Summary: This is part of our Investor Spotlight series, which highlight the real estate journeys of our investor community. Our hope is that these stories will inspire you to aim big and take your first steps to achieve Fast FIRE through real estate investing. In this month’s investor spotlight, a physician/software engineer couple share their successful journey in real estate investing – and they just started in April of 2018!
*** If you want to learn how to build a six figure portfolio like Monica and Alin, check out our course, Zero to Freedom Through Cashflowing Rentals! Click here to learn more! ***
The goal of our Investor Spotlight series is to provide you with stories of real physicians on their journey to achieving financial freedom through real estate investing.
In this series, we interview a range of investors, from those who are just starting out to those who already own large portfolios.
Through this process, our hope is that you will gain applicable insights and inspiration that you can use on your own journey to Fast FIRE through real estate investing.
Today’s investor spotlight is on Monica and Alin. Monica is a hospitalist and her husband, Alin, is a software engineer. The two of them started investing in real estate after visiting us in Hawaii in April of 2018! In just eight months, this power couple managed to build a 22-unit empire, generate six figures of cashflow and save over six figures in taxes!
Let’s see how they did it!
How did you get interested in real estate investing in the first place? What is your “why”? Was there a triggering event?
My husband, Alin, has been wanting to build another source of income besides our jobs for years. He listens to podcasts, has read a lot of books, and was constantly thinking about how we could build another income stream. He even listened to every single BiggerPockets podcast episode! In the evenings, we would take walks, and he would pull out the earphones so we could walk and listen together. It took some time, but eventually I started to see why we should consider investing in real estate.
Like everyone, we wanted to achieve financial independence. We wanted the flexibility to choose our schedule, to be able to cut back at work if we wanted to, to be able to travel and spend time with our families.
We then met Kenji and Leti several times over dinner to talk about real estate. Those meetings, as well as our continued reading and podcasts, helped us clarify our vision and understand what we wanted to do before we actually started purchasing properties.
Then, in April of last year, after a trip to Hawaii, we started to take action.
Once you decided to pursue real estate investing, how did you get started? What was your first purchase?
Our first purchase was a duplex in Medical Lake [near Spokane, WA] in May and, shortly after that, we bought a 12-plex in Oklahoma City, and then another four-plex in Spokane. We currently own properties in Spokane, OKC, Moses Lake [WA], and Medical Lake [WA].
Our goal was to get to >20 units and qualify for real estate professional status by the end of the year. We got to 22 units by December 31st, 2018, and, in the process, I also qualified for real estate professional tax status!
How did you manage to buy so many properties so quickly?
We did a couple things to free up money. We had a house that we had bought several years ago for my parents. Since it had appreciated, we refinanced it and took out money. We also did a HELOC [home equity line of credit] on our house.
Now that we have the tax refund and the rental income from last year, we plan on expanding even more. We took a small break after buying 22 units because we wanted to be sure that we had the resources to handle any remodeling jobs or other things that come up in the meantime. But now we have another property under contract so we are on our way to growing our portfolio!
So, with the market as it is, how did you find so many deals?
We had a team of agents working for us in different locations. They would find off-market deals, or they would find good deals on the MLS [multiple listing service]. We looked at a fair number of not-so-great deals. But there were good deals too. Our 12-plex in OKC started out as an OK deal, but became a really good one after we negotiated the price down after the property appraised for less than the contract price.
In fact, the OKC deal and another one of our deals currently operate at >20% cash-on-cash return. But I consider all of our deals to be a success.
[Author’s note: cash-on-cash return is the amount of cashflow you make on the money you have invested. See this article for more information on real estate investing metrics.]
Let’s talk through your 12-plex. Tell me why you decided to go bigger early on in your investing career?
Alin wanted to go bigger early. In fact, now I wish we had gone bigger from the get-go. That’s because we could have hired one property manager instead of dealing with multiple property managers. Really, for us, the bigger property has been the same amount of work as the smaller ones.
That being said, some of the properties made sense at the time when we were just starting out, and all of these will be refinanced at some point to get money out so we can continue to grow. They’ve all appreciated, from a combination of market and forced appreciation, since we’ve rehabbed most of them. So, the smaller ones have been really great for us as well.
Would you walk us through the finances and how you managed to get such a large tax refund last year?
While our properties cashflowed six figures last year, we we were also able to get back six figures in tax savings! I’m still amazed at how we can have significant cashflow AND tax savings at the same time. You would think you would have one but not the other. This was in part because we cost-segregated our properties and took advantage of 100% bonus depreciation. The other reason we were able to generate so much tax savings was that we remodeled our properties and wrote these expenses off using de minimis safe harbor. Now all of this would not have been possible without real estate professional status.
How are you balancing your real estate investing with your career(s) and your clinical work?
I am a nocturnist, and I only work one out of every three weeks, so I have plenty of time to do our real estate-related work. I keep track of my conversations, meetings, bookkeeping, our trips to Spokane and OKC to see our properties and all our other activities in a calendar so I have a record for real estate professional status.
My husband also does a fair amount of work for our business. He does a lot of looking at the numbers. He’s also building software to help organize our real estate profit and losses and tax documents in an efficient, effective way. If you can believe it, there isn’t much in terms of good tax software for real estate investors to track property performance.
Can you tell us about any difficulties or failures you’ve had in investing? What has been your biggest challenge? Any big learning points you’ve taken from these experiences that you can share with us?
Our biggest challenge has been dealing with the vendors. We have learned that contracts are not always fulfilled. In addition, some vendors who start out great can disappear on you or start to perform poorly. When you are investing in rentals, things will happen that you don’t expect.
We’ve also inherited a couple of tenants who have ended up being nightmares. For example, we have a tenant who is noisy and disruptive. She drives away prospective tenants for our other units. Her lease ends in August, so our plan was to not renew with her. Our property manager gave her notice in June that we are not renewing her lease. She is now asking our property manager why she has to move out and is being very disruptive.
How about any big successes? Anything you learned from these good outcomes that you can share that might help other investors?
All of our property investments have been successful.
We learned from Leti and Kenji that it’s sometimes best to do rehabs early on in order to reduce maintenance and to attract better tenants. This strategy also frontloads the tax benefits.
For example, our Medical Lake property has 22-24% COC when rented. Currently, we are remodeling it, so it has one vacancy that drops the cash-on-cash to close to 12%. By putting $12,000 in rehab, we won’t need to put money into the property for years, we’ll get higher market rent and we get the tax write-off.
How has real estate investing affected your lives? The good and the bad.
As for the bad, investing has added some stress, especially in the beginning when we were first starting out. Plus you’re having to deal with difficult people at times – both renters and bad vendors.
That being said, it hasn’t affected my sleep. There are times when my husband and I have had “productive discussions” to try to figure out what to do, but nothing has been impossible to achieve.
And sometimes things work out surprisingly.
For example, we’re self-managing one property with Cozy. We had several things that the tenants contacted us about, but I wasn’t sure how to fix them. So I looked at Angie’s List to find a vendor. I found someone who was willing to help us. He was a friendly man and quickly became our go-to handyman. Now the tenants even text him directly for issues that come up!
Where are you now in your journey? Do you still want to grow? What are your goals of where you want to be in 1 year, 5 years, or 10 years from now?
I’m not ready to stop being a doctor. Even though I sometimes complain, I enjoy what I do as a nocturnist. Also, I recently gave a four-hour lecture to medical students on cardiology. I found teaching to be extremely fulfilling, so I want to do more of that going forward.
As far as our real estate portfolio, our goal is still to achieve financial independence. I want to be in the situation where if I work or not, it doesn’t matter. I don’t mind going to work, as long as I’m not “told” when to go to work. I also want to be able to have the time off on anniversaries or days that have meaning to me instead of frequently working holidays.
Any final words of advice for doctors interested in starting out in real estate?
Live within your means.
Be sure to invest in real estate in such a way that you can still sleep at night.
Author’s note:
We are grateful to Monica and Alin for sharing their real estate investment story with us. Hopefully this investor spotlight has shown some of you how a couple, just like you, can achieve such big results with focus, working as a team and leveraging assets they already had in place. If you’d like to reach out to Monica and Alin, please feel free to email us at leti@semiretiredmd.com, and we can forward your email to them.
