buying rental properties
Invest in Real Estate,  Long Term Rental

From One to Nine Rental Units in a Year

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Way back before I had ever heard of Mr. Money Mustache, ChooseFI, or the FIRE movement, I was interested in real-estate investing. I had zero knowledge, zero experience, and zero funds (literally to all three). All I had was a lifetime experience of growing up poor, a half read copy of the 4 Hour Work Week (which was only because I read the 4 Hour Body first and decided to check out Tim Ferris’s other offerings), and the results of a google search about different ways of passively making money.
I didn’t feel that I had enough knowledge about any particular subject to write an e-book about, I had no money for peer-to-peer lending, I didn’t don’t know how to build an app or do any sort of coding, and I had have? nothing to blog about. The only thing on the list that I could foresee happening at any point in the near future was investing in real-estate. This quickly led me to a site called BiggerPockets.
For those of you who don’t know, BiggerPockets is pretty much the one stop shop for real estate education. They have thousands of blog articles, over half of a million forum discussions, webinars, two different podcasts with hundreds of episodes, and the list continues on and on…. I read an article here and there for a couple weeks before I let my limiting mindset take control and just chalked it up as something that would never happen and forced myself to become disinterested so I wouldn’t be disappointed if something never came to fruition.
Fast forward a few short years later and my wife and I have 5 rental properties and 9 total units. The crazy thing about it is that we started last year with 1 property and it was the condo that we lived in. Real estate had continued to be an infatuation of mine, even when I wasn’t thinking about investing or saving, the idea was always in the back of my mind growing like one of those deep, painful pimples just waiting to fester up to the surface. So once we found the FIRE movement and started to accumulate disposable income to invest anyway that we saw fit, I was already inclined toward real estate investing as opposed to the more common and more passive way of index investing.
We started last year with a pretty significant downsize in our living space and expenses. We had just bought a $43,000, 650 sq ft, 1 bed 1 bath condo to replace our $165,000, 1200 sq ft, 1 bed 1.5 bath condo. The monthly difference on that decision was $1,140 in savings. Now, I know what you’re thinking, “of course you can afford to purchase properties if you sold a place for $160k and bought one for $43k”. When we sold our condo, we literally broke even down to the dollar on just paying it off. Mrs. RRR and I left the closing with no more money, but no further liability tied to this leech of a property, which we thought was worth it 10x over.

Property #1

The condo that we purchased was listed as a “Make me Move” on Zillow. It was rented out at the time, but the owner had moved out of state and didn’t really want to deal with it anymore. We threw out a couple offers, and nothing really came to fruition…until a few weeks later when her tenant put in his notice that he was planning to move. Suddenly she became a little more motivated. She actually removed the “For Sale” listing, and added it back as a “For Rent” listing. I reached back out to her and after a long, drawn out negotiation process, we finally settled on a price. So anyways, property #1: 1 bed 1 bath condo for $43k. Currently renting for $700.

Property #2

A couple months passed, and we had been accumulating a decent amount of savings. I was (and still am) checking MLS, Zillow, and other listing sites daily. There was a duplex that had been for sale for a while, but it was mistakenly listed with the single family homes, and not with the multi-families where it belonged. We went and checked it out and it was a really nice house, 2 bed 1 bath on each side, but the neighborhood was a little sketchy. We decided to pass on it. Kept looking for properties and a couple months later it was still available. I decided to throw out a really low offer and see what would happen. My realtor was like “You know this place is listed for $69k right? Are you sure you want to offer that low?” I’ll be damned if my first offer wasn’t accepted. Which just showed me that I didn’t offer low enough. Property #2: 2 bed 1 bath duplex for $47,500. Currently renting for $725.
We kept our heads down and didn’t let lifestyle inflation take control of us. We maintained our savings rate and just slowly accumulated money for the next property. We put in offers on single family homes, duplexes, triplexes, quadplexes, pretty much any good deal that came on the market. But all fell through for one reason or another. It was getting frustrating, but even with that, we knew the numbers on rent and we would set a number for purchase price and not go above it. It had to be treated as a business, we had to remove all emotion and let the numbers dictate the price we were willing to pay without budging.

Property #3

After months of this, we came across our house hack (read more here: The House Hack that Allows us to Live for Free). 3 bed 1 bath with a detached apartment listed at $89k. We went back and forth on price, and settled on a price and them paying for most of closing costs. When we put in the offer, the house was being occupied by the owners and they were renting out the apartment to a guy for $550 a month. Well, between the accepted offer and us closing, the tenant turned in his notice and moved out. The sellers paid us 6 months of his rent at closing to make up for the fact that it was advertised as rented out. Property #3: 3 bed 1 bath house & 1 bed 1 bath apartment for $86,500 and a few grand our way at closing. Currently renting at $870, and we live in one side for free.

Property #4 & #5

It just so happened that while we were waiting to close on property #3, a couple of duplexes popped back up for sale in a neighborhood not far away. I had noticed these duplexes for sale a few weeks before, but they were off the market the same day. This neighborhood is starting to see some gentrification, but it’s been happening pretty aggressively. We jumped at the opportunity to pick up 2 units that were cash flowing immediately, and two more units that would be ready pretty quickly, especially in a neighborhood where appreciation is going to happen sooner rather than later. The duplexes are both 1 bed 1 bath units, and while they are on two different streets, they are side by side on a corner. One duplex was fully occupied, while the other one was completely unoccupied and needed some updating and repairs. Made a couple lower offers, but they said they had multiple offers…so these are the only properties that we’ve paid listing price for. But after they accepted the offer and we had the inspection, the owner came in with cash at closing for us to cover the repairs needed between the two buildings. Properties #4 & #5: 4 – 1 bed 1 bath units for $49k per duplex, so $98,000 total and $3000 from the seller. Property #4 is currently renting for under market at $700 but as soon as the leases are up, it’ll go up to ~$1,000-$1,100. Property #5 is unoccupied while I finish up a couple bathroom remodels, but when I finish up, it’ll rent for ~$900-$1,000.

Financial Breakdown

We put 20% down on all the properties except the house-hack, and that one we only put down 5% because we knew that we were going to have two more closings in less than a month with more money down and we didn’t want to deplete our cash that much in case of a repair or emergency. So 20% down on all the places except the 5% down on the house-hack puts us just at a little over $42,000 down on the properties with around $230,000 remaining in mortgages. Comparatively, the average listing price for a house in Madison County, AL, where all the properties are located, is $249,900. The total mortgage payments that we have equal $2,006 per month. Our current rental income is $2,995 a month. Once the renovation of the two units at property #5 are completed and rented out and I increase the rent at property #4, we will have at least $4,195 in monthly rental income and will still be living for free in one of the units (that was rented for $550 prior to us moving in, which would put us at $4,745 when we decide to move out of it). After taking 20% of the rent off the top for repairs and vacancies, and subtracting the mortgages, we will be left with $1,790 a month, or just shy of $21,500 a year of rental income.
If we decide to not purchase any more properties, and to pay off the mortgages (Update: didn’t happen. Check out our post on Buying Rental Number 10) after the deductions for vacancies and repairs, we will be making a couple hundred shy of $38,000 a year in rental income. If/when we decide to move away, with the rental income from the apartment we are currently living in factored in, it’ll practically pay for the cost of a property manager if we decide to outsource that and not manage from afar.
If it wasn’t for the initial action of saving, scrutinizing where every dollar is going, and flexing our frugality muscles, we wouldn’t have had the money to invest in a rental property. We were spending almost every dollar coming in and the only savings to speak of was us contributing up to the match in our 401k, and we thought that was killing it. That’s what everyone else was doing too. But, the biggest difference is that the average person is retiring at 62 years old, and that just wasn’t going to cut it for us. That’s why we’ve busted our asses and hustled this year to work our way up from one condo to nine units. And more importantly, to build our perpetual money-making machine that will let us retire before 30.
Are you planning to have any rental properties in your portfolio to supplement your retirement income?
“Landlords grow rich in their sleep” – John Stuart Mill


  • Scott @ Costa Rica FIRE

    Congrats on building up your portfolio! The cash flow looks great, but hopefully you don’t run into issues with tenants falling behind, etc. Not in the same market, but we have a couple of properties at similar price points and had a couple of evictions. One of our places has a tenant currently 3 months behind and then our attorney missed the eviction hearing – what a mess! But these things happen, and the nice thing for you is that you have a portfolio so you can weather the inevitable storms without dipping into your other cash.

    • James Lowery

      Scott, thanks for the feedback! You definitely bring up some valid points. Sorry to hear about the evictions and the attorney causing more problems. Luckily, I haven’t had any issues at all. I stay pretty on top of the tenants and the rent, especially at the beginning, with reminders of when the rent is due and that there will be a late fee regardless of the situation if they are even a day late. I’ve had pretty good luck with my current tenants because they’ve all been on time and even early sometimes. I’m just continuing to set aside my 10% for vacancies, and 10% for repairs in the event that we have a situation similar to yours, it won’t effect our cash flow.

  • RootofGood

    Seem legit.
    So basically if you can pay off the $230k mortgages then you’re FI? That’s not a huge mountain to climb, my friend.

    • James Lowery

      That’s exactly the plan, Justin. We figure if we put all the rental income, and all our excess money that we were using for the down payments toward the mortgages, we should be able to knock them out pretty quickly (in the next couple years). Then we still have our Roth’s and 401k as a cushion that we can let accumulate until we actually need it.

  • Captain DIY

    Man, I am so interested in dipping my toes in that world! Housing is pretty expensive up here in New England right now, but we are saving our way up to a position of strength so when we do dive in it’ll be done right.
    Thanks for the breakdown, and I’m excited to here more!

    • James Lowery

      Thanks for the positive feedback!
      It seems that housing is starting to get expensive everywhere, which just makes the good deals that much easier to spot, but also harder to get because everyone is looking for them. With your DIY experience and eagerness to tackle projects, you could probably pick up a distressed property, rehab it back to a rentable property, and then sit back and watch the cash roll in.

    • James Lowery

      Thanks, Reluctant Frugalist! Once you get started, it’s almost an addictive process. I have to keep in mind that there is an end goal and that goal is to fully fund my lifestyle and not to have more units than I need. That’ll make the process quicker, and hopefully less headaches and stress involved.

  • Dustin S. Branham

    I could see you suddenly abandoning the plan to pay off these mortgages as soon as another good deal comes up. Return on leveraged properties is so much higher than return on principal paydown, as I’m sure you already know. Plus, you’re an opportunist and this fits your personality. See an opportunity, take it. You’ll also benefit from increased diversification, which cuts into that vacancy risk, when you have 10 tenants instead of 7. But you guys have done such an awesome job. I’m envious with my measly 3 properties!

    • James Lowery

      It’s funny you say that Dustin, because we just put in an offer on another property yesterday.
      I would describe us in the same way you did, as opportunists. If something comes up that will help diversify us or give us added income then we will definitely consider it on a case by case basis as long as it doesn’t drastically increase our working timeline.
      On the other hand, three properties is no small amount either. I’m sure if you want more, you’ll get them. Keep grinding!

  • Stephanie

    Enjoyed the article! My husband and I are also speeding up our FI journey with rentals. We have 6 so far and are in the middle of a flip to increase cash and pay off some debts. Looks like you guys are well on your way!

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  • Kim

    Great, detailed article! Are you worried about being over-leveraged at all? I got into investing during the last financial/housing crisis and it definitely makes me a little more hesitant to carry mortgage debt.

    • James

      Thanks for the feedback, Kim! We aren’t really concerned with being over leveraged mostly because our purchase prices are so low. In my experience, most people that lost their shirts in the housing crisis were people overspending and people buying for appreciation. I don’t think we are in that boat, but if we have a recession, I guess we will find out! Hopefully not though..

        • James

          We manage them all ourselves. Outside of our AirBnb at least. If we were local, we would manage that one too, but it was a little intimidating for us to try to manage that one from afar with us just starting out.

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