Updated: Nov 27, 2018
Amy and I spent two years looking for the right opportunity to enter the real estate world. We knew we wanted to do something but didn't really know what. We started looking at single family homes around our home in Michigan around $80-$100k. We felt if we purchased a house and had it rented out we could profit after paying the mortgage about $300 per month (hardly allowing Amy to retire and become a full-time momma). We only had Molly at the time, we had to start thinking of what else could we do besides single family. YouTube was our friend watching real estate videos on how this landlord thing worked and found more negative reviews than positive. We contemplated this just because of the tax benefits alone. We just started to learn about owning real estate (besides our home) and the very attractive tax advantages of income producing property. We thought of buying a vacation rental in northern Michigan as it was always a dream of mine. We have spent the last nine years renting vacation homes during the summer months and in the winter to go snowboarding at Nubs Nob or Boyne resorts. To have a couple of our own while other people pay off the mortgage is about the best situation I can think of for planning retirement. About the time I would be retiring we could have a couple houses that produced new passive income and we had places to stay for free. We ran into the same problem this idea would deplete our cash on hand and would be very difficult to scale if I wanted to stop working in near future (before the standard 30+ years nowadays).
Getting back to self training on YouTube a came across wild man Grant Cardone and his very aggressive and rich lifestyle oriented real estate advice of investing in multifamily or apartment buildings for anyone not familiar with that term. He would always say when someone called in saying they had $50k to invest in real estate he would tell them save your money until you have $100k and buy a 16 unit apartment complex. Grant really pioneered the thought of 16+ unit apartment mentality for us saying in order to properly invest in real estate you want to be a real estate investor not a landlord. 16 units and above makes it possible to have a 3rd party property management company manage your investment while you go find your next deal. After hearing this over and over from Grant during his weekly shows it dawned on me what needed to happen but we were a bit discouraged because we had some extra money saved up and it still wasn't enough to get started. The dreaded word my wife loves to hear, wait. We were getting anxious to just do something the last thing you want to hear is you need to wait a little longer and save even more money. While we continued to wait for our pockets to grow a bit more we explored a number of ways to make money in real estate. These ideas started with Michael Blank and the thought of syndication. At first we really ignored the thought of syndication and simply used MB's syndicated deal analyzer to conduct our due diligence to see if an apartment deal made sense before we pursued it enough with a purchase agreement (PA or PSA). The word syndication simply means to raise money from investors and use that money for the down payment, closing costs and rehab when purchasing an apartment building. The thought of using other peoples money (OPM) to purchase an apartment building was very appealing. This really opened a whole new world of possibles, we were free to find as many deals and raise as much money as we can to buy endless deals. Our largest problem of scaling our business quickly was no more with syndication. Little did we know raising money from people is not that easy. MB tells you to start by asking friends and family for money but not in a begging fashion more of a sales pitch to an apartment building and the total return on their investment. Amy and I both come from families that don't necessarily have experience in real estate investing. This has always been a tough thing for us to ask for money from people we know even though it makes financial sense. If we could explain it enough to them which at the time we couldn't wrap our own heads around it so how could we get someone else to. The American Dream was instilled in us from a young age to do good in school, get good grades so you can get into a good college (Go Green) get good jobs, buy a house, have a family and live happily ever after. Which is exactly what we did and are very blessed to have such loving supporting parents, siblings and friends to make that dream come true. However, whether this is right or wrong we've always wanted more. More free time, more money, more vacations, more opportunities. Sometime in 2015 after finishing our Masters of Science in Engineering Management and having our first child sweet Molly, we started to realize the path we were on (corporate america) was not going to make us happy in the long run. Our current path meant working hard, staying late, trying to get promoted so I could someday support Amy to stay home with the soon to be multiple kids. The problem with this approach is you have to decide at a certain point in your career which path do you want to take. Path one is work your ass off and make that money so you can give your kids the life you only dreamed of. The downside you will not be there to raise them, they won't know their father because money doesn't buy your kids childhood back. Path two, work 40 hours a week, not make as much money and be there as your kids grow, learn new things and be able to take them to preschool on a Thursday. Ever since I became a father I picked path two. The thought of not being there for my kids, watching them grow up and being a part of their lives is why I breathe everyday. They are my world and I would do anything for them. The problem with either path is taxes. Standardized education produces great taxpayers. At this stage my full time job and Amy's part time job we were bringing home good money but Uncle Sam was raking us over the coals. As we did our tax returns every year we would see exactly the number of dollars we hand over to the government. The more I worked and the more money I made our taxes would continue to rise. I ran into a guy during a business trip in Toronto Ontario and while we talked during dinner he explained to me he could't afford to retire because he was paying too much in taxes. I wasn't sure what that meant at the time but I thought geez this guy can't retire because he pays too much in taxes? Doesn't even sound possible but it was because he had accumulated over his lifetime all liabilities and no assets. He had no passive income and barely any tax write offs besides the interest on his mortgage. The guy solely depended on his salaried career he went to college for a worked his butt off for 30+ years just to be in a situation where he can't retire and enjoy. To back up a bit for those who do not know the difference between a liability and a asset is simple. The house you live in does not produce any income therefore it is a liability, it costs you money to live there every month. Now if you rented your house to someone and they paid you rent now the house produces income and becomes an asset. This is a very simple example again I am an engineer not a CPA. Being an engineer I have zero accounting knowledge even though I had to take a couple classes throughout my 21+ years of standardized education. To tell you the truth accounting in college won't teach you how money really works, how to handle your personal finances, how to stay away from bad debt. This is part of the reason our society lives with thousands of dollars in credit card debt. College only teaches us how to become employees and taxpayers not entrepreneurs or dreamers. I am talking real dreamers not people floating by life dreaming of things they will never achieve because they will never take action. Don't get me started about how we are just sheep taught to go to work and pay taxes. Guess what? Rich people do not pay taxes, that's right you may thing that it is illegal but it is true. Your goal in life should be to pay zero dollars in taxes. One way I have figured out how to begin to do this is through real estate.
I have never been a reader, sounds terrible I know but I do not like reading books they put me to sleep. I however found something that works for me as I drive one hour to and from work every day is audio books. I have been listening to audio books now for the past six months and the one that changed my and Amy's life forever is Rich Dad Poor Dad by Robert Kiyosaki. Don't think about it just buy the book and listen to it or read it. More to come as I relive our journey to financial freedom and exiting the rat race.