Podcast - One Rental to 480 Units: Cash-Flow Investing

After seeing the potential for passive earnings with his first multifamily property, Eric Bowlin was addicted to investing in real estate. On today’s podcast, Eric shares his inspiring journey from one property to over 480 units, outlining the lessons he learned along the way. He also covers his best buys, his biggest busts, and the barriers he had to overcome in order to start living life on his own terms. If you’re looking for tips on real estate investing and actionable steps you can take to get started, listen to this Real Estate Rockstars.

Listen to today’s show and learn:

Eric’s brief bio [6:55]
Why Eric hated being a real estate agent [7:34]
Eric’s first multifamily property [9:50]
How Eric bought a fourplex listed at $160,000 for just $75,000 [14:04]
Eric’s real estate addiction [17:10]
The biggest barrier to overcome when investing in real estate [18:48]
The mindset you need to be a successful investor [20:30]
The value of learning home repair skills as a new investor [25:05]
How to become a cash-flow investor [27:32]
Eric’s worst real estate deal [29:44]
The first step toward finding good real estate deals [31:47]
How to calculate returns on real estate investments [34:25]
Why real estate is a better investment than a mutual fund [38:20]
Eric’s life today as a successful investor [40:06]
Advice on getting into real estate investing [43:12]
Eric’s upcoming event for real estate investors [47:47]
How to break through your goals.
Plus so much more.

Eric Bowlin

Eric is the founder of IdealREI.com, EJBowlin.com, and Bowlin Capital LLC.

He is a real estate professional with hundreds of rental units and 10+ years of experience. As a thought leader in the industry, he’s been interviewed on a number of leading podcasts including Joe Fairless’ Best Ever Real Estate Investing Podcast, Rod Khleif’s Lifetime Cashflow podcast, BiggerPockets Podcast, Listen Money Matters, Millenial Real Estate Investor, Before the Millions, and many more.

As a real estate professional, Eric has also been quoted, sourced, or featured in a number of leading publications including Forbes, Trulia, Inc, Wisebread, BiggerPockets, TheStreet, Yahoo Finance, and many more.

Eric pioneered the Infinite Investing concept and using that was able to leverage a small amount of seed capital into enough income-producing assets he was able to retire at the age of 30.

During that time he was recognized and thanked by multiple town officials and police for changing part of the town.

Now Eric spends his time teaching others how to leverage their skills and assets to achieve financial independence. He also enjoys speaking at meetups and events, traveling the world, and spending time with his family.

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Read the Full Interview

Matt: What’s up Real Estate Rockstar Nation. This is Matt O’Neal and today I’ve got the most exciting guest that you’re going to hear. This is Eric Bowlin. Eric started out his career as a real estate agent and started to invest. Today, Eric owns over 480 units. He splits his time between living in Texas and living in Puerto Rico. You are going to learn today how to invest in real estate and how to make that same dream come true. Eric, thanks for being on, man.

Eric: Thanks so much for having me. I appreciate it. I’m excited.

Matt: Yes. Most people on this show are real estate agents and they’re working on making their real estate career work. I think that all real estate agents want to be investors. Take me back, what was it like being a real estate agent for you?

Eric: It was terrible. I hated it.

Matt: [laughs]

Eric: I did it for a lot of reasons. There was definitely a multi-faucet part to being a real estate agent. One was just getting some side money to eat. Back then, when I started, I was down deep in a recession. When I became an agent, I think it was 2011, which was at the bottom of everything. You had to eat. You had to pay the bills and things like that, so that’s why I was a real estate agent. Also, I was able to get timely access to deals that I didn’t want to have to be waiting on a real estate agent to show me properties and things like that. If I saw something, I could get right into a property within the hour, usually, because these were mostly vacant. Back then, they were all closed. Nowadays, things are a little different. I could be right in a property same day and it gave me an edge over my competition.

Matt: Yes. In the beginning, you were a real estate agent. You were selling homes for people, right?

Eric: I was trying to. I wasn’t very good at it. Also, there wasn’t a lot of activity back then, so getting a listing, there was a lot of people competing over a very small number of people who were buying or selling at the time. Remember, there was almost no activity going on back then. There was very few homes– everything was for sale but nothing was trading. It’s very different than now where there’s very small inventory and it goes very fast. Back then, being an agent was really challenging and you really had to dig deep to try to get just a few listings. I was mostly working with buyers because I was a newer agent, but I did have a couple of sales.

Matt: Where did that vision of creating passive income come from? Did you always have that when you got into real estate?

Eric: No. I got into real estate on accident, completely by accident. I was a full-time student, I was working on my PhD in economics, I had a part time job as a TA, I was an Army National Guard, a bunch of part time jobs, tons of student debt, $60,000 or $70,000 in student debt. I was 23, 24 years old and I was recently married at the time, and I said, “I want to buy a home,” because that’s what you were supposed to do, but of course I couldn’t qualify. Anybody listening to my story knows there’s no way you’re going to qualify for a loan. But when you buy a multi-family, like a two, three or four unit, that extra rent gets added to your income. Back then, I don’t know if it’s like that anymore, but back then, they can make your debts disappear if you didn’t have to pay them for a couple years. They were able to say, “Oh, your student loans are deferred, so we won’t account those.” You have this extra income from these other two units,” because I planned on buying a three family, at that point, and then they suddenly were able to qualify me.

It is probably part of the reason why there was a mortgage crisis back then, but I was smart about it. Unlike everybody else who bought property that shouldn’t and they got foreclosed on, I actually used it. I bought a three-family and got into it. The plan was to sell it after maybe– This is 2009 when I bought my first house. The plan was to sell it in two or three years when I thought the economy would be good again. That didn’t pan out. My plan was to finish my PhD and become a professor. Then literally, passive income came knocking at my door. I was sitting and watching TV one night and one of my tenants was there to pay the rent.

They knocked on a door. I didn’t live in a good neighborhood, because I couldn’t qualify for very much. I lived in a pretty crappy area. It was weird to get a knock on your door at that time of night because people don’t go out at night there because it was dangerous. The guy paid me the rent. He paid me in cash because he was a drug dealer and I put the money down on the table and I’m like, “Wow, that was the easiest money I’ve ever earned.”

Matt: Maybe not as easy as the way he earned it.

Eric: Yes. He definitely did everything in cash, so whatever, but it was a good learning experience. I realized that night, it changed my life, I realized that I didn’t want to go grind for money, the way I had my whole life up at that point, every dollar I’d ever earned was very hard-earned. I had earned two or three weeks’ worth of pay just in one night of watching TV, and so I’m like, “This is what I’m doing for the rest of my life.”

Matt: Yes, I think that’s why we’re so excited to have you on the podcast today, is everyone listening should have the same goal of investing in passive income producing properties the way that you’ve done. I want to dive more into what the next move was. You had this first triplex, you saw that, “Wow, people will pay me while I watch TV.” How did you then start to acquire more and start to do this more?

Eric: Right. Surely, after that I got a notice that I was going to Afghanistan, so I had to put everything on pause, my whole life. I’m like, “I’m going to do real estate. I’m going to do my PhD, everything.” I’m like, “Pause life.” Take yourself out of life for a year. During that year, I just did a lot of reading. I must have read a hundred books and it was all different types of– all different types of businesses you can run, how you can do everything. I probably read 40 or 50 real-estate books during that year, which was really important, because I’m the kind of person, once I get my mind set on something, I’m going to dive into it.

It forced me to pause and learn for a while, even though it’s really difficult to put your life on pause like that. Taking that time and actually learning about what you’re going to be doing is really important, so then I came back from Afghanistan in 2011 and I had saved up a bunch of money as well. I said, “All right, now I’m going to dive into real estate.” That’s when I got my real estate agent license. That’s the first thing I did. Then I just took all of my cash and I borrowed money from a friend and maxed out all of my credit cards and I bought a property as a flip.

For some reason, in my head passive, income meant house flipping. Definitely not the case, but in my head, at the time, that’s what I was going to do.

Matt: House flipping is definitely a full-time job. That is definitely what I would call vertical income because it’s a hard.

Eric: Oh, yes.

Matt: Did you flip your first house then?

Eric: Yes, I did. I did flip that house and realized I hated it and then I bought a four-family after that.

Matt: Smart. Yes. How did that one go?

Eric: Yes, that four-family is one of my better deals. That I bought– they were trying to sell it for $160,000, I offered 65,000. They countered at $75,000 and I took it. This was a distressed type situation, there was a mother who had retired to Florida. Her son was supposed to be living there and taking care of it, but he became a heroin addict and he basically just rented it out for drug money and so I had bad tenants. Decent area, decent spot. Not the best spot in the world, but not a bad spot, but he was the worst tenant on the whole street and it was his house. That’s why I got it.

She just wanted to do this with her property, even her own son, she didn’t care. She just wanted to cash out, so that was a–

Matt: Yes, you made you made a low offer in a bad market and ended up picking up a really good deal. What kind of cash flow did you see from that?

Eric: Yes, I still own that property today. It’s been eight, nine years or something. Let’s see, at the time, I bought it for 75, I put about 15,000 worth of work into it. I bought new heat– It’s a four-family. I need a one new heating system and I refinished a bunch of floors and that was probably– appraised out at 170, so I refinanced it about four five months later. I got a 130,000, so I pulled 40,000 on my pocket. I paid off the original amount to buy it, which was my own cash, anyway. Paid that off, and then put an extra 40,000 in my pocket and it was cash flowing something like 2,000 a month.

Matt: Wow. You were making 2,000 a month on your second investment. That must have opened your eyes to, “Man, this can be really great if I keep at it.”

Eric: That’s life-changing money. That’s life-changing money for just about anybody. It doesn’t matter if you’re earning 5,000 a year or 200,000 a year. $2,000 dollars a month extra is life-changing. That is when things started to get easier. Before that, I remember at one point, where I had $200 in the bank and I couldn’t buy groceries. I wasn’t late on any of my bills, but I started to get those letters, because they saw all my credit cards maxed out, so they’re like, “Are you going to be facing bankruptcy or foreclosure?” I’m starting to get those letters. It wasn’t good.

I never missed a payment, everything was on time, but I was like, “All right, this is really bad.”

Matt: Yes. You get this influx of cash, and then now groceries are okay, the bills are okay, you know that, “Hey, if I continue at this, I could grow more passive income than all of my expenses and I can truly live anywhere I want in the world and be free from anything.”

Eric: You would think that’s what you’d be thinking at the time, but I’m a glutton for pain, so I bought two more properties and I had no money again.

Matt: Yes, well, you had that extra 40 grand. You needed to go buy two more.

Eric: Exactly. I had all my money back plus all that extra money and then that allow me to do more projects. I never really got as bad of a situation as that, but I had basically tied up all of my money all the time for another five years after that. I always felt very poor, because every dollar– it’s like an addiction for a while. Every dollar I had, I had to buy more real estate with it.

Matt: I love that you said it’s like an addiction. I read Be Obsessed or Be Average.

Eric: Yes, by Grant Cardone.

Matt: That was Grant Cardone’s book. Yes, I just loved that thought of just be obsessed. You don’t get to 480 units like you have unless you were absolutely obsessed to do it. You were reinvesting everything you have, but you also– I know you said that you just got married around the same time. How are you able to spend this money when it might have been needed for the family? How did you balance that?

Eric: Fortunately, she was on board with me, reluctantly at the beginning. I think she took pity on me because I just got back from Afghanistan, so she’s like, “Do whatever you want, whatever you feel like you need for your life,” or whatever. I was able to spend the life savings. She did cry a lot about the money, but she always said, “Go ahead,” so I got to give her credit for that, but it was really reluctant at the beginning, until I started to earn money in it. Then she was like, “Okay, this makes good money.”

Matt: Now, this is real. I think what you just hit on is a real barrier to people investing. There’s all this fear. You had your own fear and doubt, I’m sure, and then you’ve got the person you love the most, your wife, and she’s crying about the fear of, “What if you lose all the money that we have?” You still persevered through it. I think that’s going to be something that could be a roadblock for a lot of people, is not being able to push through that fear. What was it that allowed you to continue forward, even though it was creating more hardships in your family life?

Eric: Fortunately, she was on board enough to just go with it, but the big part at the beginning, and I don’t do it anymore, but I was a meticulous planner. A lot of that came from my military background. I had planned everything almost down to the penny. Some of those original budgets were dollar accurate. It’s unbelievable. Nowadays, it’s just like, “5,000 here, 2,000 there, whatever,” but then I’ve measured every foot and calculated every material. The labor could change some things, were unaccounted for, but it was really spot-on. Then I knew I was going to get a certain amount of money left in the bank.

I knew I was only going to have $200 in the bank account for that period of time, during the sale of the first flip, before the purchase of the next. I knew that, so it was all part of the plan. It just wasn’t comfortable.

Matt: Yes, I love that too. You lived uncomfortably to be able to find a way to live really comfortably. Let’s dive a little bit more into it. What do you think the difference is between those who make it and the majority of people who give this a try and give up?

Eric: A couple of things. The biggest one is mindset. That’s one thing that I’ve realized over the years, is that most of what holds a person back is inside their own head, and a lot of that come from the people around them who want them– they’re not necessarily malicious in any way, they want them to be successful, but they tend to tell them, “That’s dangerous or just follow in my footsteps. Look, I’m doing fine,” or, “Isn’t that really risky?” or like the common one, “If that was so easy, everybody would do it, right?”

Matt: Yes, sure.

Eric: A lot of that comes into your own self-doubts that comes inside your own head. The best way to overcome that is to surround yourself with other people who have the mindset that you want to have, so go to networking events or listen to podcast, read books. Sometimes that can feel distance because it may not feel real to you, so you go to your local networking events or to conferences. Fly to a conference somewhere, for example. I’ve been to dozens and dozens of them. Just ingrain yourself for two, three days at a time with people that are the way that you want to be. That’s probably the number one most important thing. Number two would be planning, making sure that you’re actually– when you’re about to buy a property, make a really good solid plan that will help alleviate a lot of your fears.

Matt: Yes. That is so. Probably a lot of people listening say, “I wouldn’t even know what to plan,” and you’ve figured it how so that you knew exactly how to count the money and how to make sure that the expenses were accurate and the income was going to be accurate. How did you get that education before you started?

Eric: I read a lot of books, that was helpful, but I just jump into it. I didn’t know what things were going to cost. I would just into the store. I bought books. I don’t think I have any of them anymore, but I would buy a book on how to install windows, back before– YouTube existed. It wasn’t like it was now where you could just YouTube search like how to install a window. I got to buy books on installing flooring and doing handy man stuff. I’m like, “Oh, okay. That’s what you got to do.” I didn’t think to do that until I needed to install a window, and I’m like, “Oh, that window is broken. What am I going to do?” I bought a book on it. I’ll just go to the Home Depot. I would say, “I need to install a window,” and then a contractor– there’s usually people of some level of experience working there. They’d be like, “Oh, yes. You’re going to need this, this, this, and this, and you’re going to need these tools.” You can calculate those things out.

I felt like I spent like I spent half my life at Home Depot just going around and looking at the materials and talking to the people there and comparing everything. and then reading my stupid books. [chuckles]

Matt: They weren’t stupid. Yes, they ended up working out fantastic for you. They were changing your mindset to believe that you could do it. I think one of the things we just hit on is early on, you were actually installing windows, you were installing flooring, you were fixing leaky pipes you were changing out toilets, and you didn’t have those skills. You just did what it took.

Eric: My approach back then was I wanted to do everything myself once before I hired people to do it. Unless it was something that I had to hire people, like if you had pole permits, you need an electrician do to stuff, whatever, you have to do that. Then I was usually finding an electrician that I liked, and we would sit there and talk about electrical stuff for two hours as he’s doing it, and I’ll help him. I was learning it in the process, or the plumber. I’ll just sit down on the stairs as he’s doing his stuff. When he wanted help, I’d help, and so I’m really learning these trades at the time.

Then I felt it was in a much better position to hire people. You don’t have to do that, but by doing that, then I knew which contractors were BS-ing me about things, and which ones weren’t.

Matt: Sure. Yes, then you could keep your cost down because you knew what the job really took and what it really cost.

Eric: Absolutely.

Matt: Now, one of the questions I wanted to ask is I live in a town, it’s Charleston, South Carolina, prices are higher. They’re rising. There’s other people who live in San Diego, New York. When it’s not a town where you could just buy cash-flowing properties immediately, how do you invest in those areas?

Eric: Yes. You don’t actually have to invest in those areas. There’s different methods of investing. There’s appreciation of value investing, there’s cash-flow investing, and then you got to hybrid, everything in between. I invest for cash-flow because you can’t eat appreciation until you sell it, so what you need is monthly cash-flow. Not all markets are meant for cash-flow investing. Where you’re trying to build up– you can’t retire off of that appreciation, right?

How you do it is you look– almost every single city in this country within a two or three-hour drive is going to be a city or group of towns or a county or something that has something that’s a little bit more positive on the cash-flow. It’s got a little bit of lower price and a higher rent compared to that price. That’s where you can start. If you don’t live in a state that you want to invest in, like a lot of Californians don’t want to invest in California or because of the really negative landlord laws that are there, then it’s okay to pick a market elsewhere and buy in other cities.

One of my– came to my event– one of my students lived in Korea and bought I think 20 cash-flowing single-family homes while in lived in Korea. If one person can buy property from across the planet and make it over the course of many years, I think you can live in California and buy in Florida or whatever.

Matt: I love that you’re just taking that limiting mindset off the table, and I agree with you. If you want to make this happen, you can definitely make it happen. I like what you said that there’s always within two or three-hour drive a cash-flowing area that you could get to, that you could really understand. If you can get to an investment in two hours, then you can definitely go check things out and purchase properties that are going to work for you.

Eric: Absolutely.

Matt: In fact, if it hits up on the market today, you could drive there, and you could be putting in the first offer, so you could be competing really quickly. Take me through what you would call your worst investment. What was the worst deal you ever did?

Eric: Yes, the worst deal I ever did would have to be that first flip. It was terrible. Fortunately, I hired contractors on that. I didn’t do a lot of the work myself. It was about six months’ worth of time though. I ended up making $1,000 or something. Basically, zero, right? For six months’ worth of your time, I’m making $0.20 an hour, something stupid. That was definitely my worst deal. Learned a lot and definitely must say that if you can earn money and still learn a lot, then it’s better than college at that point, right?

Matt: Sure.

Eric: That was definitely my worst deal. That’s also what made me realize that I hate house flipping.

Matt: Yes, but that experience taught you a tremendous amount. Even though you say it that it was your worst deal, maybe that deal catapulted you into new things because of how much you learned. It sets you on this path to getting to where you are today.

Eric: Absolutely. Every negative experience I’ve ever had has become something positive. I’ve learned from everything. I’ve lost, I don’t know, at least six figures or more in mistakes over the years, and probably more at this point. Every single one has definitely taught me something and put me at a better position than now. If that had been a great experience, maybe I’d still be house flipping right now and still be working my butt off every day to make $20,000-$30,000 a house or something rather than earning $20,000-$30,000 a house and not working.

Matt: Just for purchasing the right property.

Eric: Right, yes. Exactly.

Matt: Let’s get into that. We’ve got all these real estate agents. They’ve got access to all these deals. Their deals are flying off their desks and they probably aren’t even recognizing them. Can you tell me what would be– if somebody’s getting started in investing, how do they identify what is a good deal that’s going to work? What tools would you recommend?

Eric: The first thing that you need to know is you need to know your criteria because everybody invests differently, everybody has something different. What you might think is a good deal might be different than what I think is a good deal. If you don’t identify that up front, I could put that right in front of you right now and you wouldn’t even recognize that it’s a good deal for you. You need to identify that. How do you identify that is more of a personal question. How involved do you want to be? What class of property, like class A, B, C, or D? You know it. Without going into too much detail, that’s like good, middle class, and bad if you want to go down that. If you want to specialize in low income, Section 8-type D-Class housing, where you can make a lot more money, but you got to be very patient for having your stuff broken and problem tenants, but you want to earn more money, then do it.

If you need to be maybe you’re a white collar-type professional and you want to be hands-off because you work 70 hours a week as an engineer or something, you probably need to go toward the higher-end properties that are going to be much more headache-free. You have to identify that, the age of your property, what neighborhoods you want to be in, what cities or towns you want to be in, what type of property. Are you looking for single-family, two-family, four-family, 10 and up? What are you looking for? Think about yourself as a real estate agent.

If you’re a real estate agent, you want your clients, or potential clients, coming to you and saying, “I want a four-family built between 1970 and 1992, or 1978 and 1995, or whatever. It needs to be three or four family only, two or three bedrooms.” If they come to you with this list of criteria, you go, “All right. That’s very specific, but I know I’m not wasting my time showing you 25 other properties that aren’t what you really want.” You hone in on that criteria and as detailed as you want it to be, as it makes you comfortable. Then know what types of– do you want to add value to it, do you want a fixer-upper, do you want something that’s working right?

Then you figure out what type of returns can I get given these criteria. The returns are much lower on high-end, good properties than they are on beat-up properties that need a lot of work. That’s just a fact. If you want to earn 30% or more on your money, know you’re going to the bottom. You’re feeding off the bottom. If you’re okay earning 6% or 7% or 8%, you know you can go to the top end, right?

Matt: Let’s break that down maybe for people who don’t 1,000% understand.

Eric: Sure.

Matt: 30% return on your money, you’re talking about cash-on-cash return, right?

Eric: Yes. There’s obviously a lot of different ways to calculate your return, but generally, in the real estate market, we’re talking cash-on-cash return, which is your total cash yearly return versus the amount of cash you outlay. It could be a million-dollar property, if you only put $100,000 dollars, we’re comparing our return based on that. You need to have your overall ROI, so you might calculate that over a five or seven-year hold, where you’re calculating some appreciation. Then there’s a variety of more complicated ways that are really not necessary for your basic residential.

Matt: Yes, so just to keep things simple, those are the two things we would look at, cash-on-cash return and overall return on income, overall ROI. You had mentioned, “Hey, if I go to the projects, if I go to an area that is pretty troubled, that maybe I wouldn’t want to drive through at night, personally, just because crime rate is high, I could potentially get a cash-on-cash return in that 20%-30%.”

Eric: Yes, you could.

Matt: But if I want to go to the highest-end, A-class, newer properties in the best areas of town, maybe a 6% cash-on-cash return?

Eric: That is a lot less on that.

Matt: Yes, maybe it’s only 2% or 3%, and then it could be in between. The target I’ve always looked at is if you can get a 12% cash-on-cash return, you’re going to double your money every five years. That’s a good target for people who are listening. How could they easily calculate cash-on-cash return if that’s not something that they’re really familiar with?

Eric: Cash-on-cash return is just your total return every year divided by the total cash you put out on a property. If I buy a $500,000 property and I put $100,000 down, let’s assume no closing costs or repairs or anything. [crosstalk]

Matt: Just a hundred grand in it, yes.

Eric: -and I make $10,000 in cash flow, after paying my mortgage, after paying my bills, my taxes, all my maintenance, all my whatever. You get your total income and then subtract out all those other expenses and let’s say you earn $10,000-

Matt: For the year.

Eric: -cash in the bank at the end of the year, then that’s at 10%. 10,000 divided by 100,000 is a 10% cash-on-cash return. Obviously, that’s not the full picture because some of your mortgage payment goes to the principal, so you pay down the principal. You might get some appreciation on the property.

Matt: Over time, you definitely will at some point in time. Maybe not this year, but if we look at a 10 or 20-year timeframe, then we’re going to have appreciation.

Eric: That’s the hope, but not all markets appreciate. Some markets depreciate. We have to be realistic because real estate is very local. If you look at the United States as a whole, yes, that’s true, but if you bought into Detroit 20 years ago, you didn’t see that. It depends. You have to be careful, not necessarily careful, but you only want to invest in places that you believe have long-term potential. Let’s just assume that you’re getting some sort of appreciation. Appreciation, your principal paid down on your mortgage, your tax benefits that you’re getting, there’s a number of other benefits you receive in real estate. Now, it’d all be calculated toward your overall return on investment.

That’s why we look at both. Cash-on-cash is a right here, right now, and then your ROI’s like, “What can I expect over a five-year hold?” or something like that.

Matt: Yes, it’s beautiful. Thank you for taking time to break that down. If a real estate agent takes their money and puts it into mutual funds and those mutual funds return 6% a year on average, wouldn’t it make more sense to put it in a 10% cash-on-cash return property that then is also paying down mortgage and also may have some appreciation because you could earn a lot more than that mutual fund?

Eric: Absolutely. In fact, it would make sense to buy a property that earned way less than 10% if you want to compare it to a mutual fund. If a mutual fund, just use your example, 6% per year on average. One year is at 12%, another year’s at negative 12%, whatever, but let’s just say on average 6%. I think the S&P 500’s average is 7%, so we’re not far off. I would buy a property that earns less than 6% because it’s still a better investment because you got the appreciation. You have the principle pay down. Your tenants are paying your mortgage for you, right? Every year you pay down your mortgage $10,000, $20,000. That’s profit. That’s true money. Someday when you sell it, you get that.

Your tax benefits, you don’t get any tax benefits. You get taxed on your earnings in mutual funds. I pay no taxes. I haven’t paid taxes on real estate ever. Usually, I get money back from the government. I earn a lot of money and the government is usually– [crosstalk]

Matt: That’s depreciation. That’s the magic pill to buying investment property most people don’t fully understand. You could depreciate those properties and any gains you have, you’re actually depreciating out those gains so that you don’t earn money.

Eric: You only get taxed on it when you sell, and then there’s way to defer or offset that when you do sell so you don’t have to pay very much or any taxes at all. That’s probably outside of the topic for today, but point is that 6%, whatever percent in a mutual fund is worth way less than the same percent in real estate because all the other benefits you don’t get.

Matt: What I want to talk about now is your lifestyle today. You started this journey in 2009. Here we are, it’s 2020. It’s been an 11-year journey for you. You have 480 units. You’re living part-time in Puerto Rico, part-time in Texas. You got a beautiful family. Just describe to me, what’s it like to be you now?

Eric: What it’s like to be me? Oh, my God. I got to talk positive about me. It’s not always good. There’s always ups and downs in anything you do in business. I like to travel a lot. I spent two months in travel in 2019. This year, I spent two months in Asia, China, South Korea, Indonesia, and Thailand. Not Thailand, Taiwan. Sorry. Next year, my goal is to go to Thailand and a couple others. I travel a lot. This year, I decided to start going to Puerto Rico. I ended up pulling the trigger and doing Puerto Rico half time so that’s tax benefits because now I have other businesses other than real estate that do tax, online businesses, coding events, things like that. Those all get taxed like normal stuff.

Puerto Rico is a tax haven so I can live in beautiful, gorgeous beaches like in, I don’t know, one of the best places on earth I’ve ever been, I think, in the nicer areas. Obviously, it’s got bad areas, but then I got a beautiful home where my kids go to school in Texas, in one of the best cities in America. Basically, if you look at every top 10 cities in the US, it’s in like the top five on every single list so I’m in one of the best places, I guess, to have a family. I just live where I want to live, travel where I want to travel, and do what I want to do. Sounds sexy, it’s boring sometimes.

When you don’t have anything that you need to do on any particular day, sometimes you don’t do anything. Then you feel like you’re being lazy. That’s why I started my online businesses and stuff, because it gave me something to focus on day to day.

Matt: Yes. I think a lot of real estate agents who have to show up today, have to prospect, have to get new listings, have to get buyers just to pay the bills, they may trade places with you in a heartbeat and say, “Oh, man, I don’t think it would be so bad not having to show up to work and just traveling to Asia for two weeks.”

Eric: Two months, not two weeks.

Matt: Two months, yes.

Eric: I look at the memes on Instagram and stuff like that, and I see a real estate agent’s Christmas calendar, and it’s work, work, work every day. They get like, a quarter of a day off for Christmas. Then work, work, work. Then they get an hour off for New Year’s and I’m like, “I just can’t imagine my life like that anymore. I used to be like that.” I don’t need to. It’s nice being able to just do whatever you want. I think that should be everybody’s goal, that you can work like that if you want to if you enjoy it, but you don’t have to work. That’s what the financial independence is, it’s what the passive income gets you.

Matt: That’s why I really wanted to spend a lot of time on when you started. I think we built a really good picture of how you got and what the struggle was like. The six-month flip that you only earned $1,000, you’re making 20 cents an hour on that property. If you would guide a real estate agent that’s listening to this show that is grinding, what’s your advice to make that first step into investing in passive income properties?

Eric: The first thing is to surround yourself with other people who are doing what you want to do. That’s the number one thing. It’s to get out there and realize that it is possible. This isn’t like– my story, it’s a good story, it’s really interesting and the crazy stuff that I’ve done in my life, but there are a lot of people who are out there making their money in real estate in passive income. Just go to Puerto Rico. There’s a lot of retired people down there because it’s a tax haven. Everybody’s got their start, like some crazy story like that. There’s a lot of people like that.

You’ll see that and you’re like “That’s real.” When you have your friends and family who are like, “Oh you can’t do that, ” You’re like, “Well, actually, that guy did it. That girl did it. That guy did it. That girl did it. I know 20 people that I just talked to who all did it. It’s not just this one guy that I saw on TV or on the internet or on a podcast. These are real people who live near me and I go and I can have coffee with or I can have lunch with. These are real people doing it right now.” That’s the number one thing that person can do.

Matt: That would be maybe local real estate investment groups?

Eric: Yes, there’s tons of them. Just go on meetup.com, it’s a great place, for anybody who doesn’t do networking. Meetup is good. Eventbrite is another good place. Then you got your– they’re called REIAs, R-E-I-As but those are salesy so I don’t always recommend them. There’s some good ones, but a lot of them very salesy. You just want to find any group that’s open to connecting people.

Matt: Yes. You start hanging around these people who are doing the deals that you want to do, you start to see that it’s possible, and then hanging around them, they start to bring deals to you, too.

Eric: Yes, they might, or you just might see opportunities that you didn’t realize are opportunities before, because your mind is open to these being. That property that you saw on the MLS, and you’re like, “Oh, who would want to buy that?” You look and you’re like, “Oh, I know who would want to buy that.” You’re like, “I want to buy that.”

Matt: “I want to buy that.” I was thinking of that fourplex you bought for 75 grand with the drug addict owner who was just collecting money and was the worst guy on the whole block. I was thinking there was a lot of people on this podcast who would say, “I wouldn’t do that.” I wouldn’t go in and clean that up. I’d have to inherit those tenants.

Eric: Yes. That’s where you make your money.

Matt: Then all of a sudden, if they did do it, if they did see it as a massive opportunity, there’s 2,000 a month in passive income that came along with that deal.

Eric: Absolutely. You know what, that was a long time ago. Even just recently, just last year, I bought a five-family for 100 grand. It’s worth, now that’s rehabbed, like $400,000, or something right now, I don’t know, I forgot what the appraisal was but it’s or maybe more. Plenty of these opportunities still exist and they do exist in the MLS. Now, they’re more rare on the MLS than they used to be but they’re out there if you look for it. You might say, “Who wants to buy that property?” You’re right, at that price, maybe somebody won’t want to buy that. That doesn’t mean you can’t make a low offer. People still do accept low offers today, in this crazy market.

Matt: Sure, people still have problems. The reason that low offer was accepted was not just the time in history that she bought it but it was also because she was dealing with some personal stuff with her son and a property that she was an absentee owner on and didn’t want to deal with anymore. That same situation exists today in just about every town. There is somebody who doesn’t want to deal with the property that’s causing them headaches, and they will take less than what they’re asking.

Eric: I just sold the property I didn’t take the highest offer. I didn’t take the highest offer by $40,000. It was because I took the one that I knew was going to close versus the one that was going to drag me out six more weeks and wasn’t going to close. I sold something for– I forget what the price. Like 215 versus my highest, or 220. Maybe my highest offer’s 260 on it. It was 50,000 over asking and I didn’t take it. I went with the more reasonable, I guess more reasonable one but the one I knew was going to close on it.

Matt: Yes, you valued that over whatever the highest number was, and there are other sellers who are just like you.

Eric: Absolutely.

Matt: Man, this has been so great and I know you actually coach people and help them do this yourself. You’ve got an event coming up this March. Talk a little bit about what you do and how you can help people do what you’ve done.

Eric: Yes, absolutely. The event coming up, it’s 10x My Portfolio Event. Go to 10xmyportfolio.com to check it out. It’s a really no BS, hands-on real estate investing. I like to call it a workshop. It’s not all workshop, but it covers all the main points that you need. People did walk to– go to that event and they literally said, “I had no idea how to get started, what I need to do and now I feel like my eyes are open and the path is clear.” That’s one of my testimonials that came from it.

One guy, his life changed so much at the event, he actually broke down crying. I don’t know, it’s crazy. He’s like, “The whole world is open to him now.” This was life-changing for the people who went so highly recommend it if you’re interested in real estate investing. It’s in the Boston area, March 14, and 15, 10xmyportfolio.com if you want to get tickets. I had people come from California, from Alabama, Colorado, it was definitely worth it. I was a little nervous. I ran my first event last year and I wanted to make sure I provided the value for people flying across the country, getting a hotel, and everything.

I definitely feel like I was able to. I definitely gave that value. I know it’s there. I’d love to, it’s great for real estate agents who want to become real estate investors because they’re already professionals. They’ll understand on a much deeper level than a brand new person who’s never touched real estate in their life, but it’s good for them too, but definitely a real estate agent get a lot of value out of that.

Matt: Yes, that’s great. A benefit too is that a real estate agent’s going to know how to talk to their investors a lot better after they get out of that event.

Eric: That’s a really good point. I didn’t even think about that. There’s a real estate investor that I know. His name’s Bob Helms, they call him the godfather of real estate and he’s a real estate agent. He focused on investors, being an agent for real estate investors. He’s actually the father of Robert Helms, who has The Real Estate Guys radio show, and believes every real estate agent needs to focus on getting investors as their clients. They are the best clients he says.

Matt: Yes, they’re repeat buyers and sellers.

Eric: Exactly.

Matt: It’s like passive income from actually do it your job as a real estate agent.

Eric: You don’t need to be grinding for more and more clients all the time. You need to buy your own real estate, but then you can just have a small handful of investors who buy regularly and they’re the ones who provide your living.

Matt: Yes, that’s great. I know you have a real estate blog as well, where you’re writing about this stuff. Tell us a little bit about that.

Eric: Yes, so I started that a month after I “retired” in January 2016. That’s when I quit everything and stopped being an agent, stopped being the contractor and doing all that stuff. I got bored, so I started my blog. It’s called idealrei.com and tons of information. I lay it all out for everybody. If you want to check that out, you can subscribe to the newsletter. If you want to reach out to me if you subscribe to the newsletter, you’ll get an auto-email from me that just says, “Welcome.” You can reply directly to that and it’ll go straight to my inbox. I try to reply to every email that I get. I don’t always get to all of them, but I try to reply to everybody.

Matt: Eric, man, thank you for coming on the show today. Thank you for opening up a lot of people’s eyes, including my own about what you can do to become a passive income owner rather than toiling away at your real estate job. We appreciate you, man.

Eric: Thanks so much for having me. It’s been a lot of fun.

Matt: All right. See you later, man.