Real estate has always caught my attention. After graduating college with a degree in aerospace engineering, I moved to Denver in 1999 to start my first real job. At the time, I knew very little about real estate investing other than real estate was a good investment. I heard about people growing their real estate empire by buying a property and moving into it, and then a few years down the road buying another property, moving into the second property, and turning the first property into a rental. I thought this was a great idea. One year later I bought my first property and my real estate investing empire had begun.
My first property was a small one-bed, one-bath, 700 sqft condo and it was all that I could afford. Before even moving into it, my mindset was that it was an investment in my future. I was off to a good start. Four years later I bought my second property. It was a new construction two-bed two-bath, 1200 sqft condo that had a beautiful view of the park. I moved into it, and turned my first condo into a rental property. I was moving up in this world!
Learning from My Mistakes
Soon after I bought the two-bedroom condo, I realized it was a mistake. I was so enamored with the view of the park and the nice new place, I didn’t open my eyes to see that it was not in a great neighborhood. I had just committed one of the classic real estate blunders – buying the best property in the neighborhood. After this, I decided I needed to get educated about real estate investing. Over the next year or two I read dozens of books on real estate investing, joined a local real estate investment club and even took some classes from some real estate investing gurus (some were great experiences, others were a complete waste of time and money). By 2006 I felt I was ready to venture out on my next great new investment.
I bought a small three-bed, one-bath house that needed a lot of fixing. I was going to try my first fix-and-flip! By now I knew that all the professional investors would hire a crew to do the repairs, but I wanted to continue my learning experience and fix it up myself. My rationale was that by fixing the property myself I would learn what it takes to do the repairs, and in the future I would know whether a contractor was giving me a good price or a bad price for the work he was bidding. This strategy partially worked. I learned a lot about what it takes to fix up a house. Where this strategy failed to succeed, is that it took about a year to fix up the property (about 3 times longer than planned). The real estate market had already turned for the worse and my potential $20K profit turned into a potential $20K loss during that one-year span. Instead of realizing that loss, I decided to turn it into a rental. As a rental it was making about 50 bucks a month. Some key learning points about this experience include
- I learned what it took to do the majority of repair work on an average house
- I don’t actually like doing the repairs myself
- It takes a lot longer than you initially expect to fix up a house, especially if you are not experienced
- If you take too long to do a fix-and-flip, you give the market an opportunity to change direction on you
- I didn’t do enough research to understand the macro-economic picture
Macroeconomics and Successes
You and I both know the devastation that the real estate crash spread across America. I don’t blame myself for not seeing it coming, the problem was, I wasn’t even looking for it. Lesson learned:
- Keep an eye out for the macroeconomic conditions that can affect your real estate investment
I failed to watch for this on the way down, but knew from my stock investing experience that bottoms are almost always overdone and great buying opportunities will present themselves at the bottom of a cycle.
I was able to take advantage of this knowledge with my next purchase, a triplex that I bought in 2011. The real estate market in Denver was on the tail end of the recession. Prices had dropped about 50% from their high and I knew it was a great deal when I bought it. I bought another property in 2012. Both properties have increased in value significantly and the triplex is now a cash cow, as rents have also gone up significantly.
In 2016, the real estate market has fully recovered in Denver, and then some. All my properties have equity in them. One piece of advice I’ve picked up over the years is to ask for money when you don’t need it. I’ve taken this to heart and have taken out Home Equity Lines of Credit (HELOC) on all my properties. I originally thought that buying properties at the county auction was the best way to get a property at a discount in this market (you have to pay all cash, so the theory is there will be fewer buyers and deals can be found), but after going to the auction for about 15 weeks in a row and seeing 75 properties sold at auction for approximately market value, I decided that wasn’t the way to go for me. At least not in today’s market. Instead I’ve decided to use the HELOCs to invest out of state where cash flows are higher than they are here in Denver. I’m doing this through real estate crowdfunding. This is also allowing me to invest in apartment buildings as well as other commercial and industrial properties.
Future Goals & Objectives
I want to share my knowledge and experience with you to help you grow your personal wealth, gain knowledge and experience about real estate, real estate crowdfunding, personal finance, wealth building, and help you develop the proper mindset to achieve the aforementioned objectives. In doing this, I also hope to improve upon my own mindset and expand my own knowledge in all of these areas so that my own personal wealth grows with yours.
I hope you join me in this journey and I hope you enjoy reading my posts. Happy wealth building!