How 20 Minutes a Day Led to 8 Rentals and a $13M Care Facility

0:00So things escalated very quickly. So we bought that property again kind of as a proof of concept, kind of as a symbol, not really thinking that we would do much more other than hold that and let it do its thing while we continue to go live our lives. But 4 months later, the agent that sold us that first property called us and he's actually he forwarded us an email that I'll never forget and I I I reference it regularly and it talks about these two houses that came across his desk. They were offmarket. They're both leased to operators for assisted living. So, they had five-year leases, paying about 40% above the market rent.

0:34There's no vacancy. It was almost a triple net style lease. Like, they covered all repairs up until about, you know, the major capex items. — So, you're responsible for mechanicals and HVAC and roof and stuff like that, but other than that, it's about the best lease you could ever ask for for a rental property. And there was two houses being sold together offmarket. So we had, you know, no bidding war or anything. If we wanted them at the price that they were selling, then we had a shot at it. So we kind of in our heads, you know, we were brand new rental property owners.

1:05We were not sophisticated, like I said, no mentors, no no real base of knowledge to fall on, except, of course, my parents who had their experience. So we talked it through with them a ton. And we were not in a great financial position to be able to buy two more properties so shortly after buying the first one. But we ended up buying that. We long story short, we we sold a bunch of stock. We b pretty much drained our stock position down to nothing, which was a big risk. And we ended up doing a a refinance on our primary home that we owned to buy those two properties because we recognized that the potential of those was so, you know, 40% above market rent, no vacancy, incredible cash flow.

1:43It was just such a compelling long-term investment — that we just we figured out a way to make it happen. But with that came this big identity shift. Instead of I think there's a lot of people that own maybe one or two rentals. They don't think of themselves necessarily as real estate investors. They do it because their financial adviser told them that it's smart to have real estate or they haven't quite made the identity shift that no, I am a real estate investor. I am a business owner. And I think when we bought those those two as a package and all of a sudden we went from one to three rentals in about a six-month span again coming off of this big life change that I had earlier that year.

2:19That really lit a spark and we started falling in love with the process of of being real estate investors. The bit, you know, everything from like the architecting the deal and understanding, you know, how to set up all the different accounts, the tax planning, like that's when I really fell down the rabbit hole and started understanding like if we continue to feed this and grow this to the best of our ability, the potential, you know, not only the cash flow, but the wealth accumulation, the diversification and and lack of reliance on W2, lack of reliance on stock, it was just like it all started flowing in my head so quickly.

2:51So to fast forward to your question about how do we end up with long distance well one of you know the things that we've learned many times over now life is not you know linear and it's also not driven in our case by real estate investments like we were living the rest of our lives — so you know during co entertainment industry shut down overnight it forced us to reevaluate everything we had to find new employment — so we ended up moving back to Seattle which is where I grew up and we had four houses in Vegas. So, we had to decide, do we keep these or do we sell them?

3:24The risk averse thing would be to sell them and just go buy a house in Seattle. But we said, we worked so hard and so many things broke our way to get these four properties. It would feel foolish to just cut bait on that and leave. Like, let's figure it out. So, during COVID, we moved there and we and we figured out how to self-manage from afar. It was far from perfect. We didn't have the best systems. We didn't have, you know, we didn't even have a third party property manager, but we figured it out and we strung together systems and and leverage connections that we had.

3:54So, again, it was proof of concept. All of a sudden, we were, thousand miles away, managing four properties. That gave us the courage. Fast forward just to round out the portfolio. We bought two properties while we were in Washington. And then we ended up doing a fully long distance, this is the only market that we had ever lived in. We bought three houses in 2022 in an area called the Quad Cities in Iowa. And that was again like a brand new thing. We researched the market. We researched a ton of markets in the Midwest and the South. We picked one. We we hired a team, you know, agent, property manager, lender, all that stuff.

4:29So that was another proof of concept. I think all of these things were us kind of just trying to prove out different ideas to ourselves and and see what works and and and build a long-term plan accordingly that that fit into our lives instead of conforming to that plan if that makes sense. — Oh, absolutely. Yeah. I think a business should always feed you or you know provide you with what you want as opposed to you providing the business with what it wants which I think 90% of people out there have it backwards. So that's interesting because both my parents are from the Quad Cities actually, so it's kind of that you bought there.

5:05They're from the Illinois side, but yeah, it's not a not a huge area. So, it's funny that you you landed there. — that's funny. — So, I it sounds like you got your first exposure to elderly care facilities through those that second two properties that you purchased. And I want to come back to that, but first I was curious because I think this question comes up a lot. You know, you bought a lot of properties over a relatively short period of time. How did you finance all those? Because everyone's always like, "Oh, I'm going to run out of money." And, you know, Yeah.

5:37I'd do that, too, if I was already rich. You know, you see that in the comments all the time of of videos or content. So, what what did that look like for you guys? — Yeah. Yeah. So, you're headon. You hit the nail on the head. Everyone runs out of money at some point, whether it's on the first house or the 10th house. And for us, you know, some of it I cannot take any credit for because we started buying at a very opportune time where the outside market was appreciating at at rapid pace, especially in a city like Las Vegas.

6:08So, we bought our first primary house in 2017. And that was, you know, at the time in Vegas, you could get we had a four bed, two bath house that we're able to buy. It was $250,000 in a neighborhood where that same house 3 years later was worth 330,000, right? So, like can't take any credit for that. We didn't do any real value ad, but that was the one where I mentioned before, we were able to pull money out and use that to finance those two houses. — we had we were dual income, no kids in a low cost of living market.

6:39So, even though we weren't making as much money as we'd like, we had a pretty decent control over our expenses and our ability to save. And we also skipped we we went skipped a big lavish wedding and ended up getting married in our backyard in Vegas which you know this is one of the benefits of living in Vegas. We — we were we essentially made a decision in the moment that you know the the expectations and the expense and all the stuff that goes into a big wedding. It just wasn't the right decision for where we were in our lives at that moment.

7:10And so we were able to save you know a lot of money. Nothing against big weddings, but like by skipping that whole chapter, not only were we able to kind of start our married life earlier and start pursuing our goals, but we also saved all that money, which was a big part of what funded our first rental. So, the first like few were were kind of leveraging different pieces of money from our personal financial life. But then from there, we again the market had appreciated quite a bit in Vegas by the time we moved. We moved back up to Washington. We struck two creative deals with my parents where the two properties that we found there, they were both ones that we bought as primary owner occupant.

7:49So, we were able to buy them at lower down payments and really compelling interest rates. This was 2020. Like, you know, one of the interest rates was 2.7% and the other was 3.1%. — And these were on pretty expensive properties, — but we worked a deal out with them where the the whole plan was always to move out of them and turn them into rentals. And then in that case, you know, they they put up a large part of the down payments and then we split the cash flow once they turned into rentals. And then the the kind of cash flow snowball from all of those combined was able to help roll and start buying some of those Iowa properties.

8:25So, I mean, there's no singular answer. It was kind of like — each transaction, each deal as it came across our plate, we figured out what tools we had available. We did a 401k loan for one of them. We did multiple refies. We lived in them before renting them. Like, so I actually did a portfolio breakdown where I explain all this stuff. It's a little it's a little freebie I can maybe link to if anybody's interested. But it goes through each house and how we got it, what was going on in our life and and you know how that whole portfolio came to be.

8:56But I to your point like there's there financing is one of the biggest barriers for most people and it makes sense for I think a lot of people assume that that can't be solved. There's always a solution. It just it just depends like you got to you got to find the strategy that fits not only your financial goals but also the types of strategies that you can learn and that you're willing to learn in order to implement it. So, I don't know. I I don't we didn't do anything super fancy.

9:27It was just solving one problem at a time as it presented itself. — That's Yeah, that's so key what you just said there. Solving one problem at a time. I think the the theme for me as you explain that is that you didn't know what the next step was or maybe three steps into the future were. And I think all those people who, you know, live in the comments and say, "Oh yeah, if I was a millionaire, I'd do this, too." you know, but I've never interviewed someone who starts off as like this super wealthy person who's like, I'm just going to get into real estate investing because it'll make me way more wealthy.

10:00Like, it's always people who start from scratch. They don't know what it's going to be like. Like, for us, it was a very, very windy path. And we figured it out on each deal, different type of financing. And and ultimately, you figure out how to do the next deal then. And, and it starts to get easier. Now today we can do pretty you know we have a pretty decent system that we can replicate but in the beginning it doesn't always start off that way. But the the key was just being willing to start and and I've never ran into someone who couldn't figure out the first deal.

10:37Like if if it's a truly a great deal and you have enough motivation, you can get a deal done. You know, whether you have a dollar to your name or or not, like it's it's possible to to figure out a way to structure a deal to get it done and then you figure out the next one from there and you just keep going. But I love that that that's a that's such a great explanation and you can tell that it's a real explanation, not just like here's what the book says to do and I've never really actually done it.

11:09So I I want to kind of transition from the the eight property portfolio that you built to what you're doing now with this new development because this is much larger deal than you've done in the past. Different type of deal and ironically we had we were just talking about this. I I had Brett I think it's Cha Chotsskis Cha Chakis — Chakavis — Chakavis. I always struggle with his last name on the podcast, but he was on I think about seven or eight episodes ago if people want to go back and listen to that.

11:42But his whole premise is these elderly care mansions he calls them. Which is really cool. When I first heard it, I was like these things don't sound like they go together like a mansion and an elderly care facility. It feels like it evokes different types of emotions I guess or different thoughts of what what these are but they really do go well together and after he explained it I mean it makes so much sense I mean the numbers were were really compelling so I'm curious you know how you got linked up with him because I know you're you're working with him to develop your own now your own facility and I want to talk through what that looks like and your projected numbers here and timeline and all that stuff.

12:29So, how did this all start for you? — Yeah, I'm going to I'm going to hit this from a couple different angles. So, first, you know, from the rental portfolio, we're very proud of what we were able to do with those eight properties. You know, we had built not only did we start overcoming all those mental barriers at the very beginning, you know, and proving different things to ourselves throughout that journey, but we built it into something that was pretty sustainable, too. It actually at its peak when we had all of our houses you know fully stabilized every it was spitting off about it was about $60,000 a year in net income.

13:03So that's after all expenses you know maintenance capex allocations etc. So it's a pretty steady income stream. Now I'm always reluctant to use cash flow for like living expenses until and unless you absolutely have to. But nonetheless it had put us in a pretty comfortable spot. But this is where I say life isn't linear and like what's on the spreadsheets doesn't always work because we also had three kids in 25 months and if you're doing the math we had twins in there like Kirby mentioned before but that changes everything right the math that we had used to try and calculate you know the the pace at which we would buy rental properties our cash flow targets all the financial side of the equation changed completely because you know curve you have three and the kids and and another on the way I I'm sure you So, anyone who who has kids probably recognizes like

13:52It it changes not only your lifestyle, but but your expense profile and over a 18-year time horizon of raising kids, like you you're going to have to be in a certain position, you're either with controlling your lifestyle and your expenses or increasing your income. — It's a long way of saying that, you know, that as proud as we are of the portfolio that we built, we had run out of our own money. We had run out of these kind of strategies to acquire more rentals and all the while the macro environment was changing in 2022. We bought three houses in 2022 but the rates were going up and and house prices were not correcting.

14:27So we kind of saw all these changes in our external life and to our personal balance sheet and it and it made us realize that what we were doing at that time was not sustainable. And when I say that, I mean coming up with our own down payments, buying houses with 20 to 25% down payments and you know that are making two to 300 a month in net cash flow. That just was not sustainable. So that's I just want to set that backdrop. Second thing is we this the second and third properties we ever bought that two pack in Vegas, they were leased to assisted living operators at the time.

15:02Like I mentioned, you know, we got an email from our agent. It fell into our lap is what it felt like. It felt like a fluke. You know, it was an incredible arrangement. We loved it. It had performed really well over the preceding five years, but we didn't know how to duplicate that and and build new relationships and find more of those. We heard an episode of a a podcast the Action Academy podcast, which I'm in that mastermind group, and there was a gentleman named Dr. Alex Schllo who came on and he talked about this strategy lease to operator assisted living which is basically you can buy a rental property and depending on the on the capacity and the strategy you can lease it out to an operator just like what we did in Vegas.

15:41You can find someone who wants to run an assisted living business but they don't want to own the real estate and they they get on a long-term lease with you. And I said, "Wait a minute, that sounds exactly like what we've already done." And he was running a group that was teaching people how to do that strategy. It was a residential assisted living focused mastermind. So the second I heard that, you know, this was 5 years after we bought the initial properties, my wheels got spinning so fast. I was like, "Oh my god." So we literally went and and joined his group. And within that group, there were people that were operating their own assisted living.

16:12And that also just like kind of pressed our mind to the outer limits. I said, "Man, that sounds that sounds intense." You know, that's a 247 business. It's a lot of responsibility, but at the same time, you know, it's find it's a great financial opportunity and it's a it's a huge impact to society at large. We started learning more about the problem of of the senior care shortage for beds, assisted living beds that exist today. And then the projection, you know, now that the baby boomers are getting into the senior age and retiring and aging faster than we have the capacity to deal with them, the more our eyes open to like, wow, this is actually even in today's world where a lot of things are getting harder and affordability is getting out of control for rental properties.

16:57This is a big area of opportunity both from a business and an impact standpoint. My wife had her father was diagnosed with early onset dementia when she was a sophomore in college and he was in a a nursing home, a really, you know, poor quality nursing home for about 7 years before he passed away. And so she when we when all this was coming together at the same time, she really also saw this model and we found out about Brett and the memory care mansion model which is this luxury building, you know, that's centered around the highest quality of care, very personalized, very comfortable environment.

17:30And it was the antithesis of what her father went through in this big smelly nursing facility with nothing hanging on the walls, smelled horrible. You know, the food was served on a cafeteria tray. Just a really sad experience for somebody to see their loved one in. — So all these things, you know, combined together kind of drew us towards that model with Brett. And we were in a group that was solely dedicated to assisted living. And over time that that really just drew us in and and we ended up hiring Brett to be our mentor and and a strategic partner in this project and and usher us endto end through the process of developing and then ultimately operating two assisted living homes in a suburb of Houston called Tombball which is very close to where we live.

18:12So I'll pause there.