Table of Contents
- Insider spoke with individuals who started with nothing before building successful real-estate portfolios.
- One ‘house-hacked’ to afford his first property.
- Another bought cheap foreclosures in Detroit with her tax returns.
Real-estate investing, if done correctly, can yield life-changing wealth.
Insider has spoken to individuals who started with zero savings or low-paying jobs and managed to build income-producing, real-estate portfolios that, ultimately, have granted them financial independence.
To be sure, it took years for these investors to get to where they are today.
Here are the strategies they used. Insider verified each individual’s property ownership by looking at closing documents.
Dion McNeeley rented his primary home to get approved for a loan and financed his first investment property with 5% down
Inspired by his brother who was able to retire in his 50s thanks to real-estate investing, McNeeley decided to start saving up for an investment property in 2011. At the time, he was making $17 an hour working at a commercial truck driving company and living paycheck-to-paycheck.
His financial situation made it challenging, if not nearly impossible, to purchase an investment property. But he had one key advantage: He was already a homeowner in Washington state, having bought a house back in 2000.
To improve his odds of being approved for a loan for an investment property, he decided to move into an apartment and rent out his house.
Doing this didn’t necessarily help McNeeley save on his housing costs, as he now owed rent, he said. However, he was able to point to rental income generated from his home, which increased his total annual earnings and improved his debt-to-income ratio.
“That’s what mattered to the lenders I talked to,” he explained. “So I was able to buy, even though I wasn’t making a lot of money.”
For the following two years, McNeeley worked overtime and focused on saving up for a down payment towards a property. By 2013, he had managed to set aside $20,000 in savings, which ended up being enough money to put down for the purchase of his first investment property: a $300,000 duplex. He financed it with a conventional loan and put 5% down, or about $15,000.
McNeeley moved into one unit of the duplex and rented out the other, meaning he started collecting rental income from two properties: his single-family home and half of the duplex. This is where he really improved his situation and was able to save significantly on housing costs. He went from paying $1,500 per month in rent to paying just $300 to live in his own home, since rental income from the other half of the duplex nearly covered his entire mortgage.
”I was instantly able to add $1,200 a month to my savings rate,” he said, and was already thinking about his next property.
McNeeley, now 52, owns 16 units across seven properties in the Seattle area. He earns six-figure profits from rental income each year and was able to walk away from his day job in July 2022.
Mike Newton ‘house hacked’ to afford his first property and scaled up by investing in a cheaper, out-of-state market
Newton grew up “extremely poor,” he said to Insider. “We were that family you did not want to have renting from you.”
After graduating high school in 2009, he forewent college and immediately started working. He was a truck driver at a sugar beet farm for five months before landing a job in construction. In 2014, he decided to pursue a career in law enforcement and has been a state trooper for the past seven years.
Up until he decided he wanted to try real-estate investing, he had practically nothing in savings, he said: “I had about $1,000 in my bank account.”
After deciding he wanted to buy a home, Newton took two immediate steps: He shopped around for a mortgage lender and he started saving for a down payment.
“The first thing you’re going to have to do is go to a lender and see what you qualify for,” he said. The lender he decided to work with qualified him for a $450,000 mortgage. That became his budget.
He needed about $30,000 in cash to cover a 5% down payment on a $450,000 mortgage ($22,500), plus closing costs. It took him just six months to save that money.
“I picked up every overtime shift that I could,” said Newton, whose base salary was $60,000 at the time. “They can never get enough people to cover all the overtime shifts, so I made about $30,000 in overtime in less than a six-month period.” He estimates that he was working 90-hour weeks during that time period in 2018.
He closed on a $450,000 duplex outside of Seattle in November 2018 and moved into one of the units. The other unit was already filled with a tenant, meaning he immediately started earning $1,600 a month in rental income, he said. Plus, a childhood friend moved into one of the three bedrooms in Newton’s half of the duplex and paid $500 a month in rent.
His two tenants covered the majority of his $2,750 monthly mortgage payment, meaning he was practically living for free in his own home. That helped him save the majority of his salary, but he realized that if he wanted to buy more real estate in Seattle, it would take years of saving before he could afford it. That’s when he started looking at more affordable markets.
Ultimately, he settled on Gary, Indiana and over about four years, bought six properties there. At 32, he owns eight properties (including the one in Seattle and another in Chicago), and plans to retire before he turns 35, thanks to his rental income.
If you’re considering investing out-of-state, “the most important thing to do is build a team and a network,” he said. Start by connecting with other investors in the area you’re looking in and ask them about the area and their experience investing there. When the time comes to find a property manager, contractor, handyman, and other key players, lean on the established investors you’ve already connected with.
Ashley Hamilton bought foreclosures in cash using her tax returns and then built 7 income streams
Hamilton first became interested in buying real estate after attending a free, local real-estate conference in Detroit in her early 20s. But, as a single mom supporting her kids on the $20,000 a year she made waiting tables, she didn’t have the savings to afford a home, or the credit history to get a mortgage.
However, she noticed an abundance of foreclosure signs throughout Detroit and decided to call the agents to learn more about the properties.
“The first sign that I called, the lady told me that the property was $6,300,” she said. Hamilton didn’t have the cash at the time, but was anticipating a big tax return later that year.
“When you’re low-income, the only time of year when you have extra money is tax time. That was always the best time of the year for me because I got an actual refund,” she explained. That year, “I was scheduled to get about $7,000.”
When her refund came in, she called the agent back and told her she was ready to buy the $6,300 foreclosure. It took her another three months to save up enough money to renovate it so that she and her kids could move in. Once they did, she no longer had a housing payment and started saving aggressively to buy another foreclosure.
Over the following nine years, Hamilton was able to buy one property a year, funding the purchases using her tax returns and her own savings, which started to snowball as she earned rental income from more properties, she explained: “By 2019, I had 10 properties free-and-clear — no mortgage, no debt — all in the city of Detroit.”
Today, at 36, she owns 35 units in Detroit — she was able to scale up quicker once she started using commercial lines of credit and hard-money lenders to buy properties, rather than using all cash — and earns more than enough in rental income to cover her living expenses. But she doesn’t just rely on that one revenue stream. She’s leveraged her real-estate knowledge to build seven different income streams, she said. She’s a real estate coach and consultant; she does project management, overseeing rehabs; she also has her own property management company and is a realtor.
“The businesses just feed each other. It’s all related,” she said. For example, “If someone buys a property, I get a commission [as the agent]. Then, if they need help with renovation I’ve got a project management company and will collect a fee for managing the contractors and the project. Then they might need to find a tenant. Well, I’m a property manager, so now I’m going to manage the property and make 10 to 12% every month doing that. That’s longevity.”