Turning $33K into $152K, millionaire renters, and why new homes are actually getting SMALLER
Greetings, investors!
A few quick personal/business updates before we dive in. First, I attended FinCon in Portland OR last month, a conference for people who create online content about personal finance. (There’s a conference for everything.) I had wanted to attend for years, but was never able to make it work until now. It was an invigorating few days of learning and networking with other content creators who had crawled out from behind their keyboards and cameras for the chance to interact in 3-dimensional space.
In particular, I was happy to meet and spend some time with Chad Carson, someone I’ve followed for many years through his books and YouTube videos. Our real estate philosophies are very well-aligned, and he was kind enough to invite me onto his podcast where we chatted about my personal path to rental properties, the anatomy of cash flow deals in today’s market, and more. That episode will be released in a few weeks — stay tuned.
Since I was already going to be in Oregon, I took the opportunity to swing down to Bandon Dunes, a golf destination that’s long been on my bucket list. One more example of the freedom & flexibility I enjoy in my life these days, which I’m so grateful for!
Lunch at FinCon. From left: Chad Carson from Coach Carson, Michael from Take This Podcast Production, and Justin from Fit Rich Life.
Bandon Dunes at its finest.
From $33K to $152K: how I 5x’ed my money invested in Property #8
You may know that I have a dedicated blog post for each of my properties, and update those posts annually with the summary of what happened at each house and the financial results. I call these my Property Spotlights.
But there were some properties conspicuously missing: I had yet to write the posts for Properties #8 through #16. But I’m committed to getting that done…eventually! ;-)
This week, I took one more small step toward that goal by publishing my article on Property #8, one of the best and most expensive homes in my portfolio. I bought it in 2019, and between cash flow, loan paydown, and appreciation, my $33K initial investment is now worth over $150K. (The post-pandemic boom in home values of course fueled most of this — but it just goes to show how powerful a boring, buy-and-hold investment strategy can be in the long-term!)
Check out the article for all the details and financial results for this property so far.
Real Estate News & Data
The rise of millionaire renters
This piece about millionaire renters caught my eye because — ahem — I’m one of them!
Becoming a renter was actually one of the big unlocks in my real estate investing journey. I sold my NYC condo, and the proceeds of that sale were the primary source of funds for my cash flow rental portfolio. If you own your home, think about this: what could you do as an investor with all the money currently tied up in your primary residence?
Plus, it turns out that I LOVE being a renter. It really is simpler and less stressful, though of course this is a very personal decision — and there are lots of non-financial reasons that someone might want to own their home.
If we look strictly at the finances, though, residents in expensive markets are much better off renting. (Yes, really.) If you’re renter-curious, check out this article I wrote last year on the financial side of the Buy vs. Rent question.
Is the age of McMansions over?
Hard to say, but it’s true that smaller houses are on the rise for a number of overlapping reasons. (I wrote about home size in this 2023 newsletter, and it was already clear then that home size had come off its peak.)
Also, here’s an important fact about home size for investors: larger homes are more expensive to maintain, holding all other factors constant. At least, that has been true in my portfolio, as I explored in this article.
The Latest in My Portfolio
I’ve updated my portfolio tracking figures through the end of September. After a tough start to the year, I’ve staged a strong comeback in the last few months! With 3 months left, cash flow for the year stands at $76K — a nice sum, but $9K below where I was hoping to be at this point.
And now this!
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Well, That’s Interesting…
Institutional investors are a tiny piece of the housing market…and they’re selling
Still think hedge funds and institutional investors own a big share of America’s rental homes? Think again. The truth is that small “mom & pop” landlords represent the lion’s share of the investment home market, and institutional investors have been net sellers of homes for the last 6 quarters in a row. (I wrote about this same topic a few years ago in this article.)
This graph drives home the point better than any words could:
It’s the combined activity of all those small investors that really drives the market. In Q2 of this year, investors were responsible for 1 out of every 3 home purchases, the highest level in 5 years. But this is mostly due to overall sales volume being lower: the number of investor purchases are down from last year, but traditional homebuyer purchases are down even more, causing an increase in the SHARE of investor purchases.
Eric’s Picks
Article: Lance Lambert’s excellent take on the news that the nation’s two largest brokerages (Compass and Anywhere Real Estate) are planning to merge.
Video: Chad Carson takes a look at the BRRRR strategy, and how it’s being impacted by higher interest rates and current market conditions.
FIRE Profiles: The stories of three early retirees — including me! — tells a consistent story about how savings is the engine of financial freedom.
Data Analysis: How much will falling mortgage rates increase the demand for homes? Lance Lambert looked at historical data to answer this question. (Double-shoutout to Lance in this newsletter — crushing it, my guy!)
Essay: This remarkable piece from former FTC commissioner Alvaro Bedoya tackles wealth inequality, farming, pharmacies, the urban-rural divide, and more. The key takeaway: as much as we all focus on right vs. left, the bigger war being fought is top vs. bottom. And the guys at the top are winning big.
More interesting stuff:
Americans think they need $1.5M to retire comfortably.
In a shift from the increasingly crypto-friendly Trump administration, the Federal Housing Finance Agency has ordered mortgage giants Freddie Mac and Fannie Mae to include cryptocurrency holdings in their mortgage underwriting process. What could go wrong?
Looking for a different kind of real estate? Maybe an underground bunker is more your style.
About the Author
Hi, I’m Eric! I used cash-flowing rental properties to leave my corporate career at age 39. I started Rental Income Advisors in 2020 to help other people achieve their own goals through real estate investing.
My blog focuses on learning & education for new investors, and I make numerous tools & resources available for free, including my industry-leading Rental Property Analyzer.
I also now serve as a coach to dozens of private clients starting their own journeys investing in rental properties, and have helped my clients buy millions of dollars (and counting) in real estate. To chat with me about coaching, schedule a free initial consultation.
Free Rental Property Analyzer
You probably know that a well-designed rental property calculator is the most important tool a real estate investor has. It allows you to quickly calculate key metrics and understand your cash returns on a target property. You can also answer questions like:
How much do your cash-on-cash returns improve if you use a mortgage vs. paying in cash?
What will your average monthly cash flow be?
How will your returns change in future years?
Those questions can be easily answered with side-by-side comparisons in the RIA Property Analyzer. I guarantee this is the best free rental property calculator out there today, and many of my readers have told me the same. It’s both powerful and very simple and intuitive to use. Check it out!
