Recently I received an email from a new investor, and I found his story so inspiring. Jahbari’s email read, “My wife and I started purchasing real estate in the summer of 2017. This year, we’re set to have a minimum of 12 properties. My wife and I have been married for six years, we really look forward to starting a family and I wanted to make sure I’m not away working to provide for them. Currently, we have four rental houses, I’d love to talk about our fears and the things we’ve had to overcome.”
I sat down with Jahbari and Shania McClennon on the podcast to talk about their journey.
Has anything changed since that email?
Jahbari: The fear is still there, but I’ve realized in light of that, you have to take action and realize you’re making good decisions—not only for yourself now, but also later on in the future.
Whose idea was it to start investing in real estate?
Shania: It was my idea. Jahbari was a little bit more slow to pick up, he wasn’t sure about it. I’m the type of person that wants to figure it out as we go, and he wants to know everything before we start. He’s more of an analysis paralysis kind of guy.
How did you come to the decision to take action, and how did you know that real estate was the answer for you?
S: I listen to several podcasts; I started listening to your podcast. I told Jahbari about it, and he actually listens to it more than I do now! Every book I’ve read says that the best way to accumulate wealth is through real estate, and most millionaires made their wealth through real estate.
Jahbari, do you see a light at the end of the tunnel now that you have this plan in place?
J: Yes, absolutely. At the end of last year, I looked back and reflected. I’m so glad we actually did go for it and purchased these properties. Now I can see the results, and know the reward that’s going to come down the line.
What were the fears you had, and how did you overcome them?
J: My wife and I are both former college athletes; we came out of college not having any debt. We picked up on a principle from Dave Ramsey, “all debt is bad.” That’s the mindset we moved forward with. When my mentor in real estate gave me a book by Robert Kiyosaki, I thought everything went against the core values I was instilled with. There was never a time when I was 100% ready and fear was gone, but I realized after reading Cashflow Quadrant, people who are really successful in life take risks; that’s a reality I had to come to grips with.
How do you plan to reach your goal of 12 properties in the next year?
J: Part of it is going to be us structuring each loan that we have, and use the BRRRR Method to roll it into the next property that we purchase. We set aside a little funds to make sure we can cover a down payment, and making sure that we always have a game plan for the next property.
What does your debt structure look like?
S: On our first property, we got a construction loan and the cash flow wasn’t great. I look back now and think we could have done something different, but it was our first one. By our third house, we finally got it. I was reading one of Robert Kiyosaki books and he said to use other people’s money. We used a line of credit that we had and put 10% down on a house. After we got that house, we create $22k in equity. That is the one we are the most proud of. Now we use that method to continue to roll into the next one. The first two properties were building blocks, but now we’ve learned to look at the numbers and make sure we have the equity to buy the next one.
What is next for you?
J: Right now we are speaking with and talking to your team. We have been doing a lot of hands-on work with our properties here in town, which is fine, but as we are learning we understand there’s a way to buy into another system that works. We don’t have to do as much work, so we’re learning more about that to make sure we are not constantly overworking ourselves. We continue to educate ourselves; every Friday I play the Cashflow Quadrant game with a group of friends. I constantly have fears, but now I either read or play the game to remind myself why I’m doing this. I’ve seen how it’s been rewarding. I want to remind myself why we’re doing this—so we can move forward and build legacy, make time for each other, and help others who want to learn.
This couple started purchasing real estate in the summer of 2017. This year, they’re set to have a minimum of 12 properties. Currently,this couple has four rental houses. Here’s their story.
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FAQs
The 1 and 10 rule is another real estate investment guideline that suggests that investors should aim for a gross monthly rent that is at least 1% of the property's purchase price and a net profit margin of at least 10%.
Is real estate always a good investment? ›
Real estate seems to be broadly as profitable over the long term as investing in shares: by most studies, fractionally less profitable if you only invest your own money into real estate, and fractionally more profitable on average if you use your own money plus a mortgage, and use this leverage to buy more (or bigger) ...
How does real estate investing work? ›
If you choose to be a real estate investor, you could own one or more properties, or pool your money with other investors into a fund that includes several properties. You earn money when properties in the fund are sold. You may also earn income from the rental of the property while holding the asset.
Why is real estate often a great investment? ›
The benefits of investing in real estate include passive income, stable cash flow, tax advantages, diversification, and leverage. Real estate investment trusts (REITs) offer a way to invest in real estate without having to own, operate, or finance properties.
What is the 80% rule in real estate? ›
It's the idea that 80% of outcomes are driven from 20% of the input or effort in any given situation. What does this mean for a real estate professional? Making more money in real estate is directly tied to focusing your personal energy on the most high value areas of your business.
What is the 50% rule in real estate? ›
The 50% rule or 50 rule in real estate says that half of the gross income generated by a rental property should be allocated to operating expenses when determining profitability. The rule is designed to help investors avoid the mistake of underestimating expenses and overestimating profits.
What is the average return on real estate in the last 30 years? ›
As mentioned above, stocks generally perform better than real estate, with the S&P 500 providing an 8% return over the last 30 years compared with a 5.4% return in the housing market.
What is the Brrrr method? ›
What is BRRRR, and what does it stand for? Letter by letter, BRRRR stands for “Buy, rehab, rent, refinance and repeat.” It's like flipping, but instead of selling the property after renovation, you rent it out with an eye on long-term appreciation.
What is the best investment in 2024? ›
11 best investments right now
- High-yield savings accounts.
- Certificates of deposit (CDs)
- Bonds.
- Money market funds.
- Mutual funds.
- Index Funds.
- Exchange-traded funds.
- Stocks.
What Is the 2% Rule in Real Estate? The 2% rule is a rule of thumb that determines how much rental income a property should theoretically be able to generate. Following the 2% rule, an investor can expect to realize a positive cash flow from a rental property if the monthly rent is at least 2% of the purchase price.
That said, the easiest way to put the 5% rule in practice is multiplying the value of a property by 5%, then dividing by 12. Then, you get a breakeven point for what you'd pay each month, helping you decide whether it's better to buy or rent.
What is the 70% rule in real estate investing? ›
Basically, the rule says real estate investors should pay no more than 70% of a property's after-repair value (ARV) minus the cost of the repairs necessary to renovate the home. The ARV of a property is the amount a home could sell for after flippers renovate it.
What's one of the biggest disadvantages of real estate as an investment? ›
Real estate investments tend to have high transactional costs, especially in legal and brokerage fees. The process of acquiring a new property is also very long and tedious with lots of legal formalities.
What is one of the main disadvantages of investing in real estate? ›
Illiquidity: Real estate is not a liquid investment, and selling a property can take time. You may not have access to your funds quickly in case of an emergency. This lack of liquidity can be a disadvantage compared to more liquid investments like stocks or bonds.
How many real estate investors fail? ›
95% Failure Rate for Real Estate Rental Investors
That's because it takes a lot of work for a successful investor. Especially for rental investments. A real business requires investment capital. Don't get tricked into those “no money down” scams.
What is the 80 20 rule for rental property? ›
In the realm of real estate investment, the 80/20 rule, or Pareto Principle, is a potent tool for maximizing returns. It posits that a small fraction of actions—typically around 20%—drives a disproportionately large portion of results, often around 80%.
How much monthly profit should you make on a rental property? ›
It is generally recommended to aim for an ROI of 10-15%. However, the ROI that is considered “good” or “bad” is dependent on an individual's financial standing and the particular property they choose to invest in.
What is the 2 rule for rental properties? ›
What Is the 2% Rule in Real Estate? The 2% rule is a rule of thumb that determines how much rental income a property should theoretically be able to generate. Following the 2% rule, an investor can expect to realize a positive cash flow from a rental property if the monthly rent is at least 2% of the purchase price.
What is the 1 rule for rental property? ›
For a potential investment to pass the 1% rule, its monthly rent must equal at least 1% of the purchase price. If you want to buy an investment property, the 1% rule can be a helpful tool for finding the right property to achieve your investment goals.
This couple started purchasing real estate in the summer of 2017. This year, they’re set to have a minimum of 12 properties. Currently,this couple has four rental houses. Here’s their story.
