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$80,000/Year Cash Flow & Financial Freedom with 7 Properties


What’s YOUR reason for investing in real estate? For today’s guest, it was to achieve financial freedom and have a flexible schedule. By focusing on education, forming partnerships, and, most importantly, taking action, she was able to quit her job and acquire seven properties in just THREE years!

Welcome back to the Real Estate Rookie podcast! Sarah Msuya was firmly entrenched in her successful banking career when life threw her a series of curveballs. After her son was born prematurely and complications caused her to miss nine months of work, Sarah knew that a traditional nine-to-five was no longer an option for her and her family. She spent the next three years learning as much as she could about real estate and building a portfolio that provides $80,000 in cash flow per year!

Like many new investors, Sarah has dabbled in several investing strategies on her journey to financial freedom—from house hacking to flipping houses and everything in between. Eventually, she was able to pin down her niche—the BRRRR method. In this episode, you’ll learn how to find the best strategy for YOU and scale your portfolio through partnerships and creative financing!

Ashley:

This is real estate rookie episode 399 er. There is never a right time to start investing. Our guest today is happier. She did it sooner rather than later because her life took an unexpected turn. My name is Ashley Care and I’m here with Tony j Robinson.

Tony:

And welcome to the Real Estate Rookie podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now, today’s guest, Sarah Ouya, is an investor out of mam, and despite a hard life with some circumstances, she’s been able to create financial freedom in just three years by following and executing a plan. And she believes it’s always best to buy real estate and wait versus waiting to buy real estate. So Sarah, welcome to the Real Estate Rookie podcast. Super excited to have you on.

Sarah :

Thank you so much. I’m so excited to be here.

Ashley:

So Sarah, in the beginning of the intro here, we mentioned that you start investing and then you had this life change. What was that life change and how was real estate an effect and play on that?

Sarah :

So it started a while ago. So my son was born prematurely in 2021. He was on oxygen and that was a rough road in and of itself. We thought we got through all of that and then this past year his daycare started noticing some indications that he should be checked out further. In November, we got the diagnosis of autism. So that’s that piece. My investments were already well underway at that point, but it set me up to be able to be there for him however he needs going forward. Knowing that,

Ashley:

Sarah, I’m curious as to is that just monetary or is that also time? Have you been able to give more time with your son because of real estate investing? Maybe you can actually just dive more into what those actual benefits are that you started investing sooner rather than later.

Sarah :

Yeah, definitely. So there’s all kinds of thoughts around autism of the belief that you can lose your diagnosis with certain kind of, I guess you could say biomedical treatments, like not mainstream stuff. So I’ve kind of taken a pause from real estate over the past couple of months. I just started back last month seriously becoming a doctor and educating myself on all of those things because it’s not really something that regular medical doctors know anything about. I dunno if you guys have heard of Jenny McCarthy, the actress, but her son had autism and he has lost his diagnosis. So I went to Texas to a conference to find that doctor and was able to get my son to be able to see him. But it’s private pay, so it’s $575 I think an hour, and then it takes a long time for all the benefits to kick in, like speech therapy, there’s all these hoops you have to jump through. So because of real estate, we were able to private pay speech therapy three times a week while waiting for all the benefits to kick in. And then he is got therapies and different things throughout the week. So had I worked as a bank manager still, I wouldn’t have been able to do that. He would’ve just had to go to regular daycare and he would’ve not been able to get that additional help. That might make a big difference in his outcome.

Tony:

What an incredible story, right? Yeah, I think we always talk about why we invest in real estate and for a lot of people it’s the big three, freedom of time, freedom of money, freedom of movement. They want to travel the world, but when you really think about what being a real estate investor and having that additional stream of income provides for you, it’s moments like this, right, where you don’t have to worry about taking time off, you don’t have to worry about how are we going to cover these bills. You can just do the things that need to be done, and I think there’s an incredible amount of peace that comes from reaching that level of success in your business and kudos to you, Sarah, for building that up and then being able to leverage it when the time called for it.

Ashley:

So you mentioned that you had a job as a loan officer. Was that it?

Sarah :

A bank manager?

Ashley:

A bank manager. Okay. So how did you make that transition from bank manager to real estate?

Sarah :

Yeah, so when I was pregnant with my son, I had some complications, so I had to leave work early. So I was out of work for I think about nine months. Some of it was paid, some of it was not paid while we got him kind of stabilized and then I went back to work as a bank manager, but was calling out all the time because of different things going on with him. So I took a job working from home and I had a boss again, which I hadn’t really had a boss in many, many years at that point, and I really couldn’t handle it. I just hated my life every day and it was just not good. It just wasn’t a good situation. So we had bought the house hack that prior towards the end of my leave. It was actually one day before I would no longer have income according to the bank before my unpaid leave started.

And so that allowed us to basically not have a mortgage payment. And my mother-in-law also came from Tanzania during that time. So we had free childcare. So I was thinking now’s the time. If there’s ever going to be a time, our bills are about as low as they’re going to be. I asked my husband and he gave me his blessing that he would handle the financial stuff while I tried to just go into real estate full. So at first I thought that meant being a full-time wholesaler, but I pivoted to just the realtor business pretty quickly. I learned that was the path of least resistance. So I made money after about three months of not making money after I quit my job.

Ashley:

Well Sarah, I’m really excited to get into the house hack and your journey Since then. We’re going to take a short break and we come back. I want to break down what your portfolio looks like today and how you were able to find a house hack where your home mortgage was completely paid for. We’ll be right back. Okay. We are back with Sarah. We learned about her journey in real estate and how it was such a benefit for her to be able to give her son what he needs and to be able to be there for him, which I think is so important. And now we’re going to get into Sarah’s portfolio and also the details on her house hack. So Sarah, what does your portfolio look like today?

Sarah :

So it’s 3.1 million in value. We have seven buildings, 15 units total. The cash flow is about 80,000 a year after all expenses. And we have a 15 unit under contract now that we’re closing April 17th.

Ashley:

Congratulations. That’s incredible. So what is this timeline? When was the first property purchase?

Sarah :

February of 2021.

Ashley:

Wow, incredible.

Tony:

So Sierra, congratulations. We’re talking about three years from when you started to when we’re recording this just over so amazing progress in a relatively short period of time, $80,000 in net cashflow a year is amazing. But I’m sure you didn’t just stumble into that kind of success. You probably made some kind of plan and attack that plan. So walk us through, how did you end up finding your niche within real estate investing? And I guess what is that niche that you’ve leveraged so far?

Sarah :

I don’t even know that I have one at this point. I feel like I’ve done a little bit of everything. It’s more of I take it piece by piece. So the first one was, I actually listened to your podcast, Tony before you were on this podcast. And then I also listened to the real Estate Rookie podcast, just all of them at once during 2020 during Covid, while I was doing house projects and I just had to figure out some way to get in. I was looking at auction properties, doing hard money flips, that type of thing. And then I found out I was pregnant. So I just decided to do the easiest, easiest thing, but still doing something because I was either going to just kind of give up on it and wait until later or do that. So the first one, I took the step to get a HELOC on my property in September of 2020, and I used that 20% down on a single family home that was $113,000 as a long-term rental. And then from there I had my son and we needed a bigger house. So we actually went under contract on a single family and my husband decided he didn’t like the location. So we pulled out and then started thinking more seriously about the duplex house hack. So we ended up doing that there. From there, it’s just been pulling equity out of properties to buy other properties. And then last year was pretty much all creative finance or private money, hard money type of stuff.

Ashley:

What tips would I want to know first before we go into even the details of the deal or what tips can you give other investors who kind of want to go the same path as you as to starting out with a house hack and then all of a sudden within two years making all these decisions, do creative finance do hard money? What are some of the things that you implemented where you were able to just be able to pivot and transition and find ways to get creative with getting your properties?

Sarah :

Yeah, so I think it’s, I listen to podcasts pretty much all the time. If I was on the road or getting ready or at the gym or whatever I was doing, I was always listening and learning and then I would take action off of that. I’m a quick start. My personality, it doesn’t take a lot to get me moving into action. So I kind of just fail forward. I just move along with what I think is right until something stops me and then I either change directions or if nothing stops me, then I just continue through till closing.

Ashley:

What advice do you have for the actual goal setting piece as defining what that goal is that you’re going to get to no matter what?

Sarah :

I’m not huge on goal setting, which is probably not the best thing to say, but I just look towards the next thing that I’m trying to accomplish and then I just take baby steps towards that until I accomplish it. But I don’t have a Word document that says this is my goal. I’m trying to accomplish it in this amount of time or anything like that. I just keep going and keep going and don’t stop.

Tony:

And Sarah, I think there’s actually some, I think there’s a balance there. I think we see some Ricky investors who swing the pendulum so far the other way where they’ve got their vivid vision, they’ve got their logo design, they’ve got their 12 year target and whatever it may be, but then they start thinking about things that are not relevant to the next step. And we get some Ricky investors who ask like, well, hey, what happens when I have 30 properties and I want to make sure that my asset protection is the right way? And you ask ’em, well, how many deals do you have right now? They’re like, well, zero. Yeah, okay, well we don’t need to worry about asset protection for a multimillion dollar portfolio. We just need to get you to the first deal. So I think there’s an incredible amount of value and exactly what you said of just like, Hey, what’s the next step that I should be taking and how do I focus on really moving the needle? So just drilling down on that just a little bit, Sarah, when you think about those next actions, how are you planning out your week at least, right? Do you have a to-do list for the week, or are you just sitting down and when you get in front of the computer like, hey, what’s the next thing for me to do?

Sarah :

Yeah, so in the past I’ve looked at a strategy. I’ll take about 30 days to really dive into it and pivot if I need to from there, but I don’t spend too much time on any one strategy if it’s not going to work out. But I also don’t cut it too short to where I didn’t give it its full time to have actually percolated and gone somewhere. One example was I was going to buy out of state in not the Rocky Mountains where you invest Tony

Tony:

Smoky Mountains. Yeah,

Sarah :

Smokey Mountains, and then in North Carolina as well. I was

Tony:

Like Shreveport. I was like not there.

Sarah :

I got all signed up with Avery Carl as my realtor, or not her, but someone on her team and made that whole plan. But this was in 2022 when interest rates went way up very quickly. So it took me, I don’t know, three or four months to refinance a property. There was just lots of mistakes and by the time it was done, interest rates were at a way different place to where that plan no longer made sense. I could make just as much money investing in my backyard where I’m comfortable as I could going elsewhere. So that’s one example of I really put everything into that strategy and turns out it didn’t work out because of the way the market was at that time.

Ashley:

So I want to hear more about your house hacking because I think this is a really great foundation for new rookie investors to actually get started into real estate investing or maybe if they’re stuck after their first one or two deals. So tell us a little bit about this house hack, how you found it, what the numbers were like and so on.

Sarah :

Yeah, so I knew house hacking was a good thing to do for a long time, but I didn’t want to give up my single family living. I’d been living in a single family home for quite a while at that point. So the way that I did it was I found a duplex that I could live with that it didn’t feel like I was sacrificing too much. So it’s actually two single families just connected by a porch. They’re just regular colonial style homes. So I bought that for $600,000 in 2021 using an FHA loan. I was supposed to put three and a half percent down, but turns out there’s a thing called FHA loan limits, which nobody knew about. My loan officer, my realtor at the time myself, so that whatever it was, 17,000 turned into 80,000 that I needed to scrounge up before closing.

Ashley:

Sarah, before we move on, can you just explain what that loan limit is?

Sarah :

Yeah, so each county has a limit for how expensive a property can be for a single family, a two unit, a three unit, and a four unit. That changes periodically. And so the loan limit for my county at the time was less than what I was buying it for. It might’ve been like 5 25 or five 30, and I was buying a $600,000 property. So more than halfway through the loan process, I find this out and had to figure out what to do with that. So I ended up spending most of my 4 0 1 KA personal line of credit. I just pulled money from anywhere and everywhere just to get enough for closing. So at first I rented it to a just someone that long-term renter, and they paid, I believe 2,500 a month. My mortgage was 3030 $5 a month at that point. So I paid $535 a month.

That lasted for about a year. And when they moved on, I sold them a house and they bought their own house. I was approached by a group home for intellectually disabled adults, and I had turned this option down in the past on my very first rental property. I’d heard horror stories and I just wasn’t ready at that time. But the more I went into it, I was kind of just of the mindset, if it doesn’t work, then I won’t do it again, but what’s the worst that can happen? And worst case scenario wasn’t that bad. So I signed a four year lease with the group home last year for $3,050 a month is what they pay. Taxes and insurance went up a little bit. So now we pay 3,127. So I pay $77 a month again now for my mortgage, but I was mortgage free for six months before that happened, but still not bad.

Ashley:

Oh, not at all. So what would you be able to rent your unit out if it wasn’t to a group home and it was just to another family living there? What would you have to pay in rent to live in your unit that you’re paying $77 for?

Sarah :

Probably 31 50.

Ashley:

Yeah, that’s incredible.

Sarah :

Yeah, so the group homes taking the other unit, they’re just waiting for me to file my taxes and then we’ll buy our next house hack because the group home likes to have duplexes so that if a staff member calls out on one side or something, they can go between the two.

Ashley:

Oh, yeah, that makes sense.

Sarah :

So I already have an agreement with them that they have the right of first refusal, but they’re just waiting for us to move out. And then they’ll take over both sides at the same amount. So it’ll be 6,100 and the mortgage will be 31 27.

Ashley:

So you are going to get flooded with this question, and if we don’t ask it, we’ll get flooded with this question because we’ve had people on that have done rehab homes, rehab facilities, sober

Tony:

Living.

Ashley:

Sober living. Thank you, Tony. That’s what I was looking for. So how did you get involved with this group home? How did they find you? How did you found them or however that worked out?

Sarah :

So I had my rental on Facebook marketplace and just a staff member from the group home, it’s his job to find rentals. So he reached out to me and he really just was persistent and kept on me. I tried to turn ’em away a couple times and he just kept after me. And then we negotiated a higher rent than what I was putting it out for. I think I had it at 27 50 as a long-term rental. And I was like, listen, I’m uncomfortable with this. I’ve never done it before. I 3050 is what I need if you guys want to do this. And they said, okay, there’s no rental increases in that timeframe. So it’s kind of fair to both of us where they might pay a little more in the beginning, but they’ll probably pay less than market as time goes on. But since then, I’ve associated with a number of others because in our area, a lot of the people that work those jobs have moved here from different countries in Africa, and my husband from East Africa, so a lot of the people that he knows is in that business. So now I have several that I could call at any point, and I got Amanda to do it too. So I’ve had a lot of my friends starting to do it because I tried it and nothing went bad.

Tony:

It’s working. Yeah, I love that you got the new strategy there, Sarah. I guess what are some questions, right? You said you were hesitant initially to move out of your single family home and do a house hack. What are some questions maybe that a Ricky should ask themselves before jumping into their first house hack?

Sarah :

I guess just comfort versus financial gain is the big question. You might not be as comfortable in a four unit place that feels like an apartment, like more of your traditional apartments, but maybe you feel comfortable in the situation that I’m in with the two houses connected by a porch or side-by-side duplex. So I guess just getting clear with yourself and your family, what is most important and is there anything we can sacrifice to make this happen in the short run in order to make a better, more financially comfortable situation for ourselves in the long run?

Ashley:

We’re going to take a short break, but when we come back, I want to hear how you were able to scale up. Was this use of partnerships, was this just with doing creative financing? So we’ll get into all those details when we get back from our short break. Okay. Welcome back from our short break. We were with Sarah who just told us about her house hack, and now we’re going to talk about how she was able to scale her portfolio. So Sarah, what was the big thing that helped you to be able to scale in those three years since you started investing?

Sarah :

Yeah, so the first two years were slow and steady a couple each year, but last year was really the year that I took it to a different level, and that was partnerships that brought me there as well as creative finance. So Amanda svi, she was episode 2 0 7, I believe it was. Her and I have known each other for seven years now. Outside of the podcast, neither one of us knew the other one was into real estate at all until 2020 when we saw each other at a real estate auction. We were both pregnant at the time.

Ashley:

You guys knew each other. That’s

Sarah :

Funny. Yeah, we were both pregnant at the time. Our sons are a month apart in age. And from there we just kept running into each other with real estate stuff over and over. We were living very similar lives, doing very similar things. And then just last May, we formed an LLC because we wanted to start flipping together. We both had quit our jobs at that point and neither one of us were bankable. So we knew we had to put 20% down to do things the way that we knew how to do things. So we were going to start flipping, but we still haven’t done a flip yet. We ended up buring instead. And just long-term buy and hold. And then the creative finance is the other piece that has come into play because it’s not easy for me to get a bank loan until I filed taxes this year I was W2 and I switched to 10 99. So the banks don’t really look at that until you’ve been doing it for two years. So we did.

Tony:

I love the progression of the story here. Obviously for anyone that’s interested in real estate partnerships, head over to biggerpockets.com/partnerships. You can pick up the book that Ash and I co-authored together about real estate partnerships. But sir, I think the question I have for you is what made you feel that stepping into a partnership for flipping with Amanda was the right step for you? What were you hoping to gain out of that partnership that you felt you wouldn’t have been able to accomplish by yourself? I

Sarah :

Was scared of the rehab piece of it. I didn’t feel comfortable with that. She had done a little bit more with the birth strategy and rehabs in some of her individual deals previously, and her husband is pretty handy. We use him on different projects now. So I felt like between the two of us, if something comes up, we’ve got to double the money. We both can contribute financially, we both can contribute mentally to it. So it just felt like in order to go to this place that’s uncomfortable, this is the way that I’m going to get there without taking too long.

Tony:

And what do you think Sarah, was her motivation for partnering with you? If she brought the rehab experience, I guess, what value did she see in partnering with you? There’s always two sides to a coin there.

Sarah :

Yeah, so we think very similarly. And she also was nervous about not getting financing going forward financially. We were both realtors, we were both making money that way. She had a few different projects going on. So that was one piece of it. And then she doesn’t really like dealing with the tenants very much. So I do that. I have connections to private money that really help us out as far as making deals work because it’s not all the points and everything that you get with hard money. And then creative finance is something she didn’t do, she’d never done before and didn’t know as much about. So she leans on me when it comes to that stuff.

Ashley:

Do you think that being a real estate agent has been beneficial to you as being an investor? Because this is also a very common question that we get as to should I get my real estate license and then after that, I’m also interested if your banking experience actually tied into real estate investing at all too.

Sarah :

So I would not advise anyone to get their real estate license just for the purposes of investing. If you’re going to also actively be a realtor, then absolutely, it’s definitely helpful. In my business, I am seeing deals a lot. I am around real estate 24 7, so it’s nice to have an adjacent career to real estate, but there’s fees you have to pay. There’s courses you have to take to keep up with your licensure. So if you’re not going to actually use it for something outside of yourself, or maybe if you’re doing tons of deals like you’re a flipper, maybe it makes sense. But if you’re just a rookie investor buying one or two properties a year, I would say no. And then the banking career, I think it definitely helped. I understand lending products very well, and I understand money very well. So I think that’s certainly helped me in ways that I probably don’t always recognize, but those concepts are not difficult for me.

Tony:

Sarah, one follow up from you, and this is going back to the partnership between you and your partner, Amanda. You said the goal was to flip. Was that actually the strategy that you guys leveraged was just kind of flipping these houses to build up capital? Or I guess how did that partnership result? How did that pan out? Actually,

Sarah :

Yeah, so we’ve tried to flip a few different times and it’s never worked out. And the longer we’ve gone with not accomplishing that goal, the more I don’t know that I really have that goal anymore. I think I just like the long-term buy and hold, and she really does too. So our flips are really burrs, which is a similar concept.

Tony:

So you guys have transitioned more so into burrs. And how many would you say you’ve completed since you started this journey? Three years ago?

Sarah :

Three,

Tony:

Okay, awesome.

Sarah :

Only one was intentional, the other two just kind of happened.

Tony:

Maybe dive into that story just a little bit so folks understand why you kind stumbled into those other two.

Sarah :

Yeah, so the market was going up very crazy in, let’s see, 2021 to 2022 appreciation was supercharged. So I did little things to help improve properties during that time, but not intentionally doing a birth. So I cashed out refinanced and was able to use those funds to buy other properties, but it wasn’t the goal of it, it just kind of happened because of natural appreciation.

Ashley:

I want to ask a couple questions about the actual property management of these burrs and your rentals. So are you guys self-managing? Are you outsourcing it and give us some insight as to that operation?

Sarah :

So right now, we’re definitely actively having conversations as recently as today about not doing that anymore. We’re under contract for the 15 unit, like I said earlier. So once we close on that, I’m about at my capacity for what I can handle. I’m replying to people later now. I’m not as quick getting things rented out. I’m just too busy in my realtor business and with my son. So we need to figure out how to be able to add that in. So I think we’re at that point,

Ashley:

And I think you made a great point there as to, yes, you’re saving money by having you be the property manager, but also looking at how you are admitting that vacancies aren’t getting filled as quickly. So there’s also money being lost at the same time where hiring a third party property management company can actually balance out what’s happening. And especially if you take on the 15 unit too. I mean, I got to that point too where I was ripping my hair out and couldn’t any more either.

Sarah :

So scary turning this stuff over to somebody else. We’re thinking about maybe my husband starting to do some of that, but it’s a lot to think about handing it to somebody else scary, but I think it’s just going to have to happen probably this year.

Tony:

Sarah, have you considered building out a team internally like virtual assistants and trying to systematize or put in some automation to tick off some of the workload?

Sarah :

There is somebody who is interested in having me and Amanda partner with them. They’re starting a property management company. So that conversation is in the works right now. So that’s one possible way. But as far as building it out ourselves, I don’t personally have interest in doing that, or I feel like I don’t really have, I mean, the time is what you make it. So I look at it from how much money am I earning with that time? So right now as a realtor, I make significantly more money than I would make as a property manager or taking the time to build out systems. So that’s where I focus a lot of my time is where I can make the most money.

Ashley:

I’ve done each of those three routes that we talked about. I hired a property management company and then I went the route of building out my own team. And I have to say so far that third option was the best, but it took me so long, like eight years to actually get to that point. And I don’t think there’s any wrong or right way. It obviously depends on the company that you hire too and things like that for sure. But just so everyone knows, you do have different options out there that there is no one best way for everyone to tackle on that property management piece. And BiggerPockets is actually coming out with a new book called The Self-Managing Landlord too. So keep an eye on biggerpockets.com to watch for that new book to come out to. Okay. And Sarah, lastly, can you just tell us what your buy box is for properties you’re looking for right now and maybe somebody listening will be able to bring you your next deal?

Sarah :

Yeah, I think the bigger the better at this point. So like five units plus preferably needing a little bit of work so that there’s some value add there. But anything in the multifamily arena really. I’m not doing much with single families anymore, but anything two units and up, I’m definitely interested.

Ashley:

And what markets are you interested in?

Sarah :

So I live in Portland, Maine, and I go all the way up to Augusta. So anywhere in between those two places. So Southern and central Maine.

Ashley:

Okay. Awesome. Well, Sarah, thank you so much for joining us on Real Estate Rookie Podcast. We’re going to put Sarah’s information in the show notes or we’ll link them below in the YouTube description. If you love this episode with Sarah, feel free to reach out to her. You can also give us the thumbs up on YouTube or subscribe on your favorite podcast platform to this series. Thank you guys so much for listening. I’m Ashley, and he’s Tony, and we’ll see you guys next time.

 

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