I’m excited to share an interview with a fellow real estate investor. Today’s guest has a great personal story. He shows how simple real estate investing can be. Today’s guest bought the property next door and self-manages.
Making it Happen: Bill from Wealth Well Done
About you (brief bio)
My name is Billy B. from Wealth Well Done. I became an investor after I survived a ten-year prison sentence after a friend of mine died from a drug overdose in 2002. I was partying with him that night; some of the drugs we used were mine; and after he left my apartment and died in his sleep, I was charged with his death. I was released from prison in 2012. Wealth Well Done is my story about the mental changes I made to survive prison and how I have built a portfolio worth more than a quarter-million dollars in the last five years. Wealth Well Done is the story of how I turned my life around. It’s about how I am turning my dreams into reality, and how you can live your dreams with me. You can read my full story of how I survived prison and accidentally found myself to wealth, here.
Where are you from?
Twin Cities, Minnesota
When did you start investing in real estate?
Primary residence = January 2015. First Investment property = May 2017
What markets do you invest in?
Twin Cities metro area, Minnesota. I try to invest in nicer B to A- type suburban Neighborhoods where good tenants would want to live.
Are you working in real estate full-time? If not, what do you do?
Not yet, but I would like to one day. I am currently managing several soloprenuer, cash-flow positive businesses out of my home. These businesses include: 1) My rental property. 2) Promotional apparel sales where I sell $300K of branded clothing to businesses and organizations a year. 3) My blog, Wealth Well Done, which currently makes $1 per day, but it’s a start!
What does your real estate portfolio look like?
I own a twin-home. It’s a unique property because it’s actually zoned as 2 single family homes that share a firewall, so I can sell them individually if I’d like. They are in a neighborhood of single-family homes so I don’t have association rules or dues to pay. They are worth $199K+ a piece. So together I own $400K+ worth of real estate and owe $240K in 2 mortgages on both properties.
Here’s a picture of my property:
What type of real estate do you invest in?
I currently own a large multi-family which I have loved owning this last year. I live in one unit, and rent out the other unit. It has been the perfect property to learn how to be a landlord. I am open to buying single family homes, or more multi-family homes if they fit my investment strategy which I will discuss below.
What is your investment strategy?
My primary requirement for buying real-estate is that I only buy it if I think I will enjoy owning it. I like nice properties, in desirable areas, with good school districts, that attract dependable, low-drama tenants. I take pride in keeping my properties in great shape so that the maintenance costs don’t get out of control, and good tenants will feel like it is their own home and they will want to continue living there.
I have learned in my sales business, that the easiest money in the world to make is a re-order from an established client. I’ve taken this insight into my real-estate investing business. My goal is to find great tenants that pay on time, and don’t cause me any drama, and try to give them such a well-maintained place to live that they’ll never want to leave.
My strategy for real-estate investing was inspired by something I heard Warren Buffet say a few years ago. Buffet said he took a huge step forward in his career when he stopped buying into lousy companies for rock-bottom prices, and he learned to buy fantastic companies at fair prices. This perspective has inspired my investing strategy with real estate: I pass on the poor or so-so properties and target nice to good properties even if I pay a little more. Why?
I want real-estate that rents easy, is easy to upkeep, and attracts a good crowd of potential tenants. I feel better owning property I think is cool and will be a cash-flowing beast in my portfolio for the long term. I personally just don’t want to deal with the headaches that lousy properties tend to bring.
Financially speaking, we put 20% down on our first house, and 25% down on our second house to get a lower interest rate. Our goal is to put 35-55% down on our next house, or even surpass our goals and buy real estate for cash if we can.
Why put down so much money down? It’s a personal gut feel decision for me. I personally buy real-estate for the cash-flow opportunities. My sales business is an up and down business, so it’s nice to know I have solid, dependable cash-flow streams coming in each month from my rental properties even if my sales are down. I know some investors would argue to maximize leverage, and take on as much debt as I can, but I personally just sleep better at night knowing that I’m most likely never going to be overleveraged on my properties even if the economy tanks.
I am 37 years old, so I lived through the 2008 crash and watched a lot of my peers find themselves underwater on their first home purchase. After seeing that, I decided I never wanted to find myself in that position, and a big down payment helps reduce the risk that that will ever happen to me. Also, the bigger the down payment, the smaller the mortgage, and the better the property will cash-flow for me. Big cash-flow opportunities are my entire goal of investing in real-estate, which is why I am motivated to put down as much as I can afford when I buy a property.
How much time do you spend running your real estate business?
Last year, when we bought our first investment property, the property overall was in great shape, but it was a little run down and needed updating. So my wife and I spent a month working day and night on it. We spent around $4,500 on a lot of basic updates (see them here) to make it a desirable property for renters.
Once all that initial renovation work was done, I honestly spend maybe 2 hours a month managing my property. My tenets take good care of the place, and it’s a well-maintained property. I personally enjoy getting dirty and working on a project to improve it every few months, so some months I put in extra hours working on a project when my tenants are on vacation and I’m bored.
Like right now, I am building a patio under the deck in the back-yard to make it a more desirable property and increase it’s value if I ever want to sell it. That project is probably taking me 40 total hours, but I am doing it by choice, rather than need.
[Note from Drew: this is a great way to approach real estate. I love taking care of my places. I rather maintain and improve my properties over time than neglect them. Real estate is a living breathing investment that requires some love from time to time.]
How has real estate changed your life?
It’s been awesome! I had to overcome a huge amount of fear when I first bought it because I’d never done anything like this before. So, overcoming this fear of the unknown was the biggest challenge. But now that I’ve done it for a year, all that fear has turned into experience, and I now want to buy another awesome property in the next couple of years.
My current rental property cash-flows me $600 a month, and I pay $200 off the mortgage per month! So that’s $800 extra dollars per month that doesn’t come from a job! My rental property has also helped remove a lot of stress out of my sales business. Now if I have a slow sales month, I don’t really care, because my rental property is making me money even if my sales business is slow.
[Note from Drew: $800/month in mostly passive income is sexy. That’s $9,600/year Bill is generating from his rental property between cash flow and paying down the mortgage. Real estate is a great wealth builder.]
What is your goal? What are you trying to achieve with your real estate investments?
I have 2 goals: My first goal is to have enough passive income coming in that I can hire a property manager and never have to worry about money again.
My second goal is to own enough rental properties, that cash-flow enough money, so that I can start buying condos in locations I love to visit so I can escape Minnesota Winters eventually.
My wife and I love Minnesota in the spring, fall, and summer. But we’d love to escape the winters to somewhere more fun. Maybe a ski condo in Colorado or a condo in a warmer place like Austin, California, Hawaii, Florida. Possibly Arizona like my best friend has done with his vacation rental property. That’s the dream we’re trying to turn into a reality.
Please share one of your investment with our readers. Please include general location, property type, some of the basic numbers (cost, returns, etc.)
Here’s a blog post I wrote about buying my first property with pictures.
How did the deal go? What would you do differently?
I did a lot of research and preparation. I talked with my friend who owns 10 doors and read hundreds of blog posts about real estate investing. All that preparation helped; the l deal went great. I wouldn’t change a thing.
Do you self-manage your property(s)? If not, how did you select a property manager?
Since I currently live next door to my rental, and I like occasional projects, I self-manage my property. But my long-term plan, as I become more financially successful, is to hire a property manager to manage my real-estate portfolio.
I am sure I’ll find my manager the same way I bought my first property: research, research, research, and then just take a risk and try it and see what works by trial and error.
What advice would you give to someone who wants to start investing in real estate?
Find people who have done it, and are successful at it, and pick their brain until you feel confident that you can jump into the deep end and learn how to swim on your own. For example, I watched my best friend buy and hold 10 properties over 8 years, and every time we hung out together, I’d ask him about how he was doing and what he was learning.
For me, it wasn’t just making small talk. I was building my education and experience reserves through him so it stopped being such a scary subject when I thought about buying real estate. Before I bought my property, I asked the nononsenselandlord.com (who I’d met at a FI meet-up in the past) if I could buy him lunch and pick his brain. He was more than happy to tell me everything he knew, and helped me prepare to schedule my first showings most efficiently, and shared his system on how to choose the right people to sign my first lease with. Article about that process here.
[Note from Drew: this is a must. Find someone who has already done it. Offer to buy them a cup of coffee or lunch. People who’ve done it typically love giving back and helping others. This is a great approach to learn and one I fully support.]
Learn from other successful people until it stops being scary and you start wanting to do it yourself. Then just save enough money for a down payment on a property that will cash flow you, and then jump into the deep end with real money and learn as you go.
What is your favorite real estate book that you have read?
I don’t read a lot of real-estate books, but I did love Rich Dad/Poor Dad, and I love watching youtube do-it-yourself maintenance videos and then learn how to do these projects myself to maximize my cash flow while I am still young and on the hunt to buy more.
[Note from Drew: This is truly an amazing book. Kiyosaki’s teachings are great. I know there is a lot of controversy about him being a fraud. Put that aside for a moment. The book is more about the mindset and psychology of the rich and less about Kiyosaki’s accolades. This book changed my life.]
Additional book recommendation?
Other books I totally loved: John Maxwells “21 Irrefutable Laws of Leadership.” The reason I love leadership books is that almost everything awesome that can happen in life, happens when people lead themselves there. If you can learn to lead, you can lead yourself wherever you want to go in life.
[Note from Drew: John C. Maxwell is the authority on leadership. I’ve read several of his books and highly recommend this one as well. Maxwell is a great thought leader. Several Fortune 500 companies rely on his teachings.]
Probably my all-time favorite book is: “Zen and the Art of Motorcycle Maintenance.” It’s a super heavy book about the subject of “quality” and the philosophy surrounding quality. But it’s a one of a kind book I’ve read several times and it never gets old to me because it’s the perfect balance of crazy and extreme brilliance.
[Note from Drew: this is not a book I am familiar with. However, I love Bill and his recommendations. Will be adding this book to the list.]