A BOOTSTRAPPED APPROACH TO REAL ESTATE

 
 

THE CHALLENGE

 
 

Before my move to New York City in 2014, I had spent three years earning $8/day in the Peace Corps in West Africa and then incurred over $70k in debt from business school. Upon my arrival in the city, I found myself dismayed by the state of my finances and the high cost of living.

With negative net worth and nothing to lose, I focused on seeking out passive income streams that could ease the cost of living in the near-term as I worked towards financial freedom in the long-term.

After months of research and connecting with people in my network, I decided to pursue real estate as a venue for passive income. However, I first faced a key challenge: I do not live—nor had I previously lived—in a market that I could afford. My goal, and opportunity, was to identify and execute real estate strategies that I could afford and that would allow me to make money immediately.

 
 

HOUSE HACKING

I leased a two-bedroom apartment to utilize the second bedroom as an Airbnb private room rental. In order to get a steady flow of target guests (respectful long- and- short-term travelers), I conducted the following activities over a two-month period:

  • Studied the local Airbnb market, including prices and amenities, and reached out to competitors to inquire about business.

  • Crafted an ideal guest experience by leveraging personal Airbnb experiences and interviewing friends and family.

  • Positioned the apartment and listing to attract active guests who prefer a quiet living space.

  • Operationalized in-take, check-in and check-out to reduce work effort.

 
 
 

LONG DISTANCE
REAL-ESTATE INVESTING

To buy properties, I need to become an expert in a market I could afford, requiring both analytical and intuitive approaches. This involved:

  • Analyzing city data across the country to identify cities with favorable rent and sales, population growth, unemployment and tax rates. With a shortlist of cities, I then analyzed local crime rates and employers.

  • Experiencing the market and cultivating relationships to hone my “gut” instinct. In two cities, I explored neighborhoods and connected with people to gain local insights and formed relationships with brokers, agents and property managers to assess where I may have the most reliable footing.

  • Assessing properties for cap rate and cash flow once I had gained a clearer idea of target neighborhoods, local expenses and rental trends.

 
 

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THE OUTCOME

Since beginning these ventures in 2016, I have accomplished the following:

  • I am an Airbnb Superhost earning ~40% of my total rental expense. My life has also been deeply enriched by meeting travelers from all over the world.

  • I own 3 units averaging 9% cap rate and 20% cash-on-cash return. 

  • I have streamlined my real estate search using processes and templates that I have generated along the way, and I am in talks with potential business partners and investors who want to expand this model.

 
 

FEATURES

Want to learn more about my real-estate adventure? Tune into my interviews on the following podcasts:

Best Real Estate Investing Advice Ever with Joe Fairless: Episode #1907, Turn Key Deal & A Duplex In Cincinnati, Breaking Down The Numbers with Amanda Cassiday, available on iTunes and Spotify.

Millennial Millionaires Through Real Estate with Jonathan Farber: Episode #212, Embracing the Firsts of Real Estate and Expanding your Comfort Zone Quickly, available on Spotify.