February 13, 2019 07:46 PM. March is right around the corner, and the spring real estate market is already starting to heat up. Real estate experts say it will likely

Is it possible to start with very little and become very rich from investing in real estate?

You sure can. I got my start in real estate when my apartment complex notified me that my rent was going from $373/month to $413/month when my lease was up in 60 days. I was incensed! How could they justify over a 10% increase on this beat-up, rat-trap, 1 bedroom when they had 30% vacancy and refused to do anything about the fraying carpet and peeling paint.

1991

It was 1991 and we were in the depths of the previous real estate market crash. I had a personal fortune of $5,000 in the bank (most of it earmarked for my last semester of college) and I wasn’t going to pay crazy money for my little apartment anymore! I marched into the Re/Max office down the street, walked up to the receptionist, and said I want to buy a house. The only agent in the office on this afternoon was Roberta, “Bert” as I got to know her. She took me into her office and it was plastered with awards for things like $25 Million in annual sales and $500 Million in lifetime sales. Bert was a very well seasoned agent and normally worked with people buying million dollar homes. She took me in and treated me like I was a million dollar customer, the customer I would eventually become.

Treat me like a Millionaire and I’ll return the favor

She stared off with asking me what I was trying to accomplish and what my budget was. I admitted that I knew basically nothing about real estate, but from what I could see in the papers, I could afford up to a $50k place considering what the interest rates were at the time. Bert interrogated me for about 30 minutes about where I wanted to live and what type of things in a home were important to me. She sent me off with homework in the form of a 15-page mortgage application and said she’d take me out to view places the next day.

True to form, I met her at the office and she took me to 3 places in her bright red Cadillac El Dorado. She told me she had 2 places to test out and one place she thought was exactly what I was looking for. She knew her customer. The first to places were okay, nothing wrong with them, and I could have been happy. The last one was what she was saving. It was perfect. Everything I wanted and right where I wanted to be. A cute little 1100SF 2 Bed 2 Bath townhouse with a full unfinished basement of 550SF in a newer community. It was only 5 years old and everything was in good shape. The asking price was $46,000 and I made a $44,000 offer as soon as we got back to the office.

They took the offer and I closed a month later. I put down $4,400 and got a state-funded first time buyer incentive to cover the other 10% down that I wouldn’t have to pay back if I owned the house for 10 years. I got a terrific rate for the time at only 8.5%. That would be horrible these days, but in the 80s mortgage rates had topped 15%, so I was just in heaven. My mortgage was $270/month, the HOA dues were $74/month, and insurance was only $90/year! My total costs were only $352/month. I had beaten my old 1 bedroom apartment rent and I had this huge place that I never thought I could fill with furniture. I had arrived.

I sent dozens of friends to see Bert, she was spectacular. I would have worked with her for ever, but Bert retired in 1995 before I was ready to buy my next place.

Almost a Landlord

I started my career as an unofficial landlord a few months after I closed when I had a college buddy want to be my roommate. He was willing to pay $250/month in rent and split the utilities. He was paying $400/month for his 1 bedroom place and this was going to save him a bunch of cash and upgrading him to a much nicer place is a much better part of town. Wow, my total monthly living costs were $102/month plus 1/2 of the utilities. This landlord thing is something I really wanted to do.

I really wanted to buy another place to rent out and I was saving as much as I could, but by 1995 the housing market had come back with a vengeance and I decided I should finish paying off my college loans before I tried to buy another place. The hardest thing to do was to try to save enough cash for a down payment. By early 1999 I was getting close. I had paid off all of my school loans and a car I had bought after graduating with my bachelor’s. I had saved about $20k in the bank and was looking for something bigger like a duplex in the $150-200k range, but big was relevant to the market. The more I saved, the higher the prices got.

My little $44k townhouse was now worth about $85k and rates had dropped to about 7.5%. It struck me, why couldn’t I refinance my place to get the rest of the cash, so I did. I refinanced my place for $68k and walked away from the closing table with about $30k in my pocket! Now I was ready to buy and just as I was looking it happened, bam, I and about 1,000 others were laid off from MCI/Worldcom.

I’m jobless, now what?

Ack, now what do I do? I have $50k in the bank, but I have no job and no mortgage company would give me a loan without a job. I searched and searched, but I just wasn’t getting any bites in the Colorado Springs market. So I got a job in Denver. Ok, I was going to buy another place for rental, but now I needed a new place to live. The market in Denver was on fire. The rush to the 2008 market crash was in full swing. I found that the real estate market had a distinct break-point at about $200k. At about $200k you could get a nice 1800SF 3 Bed, 3 Bath, 2 Car on a tiny lot, but if I went to about $225k I could get into a 4000SF, 5 Bed, 5 Bath, 3 Car on a much larger lot. I was in! I bought a place for $224k and I had the 20% to put down and a new job making 30% more than I was in Colorado Springs.

1999: Becoming an actual Landlord

I rented out my place in Colorado Springs for $700/month and I was now officially a landlord. My parent’s attorney setup the lease and introduced me to a thing called liability insurance, both of which I had to pay for. All said and done, I was clearing over $200/month.

In Denver I got 3 roommates each paying $500/month. We all paid 1/4 of the utility bills and we got a cleaning lady to come in once a week to scrub up and change linens. It was a deal, everyone got a garage space (except me, I parked on the street), run of a 4000SF house with all the toys including a wet bar, a big screen TV, and a hot tub. I was being paid $200/month to live in a 4000SF mansion (by my standards) and still had an extra bedroom for my office and guests! I packed away virtually every cent I made and bought my next rental 2 years later in 2001 for $141k.

2004: A storm on the horizon

My next, and last for a long time, rental purchase was in 2004. I couldn’t believe how fast the prices were going up on places. The place I bought in 1999 for $224k was now worth $385k and the condo I had purchased in 2001 was now worth $200k. The prices were going up as fast as I was saving. The voice in my head said something was wrong, so I stopped and decided to see what the market would do. I had 3 rentals and had gotten married in 2002, so there were no more roommates in my house. The rents on the rentals had gone up with the market, so the cash-flow from the rentals covered my house and then some. I was happy and successful, but I knew a storm was coming.

2008: The Crash

Then 2008 hit and as the housing crashed, so did the rents. All of my rentals continued to cash-flow, but just barely as I had to drop the rents to keep them occupied. They no longer covered my house’s mortgage, but I kept my job and I continued to save for the bottom of the market that I knew was coming. 9 years after I bought my last rental, I started buying again and again and again. I was upside down on 2 of the 3 rentals, but I knew better days were coming and they were.

After the storm

I’ve been to the closing table dozens of times. My wife and I now own over $2 Million in rental property and live in a $1 Million home. I still work a day job for the health insurance and pension, but I have freedom in the knowledge that I could walk away any time I feel like it. For the time being I’m biding my time until I turn 55 and fully vest in my pension. The Denver real estate market feels like it did in 2004 and I see all the signs of overbuilding and easy mortgage money in the market. There are still the occasional deals to be had with cash purchase and distressed sellers, but the competition is stiff and the rental prices are softening. A crash is probably still 4–7 years away, but the double-digit yearly growth is over for now. It’s time for me to pack cash into other investments and wait. The storm is coming again.

Summing it all up

I got to where I am with $4,400 and what I considered to be an unreasonable rent hike. There is a good dose of patience and luck in there too. I’ve stayed employed all of these years, but the real building of my wealth came from my real estate activity. If I could do it again knowing what I know now, I would have fared a lot better, but I think I can safely say I’ve been successful in the real estate game starting with very little.

You can too, but I’d be careful if you’re considering the Denver market.