If you’d have told me 2 years ago that in 2020 Jessie and I would purchase a duplex for $90,000… in cash… I would have thought you were nuts. The thought of purchasing a property with all cash wasn’t even on my radar as something that was possible for us. Now, looking back, it actually wasn’t that hard.
Here’s a quick timeline breakdown of how we got here. Around 2010 I bought my first house in Arkansas. It needed some work that I mostly did myself. I rented out rooms to roommates and lived for free while paying down the mortgage. 4 years later I sold that house and got a check for around $18,000. I used that money as a downpayment to buy a duplex in Louisiana. I lived on one side and rented out the other. When Jessie and I got married in 2016, we bought a house with a garage apartment that we rented out. It paid for almost half our mortgage. I also kept the duplex and rented out both sides. I bought one more single family house as a rental and did all the renovations myself. At this point, we adopted our son and our daughter was born, so investing went on hold for a couple years.
Fast forward to spring 2020. We had moved to Chattanooga, TN almost a year before and were finally settling in. I knew I wanted to start buying investment property again so I began to make a plan. But… we had just purchased a home here and our savings was running a little low. I called the local Louisiana bank that held the mortgages for my duplex and the other single family house I owned. I asked what it would take to get a line of credit based on the equity I had in the properties. I went through the whole process and in the end, the bank said they could give me a $67,000 line of credit on those two properties. It seemed like a solid plan.
Having a line of credit basically means that I can access the cash whenever I need to but don’t have to pay any interest on it unless I use it. Here’s how that was possible. 1) I got good deals on both properties when I first purchased them. 2) I owned the duplex for around 5 years and the single family home for around 3 years at this point. Both properties appreciated in value over that time. 3) The rents I was receiving from my tenants all those years was also paying down the principal on the mortgages. Because they were now worth much more than I owed on them, the bank gave me a line of credit using that equity as collateral.
So back to the Chattanooga duplex. I had this line of credit available to me for almost 6 months but just couldn’t find a good deal on a property. In December, I finally found a property I wanted, but the seller wanted to close fast, like within 10 days. I was able to make an all cash offer for $90,000 using the line of credit plus our personal savings. I was able to close within that time frame because I didn’t have to get approval from a mortgage lender. The duplex needs about $7,000 in updates and once it’s done, it will be worth around $150,000. Total rent will be around $1,500/month and all utilities are separate and paid for by tenants! Once the repairs are finished, I will refinance it into a traditional mortgage and pay off the line of credit.
So here is the major takeaway from this experience….The Art of Compounding Momentum
(Not sure if that’s actually a thing but I’m going with it) What I mean is this: When I bought my first house, I didn’t even have an inkling of a plan for what my next move would be. All I was thinking about was taking the next step in the right direction. When I bought my duplex, that was just another step helping me gain momentum. Buying a house with a garage apartment allowed us to lower our expenses and save more money. The single family home gave me another boost that made my momentum stronger. Even when I put investing on pause for a couple years because of kids, those investments kept rolling and the momentum continued. They were building equity and providing income even when I was not dedicating much attention to them in the moment. When the time came and I was ready to start investing again, I was able to be in a much stronger position because I had made those first few steps in the right direction. Over time, those small steps provided big advantages.
Now, please know, I’m not writing this post as a brag, but hopefully to encourage other people in their real estate journey. I’ve heard people say that real estate is a “get rich slow” strategy, and my experience is proof of that so far. It sure does feel good though when all the pieces finally come together!
Cheers until next time and keep pursuing your own journey. Sometimes the going is slow but the key is to continue to make that next small step in the right direction.
-Erik & Jessie
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