken longer for you to do all the work yourself.
Thanks Brian!! Yes there are many haters out there on buying these kinds of properties. For some people like myself, they are the best way to invest in real estate. It’s good to hear others point of view though on it sometimes. You are correct though in that I was only able to do this buy picking excellent providers and good properties.
Hi I have been following your blogs for a while and took some time to review all of your posts, especially the ones for your rental properties. Your had great success in the past year and clearly on your way to financial freedom. Through your experience, I am interested in investing in turnkey properties and would want to take action this year. Hope we can be connected and learn from each others. 🙂
Hi Bin!
Thanks so much for reading all my rental property posts. I really appreciate that and I really hope they continue to motivate you. I am looking forward to reaching financial freedom someday and I can’t wait to write about it.
I think the best way to get into these types of investments is to learn as much as you can from others who are doing it. Once you start, I would love to hear about your experiences as well.
Great stuff Alex.
I really like your blog as it resonates with the way I think. My goal is to buy at least one TK rental this year and have been working on my savings and doing my due diligence on identifying the right partners. You blog certainly helps and motivates me!!
Keep it going. Have a great day!
Ankith
Thanks Ankith! Im glad we think alike. Great minds think alike! 🙂 That is super cool you will be buying one this year, let me know how it works out for you. When I get my next one, I will definitely write a new post about it so stay tuned.
Damn you Alexander ! You and Paula Pant of Afford Anything keep making these great posts showing how rental properties can be a great tool for gaining FI. I vowed I would never own another rental ever again. WTF ? Haha !
Slowly but surely your strategy is beginning to rekindle my interest in rental properties.San Diego and all of coastal California is out of the question since decent cash flow is virtually impossible unless you have deep pockets, or you purchased many years ago.Our house is paid off and is valued at 500,000(average middle class neighborhood) plus.However, the most we could rent it for is 2300.00-2500.00 tops.Property taxes take away almost 600.00 a month of that potential income 🙁
Your properties in Indiana are not only cheap but they cash flow quite well! I like the idea of turnkeys too. Maybe, just maybe, one day I’ll get back into real estate rentals. You make a convincing case.
Haha Bobby you are a funny guy! Thanks for the comment. Rental properties can definitely be a great tool as long as you purchase with good cash flowing numbers from the start. And of course once you accept the caveats of having tenants then it is much easier. I think for a lot of people, the idea of dealing with tenants is what steers them away from rental properties.
Those prices really are crazy in San Diego, i feel for you! I have been there a few times and the weather is amazing. I would love to live there if it was not so expensive.
Call me risk tolerant however I’d say you’re not going too fast at all :)!
For me, I wouldn’t call take this as gospel advice however you’re properties are cash flow positive & I’m not sure there’s too much risk involved..
Provided you’ve got a decent buffer in place I’d say go ahead and keep smashing the goals.. Really only you can know the answer to that though man!
Loving your goals here
Yeah I think I am going to a good pace but I would’nt want to go faster then that. I think 4 in one year is plenty and I doubt I will be getting that many in such a short time frame again anyways. I think you are right on though, with the numbers that I am getting I think that the buffer is good enough to handle any emergency situations so overall, I think I am in a good spot!
Wow, that is pretty insane! And so are the prices you spent!
You can’t buy ANYTHING under $500,000 here in SF!
SAm
I don’t even think all 7 of my properties equal to $500k! Ha, now that is insane!
Wow that’s really inspirational.I am just about to start investing in my 401k and IRA and now reading this I’m having second thoughts. Thanks for sharing this. I agree with other’s comments that if it’s working for you, scale it up more!
Hey Charlie!! Thanks man! I think if you are getting free matching contributions from your 401k then you should at least do that. But I don’t blame you. I am huge real estate nerd so I always prefer dumping my money on properties! 🙂
Hey Alex I think your pace is good for you. You seem to be happy with the results so I would say stick with what you are doing
/random internet stranger advice
I did notice that you said you personally approved each of the tenants. Does that mean that the turnkey rentals you bought were not already rented out? To me, a turnkey investment has always meant fully rehabbed and fully rented, so cash flowing from day 1. Though I know some turnkey companies operate a bit differently. Just wondering if you would mind diving into that a bit further?
Also your mortgage lender sounds great! I need to get in touch with someone that will offer up 10 conventional mortgages for my portfolio!
Ha! I love “random internet stranger advice”. Its not biased and I love hearing other peoples thoughts anyways so I really appreciate that.
Yep I was able to approve my tenants and I did all that before closing on the properties. I had contingencies in place that we would not close unless there were approved tenants and I also told them that I wanted to do final approval on the tenant. So during the month or so that it took to acquire the rentals, it was during that span that they filled the tenancy.
I agree with you, if its a turnkey, it should have tenants in place and cash flowing on day 1!
Awesome. That makes sense that you can work with the PM company during the due diligence and closing period to get someone in there. I like the idea of having a contract clause stating that they must be rented–that is a great idea.
Your lender doesn’t happen to be initials S.H. by any chance, eh?
Amazing! I’m also trying to invest in real estate but it’s another game here in Canada!
Hey XYZ!! Canada is definitely a whole different beast and my understanding is that it is pretty expensive up there for real estate. That is really good that you are trying to invest up there and I wish you the best of luck for finding some good cash flowing properties!! 🙂
This is an awesome story, thank you for sharing! I totally agree with buying cheap houses. As a fellow midwest investor, that is where the cash flow lives! Keep up the good work. Look forward to hearing about what you do next 🙂
Hi John!
Thanks so much! Sometimes I wish I lived in the midwest so that it would be easier for me to purchase them but either way, I will make it work. There is great cash flow there and that is what I am all about.
This is my long term goal after I have secured my own house first. Glad to see it working for someone, gives me more confidence that’s for sure, even if we are on opposite sides of the pond! Good luck with this year!
That is a great long term goal to have and I really like that you are concentrating on securing your primary house first. That is a good idea. Family should come first. 🙂 Thanks man! Good luck to you as well.
Thanks for sharing. So much PF is focused on 401k’s and Roth IRAs, it’s nice to see that there are other options. I recently posted about my husband’s aversion to the stock market, so we’re compromising with a split between the 401k and investment property. Of course, a decent amount of our income is still going towards paying off debt, but we’re on the right track.
Great stuff, very inspiring story. I also live in Austin, TX and would like to connect and pick your brain. Did you consider areas that were closer to you like San Antonio, Temple or even El Paso? How about multi-family?
Thanks
Ramon
Thanks Ramon. I did consider other parts of texas. San Antonio was the one I was most interested in but in the end I found better deals out of state so decided to go with the better deals. I would definitely consider multifamily for investing.
Great post! Love reading stories like this from other “average joe” real estate investors. My husband and I currently have 1 SFH rental and are looking to buy at least 1 more this year. In colorado you can’t find anything that cheap! How do you manage your out of state rentals? Is your lender in those states as well?
Thanks Jessica! Congrats on your rental and I hope youre able to get the other one. I have property managers for all but one of my rentals. My lender is not in any of the states I own properties. The lender just needs to be licensed for a state to lend. Doesnt really matter where the lender is physically.
Thank you dor sharing your story. How are the properties paying out a uear later? And, any tips on how you searched for properties out of state and if you are paying a property management company to handle the rental while you are away? Also, did you purchase the homes without flying out to see them first?
My area of improvement needs to be taking more risks. Thanks for any additional feedback!
Well its been a few years now on my turnkeys and to be honest, they are all still paying out how I originally estimated. I rarely get repair calls, havent had any late payments or bad tenants. Running super smooth. Ill keep my fingers crossed it remains this way. If you go through my “all posts” section you can find all the tips and articles ive written about how I have acquired, analyzed and searched for these properties.
I did purchase a few of them without ever seeing them yes. I would not recommend that for your first one though.
This is an amazing post! Keep up the great work and I’m sure you’ll reach your goal soon. I’d be very interested to know which turnkey companies you used for your purchases? I’m in a similar situation where I’ll need to purchase out-of-state since the properties where I am don’t cash flow. Would you be able to recommend any? Thanks!
Thanks for the great post! I love (and need!) the motivation. I am about to close on a 4 unit property in western MA for $150K. We are using money in our Self Directed IRA to pay cash for the house and project $2,400 / month income after property management expenses. We have a great property management team in place and are excited to get in the game.
I am in awe and this has inspired me to get my butt in gear as well! Keep us the good work.
Thanks Kara
Thanks for sharing your amazing journey. I am trying to do the same but I have a question: I found that banks don’t finance properties under $100K loan amount, which means $130K conventional loan. Is there another way to get financing for condos under $50K (with 30% down) but not hard money?
Thanks!
Check out Garrett Gunderson’s idea of Cash flow banking. I’m currently reading his book “Killing Sacred Cows”. I am confident that I can use this as a vehicle in my yearning for financial independence. Keep up the good work.
Investing in rental properties could generate great monthly income but often it is not passive, you must treat it as any other investment, you must actively market your property to get the clients and be very proactive on any repair requests.
Thanks for sharing your experience! This is such a motivation and an inspiration. It’s a wise decision to invest in real property as the value continues to appreciate despite the condition it was bought to. It is a great start to have four properties in just 10 months because I only had two in a year. Lol! Great job here and hope to hear more of your investments growing.
I think you are doing great, so many people sit on the fence and only dream of what could be. As a Realtor I have friends tell me all the time that they want to invest in real estate and even go as far has having me look properties up for them but they never move forward. Looking forward to seeing your progress, keep it up.
My husband and I also bought 4 rental properties in 2016 and one more last year. Best retirement strategy for cash flow that we could buy.
Great read! Question: what type of lender did you go through?
Hey man, very cool stuff. I’d love to be able to pick your brain when it comes to analyzing properties. Sounds like you know how to find the diamonds in the rough! I’m a fellow average joe on a path to complete financial freedom. January 2018 I began with $50,000 in consumer debt (student loans, car loans, and small credit cards) plus a mortgage over $200,000 that I couldn’t reasonably afford, and only about $500 on average available for emergencies. I had made some mistakes and backed myself into a corner. Today (April 2020) I have absolutely no debt, my mortgage is down to the low 140,000’s, and I have about 5 months of expenses saved as an emergency fund. I just refinanced my primary residence to a 15 year (at half the interest rate that it was on my 30 year) and I’m about to start saving 15% into a Roth IRA. I’ve also begun to plan for the future as my goal is to have several rental properties, which brought me to your article. I’m telling you all of this because you said you were looking for financial freedom. I’ve found it by following the plan laid out in a book called the Total Money Makeover by a guy named Dave Ramsey. You can check him out on YouTube too. I think his story will resonate with you being that he is a big time real estate guy too. You’ll find that there are some that disagree with him, but I’ve increased my net worth by over 100,000 in 2 years following his advice while making an average household income of 65k, so I’d say the results speak for themselves. You seem like a good guy, so I just wanted to pass along some of the financial freedom that I’ve found. Best of luck to you my friend!
Maybe you already knew and if not, have since found out that Indiana taxes single family homes in such a way that, non-Indiana residents pay double what a resident would pay. You can still make money, you just need to figure that into the deal from the get-go. More power to you for taking the plunge and moving forward. I sold my Indiana SFH properties and took the money to Illinois to buy SFHs. I’ll be going back to IN when the time comes.