I Wish I Knew Then What I Know Now – A Journey Towards a Better Life Through Actively and Passively Investing in Real Estate

I wish I knew then what I know now.  This is a statement everyone has thought of at one point or another.  I think about the person I was and how I perceived the world at different eras in my life. My experiences have shaped me into the person I’ve become. I expect this is true for everyone.  These experiences have affected my perception of risk and reward, which is directly tied to how I view money.  Each person’s path is unique and their journey influences their relationship with money and, ultimately, their investment approach. 

This is my story from how I went from investing in stocks and bonds, to active real estate investor, and eventually passively investing in real estate. 

Early in the Journey

Like many who enter college, I didn’t know what I wanted to be when I grew up.  A business degree seemed like a good start.  I majored in marketing.  I wish I knew then what I know now.  I would have likely majored in finance or economics if I truly knew what I would become passionate about later in life. 

After graduating, I started a career in sales.  Very few people were getting jobs in marketing departments straight out of undergrad.  Makes sense.  You have to know your product and your customers before you can successfully market to your audience.  Bummer.  Looks like sales was my option. 

I had some fun with my career path in my twenties and was successful.  I had some upward mobility opportunity and capitalized on it by moving where opportunities arose.  Each time I transitioned into a new role, as you’d expect, responsibility and expectations grew.  As the excitement of learning a role and adapting to new living surroundings wore-off, I found myself feeling hollow.  I wanted more in life.  I started realizing that the most important asset in life wasn’t money, but time.

A Flawed Strategy Emerges

By my mid-thirties I was working in the medical device space, selling capital equipment and implants to surgeons in the operating room.  Around that time, I had found the financial independence, retire early (FIRE) community and was absorbing everything I could.  The basic premise of FIRE is to increase your income, live frugally by cutting unnecessary expenses, and invest the rest.  The idea was not to live in deprivation, but truly spend your money on what matters to you and cut out the fluff.  Defining what matters is easier when you have a  strong “why”.  My “why” was to escape the rat race, to spend more time with my kids before they left home forever, and to be a more present father and husband.  I planned to achieve this by grinding in a high income job that didn’t fulfill me, saving money with ferocious discipline and investing the rest.  Then I would live off my principal by withdrawing based on the “4% rule.”

This went on for about seven years.  Saving diligently was paying off and dollar-cost averaging into a long bull market made investing look easy.  I was getting fairly close to my original goal of having our annual spending covered by withdrawing 4% of our principal every year.  I was also getting dangerously close to a mental breakdown from the stress of balancing 80 nights a year of travel, long workweeks, a busy home life, and little time for myself and my personal health.  I wondered how much longer I could grind it out.  I was putting off happiness in the present in hopes of achieving it sometime in the future.  I wish I knew then what I know now.  

I also started to get nervous about my strategy of “retiring” early.  What if I left work and then the market tanked, exposing me to “sequence of return risk”.  Suddenly, my nest egg might not be able to support our spending.  I looked at bonds as a possible solution.  Traditionally a 60/40 stock/bond split has been a way to decrease portfolio volatility and derive income.  However, because of a 40-year bond market bull run, interest rates were and continue to be ultra-low.  If rates began to rise, the value of the bonds would fall, which seemed more than likely to me.  Holding bonds to maturity would protect the principal, but at such low rates, the income derived would never allow me to reach my goal to escape corporate America. 

An Old Dream Renewed

I had always been interested in real estate.  I wasn’t particularly handy and was intimidated by problems that could come up with maintenance and being taken advantage of by contractors.  I was concerned about managing tenants.  What if I was traveling for work and I got a call about a toilet?  I had always found a reason to not invest or get started. 

However, as I approached the breaking point with my work/life balance, I decided I had to do something.  My risk tolerance would not allow me to sleep at night based on my original plan.  I needed an investment that paid steady income with the opportunity for appreciation.  And I had to live life for happiness, not for money.  I needed real estate. 

I started to look at my investments through a different lens. My new strategy was to stay invested in stocks and use cash from credit lines to buy distressed real estate.  I would employ the BRRRR strategy – buy, rehab, rent, refinance, repeat.  If executed properly, I could theoretically recycle my capital indefinitely, and stack income paying rentals up over time.  Why had I let self-limiting doubt keep me from getting started with this sooner?  I wish I knew then what I know now

Active Investing, Turned Business to Passive Investor 

The first home I rehabbed was an REO property I had bought at auction for $55,000.  The project was a lesson from the school of hard knocks on how not to manage contractors.  A lot of things went wrong and a lot of problems arose that I didn’t have experience in dealing with.  But I survived.  After going over budget, I was all-in for $85,000 of my money.  I learned how to post listings and held an open house.  The property rented for $1,200 a month.  A few months later I had the property appraised at $145,000 and refinanced, getting all my $85,000 back and then some. 

My confidence soared.  I had found a model that was scalable that would help me achieve my investing and, more importantly, my life goals.  The funny thing is, even though I ran into a number of headaches and things didn’t go quite as planned, I loved the whole process.  I was hungry for more.  After having similar success with two more houses, I made the decision to put in my notice of resignation with my company.  I remember thinking to myself, I wish I knew then what I know now.  I could have made this decision much sooner in life if I had just believed in myself and taken action.  The worst case scenario I created in my mind never came to pass.  I stopped thinking about what could go wrong and started to think about all that could go right. 

As my investments turned into a business, I was looking for additional ways to make income and diversify.  I wanted to expand outside my market.  Diversifying geographically into Sun Belt markets where jobs and people were moving seemed like a worthwhile wave to ride.  Although, it would be very difficult to do it on my own.  As a solution, I discovered passively investing in real estate syndications.  This option could afford me most of the benefits of active investing, without most of the challenges.  Vetting operators and deals took some time, but if you find great sponsors, the returns on their investments can be very attractive.

Maybe you don’t have a passion for active real estate investing like I do, but understand that real estate is a powerful wealth builder.  I wish I knew then what I know now, as passively investing in real estate is a great alternative.  As I grow older and eventually retire, I will naturally slow down with active investing and put more money to work in passive real estate investments.

What I Know Now

It has been two years now since I left W-2 work.  Since then, I’ve accomplished things I didn’t think were possible a few short years ago.  If I had known then what I know now, I would have lived life for happiness and not for money.  Money will come when you are truly committed to what you are working towards.  I would have started much sooner on working to live and not living to work.  “Sunday blues” are a thing of the past.  I’m excited to get started with my day on Monday morning.  Sometimes taking a step back in your career can lead to bigger things down the line, I’ve learned.  Enjoying what I do every day now has me excited for bigger things than escaping the rat race for a beach.

I would encourage anyone who’s putting off taking a chance on something they’ve always been interested in to take small, daily action.  Whether it’s starting a business, developing a product, writing a blog, flipping a house, passively investing in real estate, or anything you’ve dreamed of for yourself….you never know where the journey may lead.  You’ll also never find out if you don’t get started.  I wish I knew that then, but I know now.  

Paul Shannon is a full-time active real estate investor, as well as a limited partner in a number of syndications.  Prior to leaving the corporate world, Paul worked for a medical device company, selling capital equipment to surgeons in the operating room.  After completing a few rehabs employing the “BRRRR method”, he saw scalability and more control over how he spent his time, and left to pursue real estate in 2019.  Since then, Paul has completed over a dozen rehabs on both single-family and multifamily properties.  He currently owns over 50 units in Indianapolis and Evansville, IN and is a limited partner in larger apartments and industrial properties across the US. You can connect with him at www.redhawkinvesting.com

Nothing on this website should be considered financial advice. Investing involves risks which you assume. It is your duty to do your own due diligence. Read all documents and agreements before signing or investing in anything. It is your duty to consult with your own legal, financial and tax advisors regarding any investment.

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