Hello! Who are you, and where are you from? What’s your venture?
I’m Don and I built my initial wealth from day trading in high-risk stocks/options and riding the GameStop movement. I currently don’t have a job and I live off the relatively passive income from my rental properties. I am about to close on a couple more deals, when completed, will bring my annual income to around $160k (currently at $115k).
At the start of December 2020, I kept seeing all these posts on Reddit that discussed how GameStop was severely undervalued. So after a while I too invested about $35k in stock options and ordinary shares (ten calls and 1100 shares). In the beginning, I lost around a third of the value, but I diamond handed it (holding no matter how hard it dropped). Eventually the famous short squeeze happened and the price skyrocketed to over $400 per share.
I successfully cash out everything near the peak for roughly $350, leaving me with around $375k after taxes. I already a few real estate investments, but this accelerated it to a whole another level and I bought a bunch of properties all in western NYS (New York State). I was able to acquire a triplex for $70k in cash, a duplex for $58k with financing, and 6-unit multifamily for $270k using around $150k in total investment capital (again financed). Lastly, I also purchased a single-family home for $110k, intending to make it my primary residence. 6.
I currently own 13 real estate properties, owe about $1.2m in debt and have about $300k in equity between all properties.
What’s your backstory? How did you find your deal?
I have a Bachelor’s degree in mechanical engineering and landed myself a job that let me earn $65k per year located in Upstate NYS.
That job was the worst. I had to get up at 5 in the morning every day to make it to our weekly team meeting at 6. The work office was filthy and full of dust. Everyone was old. There was no one even near my age to even have a conversation with. The only upside was that it was somewhat laid back, so I slacked off a lot. I spent a significant amount of the day browsing Reddit.
Six months later, I found another job in the western part of NYS. This job was so much better and more in line with what I wanted my career to be. It was also a great company name to add on my CV. I jumped on the opportunity even though I also had to take a decrease in pay, which lowered my annual salary to $62k (although it went back to $65k a year later). The area also had an extremely cheap cost of living (1b1b goes for $550 back before Covid) compared to my prior job. Two months later I got bored again and wanted to learn about investing. I created a brokerage account and deposited $5,000 into it.
When I started investing, I would feel giddy every time I bought stocks and earned an extra $2. I followed standard recommendations in r/investing, etc., etc. It took me less than a month to get bored in it as well as they yield less and sometimes no results. I started looking around to learn about margin trading and that’s when I stumbled across r/wallstreetbets. There I saw people gambling their life savings into option plays. They either went bankrupt or generated insane returns like 40%, 60%, 100%, and even 200% on a single play. I got hooked, so I kept reading and lurking around in that subreddit. After a while, I decided to pull the trigger and liquidated my whole stock portfolio so that I could try trading options. In hindsight, I knew it was all luck, but I gained more than $2500 with some far OTM (out of the money) calls on SPCE, and some other trades. Eventually I was able to raised my account to roughly $65k in a little under a year. On average, I could turn around $200 into $700 with earnings plays. I was a true gambling addict.
How did you finance it? Did you get a loan from the bank? Interest and terms?
When I began, I was using a local lender but then I switched over to using a HML (hard money loan). I got a loan that amounted more than $1m using credit reports and bank statements to show I had the funds. I used a HML and got it when rates were decently low. 80% LTV 30 yrs fixed at 4.875%.
For my first investment, I withdrew approximately $30k from my $65k trading account to acquire my first rental property. This was before the GameStop movement. I paid $138k for a four-unit property (a triplex with a single-family home on the same lot). This property was almost entirely turnkey with the single-family home being the only one unoccupied. As soon as I was handed the keys to the single-family home, I wasted no time renting it out for $950 a month.
As I was finishing up the renovations on my home residence, I made my second significant acquisition, which was a seven-property portfolio I acquired for $735k. Because I did a 80% cash out refinance with 2 apartments that I bought with cash, I could get out almost $100k while only having to put in about $50k for the down payment and closing expenses.
In the next few months, I mainly focused on day trading Amazon options and earned an additional $30k, which I used to buy a 3b1b SFH fixer-upper with cash.
Was there any repairs? How long did it take?
I spent about $35k remodeling the primary residence on my own, except employing a contractor to remove a load-bearing wall and build a level beam.
For the four-unit property, accounting for all costs other than management resulted in a cash flow of around $900 per month (I was self-managing these since this was my only property). I continued to keep my full-time job while still engaging in day trading on the side while all of this was going on.
For the fixer-upper, I spent my nights were fixing it myself. It took me approximately a month and an extra $5,000 in labor and supplies (including a plumber to clear a clog in the sewage line, new appliances, and other equipment), but once it was complete, I leased it out for an additional $950 per month.
How did you find your buyer/tenant? Do you have a team?
I went to places outside of the major New York metro. I sometimes spent 1.5 hours to 2 hours to search the local areas and worked with a well-connected realtor. I also found a few bargains with cold calling with aging landlord. Since I had no experience in the beginning, my main concern was it being completely/mostly filled with good standing tenants, and, not needing any major renovations.
It is a small town. I never have to worry because I never get any vacancies. All of my apartments are occupied, and I have a waiting list of 5-6 quality tenants waiting for an apartment to become available. Even in the beginning, I would have an apartment occupied within a week of the renter giving me a 30-day notice (application, viewing, due diligence, signed contract). I advertise mostly on local Facebook groups and Craigslist. Since I began, I have never had a single apartment remain unoccupied for even a month.
There’s a $2,000 for maintenance fee per month and normal repairs usually cost between $300 and $500 per month. In the beginning I was self-managing these properties, but later I had hired a few contractors to refurbish a couple of flats and repair the roof on one of the buildings. During this time, I was actively searching for a new job in the south because, to be quite honest, I was sick and tired of all the snow. I got a new job in North Carolina (paying $70k), sold my real estate portfolio and I moved there at the end of 2021. Ultimately, I decided not to sell my primary home but rent it out for $1,600 per month to a group of graduate students from a nearby college. Because I would be operating my rental business from a distance, I ultimately decided to hire a property manager to oversee all of my holdings.
What is the revenue? What are the expenses?
My annual gross revenue is $310k from all the properties. After maintenances, taxes, and other expenses, the net is $116k. A chunk of my portfolio is invested in an MCOL area valued at about $1.6m (4 SFRs) with a gross income of around $118k dollars. This translates to a 7% yearly asset value return, although I have a debt of $950k on them.
How are you doing today and what does the future look like?
I got laid off last February and decided not to look for a new job. I am now a remote owner with a local property manager. I don’t day trade as often as I used to, but I’m always looking for fresh investment opportunities in the neighborhood. I now have a couple of deals under contract, and once things are finalized, I can sit at around $160k before taxes. Before I am 30, I want an annual pre-tax income of $300k.
Any advice for other who want to get started?
I know I got very lucky, so it’s not exactly something that can be replicated and help someone get started in real estate.
There’s a common conception that NYS is a terrible place to invest because of the negative population decline. But in an area with a large population, it also means there’s going to be a large amount of competitions. The supply of apartments goes up and the amount of high-quality tenants goes down. The bigger landlords can now price out the smaller ones with extra amenities and other benefits. This would make it difficult for anyone who wants to start out. From my experience, western NYS is better. There is a very high rental demand, low rental inventory, and low real estate prices. So it looks very enticing for me.