QUOTE OF THE WEEK
“I find that the harder I work, the more luck I seem to have.” – Thomas Jefferson
Hope everyone is staying safe and staying positive through these COVID times we’re in right now. I know a lot of families were hit hard by the pandemic and that is why I decided to do this newsletter at this time. I really do want to help people find a way to, not only make it through these times, but to have options for the future as well.
This edition is about using real estate to create freedom for yourself. Many times, when people become attracted to real estate investing, they get excited by the possibility of making large lump sums of cash, but today I want to make a case for cash flow income or passive income as a way to create freedom for yourself and your family.
I’ll explain why in the feature story as I finish up my conversation with investor, Mark Warlick, that we started last week when we talked about single-family vs multi-family investing. If you missed it, you can check it out on our website at www.rocktherealestate.com under Newsletters.
Also, have you had a spiritual `tune-up’ this week? Check out the Manifestation Corner to find out what I’m talking about. Alright, so it’s time to get to it!
Let’s ROCK THE REAL ESTATE!
Lena W. Claybon
So when I first became interested in real estate investing, I, initially, wanted to flip houses because I’d heard that investors in my area made, on average, $20,000 – $40,000 per flip which I thought was pretty good money and I thought if I could do a few of those a year, I’d be good to go.
Then, I learned about wholesaling which was also a way to make lump sums of money even though in smaller amounts, but you also didn’t have the repair costs of a flipper so I decided to start there instead. So, I did and I did earn lump sums of cash at a time. My average for wholesaling was $5,000 – $10,000 per house. It wasn’t as much as flipping but I tried to make it up in volume. And for a while, it was good.
But what I noticed was that, the money was going out as soon as I was getting it. I couldn’t save, even when I was doing 2 or 3 houses a month and sometimes more. There was ALWAYS something to spend the extra cash on so each month so I had to hustle to keep leads and cash coming in.
THEN, I met a local investor, an older black gentleman, who owned several rental properties in the area and he asked me why I wasn’t keeping the houses I was wholesaling and fixing them up to rent out? And I told him that I was more interested in making `immediate’ cash. I liked having cash in the bank.
He told me he had 72 properties and because he had been paying them off over 20 years, they were all paid for and the money he made off them now afforded him to retire early and he and his wife were pretty much set.
I had to think about it for a minute and I did the math. So, most of his houses were in the “hood” but even if he got the lowest rent in that area of $500 per house, that still was $36,000 a month free and clear. Even if he still had to pay half of that out in expenses, that would still leave a nice chunk of change, and he didn’t have to hustle every month to get new leads and keep selling houses. This was passive income that he would get regardless of whether he did any work or not. I’m not sure why I didn’t think about rental income as the way to go until that moment but I got it.
Since then, that’s been my long game in real estate, to amass a portfolio of at least 100 doors (rental units) so I too can be “set”. This is how you become free financially but as long as you’re having to work for it, you’re not free. Freedom is when you have the option of working or not. It’s when you control your own time and I found real estate as a great way to get there!
Lena: So, Mark, we touched on this last week, and I wanted to continue this portion of our interview in this week’s newsletter because it deserved its own time and attention, and that is on the topic of how real estate can be used to create freedom for individuals. I want you to speak to that because basically that’s what you did. How would a person go about using real estate to create freedom for themselves?
Mark: Well, as I said previously, I think you should start with a duplex or triplex, live in one unit and rent out the others, then build from there.
Lena: But what if someone said, “Mark, I don’t want to take five or ten years to get enough units to quit my job, I want to do it now. Why can’t I start with a 20-unit or 50-unit building?
Mark: Well, if you’ve got the capital to do it, then great. But, the problem is that, there’s usually a level or expertise that comes with, not only, going after a 20 or 50-unit building, but also, running one, that a first time investor, generally, doesn’t have — unless you’ve got a mentor or family member who’s got the experience to guide you through it.
I don’t know about you but, sometimes, I get so caught up in “doing” all the things I have to do in a week, the hustle and bustle of just living in a fast paced world, that I forget how important it is to slow down and decompress. And now with COVID, even if you’re not working, it’s so easy to fill your mind with stress and anxiety, that it becomes all-consuming.
I hate to use this cliched analogy but our bodies really are like cars in the sense that, every now and then, we need a tune-up, a `spiritual’ tune-up, to realign our bodies with spirit. We have to get back to a place of centeredness so that we can rejuvenate and operate again at our optimum level.
Some people do it through meditation. Some through yoga. Sometimes all it takes is a long walk and some deep breaths to feel revigorated again. Whatever works for you, don’t forget to make it a part of your weekly routine so that you can stay tuned up and tuned in. Namaste.