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!