It’s a strange thing to think back at going broke and realize it was handedly my greatest lesson and an overarching asset in my life. Today I own 83 rental doors. I’ll begin by telling you how things went wrong, how I turned them right, and how I became a successful real estate investor.
I began attending the University of Central Florida with a full academic scholarship, but lost that scholarship in year two, after taking a hiatus to day-trade stocks. My natural linear progression at the time ultimately led me to the online poker craze. At 23 years old with $100,000 spread across the internet, I was invincible. I was never going to work a regular job.
To poker fans, or to those who remember the movie Rounders, I was a “grinder.” A grinder is risk averse and generally waits for strong cards, relying on his opponents to make that assumption. My strategy was to be calculating, to play the endurance and position game to outlast my opponents. But I never learned how to lose well. I was too competitive and immature to immediately compose myself when I lost. Poker players call it going on tilt when players become emotional and reckless. I couldn’t handle the tilt. I tried to make my losses back at higher-stakes tables. In hindsight, it was a terrible idea. It is the real estate equivalent of adding to an over-leveraged position with more bad debt.
The online poker world changed when payment processors froze player funds. My world changed as well, and in time my bankroll vanished. I distinctly remember sitting in my apartment in Orlando, wondering what I was going to do in life. Twenty-five years old, and with $35 in my bank account, I had to watch what I was buying for dinner in fear of an overdraft fee. It was time to go back to college, get my degree, and get a job. First, though, I had to figure out how I was going to pay rent.
The same guy who had been buying bottles of liquor at the night club was now filling ice for the bartender. Working as a telemarketer by day and restaurant barback by night, I went back to school with two jobs to pay the bills. This was a profound lesson in humility, and one I’ll never forget.
Seventy days went by without a single day off. I can still feel the pain in my feet after a long shift and remember rubbing them in agony. If I had another chance at business, I needed to make it count. The chance finally arrived one day – day 70, in fact – when an old friend called and offered me what would become a life-changing opportunity. My friend had built and owned a marketing company and had recently fired his manager. He needed someone to help with the day-to-day running of his business.
The past few years had humbled me. I went back into grind mode and worked 70-hour weeks. My goal was to become irreplaceable. In the second month, I realized a way to tweak his business to increase profits and offered a suggestion that ultimately doubled his revenue. I was later tasked with analyzing and negotiating most deals. Two more of my ideas were implemented over the next few years. His business was now thriving, and I was rewarded handsomely. From scooping ice and sweeping floors to managing operations at a thriving business, I went from borrowing to pay bills to investing disposable income. I was about to discover my new passion for real estate.
My First Real Estate Purchase
My first real estate deal was not far from what people call house hacking (at the time, I didn’t know the term). I bought a condo with cash on the intracoastal in Boynton Beach, Florida, for $95,000. Rent in Orlando was $1,000 per month, and I was collecting $950 in cash flow from the property. In full disclosure, I bought the condo without knowing the potential of real estate investing. Now I know. I was able to save money and hoard cash at a pace I had never experienced. I was hooked.
From One to 83 Units
After the intracoastal property showed me the power of cash flow in tangible terms, the mission became to scale. Eager to never feel the broke feeling again, I was running away from that fear and running toward cash-flowing properties. My wife and I purchased a home in Delray Beach, and I had already started looking at investment properties to purchase in the area for more cash flow: another condo, but this one with significantly lower HOA monthly dues. So I bought an REO from a bank for $85,500. This unit currently rents for $1,450 and would appraise around $200,000. These two units essentially paid the mortgage for our home, and I was already saving for the next investment. A bit tight on cash, I sought out a partner to split the purchase of a distressed six-unit building.
Anyone who is familiar with Southeast Florida knows the stories of rampant abuse of rehabilitation facilities. I had lofty aspirations. I wanted to take one that was located near a terrific park next to the ocean and convert it into rental apartments. We purchased the property for $355,000, spent $40,000 on rehab costs, and turned the building around. It has doubled in value and cash flows phenomenally. We self-manage the property and take immense pride for playing a role in gentrifying the area. Over a three-year period while operating the rentals, I went the Dave Ramsey route and paid off any debt possible.
Today I own the rentals outright with no debt. With the current structure in place, we decided to now seek out larger mutlifamily properties. With minimal debt and significant equity (I had also been investing in the stock market and alternative investments) securing agency debt was a challenge and an excellent learning experience. Freddie Mac took a fine-tooth comb through our lives, financial track records, and the deal on a 74-unit apartment complex in Memphis, just outside of Germantown. It has been an amazing experience operating at that level, and I now have bigger plans of expanding to other regions and larger deals. But I’m still a grinder. I don’t want to go broke ever again.
Who I Am
I’m a husband, and a father to a son with another baby boy on the way. I have goals for the next three-to-five years to acquire 1,000 doors, and I will relentlessly pursue the goal to completion. Then I’ll pick a new number. Constantly striving toward personal growth, I try to get through a book per week on business, investing, or self-development. I’m a true believer in building bridges and trying to add value wherever possible. But regardless of the financial success, I know I have a lot to learn and approach life in a humble fashion.
I still get dirty and do physical labor at properties to stay grounded. I’m still a grinder, worried to lose it all. People often consult me to analyze properties, and I am more than willing to help in any way possible. Anyone can feel free to reach out at any time for objective real estate or business advice and I look forward to sharing my thoughts with this community.
How has real estate investing changed your life? Let me know in the comments below!