Welcome to the Wealthy Nickel Side Hustle and Entrepreneur interview series, where I share inspiring stories of people pursuing financial freedom through entrepreneurship.
Today I had the opportunity to interview my friend and fellow blogger Jonathan Sanchez. He and his wife decided to invest in rental properties to improve the well-being of their family, and set a goal of acquiring 10 properties in 10 years. He also runs the Parent Portfolio blog, where he shares his experience of starting a family while investing in real estate.
As you know, real estate is close and dear to my heart, because this is how my own family was able to increase our net worth to seven figures or more.
While many people consider real estate to be an “investment”, it is actually more of an entrepreneurial business. You have to find properties, manage contractors, deal with tenants (or at least deal with property managers), and more. It can be quite passive, but the more active you take on, the more money you can make, as you will see from Jonathan’s story.
Since Jonathan’s story overlaps with mine, I will insert a lot to share my own experiences. Hopefully this interview will inspire you to see real estate as a great side source of your hustle and bustle!
What do you do or what do you do?
I am a real estate investor and own several properties in my area. Our ultimate goal is to buy 10 properties in 10 years.
What prompted you to go into real estate business?
My wife and I started a small real estate business to teach our children to be financially responsible.
We looked for ways to generate passive income and read one author mentioning how they use real estate to create wealth. The more I educated myself on this topic, the more confident I felt about investing in real estate.
Are you in real estate full time or do you have a day job? If you have a day job, how do you combine both?
Investing in real estate is not my full-time job, although I have a day job.
A couple of my investment properties are on their way to work. So when my property is in the process of being renovated, I sometimes stay with it during my lunch break or on my way home.
My work is also flexible enough that I can take breaks for phone calls if needed.
Nickel wealth note: In my experience, time spent on commitment goes and flows. As Jonathan mentioned, when we first bought property or were in rehab, I stopped by several times a week to check it out. I also have the flexibility in my daily work to make phone calls from time to time, which is nice.
I wouldn’t let a full-time job get in the way of your real estate investment. While I like to manage my property, you can also hand it over to the property manager to make it more passive.
How and when did you get started in real estate?
Around March 2019, I shared with my financial advisor that I would like to invest in real estate. He put us in touch with a friend and an experienced real estate investor to mentor us. Two months later, we bought our first investment property.
Do you have a mentor, coach, or coaching that you used to help you get started? If so, how did it help you?
Yes. Our mentor is a real estate agent and owns several investment properties in our area. He introduced us to a network of other real estate professionals. I believe that a lot of our success is due to these connections and relationships that we have built.
Nickel wealth note: In my opinion, having a mentor is a key component of successful real estate investment. A mentor can give you the advice and confidence you need to take the first step and buy property, which can be a huge psychological barrier.
Whether it’s a self-investing real estate agent (like Jonathan’s mentor), a local flipper or rental property owner, or even an online community like BiggerPockets, having a place to go with questions will go a long way in determining your success. …
What are the main costs associated with your real estate business?
One of the main expenses is the initial payment, which is usually 20-25% of the purchase price. If you need to improve the property, you will also have to pay contractors.
However, using the BRRRR method is a way for investors to recoup their initial investment. If you find a good deal, the rental income should be enough to create a cash reserve for job vacancies and renovations.
Nickel wealth note: If you’re not familiar, BRRRR stands for Buy, Rehab, Refinance, Rent, Repeat. Good deals can often be found on dilapidated objects requiring a little love.
If you can buy a $ 100,000 property that has to spend $ 20,000 and then value it at $ 150,000, you can pretty much refinance all your money in the end and get your rent with no money! Of course, this doesn’t always work out perfectly, but it’s a good strategy to cut down on the amount of money you’ve invested in your rental property.
Tell me about the day to day activities of your side job (what is a “day in the life” of a real estate investor?)
When I work on a new home, I often follow the contractors work about four times a week. A rehabilitation project can take anywhere from two to three months.
After renting out, I spend no more than eight hours a month solving tenant problems.
How did you build your business to the level it is now, from where you started?
I have always followed good trades closely. Real estate didn’t make sense if the numbers didn’t make sense and didn’t suggest a decent profit. I’ve also used the BRRRR method to my advantage to scale so quickly.
Nickel wealth note: We have also always looked for great deals. Real estate is quite illiquid, and when people want to leave quickly (like a tired homeowner), you can often buy it for 70 or 80 cents a dollar. This is one of the ways we were able to get rich so quickly – we invested $ 20-30,000 in the capital of most of the properties we bought!
It is also important to know your numbers and whether it makes sense to rent out the property. If you are looking for resources there, I have written extensively about the real estate investment calculations that every investor should know, and especially the 1% rule for rental properties.
What do you think made you successful where others have failed?
I live in an area where real estate, which can be bought relatively inexpensively, also generates cash flow. Some investors in other parts of the country were less fortunate. They have to invest out of state, and this is a strategy that not everyone accepts.
Nickel wealth note: Not everyone can find a bargain rental in their backyard, but investing out of state is also a good option. Sometimes I want all my properties to be out of state, so I had to hire a property manager and give up managing my own lease. I have a little control problem!
I think one reason I see a lot of investors fail is because of their unrealistic expectations. You won’t become a millionaire overnight.
A truly lucrative property rental deal will usually bring you a couple hundred dollars a month after all the expenses. It’s not just cash flow that you’re retiring.
However, there are many long-term benefits to owning a property, such as tax deductions, higher value, and the fact that tenants are paying your mortgage. If you look at a time horizon of 5 or 10 years, you can easily get 20-30% per annum on your initial investment, but it just doesn’t end up in your bank account every month.
Tell me a story about your best offer …
I bought my first property for about $ 135,000. After the improvements were made, the property was valued at over USD 171,000. After two years, the current market value of the property is approximately USD 205,000.
Nickel wealth note: This demonstrates the strength of real estate and the ability to find great deals. Where else can you turn $ 135,000 into $ 205,000 in two years? Jonathan did not say how much he invested in rehabilitation, but mine is usually 20-30 thousand dollars. Thus, if he invested 20% (27 thousand dollars) plus 25 thousand dollars for rehabilitation, then 52 thousand dollars were invested in the property in cash, and his own capital is now 45 thousand dollars. Almost doubled my money in two years!
What obstacles did you have to overcome to be successful?
My first property was broken into during the rehabilitation phase. The thieves tore open the drywall and stole $ 50 worth of copper from the bathroom in the basement. The renovation cost more than $ 8,000!
At that point, I had to agree that real estate investing is a mental business and that I had to decide how I was going to react. Six months later, I bought a second property.
Nickel wealth note: I think every investor has such a story. We made a lot of mistakes with our first rental property, including when our contractor left town with over $ 15,000 of our money in his pocket. It was a huge loss at the time, and I was thinking about giving up. But in hindsight, this property is still one of our best rentals, and more than recouped the money we lost in the beginning.
What are your goals for the future in real estate?
The current real estate market is very hot right now, which is pushing prices to the point where they will not be cash flowing in my area. So for the time being, we’re just waiting and watching closely for the next great deal.
Nickel wealth note: This is a tough time looking for a home, but even my hot market (Dallas, TX) has suggestions if you know where to look. A few months ago we bought a house from MLS – everyone says it is impossible to do this in this market. At least a dozen applications were submitted, and we came to the highest offer of almost 20 thousand dollars! But we were able to offer cash and fast closing, which was important for the seller. Be patient and watch out, you never know when you will find your next property!
What are the pros and cons of this side fuss?
The upside is that real estate will generate a huge cash flow after the debt is paid. Unfortunately, investors will have to work with tenants who, if not properly verified, can be a big headache.
What advice do you have for those looking to get started? Who is the perfect fit?
I advise people interested in real estate investing to establish a relationship with a local banker familiar with real estate investment. Also, start living sparsely to save on the down payment. It will be a small temporary sacrifice in order to acquire the next rental property.
Thanks for sharing your story, Jonathan! It’s great to see others striving for financial freedom through real estate.
If you want to know more about real estate investing, here are a few articles I wrote about our journey:
Our first property to rent (and how you can learn from our mistakes)
Is it worth investing in real estate? 6 lessons from a real investor – me!
Income Statement: How We Made an Extra $ 100K Last Year