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Investor Spotlight: Rafal and Jennifer

Financial Freedom through Real Estate Investing

Summary: The goal of our Investor Spotlight series is to provide you with stories of real doctors and high-income professionals who are at different points in their journey to financial freedom through real estate investing. Today’s spotlight is on investor couple Rafal and Jennifer. They met their ten year investing goal within one year and are well on their way to financial freedom through real estate investing!

[Disclaimer: We are not accountants, lawyers or financial advisors, so please consult your own team of professionals about the topics covered in this article.]

We interviewed Jennifer and Rafal during our first annual Fast FIRE to Freedom Summit in August 2021. You can watch the interview here to hear Jenn and Rafal’s real estate journey in their own words!

Want to hear more stories like this? Don’t forget to sign up for our FREE 2022 Fast FIRE to Freedom virtual Summit

Jennifer and Rafal live in Maine with their two children. Jennifer recently transitioned away from family medicine. She owns a growing medical aesthetics practice and she also achieved Real Estate Professional Status in 2021. Rafal is practicing as a full time Anesthesiologist. At the time of this interview, in summer 2021 they owned 8 multifamily properties and 2 short term rental properties for a total of 35 doors. Since then, they have grown their portfolio to  9 multifamily properties and 3 short-term rental properties for a total of 60 doors. Sign up for the FREE Fast FIRE to Freedom Summit to hear how they continued to grow their portfolio!

 

How did you become interested in achieving financial freedom through real estate investing in the first place? 

Jennifer: We had a condo that we owned from residency that we bought at the peak of the market and could not sell. So, we ended up becoming accidental landlord And we rented that out for many years. We also owned a camp on the lake in Maine that we ended up using as a short term rental. So those were pre-existing before taking the course. And then once we started, it just kind of took off from there

Rafal: We actually went to the White Coat Investor conference in Las Vegas. We saw Leti talk about your ZTF course and your experience. And then we said, we’ve got to do this. We actually went to the conference a couple of days before everything shut down before COVID. As soon as we saw Leti speak, we signed up for the course that summer. Once we started the course, we started looking at different markets and decided to actually do it.

Leti Speaking at the White Coat Investor Conference
Letizia Speaking at the White Coat Investor Conference

What is Your “why” behind this? Was there a triggering event that led you to start your journey of achieving financial freedom through real estate investing?

Rafal: I think when we first started the course, it was about mentality and figuring out why we wanted to do this. We had our goals for family time and being able to spend time with our kids and actually becoming financially better off. Our goal was that within 10 years, we would have about $120,000 of cash flow per year, so we can replace our retirement money. We still obviously have retirement accounts. But we wouldn’t have to use them as much if we had this cash flow from real estate and that would enable us to retire sooner.

 

Once you decided to pursue financial freedom through real estate investing, how did you get started? 

Rafal: We decided to stick with our local market, even though we thought about other markets out of state. We decided to try to do it locally first to see if we could do this and how this would work out. Especially knowing the area a little bit better. We started putting offers in and acquiring properties before the course was done. We had two properties before we even finished the course.

 

What type of properties make up your real estate investing portfolio? Were they in state/out of state? 

Rafal: We have 8 multifamily properties and 2 short-term rental properties for a total of 35 doors. As I mentioned, our properties are in our home state of Maine. 

 

How are you balancing gaining financial freedom through your real estate investing with your career(s) and your clinical work?

 

Rafal: I’m still continuing to be a full-time anesthesiologist. Jenn has transitioned from family medicine. 

Jennifer: I transitioned from part-time family medicine, part-time medical aesthetics practice owner, to focusing solely on my medical aesthetics practice. 

Rafal: We bought a property that had seven residential units in the back of the property and in front there was a commercial space. The space used to be a pool store and we weren’t sure what to do with it. 

 

Jennifer and Rafal’s mixed use property before renovations
Jennifer and Rafal’s mixed use property before renovations

 

Our original plan was to add more residential units where the commercial space was. But then I went to the town zoning meetings and they were not working with us. So we decided to leave it as a commercial space. At that point, Jenn was transitioning from family medicine to focus on her medical aesthetics practice and she was outgrowing the current space she had. 

Jenn:  So it just seemed like perfect timing to switch offices and pay ourselves rent, instead of switching to another bigger space and paying someone else rent. 

Rafal: The beauty of that is, the commercial space that we’re utilizing for Jenn’s medical aesthetics practice, will not only be our own because we own the building, but she will be paying the lease to our real estate company. So we’re using two separate LLCs for that.

Also, for the cost segregation of that property, it’s not only cost segregation of the building, but also cost segregation of the rehab that she’s doing. Which is huge because it qualifies for almost one hundred percent of the rehab as depreciation. So, it’s almost like a double cost segregation before doing this new medical office in the space. Therefore, even though we put a lot of money into having our office be really nice, it’s going to come back next year when we do our taxes. So that property ended up being really nice for us. Now we have several residential units and Jenn has her own office right there. And we own the whole thing.

If you need a referral to a great real cost segregation company, like the one Jennifer and Rafal used  CLICK HERE

 

Can you tell us about any difficulties or failures you’ve had in real estate investing? Any big learning points you’ve taken from these experiences that you can share with us?

Rafal: We’ve made mistakes as everybody else has, and we learned from them. One of the properties we bought was an eight-unit property, which was spread out between four buildings. We did our inspections, and went to them, just like we have done for all of our properties as much as possible. We trusted the previous owner and believed that all the water pipes underground were done the correct way, which they were not. Also, we found out that they were not under the frostline, and if you can imagine, in Maine, that can be a problem. The pipes froze through the winter.

Jennifer: And this landlord was doing a lot of his own work. So again, we kind of just took it at face value that he knew what he was doing.

Raf: What happened was, in the middle of winter, we got phone calls that there was no water in these eight units and it was 20 degrees outside. We had to figure out how to repair the pipes and also what to do with the tenants. We ended up spending a lot of money on these repairs. Over $120,000 at this point, trying to fix all the pipes. There were people digging into the ice to get to the ground in the middle of the winter, trying to get to the pipes. We put all the tenants up in a hotel for almost four weeks because they didn’t have hot water in their units. 

Jennifer and Rafal’s Pipe Project in the middle of the Maine Winter
Jennifer and Rafal’s Pipe Project in the middle of the Maine Winter

Before all this happened, this property had amazing cash on cash. We bought it with 10% down and with a huge kickback. So we got this property with $20,000 to $30,000 down. And it was about a $460,000 property. So even after spending $120,000 on these repairs, the cash on cash was still at about 60% for this property. 

Also, this property has a couple of section eight tenants. We also helped some tenants apply for COVID relief as well. So there was money coming from the state automatically, which was nice during COVID. 

We learned from that experience. Now we don’t trust a seller who says, oh yeah, “It’s done just fine”, or I did it myself. We had inspections, but we were new at this and didn’t know that pipes underground could be a problem too. This was one of the first three properties we bought. Now we are renovating the property. We have extended the units and we cleaned it up a lot as well and it’s still bringing in good cash on cash. But it was an expensive lesson.

Jennifer: Although, I don’t know what would have triggered us to have done anything differently, honestly. What would have made us think that it needed to be inspected more than the inspections we normally did? Thankfully, this was six months into our investing journey. So we were deep in at that point and we knew there were risks.

Rafal: Also, there’s also a huge barn at this particular property. Which I’m going to rent to the contractor who fixed the pipes. He needs storage for his equipment. And I told him I have this barn right here where you were fixing all these pipes last winter. So we have additional income from that property now. So one door closed and another one opened.

Jennifer: Yes, we have some silver lining from that situation. 

 

How about any big successes? Anything you learned from good outcomes that you can share that might help other real estate investors?

Rafal: I think for me (and Jenn may have different ones) it was a big mental thing. We learned that yes, you can do this! It’s scary because if you don’t know anything about real estate, or even for people who haven’t bought houses before or anything like that, it’s definitely scary. 

However, if you can go through residency, and the stress of keeping people alive every day, I’m pretty sure you can do this. It’s just about your mentality. It’s hard work, but the more you put into it, the faster you learn. Obviously going through the course was huge for us. We learned so much from it and we used what we learned from it as soon as we could. 

We were literally staying up at night listening to podcasts and trying to figure out, how do we do this? Because it was so important for me to get to that goal of being able to retire sooner. As well as to have the family time we were missing with our kids. We also wanted them to see us do this and then maybe someday they can do it.

For me, real estate is also a long-term wealth builder, for us and for our family. And there is also the tax saving aspect as well. So I think that was part of my thinking and mentality was a huge part of all of it. 

Jenn: I think part of our initial success was also credited to our team. I don’t want to say we got lucky, because we did do our research. But we really have a great agent. I think what helped with that was some of the creative offers that we made. Which we never would have come up with on our own. We also did a  lot of research about lenders and finding ones that were also willing to be creative. I think that just allowed us to do this a lot quicker than we ever thought was possible. Therefore, I’d say the team played a big part in that from the beginning.

Rafal: As far as money, we have some savings we used. But also during COVID, we could cash out about a hundred thousand dollars per person from our 401k’s without penalty. We have to pay taxes on what we withdrew over the next three years, but we were also going with REPS  for the following year. So, we got some money out of the 401k’s, but not all of it. We also got creative with our agent before the market was really crazy. Some of the offers we put in were for the full asking price. However, instead of getting a haircut later, we would say, you know, we want credit at closing instead of getting money back, we call it a kickback. And that’s what our agent brought up to us. And we never thought that was possible. 

Another creative thing we did was we went to a local federal credit union and asked them if they would agree to us putting 10% down, instead of 20% down with commercial loans and one of them agreed. We ended up putting 10% down on our first four properties. This was huge because we could double our properties with the same amount of money. 

For example, one property we bought had an asking price of $340,000 for six units. And 10% down would have been $34,000. But then because it got a kickback, we negotiated a $25,000 credit at closing. Which means our down payment went from $34,000 to about $9,000. With that property, we were able to increase rents from $3,200 per month to about $5,500 per month in two months with no improvements. We got lucky because it was a decent property. And now the cash on cash is at 197%. Which is insane because we got the property for $9,000! Once we did that deal, I said, wow, we’ve got to go after everything we can while it’s still a possibility. So it’s worth it to work with a credit union. They did a few more, with 10% down. And then we got some with 20% down, like most people do.

 

Where are you now in your real estate investing journey? What are your goals for where you want to be in 1 year, 5 years, or 10 years from now?

Jennifer: I think we may push pause a little bit on the acquisition part of things and really just make sure that we’re maximizing everything that we’re doing. Find all of the hidden values. Make sure that the rents are where they should be. See if the expenses can be improved in any way. So I’d say more, just really tightening up what we have for now. 

I know Raf, and he will never stop looking for properties. So, I wouldn’t be surprised if there’s more properties coming this year as well. However, I think our focus will be more on really tightening up what we have. 

Rafal: I think the acquisition phase will probably slow down throughout this year and we’ll focus on what we have. And I think the efficiency phase will kick in. Then, I think I want to go through every property step-by-step and make sure they are running as efficiently as possible and get it on paper.

After that, we’ll see what happens next year. If Jenn decides to focus more on her business, then maybe we will focus more on short-term rentals. Because we probably won’t achieve REPS if she is working a lot at her new business. I’m getting more interested in short-term rental markets as well now. Especially if we can get the property with 10% down. 

In the future, we will do 1031 exchanges. I would love to exchange a few of these properties and get some bigger 20 or 30 unit properties. We definitely want to go bigger at some point, but we’re happy where we are right now.  I think we just want to continue to grow and learn.

 

 

 

Have you found a way to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD Facebook page and join our Physicians (for MDs or DOs only) or Professionals group! Also, if you missed it, check out our prior Investor Spotlight.

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

Do you want to learn how to creatively fund your real estate portfolio and achieve financial freedom? Join the conversation! Follow our Semi-Retired MD  Facebook page and join our Doctors or Professionals  group!

Semi-Retired M.D. and its owners, presenters, and employees are not in the business of providing personal, financial, tax, legal or investment advice and specifically disclaims any liability, loss or risk, which is incurred as a consequence, either directly or indirectly, by the use of any of the information contained in this blog. Semi-Retired M.D., its website, this blog and any online tools, if any, do NOT provide ANY legal, accounting, securities, investment, tax or other professional services advice and are not intended to be a substitute for meeting with professional advisors. If legal advice or other expert assistance is required, the services of competent, licensed and certified professionals should be sought. In addition, Semi-Retired M.D. does not endorse ANY specific investments, investment strategies, advisors, or financial service firms.

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Hi, we’re Kenji and Leti

we provide coaching and mentorship for doctors and high-income earners

Several years ago, we were newlyweds working as full-time hospitalists. On paper, it looked like we had everything: the prestigious careers, the happy marriage, the luxurious rental home, the cars, etc.

But in reality? Despite having worked for several years, we had very little savings. Despite our high income, we had very little freedom in terms of time or money.

One thing was clear: we had to do something.

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