What's up Jump In Nation! We've got another #JumpIn Stories interview, where we profile individuals who have taken the leap and jumped into real estate investing. These investors have taken action (arguably the toughest part), and are doing everything they can to create a life of financial independence.
Bo and I go back to the days when I was trying to stabilize My First Property after poor management and a vacant house. Since then, we've been talking back and forth and following each other for over a year now. He runs the website: BiggerCashFlow.com and puts out great content on his podcast as well!
Let's get started!
Bo, tell us a little about yourself.
Hey guys! I was born in South Korea. My family and I immigrated to New Zealand when I was 5 and subsequently came to the USA when I was 11 (I wish I kept my British Accent, my Real Estate negotiations would be so much easier!).
I grew up in Southern California all through high school and college where I received my Bachelors in Business Administration and Accounting. As a result, I currently work as a Senior Consultant for a mid-sized CPA firm and I have been working in this industry for about 6 years.
Aside from work I love to travel with my wife, eat good food, and read a ton of books (mostly non-fiction business/self-help/real estate related).
Where do you invest?
I currently invest in the markets of Indianapolis, IN, Little Rock, AR, and Kansas City, MO.
Why did you jump into real estate?
I grew up with a very traditional way of thinking of going to college, getting good grades, and finding a job where I can climb up the corporate ladder for 30-40 years and hope for a lush retirement. However, seeing my dad and aunt start and maintain a business for over 10+ years starting from scratch and at times helping them both with their businesses, made me realize that I had the blood of an entrepreneur. I wasn’t entirely sure so I went to school for accounting to learn the language of business and get better at reading the numbers/financials.
Through working 6+ years in the industry, I realized that there were trends in successful companies as well as high net worth individuals who invested their money, especially in real estate.
After I got married, I quickly saved up a downpayment and bought my first primary residence. I “house hacked” and rented one of the rooms that allowed me to reduce my mortgage to levels close to my apartment lease payments.
I soon had a lightbulb moment and wanted to create more passive income through real estate, but I knew Southern California was not a cash flowing market. As such, I started my journey of researching, buying, and holding out of state rental properties for the long term!
What’s your investing strategy?
My strategy is buy and hold real estate for cash flow. Not wholesaling, not flipping, just simply buy and hold. Based on 2 years of my experience investing in real estate, I see A LOT of wholesalers and flippers who make great money in real estate, much higher than the average W2 worker. However, when I talk to them, I realize they mostly say the same thing, they want to purchase buy and hold rentals, but they have to continuously flip for their income. They have created another job for themselves. As much as it is tempting to make a $15-25K profit on a flip, I BRRRR it and keep the equity for myself and for cash flow.
Why do you invest outside of your local market?
I invest out of state for a couple reasons:
1) California is not a great cash flow market. The rent to value ratios here can be anywhere from 0.3-0.5 if you’re lucky. I did the math and in most cases Id barely break even if I purchased a $400K townhouse/condo that rents for $2,000 factoring in all expenses, debt service and maintenance/vacancy reserves.
Not to mention California is a very tenant friendly state, as such I have had friends with non-paying tenants file bankruptcy and cause them 6-7 months of losses. Imagine paying 6-7 months of mortgages, utilities, and legal fees on a $400K property! Ouch.
Lastly, I invest out of state as the price points at $80-100K allow me to sleep easier at night. If I make a “mistake” on a $80-100K purchase, its nowhere near as painful as a $400-500K property. The potential upside may not be as high (appreciation), but I am in it for cash flow.
What’s the first step you took to invest in long-distance real estate?
The first thing I did was purchase a half dozen books on investing. I love to read so I bought: Book on Rental Property Investing, Millionaire REI, ABCs of REI, Long Distance REI, Retire Early with REI, and Raising Private Capital. Then I started to attend my local REI meetups (Tip: Go to meetup.com and you will find at least a dozen meetups in major metropolitan areas) and network with other experienced or novice real estate investors.
I also signed up for a free BiggerPockets.com membership and messaged local investors and bought them coffee or lunch to pick their brain on real estate investing. At least 30-40% took me up on my offer and about 5 of them I talk to regularly about real estate investing.
(Tangent: One of my friends told me a trick where you should spend 1/3 of your time with those who are a couple levels above you and where you want to be (mentors), 1/3 of your time with those on the same path as you (colleagues to help motivate and keep you accountable), and 1/3 of your time with those who are coming up behind you to give back, reinforce what you have learned by sharing your knowledge, and be thankful for the help you have received along the way.)
What’s been your worst moment as a real estate investor?
My worst moment would be when I trusted the wrong people and ended up losing about $5,000 on my first deal. The property itself was okay, as I recently got it appraised for $7K above purchase, however, Management was terrible and they placed an unqualified tenant who was eventually evicted and caused some major damage and stole all appliances. Further, this Property Manager did not winterize the property during the colder months causing a pipe to burst and damage the electrical and furnace in the basement.
What’s your greatest takeaway from that moment?
Like Ronald Reagan said, “trust, but verify.” I should have talked to a couple more investors where I would have found out they grew a bad reputation. However, I was blinded by the cash flow and fell in love with the property and ignored my gut.
Overall, it was a good lesson learned as I quickly flew over to the market, built new relationships and now have a strong team in place. Your first one is always the worst, what's important is that you take action before you fall into analysis paralysis.
How has real estate changed your life?
Real Estate has definitely changed me in more ways than one. Most importantly, I have created pretty good cash flow (averaging a net of $3K/month) during the past year which has relieved me of my burden of “needing” to climb the corporate ladder for more safety and pay.
I realized that being safe is dangerous, and taking calculated risks is the safer bet. I also realized that not many people know what they are talking about when they give advice, so you have to take a hard look at them and ask yourself if you would trade places with the person giving you advice. Not only talking about monetary things, but does that person seem fulfilled with their health, relationships, spiritually, and mentally. If not, don’t give up on your dreams or your desire to buy real estate, start a business, or create passive income because “Uncle Jack tried it in 2008 and lost all of his money.” It’s not what you know, but what you think you know that can hurt your growth.
If you could learn any real estate related skill right now, what would it be?
I would love to learn how to become a better marketer, negotiator, and capital fundraiser (doesn’t everyone, right? Ha). One of my mentors told me that “you have to ALWAYS be marketing (generating leads) and raising capital. It doesn’t matter if you don’t have a deal yet, or it doesn’t matter if you don’t have 10, 50, 100 units. Those two things are the lifeline of any business and you have to get better at it each day.”
I took this to heart even when I only had 3 properties, and on my 4th one I raised private money, and my 5th-11th properties have all been off market deals (wholesalers, direct-to-owner marketing, broker relationships, and through social media).
If you had an extra $100,000 what would you do with it?
I would buy a duplex nearby where I live with 5% down, so that I can make my current primary a rental property. Even in an expensive market like Los Angeles, if you pick the right neighborhood and financing options, you can make the properties cash flow (e.g. 5% conventional financing househack). It may not be for everyone or for extremely expensive markets like SF or NY, but my primary residence has appreciated $70K since I bought it in 2017 and it was purchased with only 5% down (roughly $30K). I have realized major tax benefits, pride of ownership, rental income (house hack), appreciation, and debt paydown. Buy a tri or fourplex if you can.
What’s the best book you’ve read recently? Why?
Maxout by Ed Mylett. (I wrote a book review about it here: https://www.biggercashflow.com/recentposts/2018/8/30/books-005-maxoutyourlife-edmylett)
The book is based on mindset, and not specifically, but I believe that 80% of anyones success begins with our thoughts. That’s why successful people shield what information they consume as they become thoughts, habits, and result in being our identity. Ed talks about creating positive habits, goal setting and developing a “will to win.” It definitely gets you pumped up to go out and life a “MAX OUT” life. I had the pleasure of hearing him speak at a real estate conference in San Diego and he has definitely inspired me to work 110% every single day as I am not creating something just for myself and my wife, but something for both our families and future generations to benefit from.
Favorite Book Quote: “The average person has 75,000 thoughts every day, and 91% are exactly the same as the day before. It isn't hard to see why so many people stay in the exact spot in life as it relates to relationships, careers, finance, fitness, etc. Do you ever think about what you think about? Thoughts are like magnets; they draw to you that which you think about regularly. They also create the filters you see the world through. If you want real change, you must first change what you are thinking about.”
What’s your end goal?
My 5 year goal is to create $15K a month in passive cash flow. I currently started a blog at www.biggercashflow.com and also release weekly episodes on my Bigger Cash Flow podcast as I always wanted to be a personal financial advisor. I think I may grow this passionate out in some shape or form where I can help other people like me create passive income and chase what really matters to them.
I had a quick conversation with my coworkers where I asked them, if money was no object (i.e. lets say you have $10K month in passive income far exceeding your expenses), what would you be doing right now? Initially, they gave me blank stares as nobody had asked them this question before, but eventually I got answers such as DJ, producer, blogger, full-time traveler, and actor. This made me realize that we may be trading up our dreams and passions for a paycheck to work in a cubicle building out someone else’s dream life. If I choose to work in that W2 job because I love it every single day, that is different, but for the many of us that may not feel that way, I think passive income is the answer.
What’s your greatest piece of real estate advice?
My advice would be to educate yourself (podcasts, audiobooks, REI meetups, pay a mentor if you have to – it all depends on everyone’s goals, resources, and ability), and take action, no matter how small, by your 3rd month.
This can be in the form of underwriting 10 deals a week, making 5 offers, or buying a turnkey property. You may be wondering “what if all 5 offers get accepted?” that means your offer was too high. Making many offers may scare you, but make them at the right prices where if all of them were to be accepted, you’ll find a capital partner in no time.
In summary, you don’t have to be great to start, but you have to START to be great. So JUMP IN REAL ESTATE!
And there you have it folks!
THANK YOU Bo for sharing your story and taking time to connect with Jump In Real Estate and the community. Best of luck, happy investing, and can't wait to see how your journey progresses!