Getting Started: Renting vs. Buying.

In early 2015, I was renting an apartment in downtown Jacksonville at 11 East with Brittany (my girlfriend at the time).

It was fantastic! The sunsets were great, and the location was super convenient for work (right across the street in the Wells Fargo building), but I knew that paying rent wasn't going to help me achieve my financial goals. And, one way or another, I was going to be a financially-free person. I wasn't going back to living in my mom's basement like I was for the entire year before. In sum, I wanted to build equity and cash flow for myself and not for someone else by renting their property.

So, off I went on my real estate journey at age 24 with $30k in student loans, a ragtag 1999 Toyota Camry, and some credit card debt -- the game was on.

Our First Real Estate Experience.

My girlfriend (now wife) Brittany and I met with an agent and began viewing properties. After being totally unrealistic with "budget homes" in a low price range and seeing upwards of 15 homes (in some not so great areas), we increased our budget by $50,000 so we could get something that really worked for us.

We found the right property with a lake view in a decent neighborhood: Coachman Meadows. The listing agent was part-time and completely unresponsive, so, after a few days of not hearing back, I ended up knocking on the Seller's door to strike a deal with him directly. This whole experience (it wasn't great) helped me decide to pursue my real estate license, thinking that I could service people way better (and, I found that I could).

That Coachman Meadows house was our first purchase (purchased for $190,000 in 2015. Now worth $330,000), and although we weren't thinking of it as a house hack, that's what it became. My definition of house hacking is buying a house and then within a year, turning it into a rental, and then doing the process again. (FYI - Most people use the term house hacking as a term to describe renting out other bedrooms while living in the property). Due to us purchasing the home as our primary residence, we only had to put 3% down. And, instead of paying rent, we were now paying ourselves by building equity. We had some maintenance, and we did have to get the roof replaced, but insurance covered 85%+ of the cost due to a hurricane causing the damage.

Living on Low Overhead & Buying Our 2nd & 3rd Properties.

A year later in 2016, after starting my career in real estate sales, we decided to move again so we could get into a better school district (we were thinking long-term). We went into a pretty extreme savings mode, only spending 7-12% of our combined incomes so we could reinvest the rest (yes, really - we cut costs everywhere).

So we bought a property in Villages of Pablo (purchased for $215,000 in 2016 and now worth $350,000) and rented out our first house. We bought this new home again as our primary residence, only needing to put 5% down.

Within just a few months, we found that we needed more space for our fast growing business with an extra office room to work from home. We talked with neighbors, and found an off market property just four houses down that we got under contract for a great price (purchased for $280,000 in 2017 and it's now worth $405,000) and put 5% down once again as a primary residence.

Buying An Investment Property Using 25% Down.

We then got tired of moving and in 2018 (Brittany was pregnant!) an opportunity arose to buy a rental property for ourselves using 25% down. The property had a great lake view, was in an attractive neighborhood and was purchased for $235,000. We then decided two years later to sell it to a family member for $275,000 since they couldn't find a house for themselves in this super fast moving market. Of course, this wasn't a financial decision, but family one, and we are glad we did it! That’s what wealth building is all about: it gives you options.

My Big Financing Mistake.

During this entire time, I made a really dumb money decision. Due to our real estate sales business taking off, I used every dollar we earned to completely payoff the first four houses.

Now, I've done a lot of stupid financial moves (just ask my wife or family members), but paying off our rental properties was a HUGE mistake. I decided to do this because my friend, who knows nothing about real estate and who has very little wealth, said I should. I bought into this minimalist, small-thinking approach, which was not our own, and I paid the price for that.

This was an important lesson: be careful to take financial advice from other people unless they're a proven expert with a growth-mindset. I had to later cash-out refinance these homes and lock in an interest rate that was 1% higher and pay all the financing costs again ($ used in the next part of this story). Whoops! I later learned about inflation induced debt destruction -- which is the #1 reason not to payoff your low interest "good" debt.

Learning How to BRRRR.

Then, in early 2020, after joining GoBundance, I was mentored up by a friend in the group who taught me how to purchase properties from foreclosure auction. With the funds from the cash-out refinance, I ended up buying 4 properties between January and February of 2020 and renovating them, renting them, and refinancing them. I read all the books, including BRRRR (Buy, Rehab, Rent, Refinance, Repeat). It was quite the experience.

Oakleaf, Jacksonville BRRRR

$107,726 cash purchase + $28,000 two month cash reno = $135,726.

This property is now worth $205,000 and we earn $700/mo over the mortgage payment.

Northside, Jacksonville BRRRR

$146,686 cash purchase + $5,000 one month cash reno = $151,868

This property is now worth $270,000 and we earn $450/mo over the mortgage payment.

Southside, Jacksonville BRRRR

$76,248 cash purchase + $12,000 one month cash reno = $88,248

This property is now worth $140,000 and we owe it cash. It cash flows $1,080 over the monthly HOA payment. Cash got stuck on doing the cash-out refinance due to a 1st lien that didn't come up on the original lien search, currently going through the process with the owners policy.

Riverside, Jacksonville BRRRR

$123,339 cash purchase + $16,000 one month cash reno = $139,339

This property is now worth $225,000 and it cash flows $1,000/mo over the mortgage payment.

After these property purchase experiences, I was torn between finalizing my $5M line of credit with Corevest to purchase 4-5 properties a month to BRRRR or doubling down on the brokerage my wife and I just launched, Momentum Realty.

How I Chose to Spend My Time.

Realizing that hunting for the next deal didn't really excite me, I decided to stop buying rentals and instead focus 100% of my time helping other real estate agents become millionaires through real estate sales and investing. Good thing anyway, because when March 20th came around, due to COVID, foreclosure auctions dried up.

Later, we bought one more property in 2020, as our primary home with a pool (it was basically a FSBO), for $468,500 and now it's worth more than $550,000. The home should have sold for SO much more but it was listed by an agent who did not market the property. A Momentum Agent would have been able to easily sell the property for $500,000+. As usual, Sellers not doing research, costs them big time.

The Final Result.

Altogether, we purchased $2.5M worth of residential real estate in five and a half years, and by holding them in the hottest market ever, it caused us to gain $1M+ worth of equity and create monthly cash flow for our family of $5,200+. And, that doesn't include the one we sold to family for an additional $40,000 gain. A lot of these gains are simply due to good timing, but we also backed all our purchases with cash flow which limits our potential downside in a market shift. Generally, when you invest for cash flow and not for appreciation, wherever the market is at on any particular day, doesn’t really matter.

My wife and I have since, September 2020, stopped buying residential rental properties (we did, however, recently buy a commercial property for our loan branch). And, we’ve decided to hold onto these properties so we can pass them onto our kids.

Diversifying Our Portfolio.

Since COVID, prices have come up so much (along with rents), that we can't wrap our head around buying more rentals after a 12 year bull run and 35%+ price increases within such a short period of time. Knowing we are playing against the current fundamentals of supply demand, which support this atypical market, we have still chosen to diversify our investments by building a stock portfolio and investigating creative tax plays to offset our ordinary income. We didn't want all our eggs in one basket that is also tied to what we do for a living.

Helping Agents Become Financially Free.

We are now 100% focused on building a brokerage that supports the bundling of services - brokerage, title, mortgage, etc. - for the agent and consumer. We help our agents also achieve financial freedom for themselves and their families.

Jon | jon@movewithmomentum.com | 904-570-1216 | @realestatejax