Balancing Real Estate With Life

Balancing life with real estate is done in seasons

Let me explain…

To create a good real estate portfolio, there will be a period called "the grind." During this time, you will begin to build and expand your portfolio. The grind can last for 5-10 years, depending on your goal. After the grind, there is a season for relaxation and enjoying the rewards of your hard work.

What does the grind look like? 

As someone towards the end of the grind, let me show you…

Phase 1 - Get frugal and learn how to save money

If you can’t save money, there will be no money to even invest. If you are a natural saver like me, this is easy. If you are a natural spender, this will be hard, but something necessary. Find ways to increase your income - job hop, work overtime, consult - while finding ways to decrease your expense. Both must happen to maximize your savings rate.

What’s the biggest expense? Living expenses aka rent. If are able to, live at home with your parents for free. Free housing and free food. I was fortunate to do this for 5 years after graduating and helped me pay off $250,000 of student debt and save up for my first down payment. Yes it sucks to live with your parents, but living with your parents can lay a nice financial foundation if you can give up short term comfort.

What if I can’t live with my parents? Rent a room. Just rent a room which includes all utilities. I was able to rent a room for $800/month with all utilities in California. Still much cheaper than renting a 1 bedroom for $2500.

Credit card hack. I used all the travel points from chase sapphire reserve to cover all my flights. You can still travel and enjoy life while having a high savings rate. I just wanted decent hotels. No need for high end fancy hotels.

Phase 2 - Scale

After you get your first property, this is when time becomes an asset. Over time, your property value goes up without you doing much. Why I preach, buy real estate and wait. Wait and see how much your property value goes up over time. My first single family home went up by $500,000 over 5 years. What did I do? I do a huge cash out refinance. I lowered my interest rate from 4% to 3.125% and was able to pull out $500,000 tax free. Yes, this hit my cash flow big time (now cash flow negative). Yes, I needed a high income W-2 with a good debt-to-income ratio. Yes, I needed a good credit score.

The $500,000 tax free was the seed money to buy my 26 unit and 20 unit apartment complexes. See how powerful real estate is? My first deal funded my apartments without me doing much.

Phase 3 - Stabilize

Ok, now you own 2 value-add apartment complexes. You need to renovate the majority of the units. You need to churn your tenant base over. You need to raise the rents to market value and bring in higher quality tenants. You may need to fire a property manager or two. You may need to fire your general contractor. This is a 2-3 year process. Trust me - I renovated around 40 units in 18 months.

After 2-3 years, you will have a mostly renovated apartment with a new tenant base paying near market rents. At this point, you can do a huge cash out refinance and continue buying more real estate or enjoy the cash flow.

Phase 1-3 will take between 10-15 years. You will be juggling a full time W-2, have family obligations (elderly parents & kids), and commuting while building a real estate empire. Yes it sucks. Yes it’s hard. Yes you will be stressed out of your mind and want to give up. If you can survive first 3 phases, then you can hit the end of goal of relaxation

Phase 4 - Relaxation

Your real estate empire covers all your basic needs and your W-2 income. You can leave your soul sucking W-2 job and enjoy life. Spend more time with your kids. Spend more time traveling. Spend more time doing nothing. You spent the past 10-15 years grinding and now can enjoy fruits of your hard work.

Ask yourself: Is a 10-15 year grind worth a lifetime of financial freedom?

I host free Q&As every Tuesday at 7 pm PST. Click here to join!

Want insider secrets to buy multifamily real estate? Check out the mentorship program!

Bala