Imagine setting out to buy your first rental real estate unit … and having the opportunity to buy thirteen.
What would you do? Would you freeze like a deer in headlights? Run in the opposite direction? Or lean in and find a way to make it work?
Luke Andrews, author of Amazon bestseller 10 Mistakes Everyone Makes Buying Their 1st Rental Property (now available for free download at 10investormistakes.com) chose the latter.
The opportunity came when sitting down for dinner with his co-worker and future investing partner, the co-worker’s girlfriend, and the girlfriend’s parents.
“We’re passionate about real estate investing,” Andrews told Ricci Truong of the Camaplan Podcast. “We’re looking for some properties. And they said, ‘Well, interestingly enough, we own a lot of properties and we’re looking to retire and sell our portfolio.’”
Despite having only pulled together $20,000, barely enough for a down payment on one unit, Andrews and his partner jumped at the chance to jumpstart a significant portfolio. They ended up bringing on an experienced “money partner” and splitting the deal 50/50 in exchange for them doing all the management.
Powerful Partnerships
Andrews encourages new investors to follow his lead — don’t go it alone.
“I have so many that come and say, ‘Well, I don’t wanna take on a partner because that’s gonna eat up half my profits,’” Andrews said. “And I was like, ‘Well, it also cuts your risk in half. It also gives you additional people to bounce ideas off of, to share the workload.”
Finding a partner can also help you shore up your weaknesses, too.
“If you’re looking at partners, don’t look for your twin. Look for your mirror, right?” Andrews said.
Case-in-point — his own partnership. “My business partner and I have very similar goals and visions,” he said. But they have different strengths. “I’m really strong on the analytical and the financial side, and then he’s really, really good at dealing with contractors and getting those things done.”
40 Under 40
The hits kept coming — Andrews’ next opportunity after the first thirteen units was an opportunity to purchase a portfolio of fifteen single-family homes. This fast start gave birth to a private ambition — to acquire forty rental units before his fortieth birthday. He achieved that ambition with months to spare.
But not every investor has to move as quickly as Andrews did. “I always tell people to get started somewhat small,” he said, “and I like single-families and duplexes to get them started.”
Acquiring many rental units quickly helped Andrews quit his 9-to-5 relatively quickly. That doesn’t mean he doesn’t work, though.
“The word ‘passive income’ can be somewhat deceiving,” Andrews said. “There’s definitely some work that goes along with it. There is some stress that goes along with it.”
He also pointed out that early in the process, a lot of work gets front-loaded — viewing as many as 100 properties only to have nothing come of any of them. But once you get going, the results snowball. “I get paid a lot more than I should for the amount of work that I do,” Andrews said.
A Family Affair
Andrews uses the free time to spend time with his two sons. He particularly enjoys coaching their sports teams — something his own working-class father rarely had time to do.
But when he was managing his portfolio of rentals hands-on, he made sure his sons were familiar with the family business.
“I would take them with me to do the work,” Andrews said. “You know, they can, they can pull weeds, they can clean things up. I would take them with me to collect rent. I wanted them to see, you know, how we make money.”
It was more than just a lesson in business or adulting, though — it was a lesson in gratitude.
“I want them to see that not everybody has the same type of house that we live in,” he said. “It adds an additional appreciation.”
“Work ethic and passion is what I try to instill in my kids.”
Today, Andrews outsources most of the work on his portfolio to property managers, contractors, and other vendors, leaving him with more time to coach his sons’ teams.
“There’s not quite as much and it’s not as hands-on, but you still have to make a lot of decisions,” Andrews said. “The nice part is that you can make those decisions from just about anywhere. So decisions I found are a lot easier. make when you’re having a cocktail on the beach, right? … When you’re sitting out by the pool, decisions don’t seem as stressful, you know?”
