If you read my first blog, you know that my whole journey into real estate and how I came to be a construction teacher all started when I decided to renovate my kitchen (If you didn’t read my first blog, 153 Days until My Last Paycheck, read it here). Long story short, I caught the DIY bug. Next, I refinanced my house. That's when I got cash back and paid off all my debt (which I knew nothing about and didn't even know was an option for the longest). From there, I attended a seminar on wholesaling, fixing, and flipping properties and the rest is history. I dedicated a year to studying all things real estate. While I was reading one day, I came across something called a 1031 exchange (a complicated subject that I didn’t actually do, but it sparked an idea that led to a journey). By the time I read that information, I was going to local real estate meetings often. I called my friend, whom I had met at one of those meetings, who was a real estate agent. He put me in contact with a mortgage broker who, to my surprise, said I most certainly could buy another home (on a teaching salary!!!), and here is how I did it.
“You don’t know what you don’t know.”
One strategy that I heard over and over in my reading, in podcasts, and on videos was how some people used multifamily property (such as a duplex or triplex), where they lived in one unit and rented out the others, to offset their mortgage. The rental income from having a home with multiple houses in it, but still only one mortgage, gives you the opportunity to offset the cost of that mortgage, property taxes, and other expenses. You just have to find a multifamily property where the rental income covers those expenses. Then you can live in one unit for free and potentially even make a profit. Even if you don’t make a profit, you offset your mortgage or may no longer even have a mortgage payment. So essentially you are paying off your home and building equity but with someone else's money (the rental income you receive). This truly defines the term “making money while you sleep.” Maybe I should rename my blog, “Making Money While She Sleeps.” Well, it gets better. If you find the multifamily, the bank looks at the potential income to offset your debt-to-income ratio. The kicker is that the bank will do this for both the house you are currently living in (if you choose to keep it and make it a rental property) and the other units in the multifamily. Owner-occupied mortgages typically have lower interest rates and require a smaller down payment than non-owner-occupied mortgages. I borrowed the money I needed for the down payment from an annuity I got through the school system when I started teaching. They’d taken $50 out of my paycheck that I never missed because I never saw it in the first place. Now I could borrow from it at 5% interest. This is how I kept my first house and bought a quadplex (4 units). This can also be a way to free up more of your income to save or invest in other properties. Sidenote: That first house has appreciated over $100,000 in value since I bought it 8 years earlier. Two years after I bought the quadplex I sold it for a profit of $97,000 which I then used to flip more houses.
“God does not choose the qualified, He qualifies the chosen.”
It's worthwhile to mention that buying a multifamily property and being a landlord can come with its own set of challenges and responsibilities. These challenges and responsibilities include finding tenants, handling repairs and maintenance, and dealing with legal issues should they arise. It's vital to do thorough research, understand what you are getting into, and consult with professionals before making big financial decisions. However, don’t let fear deter you either. I look back now and see someone who did the same thing day after day, year after year, and never even thought of changing because one, I was stuck in a rut, two, I was in my comfort zone, and three, I didn’t know and was too tired to look because I was teaching and working a second job to make ends meet as a single mother of two. Now I own several rental properties. I still live in the quadplex and, along with my two kids and best friend, I have flipped over 10 properties. I can now retire and live off passive income while my retirement account continues to grow. Believe me, I never thought it possible! That’s why my second favorite saying is “You don’t know what you don’t know.” That saying reminds me to keep looking, keep asking questions, and keep learning! What is my first favorite saying you ask? God doesn’t choose the qualified, He qualifies the chosen. I’ll end with my 3rd favorite personal mantra, “Nothing changes if nothing changes.” Let that sink in! Now start making changes.
“Nothing changes if nothing changes.”
