My real-life real estate investment story
Patience, sweat-equity, and a little imagination can take you a long way in the world of real estate investing.
The internet, enterprising apps and a desire to earn a little change to throw at your savings account make finding a side hustle easy. Stories about people making $1,000 and much more each month doing a mind-boggling array of tasks are everywhere.
In the financial independence universe, these earnings are looked at for the way they compound over the long haul. Depositing $1,000 each month for just six years adds up to $72,000 before any ROI from interest. It’s a perspective that deserves a bit of exploring.
It’s easy to find exciting stories about people driving up their bank balances. Like Julie, whose line-up of profitable side gigs includes selling temporary bridal shower tats on Etsy. Then there’s Bobby Hoyt, who’s figured out how to do digital ads as a side hustle. And the tactical thinkers like the Lyft driver I chatted up on a recent trip downtown. He makes about $1,000 a week by limiting his side hustle to timeframes when ride requests are high. He said his Lyft earnings have been a financial game-changer for his family.
I have a side hustle story as well, along with my husband. Although our real estate isn’t generating a monthly income, if we look at our long-term future, our endeavor definitely will be a game-changer for our family.
Real estate investing often yields big returns
Financial independence proponents are split on whether real estate investing is a smart approach. There are at least two schools of thought. Some have divested because the demands wear on them. Others sing the praises of real estate and all the forms it can take. Economists are noting deep deficiencies in the traditional mentality that skews toward home ownership.
However, homeownership and owning rental properties over the long-term usually provides a return with sound margins. If you’re curious to know what it’s like to set out on a strategy to flip a house, rent out a portion of it while you renovate, and then build another house from the ground up, I’ve got the tales.
But first, I should probably disclose the skills my husband brought to our real estate investment. Although he’s not a builder or employed in the trades, he was confident he could build a home himself. His hands-on carpentry and other construction experience dates to when he was a middle schooler and a family friend helped him finish off a portion of his parents’ basement.
He later went to a magnet high school for industrial arts, rounding out his abilities. His background motivated him in our endeavors; however, it’s important to note that anyone can learn these skills at any time.
We shopped with two side hustles in mind
Twenty-three years ago, while in our late 20s, we made our foray into real estate by purchasing a 1907 fixer-upper in downtown Vancouver, Washington.
We picked a place that met our key requirements: Potential to appreciate handsomely (i.e. it was really bad off but had lots of potential and was located in a high-walkability neighborhood) and a separate living space for generating cash to pay for remodeling.
Even though we each had jobs in our respective fields, we planned to flip the house. We envisioned spending a year or two fixing it up, selling it, reaping the financial rewards and moving on to our next project.
What actually happened? We finished one bathroom fairly quickly and cleaned up the living area that went with it. That allowed us to rent that space as a studio apartment right away.
The other part of our plan didn’t happen quite the way we’d envisioned
Peeling back the layers and modernizing electrical and plumbing, as well as gutting the other bathroom and the kitchen, took years instead of months. We also replaced the roof (with a little hired help), decommissioned an old oil furnace and storage tank. We installed a new gas furnace.
But we did it all. Or rather, my husband pretty much did most of it. Whatever our work uncovered, he met it dead on.
Rotten exterior wall in the shower? He cut out the bad studs, replaced the wood and made sure it would stay dry. An old brick chimney hanging through the ceiling and blocking much-needed space for new cabinets? He took the bricks out one by one, patched things up and kept rolling. Can’t afford even the cheapest kitchen cabinets at Home Depot? He built cabinets out of mahogany for far less than any other new cabinets from anywhere. The list goes on.
After six years of pouring blood, sweat and tears into our home, we had a deep understanding of the degree to which it had been cobbled together with seemingly “found lumber.” We were dumbfounded that the original homeowner/builder apparently hadn’t had something as simple as a plumb bob.
The experience left my husband chomping at the bit to build his own house.
The funny thing about the obstacles was that instead of leaving us discouraged and burnt out, we were even more motivated than before. Thanks to that experience, we both felt ready to tackle something bigger and were willing to look far from the metro area, where property values are lower.
To be honest, we weren’t thinking about an early retirement or much about how the move would help our financial position. We didn’t do a detailed analysis because we knew, once the house was finished, we’d be able to sell it for much more than we put into it. And we didn’t care that much because we were merely following our bliss—which is the ultimate goal.
The objective: build a home where we could eventually live full-time. The appeal: have a place in a particular area of Washington State’s Olympic Peninsula with a saltwater view of a deserted island where, during our early 20s, we spent about a year as caretakers.
Knowing this involved a 200-mile-drive and a four-hour plus trip each way tells you our level of commitment.
Financial thumbnail: The lot cost $16,500. With our savings of about $20,000, an inheritance of around $17,000 and discretionary income left over from our paychecks, we could build ourselves a home. We looked at it as our “vacation” home and where we’d live when we’re no longer tied to a geographic location for work.
We anticipated the project would require spending a total of roughly $125,000, which we would cover using our monthly income and a home equity loan of about $20,000.
This time we didn’t have a timeframe
We made an offer on the lot in 2003, closed on it in early 2004, worked with an architect to draw up plans throughout the spring and into early summer. By July, our foundation had been poured and the septic system was installed. At the end of the month, the two of us--along with a few dedicated friends--went to work on the framing.
We spent a week on site in a borrowed tent trailer. After that, we went up every Friday night after work, got up early Saturday, worked until about 8 or 9 o’clock at night. Sundays we worked as long as we could until packing up and heading home to Vancouver, sometimes arriving shortly after midnight.
Two years of that got us to where enough of the house was finished for the county to give us our occupancy permit. Which meant the house was largely finished. However, there are a number of features--most hardly noticeable, others glaring--still to be finished.
For instance, literally today, 16 years later, we are about to install our permanent staircase. It has been a feat of design for my husband, as well as the architect. It will be semi-floating, with exposed stringers and treads made of bowling alley
DIY makes it affordable
We are doing the staircase ourselves (husband found bowling alley on craigslist, he’s welding metal brackets he’ll use in attaching the treads to the steel beams, he’ll build the staircase, install the flooring under it and will also build the handrail system). Because of that, it is costing a fraction of the $10,000 or $12,000 we would otherwise anticipate being charged by a professional using components manufactured for staircases.
From an investment standpoint, the project has turned out well. We did take out a home equity loan of about $20,000 and paid it off within 10 years. When we finish the staircase and the balance of the outstanding details, our house likely would sell for at least three times what we’ve put into it.
We recognize net proceeds would have to reflect the deduction of costs for maintaining the house -- property taxes, association dues, utility bills, maintenance (which has been minimal) and travel expenses. We consider those costs part of a lifestyle that allows us to be in our happy place. Still, we’ll come out ahead. And once it is completely finished, we may rent it out to help recuperate some of our costs.
The lesson? Find a passion you can make into a side hustle
We highly recommend working hard at something you love to shore up your financial future. Pursuing this dream has brought us a lot of happiness. We’ve had a lot of great times there with family, friends and neighbors. Having built our own home, especially one that reflects our unique preferences, is highly rewarding. As is knowing the financial benefits of sweat equity.
One of the most important aspects when you go looking for a side hustle -- assuming we’re only considering those with positive positive financial benefits -- is recognizing a passion and aligning it with your money-making skills and abilities.
Because leaning in to your passions not only adds to your quality of life but also is invigorating. Try to pick the pursuit that fills your bucket because you’re going to need that energy for the challenge.
I’d love to hear about your side hustles, how you decided to pursue them and your advice on what works.