Thank you soulpatchmike for sharing your story. I enjoy reading people's journeys and think your story is awesome. High five to the long-term tenants at your first duplex! I also have a follow up question....Were you not interested in purchasing rentals between 2009-2016?
I was broke between 2009-2016. I got shingles due to stress twice during this period of time, single income household with 5 kids and a portfolio of real estate that is about 3 months vacancy from it all blowing up. All my real estate was upside down and my net worth was negative, but I knew that time heals nearly all nominally good investments so I waited impatiently for the market to come around and focused on my paltry 5% 401k contributions with matching.
Makes sense that your appreciation is terrible considering your purchase years and the fact that they were two new constructions. Probably about the worst anyone could do short of buying all 4 new constructions in 2006-2007. It really is the luck of the draw as none of us know what the future holds.
Very true. Again time heals most wounds associated with poor timing in investing as long as the investment was nominally good.
Like I tell Clark, you did NOT turn 7k into 605k. This narrative is highly deceiving and flat out wrong. It was work, it required lots and lots of time, and it was a part time job (between looking for listings, negotiations during the purchase, finding tenants, etc). There is also significant risk associated.
I made a choice to become a full time real estate agent and mortgage loan officer 4 months before my DW quit working to care for our newborn first born child in 2002. This was a huge risk. I would argue that nothing I did in my real estate investing was as risky as that because the property portfolio I put together always provided cash flow(minus one cash injection for an extended vacancy in 2006). Sure it ended up heavily leveraged(in the recession) and that is a risk, but I was committed to making it work and positive cash flow was my saving grace. Keep in mind, it was very very stressful to the point I got shingles when my net worth was negative for a few years, however, I never was cash flow negative so much of the fear and stress was self induced.
Doing real estate full time certainly gave me access and abilities that non-agents might not have, but that doesn't make the narrative deceiving.
For clarification. I lived in the duplex from 1999 to 2001. I had to pay rent or a mortgage somewhere, but if you want to count that as investment it was roughly $700/mo over 2 years(~$17k), however, in 2001 when I purchased my first primary residence, I took a cash out refinance of $22k for a down payment from the duplex. 16,800+7725=total investment of 24525. Minus 22000=2525 of my "investment" was left in the duplex after the first two years. One thing to consider is that we haven't talked about closing costs because I did no closing fee loans. The rate is premiumed up and there is a premium that the broker uses to pay the appraisal and closing fees.
So in reality, I invested ~25k over 2 years while having a place to live and a tenant that taught me to be a home owner and then got out ~22k to purchase my first primary residence. The property still cash flowed after the refinance. This was the point where I separated the property account from the household finances.
While I do agree that no one will recreate what I have done with my paltry investment in real estate 23 years ago, what I am sure of is that there are many many stories of people that have had similar experiences to me. Today there are people who might invest 20-30k and they will turn it into 2-3Million in the next 20 years without additional injection without deception.
I also assume you self-manage. Even at your extremely low estimate of 20 hours/ year per property, that is still 80 hours/year (I can guarantee you it's more than this once you factor in the above mentioned matter) for 23 years for a total of 1840 hours you put in. Even at a measly $20/hour (I'm sure you make a lot more) = 40k.
My wife spends about 300 hours per year reading fiction novels. I have friends that spend 500+ hours per year between travel and time in youth sports facilities. If I read about investing(real estate or equity market) 300 hours per year should I really be calculating a monetary figure of how much I put into it in $/hr? What about helping a friend with a remodel? People spend time doing the things they value most. I spent about 300 hours researching and building a custom Nixie Tube Clock over a three month period. Over the 23 year period, I had a 3 year period when I didn't set foot in any property and there was an 8 year period where I didn't set foot in the duplex. The time I have spent on rental real estate in the scheme of things has been less than a part time job over 23 years. If I have spent an average of 8 hours per month over 20+ years, that includes lots and lots of months with ~1 hour going to the post office and depositing checks and a limited few multi-week periods doing heavy turn overs with paint and carpet or other flooring that were intense 40-80 hours over 2-3 weeks.
My experience is my own, however, I have heard many many stories over the years similar to mine. With that said, I don't recommend real estate investing to other people because it probably wont work for them. In my experience over the years in real estate investing forums and my sphere of influence, of all the people that research buying rental real estate for income or financial freedom a small fraction(likely 1% or less) actually by a property. Of those people, about 1% build a small hobby portfolio they keep long term and about 1% of those people build a portfolio that provides financial independence(and being a CEO at minimum) Said another way, anyone can do it but few are willing to.
How about from 1999-2004 when you paid PITI on the property when you lived in it? the 675/month of rent from the other unit certainly didn't cover all of that, correct? I could go on and on, but you get the point.
I think I covered that above.
I point this out every time I can because we should not be selling snake oil to this forum and we should be giving out honest experiences to people who are new/wanting to own rentals.
Still, kudos to you for your 20+ years of experience/journey in rentals and glad to hear that you are getting great profits today!
The only magic or snake oil I have experienced is having the intestinal fortitude to hold a portfolio of properties worth $470k in 2011 that I owed $571k on. I think of myself as a pretty lazy boring person. However, when I get excited about something I immerse myself in it and spend all my waking hours outside of work doing it. That is where I find the most joy outside of my family. Over the years here are most of the things that I have spent hundreds of hours doing.
1987 - Invested hundreds of hours rebuilding a 1978 Suzuki RM100. Had to take the case apart and had the transmission gears on the floor in the basement to have the case welded. Had a service manual and no internet. My parents are not mechanically inclined and gave me a ride to the motor cycle parts store every couple weeks for parts. It took me all summer to get it back together and my folks happily spent about $300 in parts for me to stay busy while they worked.
91-92 - invested hundreds of hours on car audio.
93-94 - invested hundreds of hours researching stock investing in IPOs and bought a course. Opened a Waterhouse brokerage account and invested about $4000 I received from my grandmother after selling their cabin. Lost about $2000 in IPO investing and changed my strategy, then lost interest and let the rest just sit for the next 10 years or so.
94-96 - invested a couple thousand hours over 2 years in a tech school degree also worked 2nd shift full time in my second year.
97-99 - invested hundreds of hours studying real estate including a Carlton sheets no money down course, also invested hundreds of hours taking night classes for 2 years to complete my bachelors degree
99-2000 - purchased first duplex. Most of my free time this year was split between dating my wife and networking computers for gaming with buddies. Warcraft 2 FTW!
2000 - invested time in my wife getting married and enjoying our first year of marriage.
2002-2006 - invested all my time in self employment after quitting my w-2 job. Lots of time spent with my first child and did 6 rental property deals including selling 3 of them and reinvesting.
2007-2008 - invested time in a w-2 job, invested about 500 hours over about 6 months to learn java and develop an online wiring configurator.
2009-2010 - invested hundreds of hours learning to build and fly electric airplanes.
2013 - invested hundreds of hours researching selling on Amazon FBA. Bought some items from China and sold them on Amazon. Learned it wasn't for me, but know that there are stories like mine about real estate for people on Amazon.
2012-2016 - invested hundreds of hours learning to solve a rubiks cube and further to solve in an average of 30 seconds with more efficient ways to solve and practice.
2015 - invested about 300 hours researching and building a Nixie Tube Clock
2016 - invested hundreds of hours researching and building a car audio system for my suburban
2018 - invested hundreds of hours researching and converting my zero turn lawn mower to electric power.
2019 - invested hundreds of hours over 4 months helping a friend gut and remodel his kitchen.
2020 - invested hundreds of hours over about 6 months installing an egress window and building an office in my basement as my permanent workspace.
2018-2019 - invested hundreds of hours taking classes towards my MBA, completed at the end of 2019.
2014-current - invested hundreds of hours in the first year developing an investing philosophy and implementing it. Spend more time monitoring and reading about investing than I do on all rental real estate tasks these days.
2021-2022 - invested a lot of time supporting my wife through a 12 month treatment process for cancer. Her last surgery was in May and now I mostly sit and stare at youtube or twitter being disappointing watching humanity degrade in real time.
Everyone that has a 40 hour a week job also has nearly 80 additional awake hours each week to do whatever you like. Take advantage of them to do things you want to do and don't shame or call it deception or snake oil when people don't use those extra 80 hours the way you do.