The concept of achieving financial freedom seems like an unattainable dream but it can be done and it can be done by ordinary people. There are plenty of stories that prove it. There are tried and true real estate investment strategies that can bring you financial freedom, a legacy for your children, and as you will see in this story, income protection. These strategies may sound boring compared to some of the wall street stories you hear, but they work.
Meet one of our investors named Priya. Priya is originally from London, England where she held a couple of successful real estate investments. When she and her husband moved to Arlington, VA they had to adapt their strategy to build a better passive income portfolio. Priya’s story is inspiring, and the results are very representative of what a real estate investor can expect. It may inspire others to emulate her formula for success.
Priya’s keys to success are:
o Understand your current financial situation
o Clearly define your goals
o Learn all you can about real estate investing
o Understand your personal time constraints and pick your strategy accordingly
o Understand that personal spending decisions affect your path to financial success
When Priya was growing up in London, her parents owned a few rental properties and they did very well. The few investments they made allowed them to retire comfortably. Other community members also invested in real estate so there were plenty of models for success all around her. “My parents really inspired me to get into real estate. I saw the benefits and wanted to start investing early in my life.” Priya said.
Her first opportunity to invest came when she realized how London’s change would impact London neighborhoods. At the time, London had plans to build a new underground train line called the Crossrail. This new train line would make it easier to access the city from East and West London. Primed with this insight, Priya and her brother bundled their resources and set out to find a property on the city’s outskirts, worth investing in.
Their search led them to a property that had recently been renovated by a real estate developer. Although they weren’t overly impressed by the property, they could negotiate with the developer to agree on a decent price that freed up some budget to make a few final improvements. The location and the upcoming Crossrail train line were the appealing factors, and they were confident that the real estate prices would go up.
Sure enough, the Crossrail transformed the area. The property’s value doubled in just a few years, which made them feel very confident in their analysis. They refinanced the property and bought another property on the other side of the Crossrail where additional development was taking place. That second property also did well, and that gave Priya a solid foundation to build on.
Overall, Priya’s formula was simple: research to find rent-ready properties in an up and coming area with the potential to appreciate, purchase them and rent them out. Once the value increases, refinance, and use that money to buy another property. Repeat, repeat, repeat.
Finding Her USA Formula
When Priya and her husband first moved to Arlington, Virginia, she didn’t know much about how real estate worked in America. She states that it was like “starting all over again” but she relied on her winning formula. Her first challenge was to find good areas in which to invest, and because she was new to the country, she decided to work with a real estate agent well versed in the local market and willing to give her sound advice along the way.
It was 2015 when Priya and her husband invested in a condo in South Arlington close to their home which they rented. Without much difficulty, they were able to rent out the condo and earn passive income.
The market dramatically changed when Amazon announced that they were building a new headquarters in the area. Remembering her London experience with Crossrail, Priya understood how quickly a market can change when these types of corporate investments and projects are announced. She expected the demand for properties to grow and the area’s prices to increase significantly, and they did. In April 2020, when the Coronavirus started to surge, she decided to put her condo on the market. It was sold within 3 weeks at the full asking price. Initially, they were planning to use the profits to buy themselves a primary residence but as Priya realized, “Why tie up all our money in a down payment on a home and feel stuck paying the mortgage for the next 30 years?” At that moment, Priya realized that buying that home was really not in alignment with her goal of financial freedom and it was in contradiction to what she had learned from her family.
Priya and her husband chose a different strategy for the money they made from the sale of their condo. Rather than buy a single home to live in and chaining themselves to a mortgage for 30 years, she and her husband set a goal to buy 10 to 20 single-family rentals that would produce enough passive income to live on and eventually provide financial independence.
This required a lot more planning than casually owning one or two houses. They did a lot of research. First, they figured out their own finances in terms of living expenses and how much they could afford to invest every year. They researched all aspects of real estate investing: financing, taxes, different markets of the US, rental laws in each state, etc. It took almost a year to put a solid plan together, with the goal of acquiring a certain number of properties every year for the next couple of years. The result of their research was a set of clear, specific, attainable goals.
With a clear roadmap to financial independence, Priya and her husband decided to embark on this journey. Priya altered her strategy slightly from what she had done in London with her brother and with her condo in Arlington. This time instead of investing for the appreciation they would focus on rental properties with positive cash flow and their plan was to acquire distressed properties, renovate them, rent them out, refinance them, and repeat. (This strategy is known as the BRRR strategy.)
During their research, something else came to light. The proverbial ‘ah-ha’ moment. They realized that the high price of a property in the Arlington area limited their ability to reach their target. And so they began searching for investment opportunities out of state, where they could afford quality single-family rentals, at a much lower price, with great returns. They selected a couple of markets and tested their strategy but every time they got close to buying, they hesitated because they didn’t have the local knowledge. To do what they wanted, they needed to hire a contractor, they needed to find someone local that they could trust to verify the renovation quality, and then they needed a property manager. While it can be done remotely, Priya felt it overwhelming to coordinate everything from hundreds of miles away and a full-time job. This realization led Priya and her husband to evaluate turnkey rental companies. A turnkey rental company sells rental properties that are already renovated, have a tenant in place, and include a property manager.
Turning to a Turnkey Company
Priya evaluated turnkey rental companies. She sought an experienced company she could trust and that was well connected to take care of the business of acquiring properties. The company she chose had to provide a full array of resources: property management, legal expertise, access to lenders, insurance and title companies, reliable vendors and contractors, knowledge of the local market, and so on.
In addition to the turnkey company’s reputation and connections, she considered their processes and business model. With the goal of acquiring multiple cash flowing properties, Priya needed a turnkey company with whom she could envision building a long term relationship. Was the turnkey provider set up to provide a continuous supply of properties for her to buy? Were the properties rented before the property got transferred to Priya and her husband? Did they offer a solid profit and return on investment? How are ongoing repairs and renovations handled? What did the reviews say about the owners’ character? Would the company provide good customer referrals? In the end Priya chose MartelTurnkey as her turnkey rental provider.
It didn’t take long for their strategy to pay off. A few months after selling their Arlington condo, Priya and her husband acquired three single-family rentals and they currently have two more under contract, something they would have never been able to accomplish so quickly without the expertise of a turnkey rental company.
During the interview when asked if her investments made a difference in their lives, Priya responded unequivocally, “Yes definitely.” Priya explained that they recently had their first child and the cashflow allowed her to take more time off without worrying about extended maternity leave. She also recently lost her position as a project manager due to Covid-19, but the extra income has given her plenty of time to decide when, and if, she’ll go out to find another job.
The extra income has also given them the chance to take their time doing more research, planning and investing. Priya already knew this combination was essential, so she and her husband were more than willing to devote the time to it.
Fortunately for other potential investors, Priya has been able to distill her process down into some incredibly useful advice. Here’s a detailed version of what she’d tell new investors looking to use her story to find their own path to success.
o Know your financial situation inside-out. Have your debts under control, determine how much financing you can actually get for your investments. Have enough money on hand to handle emergencies.
o Learn as much about real estate as you can. Know how to calculate your returns, know how to buy a home, and be aware of the additional costs.
o Know your goals, come up with a plan to reach your goals, and figure out if you have the resources needed to support that plan. What do you want long term? What do you want to get out of this investment experience?
o Don’t rush into buying. Start with a single property, and focus on the learning curve, which will be huge. Take your time and do what you have to do to master it.
o Reassess frequently. Run the numbers every few months, then run them again. Figure out what you’ve done well, and pinpoint what you could do better.
o Be flexible. Learn your own process until you get comfortable – this will make everything a lot easier. But don’t become so set in your ways that you aren’t willing to make productive changes.
As you can see from these bullet points, the process is simple. All you need is hard work and commitment, and a willingness to make some sacrifices along the way. If you do you can attain success and financial security, and live the life you’ve always dreamed about.