Since a lot of people asked me how does one exactly afford the downpayments for all these homes, I’d thought I’d break down roughly how my wife and I turned 1 house into 6.
(Note: this is somewhat simplified and not the exact timing of how things worked, but in retrospect, yes how things worked)
Started with house number 1. Paid 20% down plus modest renovation costs.
We saved all the cashflows (see thread below) over the years and “cash-out” refinanced property #1 when interest rates fell. That’s pretty much the whole story!
The savings from the cashflow + the refi proceeds covered *all* of the down payments on the next 5 properties and *almost all* of the renovation costs as well.
That's really the extent of the story.
Started with one good deal. Didn’t touch the cashflows so we could reinvest them. Waited till we had a track record that showed up on our tax returns so we could refinance.
Since interest rates had fallen and we had paid off a decent amount of the principal, refinancing didn’t increase our monthly mortgage too much on the first property.
Not sure if any of this is something I’d advise others to do, but sharing to demystify slightly the process. There was no grand plan or huge amount of capital, just stumbling along and figuring it out as we went along. Also, whole thing could be a huge mistake! Time will tell.
• • •
Missing some Tweet in this thread? You can try to
force a refresh
There is a bit of a gold rush of people investing in Airbnbs and vacation rentals this year (related to pandemic remote work, interest rates, and perhaps the company’s IPO). I’m not sure if people realize quite how risky the asset class is.
This point was hit home the other day when listening to a podcast where someone with less than a year’s investing experience mentioned they were closing on 5 new Airbnb properties this month. Then i heard a podcast featuring someone with 5 properties and only 30 days experience!
So I thought I’d come up with a bunch of risks regarding investing in Airbnbs and vacation rentals.
The most interesting thing we did during the pandemic was … we bought an Earthship!
An Earthship is an off-the-grid, self-sustaining home brilliantly designed by Michael Reynolds. It’s a house that half-buried in the earth, half greenhouse near Taos, New Mexico. en.wikipedia.org/wiki/Earthship….
The electricity source is solar. In the winter, it’s heated by the the south-facing greenhouse. It can be freezing outside, but this room gets very warm.
New year, new project I wanted to share on Twitter!
My wife and I have started investing in vacation rental real estate (ie Airbnbs). First accidentally, then occasionally, now more seriously.
We bootstrapped a small portfolio of homes in Sonoma, Kauai, Taos, Mt. Hood. Started with about $150K in savings and have more than 10x that value in about 6 years. We’ve grown our starting investment around 70% a year after cashflow and appreciation.