In the fall of 2016 I was on a search for the best areas to invest out of state. I decided it was finally time to venture out of my Washington State comfort zone and see what else is out there. The only problem is I really didn’t know where to start. With hundreds of cities to choose from I decided to see what other investors were doing and start there.
That initial search brought me to Alex’s site, cashflowdiaries.com. I think I binge read the majority of his blog posts for a few solid hours and came away deciding that I would follow Alex’s advice and research Indianapolis. 3 months later I closed on my first out of state rental in Greenwood, IN just outside of Indianapolis.
Alex and I had emailed back and forth a few times, and I really enjoy his willingness to be a resource and I find his transparency refreshing in a world of guru’s and people out to there trying to sell us on theory not experience.
When Alex agreed to my interview request I was thrilled! His story is so inspiring that I knew the readers of REI Millionaire would benefit from hearing from Alex. So let’s dive into the interview!
Investor Interview Questions:
When did you first decide that you wanted to invest in real estate, and what made you decide to invest in real estate? I was about 23 years old when a friend of mine introduced me to Rich Dad, Poor Dad. I was so intrigued by what I learned from this book that I spent the next few years researching and expanding my knowledge on how to invest in real estate. I knew real estate would be the key to financial success and wanted more than anything to get involved. I was 26 years old when I bought my first investment property.
What is your professional background? I have worked in the IT industry for the past 15 years. To this day I still do. I work as a Level 3 Application Support Technician. For now, I have to continue working this day job and will be stuck in the rat race until I can generate enough passive income to be financially free. Having this job helps me qualify for mortgages as well as provides income to purchase rental properties. I dream about the day I can quit my job and be financially free!
Where do you live? Do you buy properties locally, out of state or both? I currently live in Indianapolis and literally moved here less than a year ago for the sole purpose of helping me achieve financial freedom faster. The cost of living and real estate prices are cheaper here which is helping me grow my real estate portfolio at a faster rate than where I was living in Austin, TX.
What, where, and how did you purchase your first investment property? I was 26 years old living in Austin, TX when I purchased my first investment property. It was very scary getting my first one for fear of the unknown and just being a newb and all. I purchased this before the Real estate crash in 2008 so I was able to get 100% financing on an investment property. I bought a foreclosed home from the MLS for $80k, cleaned it up then sold it via owner financing a few weeks later for $105k. This is a note I still carry to this day and I get about $150 cash flow from it each month as well as have some equity built in for when and if my purchaser ever refinances.
This type of investment is also known as a wrap around mortgage. I really don’t know why I got involved in such an advanced real estate investment as my first one but luckily it was and still is a success. I would not recommend any beginner do something like this for your first one. All my other investment properties after this first one have all been rental properties aka buy and hold. I am all about that cash flow baby!!
What lessons did you learn from this first property? Do you still own it today? I learned that when you have passion and a dedication to succeed, you can accomplish anything. As mentioned above, I do still carry the note on that deal and still am generating passive income from it each month.
What type of properties do you invest in? Single family, condos, multi family, apartment complexes, commercial or other? I love 3 bedroom, 2 full bath single family homes with a garage. These are my bread and butter homes because it’s fairly easy to rent them out and also gives me the best exit strategy if and when I ever need to sell. These types of single family homes sell the best. I would not invest in condo’s due to HOA issues. I would consider multi family if the location was right and am not opposed to ever getting a multifamily in the future. I don’t have any experience with commercial but some day would love to get involved in owning a large apartment complex.
How many properties do you currently own, and where are they? I currently own a total of 9 properties including my note that I carry from my very first deal. I have one rental in Austin, TX, one rental in Kansas City, MO and six houses in Indianapolis.
Would you mind sharing the value of your portfolio and the annual cash flow it provides? My total net worth is currently about $534k. This includes all my assets and equity from all my properties. I am very proud of this considering I came from a poor family and have self-created all this on my own with hard work and a passion to succeed. I also generate close to $4k per month in passive income from all my rental properties. This is including my latest rental property which I just finished rehabbing a few weeks ago and just placed a tenant for it a few days ago. I have been keeping track of all my investments and assets via my net worth tracker. Feel free to check it out and let me know what you think.
How were you able to purchase so many rentals in such a short period of time?
Being frugal and patient is what it comes down to. I cut spending down to the very minimum when I got in serious buying mode and saved as much money as I could to have a down payment which then allowed me to get financing on my rentals. This is how I purchased my first 5 rental properties. It helped that I already did not have very many bills and was getting paid a good salary from my day job.
Fortunately, now I am at the point where I am able to save money a lot faster and because the real estate prices in Indy are low, I am able to purchase new rental properties in cash. My last 3 rental properties were all purchased in cash. It also helps that I do not have any children yet and still don’t have very many bills.
Do you invest in anything other than real estate? If so, what else do you invest in? I mainly stick to real estate investing however I do dabble in stocks as well. I currently have about $40k in stock. About half of this is from company stock options and the other half is from me playing around with mining stocks. I think the economy will inevitably crash sometime and when it does, this typically sends mining stocks (like gold and silver) through the roof. It’s a gamble and I would not recommend others to do this unless you are familiar with the volatility of how the precious metal sector works.
What are some of the biggest investing mistakes you’ve made? Well to be honest with you, I haven’t really had any investing mistakes that I have made to date. I have carefully and fully vetted each of my investments and so far it seems to have paid off. The only regrets I have is not buying more property in Austin, TX 10 years ago when I lived there. Prices are through the roof there now which is part of the reason why I left. Cash flow deals in Austin, TX are extremely rare these days.
What do you look for in an investment property? Is appreciation or income more important to you? Well my ultimate goal is to be financially free which to me means that I am making enough passive income to replace my w2 income and live freely without having to worry about money. With that being said, passive income aka cash flow is what I strive to achieve so my primary purpose with investing in real estate is for the passive income.
Any appreciation I do make I only consider icing on the cake. When I analyze, evaluate and purchase investment properties, its all about the cash flow and cash on cash returns. I do not ever anticipate appreciation nor do I calculate it in my spreadsheets. I do however feel that when purchasing a real estate property, you should try and get one in an appreciating market and one that only shows signs of growth. By doing this, you increase the odds of higher appreciation gains.
How has investing in real estate changed your life? My finances have greatly improved since I started investing in real estate. I make more money now than I ever did and most importantly, I feel really good about the future of my finances and being able to provide for my family. I can see the light at the end of the tunnel now for my dream of quitting my day job.
Share with us your secret sauce… What about your investing strategy is unique or different? Ha! I don’t really have a secret sauce other than being highly dedicated to achieving success and not being afraid to invest.
Of all of the areas you own properties in, which do you think is the best place to invest today? I own properties in Austin, KC and Indy. I chose to move to Indy for the sole purpose of investing in real estate so I can definitely say with confidence that I think Indianapolis is the best place to invest right now. Otherwise I would have moved to the city I think is better. Indy has been steadily growing both by population and economically. If you have time, check out this post on why Indianapolis is a great place to invest, you will see for yourself all the great things happening in this city.
Given the recent market shift from a buyers market to a sellers market, how has your strategy changed to continue to acquire good deals? It hasn’t really changed my strategy much here in Indy but as the real estate prices continue to rise, I will be forced to change my strategy. When it gets to the point where I am no longer able to find good returns on investment properties, I just may have to move or start purchasing in another city. Or if I think the real estate cycle is due for a crash, I will stop purchasing and just collect my rent income.
But for now, Indy is hot and I plan on continuing to purchase here. When searching for a rental property, I review all deals from wholesalers and MLS listings (mainly foreclosures) sometimes for months before I find what is right for me. I will continue using this strategy for the foreseeable future.
Which rental property is your favorite, and for what reason is it your favorite? This one is tough because I have quite a few rental properties that I love. I have multiple rentals where the tenants take good care of the house, pay rent on time and are very maintenance free. Those will always be my favorites.
What is your craziest story that you can share about a specific rental property or tenant? I’m not sure if I have just been lucky or what but since I started investing in rental properties years ago, I have not had any crazy tenant issues. Im sure the day is coming when I do have one but for now it has been smooth sailing for me and my tenants. I will knock on wood to keep the streak going. I do think its inevitable that one day I will have to evict someone. Hopefully that day will not be for a long time.
As you acquired more properties, did you face any financing challenges? If so, how were you able to overcome those? When I first started financing rental properties I did my research, spoke to dozens of lenders before I found the right one for me and one that understands what I am doing. Because of this, I have never had a problem financing properties. This mostly in part to the fact that I have a great credit score and cash reserves. Lenders love that and if you have the right one, you should not have any problems getting financing.
What is something you wish you knew when you were first starting out that you had to learn through experience? The only thing I wish I knew when I first started out was to be more frugal with my money and put extra effort to accumulate more savings. In hindsight, if I had been more financially aware, I could have had a few more rental properties by now which would have made me a few notches closer to financial freedom.
What advice would you give to someone who wants to get started investing in real estate? Most people I talk to that want to get into real estate investing are fearful and tend to over analyze. There is only so much you can read about before it’s time to take the plunge. My advice is to read as much as you can and when the time comes, pull the trigger!
How long do you think you will continue to invest in properties? Is there an end goal in mind? I have never been one to put final numbers on anything but for now, my goal is to have around 15 rental properties. This amount would give me the passive income amount I feel I need to live freely with no worries about money. I want to be able to live off of my passive income, provide for my family while still having the luxury of being able to travel and enjoy life. What more could you possibly want?
I think now it’s about time I head to the fridge and grab me a nice cold IPA! Nothing like a fresh cold brew to relax to after a hard day’s work of my rental properties making me money!!!