- Seth Jones had an investment rule in real estate: rent only houses for 1% or more of their value.
- It sold its 10 properties and put the money in a stock market portfolio on the stock market, or ETF.
- Jones says that life is easier without the headaches that accompany real estate management.
This is a test such as told on a conversation with Seth Jones, 36, who lives in Port Orange, Florida, about 20 minutes south of Daytona Beach. Jones began to buy investment properties in 2015, then started selling them in 2020 to put his money elsewhere. The conversation has been modified for duration and clarity.
When I was younger, I read books like “Rich Dad, Poor Dad” and “The Millionaire Real Estate Investor”. That’s all I wanted to do.
When I left the army at 22, the first thing I did was to get a job as a real estate agent because I thought it would help me become an investor.
My wife and I moved to Port Orange, Florida, in 2013 to be closer to her parents. I quickly realized that Florida was saturated with agents. Even at the time, there were only a small number of very good mortgage brokers. So I pivoted.
It took time because I had to develop the right references. I became a personal banker with a regional bank and worked it for about a year and a half. Finally, I became a branch director. During all the time, I worked on my license to become a mortgage broker.
For years, my wife and I were hyper-concentrated to save money. My wife is a teacher and we only experienced her salary. All my income was devoted to savings to buy properties. We almost never ate and never went to bars. My faith is really important for me, so I spent a lot of time crossing the people of the Church, which has made things easier. Many people in the church live quite simply, so we haven’t done a lot of socially or traveling things either.
The goal was to go to 100 doors. It was my entire goal. I just wanted to build a real estate business that would end up supporting me and my family, and I wanted to do it as quickly as possible.
I only bought my first property in 2014. They were actually two, each with three rooms at less than $ 60,000. I was able to pay 15%.
I created a rule to guide my real estate investment strategy
I am very conservative by nature. The fundamentals have always counted me.
It was frustrating for me that in the aftermath of 2008, many people developed a state of mind that real estate simply does not drop into value.
I have developed a rule as a mortgage broker that I often call the 1%rule. It is very simple mathematics, in the backpkin. When I look at a property, the first thing I am looking for is whether the monthly rent that I can charge is greater than 1% of the value of the house. So, on a property of $ 100,000, am I able to rent it for $ 1,000 per month? On a property of $ 200,000, am I able to rent it for $ 2,000 per month?
This is not any case and does not always do or does not break a purchase. But I use it as a guidepost and for a quick analysis of an agreement.
After the first two properties, I was able to grow fairly quickly. In 2018, I opened my first mortgage brokerage, which increased my income and gave us more resources to invest. In 2019, I was able to target better quality properties in the best school districts.
My tenth and last purchase was a property in Lexington, in South Carolina, which I bought for $ 138,000 in February 2020. At that time, I realized that I had concentrated all my risks in Florida. I started to worry about the impacts of a big hurricane and I wanted to diversify my wallet out of the state.
By doing my research, western South Carolina seemed quite isolated from national disasters and I found a good school district in Lexington.
I ended up with a portfolio of 10 properties.
The Covid real estate boom worried me and I came out
In the world of real estate investments, everyone was talking about cash flow.
Around 2019, I noticed a change in focus. I listen to a lot of financial podcasts and I heard the passage of everyone, cash flow, focused on appreciation. This is never like that that I examined the subscription offers.
At the beginning of Covid, I expected that the values of the properties were stressed and potentially lower. Obviously, the opposite happened.
I watched things take off. I did not know what was going to happen in the future, but the fundamentals started to change. I used Reventure, a real estate data aggregator, quite largely. It draws the data from many different sources, and I would follow price / rent ratios for the local market.
For properties, I used all websites, but I prefer to redfin. I find that it is the most precise, and I like the functionality where you can see comparable sales.
I sold two properties in 2019, three in 2020, three in 2021, one in 2022 and one in 2023. The greatest appreciation was a house that I bought for $ 190,000 that I was able to sell for $ 500,000.
I put all our resources in liquid assets – a diversified multi -active ETF portfolio of fundamentally sound (SCHD), gold (IAU), long -term treasury vouchers (SCH) and short -term treasury bills (SCHO).
I have no regrets, and I think I will be justified once we have a certain type of correction.
I have people who tell me that I am an idiot for having sold my properties. They think they could have done 10 times what I did in real estate.
I think real estate is an excellent tool for creating wealth, but it is also true that the fundamentals count. There is a significant difference in my head space, not having real estate. From the point of view of responsibility, I have no external concerns. No one will be injured. I do not take care of telephone calls at the end of the evening.
There is still stress in actions and commercial actions. You do not see a ticker on a house that goes up and descended all the time, but life is much simpler.
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