This week we have an interview with Jennifer Beadles from REI Millionaire. Jennifer has a fascinating real estate story. She started investing in real estate at an early age and went all in. Jennifer and I met last year at FinCon and immediately clicked as we both share a passion for real estate investing.
I’ll let her fill you in on the details and stop stealing her thunder. Take it away Jennifer…
Where are you from?
Snohomish, WA about 35 minutes North of Seattle
About you (brief or long bio)
I’m a pacific northwest native, a lover of travel & the outdoors, obsessed with life hacks, and I’m passionate about helping others achieve wealth through real estate.
In my teens, I worked as much as I possibly could to earn extra money.
When I turned 16 I started my first job bussing tables at Alfy’s Pizza and fell in love with my newfound freedom to spend my own money on whatever I wanted to.
I often held two to three jobs at a time. My senior year in high school I worked at two different retail stores at the mall, and at a local fast food restaurant, in addition to taking a few running start college classes and finishing up my high school classes.
Unsure yet of what I wanted to do for a career, I continued community college for two years and eventually quit because the two jobs I was working left me with little time to complete my homework.
Two years out of high school with no college degree and no plan on going back to college, I kept hearing about people having success and earning a lot of money in real estate. I set my focus on owning a home by the time I turned 21, and worked at an espresso stand from 5 am – 1 pm, and a restaurant from 3 pm – 11 pm saving everything I could to achieve this goal.
One month after my 21st birthday, I closed on a home built in 1901. The place was a fixer-upper, and I decided to go all in with real estate and started applying for real estate jobs. Pretty soon after, I got hired as an executive assistant to a builder/developer and real estate office owner.
I became a sponge and started learning about land development, estimating, hiring subcontractors, and designing homes. On the side, I did tenant placement for the owners and saved the extra income for my own investments.
In 2009 I got my real estate license so that I could use my commission towards a down payment on a house hacking duplex, and to get access to properties. In the 6 months that I had my license, I sold 6 homes to friends and family and fell in love with the process of finding & negotiating deals, and the commission checks that came with a job well done.
[Note from Drew: getting your license is a great strategy to save on your real estate investments. My mentor also served as my real estate agent. He has saved a fortune representing himself. I bet Jen has saved herself a small fortune as well. Being an agent also provides a great way to increase your income.]
December 31st, 2009, at 23 years old, I quit my 9-5 and became an investor and an investment focused real estate broker. I quickly became the number one agent at my real estate office while other agents were struggling in the recession due to my investment niche.
I helped investors build new construction homes for resale (since that was my background), flip houses, buy rental properties and acquire properties at the foreclosure auction.
[Note from Drew: Jennifer went all in and quit her job. She absolutely loves real estate and is passionate about the business. At the time, her soon to be husband and her rental portfolio had 2 duplexes and 2 single family homes. This was a risky move as they spent all of their savings on the new duplex and their wedding. She had the grit and determination to make this work. Taking risks, especially when you are young, can be very rewarding. Make sure you are taking calculated risks.]
In March 2010, I got married. My husband and I became laser-focused earning as much as we could and then using any extra money to buy rental properties. We were able to
get creative by buying mostly fixer upper type properties, which we renovated ourselves in the evenings and on the weekends.
[Note from Drew: Notice how Jennifer and her husband focused on generating more INCOME and NOT cutting expenses. While keeping spending in check, frugality will only go so far. There is virtually no limit to how much you can make. I am personally a fan of offensively building wealth.]
In 2014 our rental cash flow had replaced my husband’s income, and he retired early at 29 years old. After 3 ½ years, he became bored with early retirement and went back to work for a friend with very flexible hours and unlimited vacation time. I then decided to retire from real estate sales in late 2017 to focus on doing more new construction projects, apartment acquisitions and helping connect other investors with my out of state investment teams through my new company, Agents Invest.
[Note from Drew: Retiring Early (RE) is not for everyone but Financial Independence (FI) should be. Having options and flexibility is great. Jennifer’s husband may not have been able to land his sweet gig if they were not financially independent. FI gives you the ability to do things on your terms.]
When did you start investing in real estate?
2007 – I was 21 at the time and worked two jobs to be able to purchase my first house. After closing, I quit my jobs in order to go into the real estate industry and got hired as an administrative assistant for a small building & development company.
The next property was purchased in 2008, which was a one-year-old duplex that I acquired with a partnership with my parents.
From there my husband and I took turns buying owner-occupied houses, which we would live in for a year and then buy another. Once we exhausted those options, we moved on to the BRRR Strategy, then using HELOC’s on our highest equity rentals, and then to a more traditional method of putting 25% down on small multi-family properties.
[Note from Drew: Several great strategies here. Buying an owner-occupied home with a low or no down payment loan is a great way to get into real estate. Jennifer’s husband used a 0% down loan. Jennifer used an FHA home loan which requires a 3.5% down payment. I used FHA loans for my first and second property. HELOCs are another great way to take tap the equity in properties that have appreciated. I used a HELOC from rental property #2 to buy rental property #4.l]
We purchased 1-2 really great deals a year, and in 4 years were able to achieve financial independence, early retirement for my husband, and over a million in net worth from our real estate portfolio.
What market(s) do you invest in?
Seattle, Indianapolis, Oklahoma City
Are you working in real estate full-time? If not, what do you do?
No, I “retired” from a very lucrative real estate career as a real estate broker in late 2017. Now, I run my company Agents Invest, which is maybe 10-15 hours a week, and the rest of my time is spent on evaluating new investment opportunities, blogging and spreading the word about investing in real estate.
What does your real estate portfolio look like
Currently, we own 15 rental units in Washington state which are mostly duplexes and a triplex, and we own a duplex in Greenwood, IN. We also have a primary residence and a new construction duplex we’re building in Washington.
What type of real estate do you invest in?
We primarily invest in value-add small multi-family (2-4 unit) properties which offer high cash flow and a strong equity position after we get the property into performance.
[Note from Drew: this is one of my favorite ways to invest in real estate. 2-4 unit buildings usually provide great cash flow. The financing options for small multi-unit buildings is great since you can still qualify for residential loans (bigger apartment buildings require commercial loans).]
What is your investment strategy?
Acquiring fixer-upper properties (or building new) that have 2-4 units. Our goal is to leave as little of our own capital as possible into the deal after we’ve fixed the property up. We maximize the cash flow by making smart renovations that are inexpensive but will last for a long time. We also use HELOC’s as an opportunity to tap into the stagnant equity trapped in a property. This allows us to get a return on the equity without having to sell the property and lose an income stream.
Another strategy we utilize is the supported living program, which exists in all 50 states but few know about it. We rent out half of our units through this program.
[Note from Drew: this was not a strategy I was familiar with. Supportive living programs remove some of the risks associated with being a landlord and owning rental property. Just goes to show – you should never stop learning.]
How much time do you spend running your real estate business?
Running the business: 4 hours on average a month which includes some bookkeeping, sending notices to tenants, handling repairs.
Growing the business: 5-10 hours a week evaluating new projects
How has real estate changed your life?
My life would be drastically different had I not started investing in real estate in my early 20’s. I’d probably be working a 9-5 job somewhere and would be limited due to the lack of a college degree.
Now I have the freedom to work on whatever I want, knowing that no matter what I do all of our bills will be paid by our rental income with extra going to savings each month.
Real estate gave me the ability to have a lucrative career in sales, allowing me to earn more in one year that I could working several years in a traditional career. That career paved the way for investing, which eventually replaced the need to work.
What is your goal? What are you trying to achieve with your real estate investments?
My goals have changed over the years, and the current goal I am working towards is generating $250,000 a year in (semi) passive income from our investments, this is outside of any business income. We are 19 units away from that goal if we continue with the same criteria.
We may focus on larger apartment complexes to achieve this goal sooner, and we love the challenge of learning about a new strategy.
Please share one of your investment with our readers. Please include general location, property type, some of the basic numbers (cost, returns, etc.)
I share a lot about my investments on my blog, but below is one that is pretty ordinary and certainly not our best deal, but a great one because it was our first out of state investment.
This is the duplex I purchased in December of 2016 in Greenwood, Indiana.
It was built in 1974, each unit is 1240 sf with 3 beds and 2 baths and two car tandem garages This is my favorite building style due to the only common walls being garages, and the size of the units are not too large (too large of units means a more expensive turn over) or too small (harder to keep renters long term as they grow out of them), and it’s single story. All of our units are single story properties, which we’ve found to be easier to rent (works well for families with small kids or aging tenants who don’t want stairs). Plus, we don’t have to worry about decks.
Purchase Price: $155,000
New Rents: $2,235
Utilities: Paid for by the tenants (including water/sewer/garbage)
Our initial investment was $60,662 and this property cash flows after all expenses $9,120 per year, which means we’ve achieved a 15% cash on cash return before taking into account appreciation, tax advantages or principal pay down on the mortgage.
[Note from Drew: These are good numbers. Jennifer will recoup all of her investment in about 6.5 years.]
How did the deal go? What would you do differently?
For our first out of state investment in a city we’d never been to, and where we didn’t have anyone we knew personally, it went really well.
The only issues we had was that I had switched over the utilities, but had not communicated with the gas company to make sure they lite the furnace, so over the winter the pipes froze and we had to replace some plumbing.
I also made the mistake of hiring the wrong property manager at first, and got stuck with some outrageous AC unit repair bills and a unit that sat vacant for longer than it should have. The new PM (property manager)solved all of that, and it’s been a great investment ever since.
[Note from Drew: There will usually be growing pains as a landlord or real estate investor. It’s important to learn from your mistakes. Jennifer shares a great post on some of the deals she passed on; very insightful post.]
Do you self-manage your property(s)? If not, how did you select a property manager?
We self-manage all of our Washington State properties, our Indiana property is managed by a property manager.
What advice would you give to someone who wants to start investing in real estate?
Start as soon as you possibly can, even if you feel like you’re not quite ready or don’t yet know enough. Experience is the best teacher, and if you make smart decisions and stick to your investment criteria it’s hard to lose money.
House hacking is by far the best way to start, we house hacked a duplex early on and that duplex paid us back our initial investment years ago, and continues to pay us $10,000+ a year just because we were willing to live in one side for a year.
[Note from Drew: House hacking is a wonderful tool. I would not be where I am today without house hacking. It’s something worth considering.]
What is your favorite real estate book that you have read? Additional book recommendation?
The Four Hour Workweek by Tim Ferriss. It’s cliche but for me that book wasn’t about achieving a four hour work week (I’m pretty sure Tim says this is not the point of the book anyway) but rather a way of looking at your life for maximum optimization and leveraging work you don’t want to do to overall be a more productive and happy person.
Additional amazing reads are: So Good They Can’t Ignore You & The Millionaire Fastlane. These are very different books, actually opposing opinions, and I like them both for different reasons.
So good they can’t ignore you talks about exploiting your strengths, and how to stand out from the crowd. The Millionaire Fastlane is an in-your-face book about choosing a Fastlane way to build wealth as opposed to the ‘slow lane’ way with businesses that aren’t scalable.
What haven’t I asked you that I should have?
Other than real estate, what are your passions?
To this, I would answer small life hacks that really add up. For example, I use travel reward credit cards for our renovations, which allow us to travel with perks (airport lounges, hotel status) and major discounts and even sometimes free.
I also use some grocery hacking techniques to save on our grocery bill by shopping once a week and using apps such as Fetch Rewards, Ibotta, Checkout 51, and coupons.com. For every dollar we save on groceries, I look at that as another dollar that can be invested in real estate.
You can learn more about Jennifer Beadles at her site www.REImillionaire.com. She shares a wealth of information about real estate investing and real estate journey.