May 22, 2022
Do you want to work only because you want to and not because you have to?
Rachel Richards has built a real estate portfolio of 38 units by the age of 26 and is now passively earning $20,000 per month. In this episode, she tells us how she stopped trading time for money by investing and opening up passive income streams other than real estate. She also shares why she continues to work and find ways to challenge herself even after “retiring” and achieving financial independence.
Rachel Richards is the best-selling author of “Money Honey” and “Passive Income, Aggressive Retirement.” Listen in to know more about her journey!
[00:01 - 07:54] Living off of $20,000 in Passive Income Monthly
- Rachel on being a finance nerd and on her experience in the industry
- Why people should look for off-market deals
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- This is how she found their first duplex
- From self-managing to hiring property managers to self-managing again
- The biggest mistake they made so far
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- Don’t be cheap!
- Owning real estate out of state
[07:55 - 14:15] Passive Income Strategies
- You don't have to own a rental property to generate passive income
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- Self-publishing and making $4,000-$10,000 a month
- Rachel’s goal to make income more and more passive
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- Being a limited partner
- Setting boundaries and being more intentional
- Looking at opportunities in mobile home parks and self-storage
- Screening syndications and doing due diligence
[14:16 - 17:55] Creating Impact Through Her Work
- Living freely and having time for things that fulfill them
- Writing to inspire others, especially women
- Doing what serves them and the people around them
[17:56 - 19:06] Closing Segment
- Reach out to Rachel!
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- Step into the path of financial freedom with Rachel’s FREE Passive Income Starter Kit!
- Links Below
- Final Words
Tweetable Quotes
“Being cheap can cost you a lot more money in the long run. This is not the place to cut corners when you hire people like contractors and property managers.” - Rachel Richards
“Don't be afraid to invest out of state. It really forces you to be an efficient property manager and owner of real estate.” - Rachel Richards
“I want to make a big impact and help as many people as I can. That's what I'm passionate about, especially helping women.” - Rachel Richards
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Connect with Rachel! Follow her on Instagram and visit her website, Money Honey Rachel. Get her FREE Passive Income Starter Kit, and check out her books, Money Honey and Passive Retirement, Aggressive Income, to know more about money management, personal finance, and investing!
Resources Mentioned:
Rich Dad Poor Dad by Robert Kiyosaki
The Hands-off Investor by Brian Burke
Connect with me:
I love helping others place money outside of traditional investments that both diversify a strategy and provide solid predictable returns.
Like, subscribe, and leave us a review on Apple Podcasts, Spotify, Google Podcasts, or whatever platform you listen on. Thank you for tuning in!
Email me → sam@brickeninvestmentgroup.com
Want to read the full show notes of the episode? Check it out below:
Rachel Richards 00:00
The great thing about moving away is that we've been forced to streamline, and systematize all of our processes and doing that has made self-managing so much easier. I was so afraid to move away. But owning real estate in another state is so freeing and it's a lot easier than I thought. So if that's anyone's hang-ups if you're listening, to don't be afraid to invest out of state, it really forces you to be an efficient property manager and owner of real estate.
Intro 00:27
Welcome to the How to Scale Commercial Real Estate Show. Whether you are an active or passive investor, we'll teach you how to scale your real estate investing business into something big.
Sam Wilson 00:39
Rachel is the best-selling author of Money Honey and Passive Income, Aggressive Retirement. She built a real estate portfolio of 38 units by the age of 26. Rachel, welcome to the show.
Rachel Richards 00:50
Hey, Sam. Thanks for having me.
Sam Wilson 00:52
Hey, pleasure’s mine. Three questions I ask every guest that comes on the show: 90 seconds or less, where did you start? Where are you now? How'd you get there?
Rachel Richards 00:58
I started my real estate investing journey in 2017. My husband and I purchased our first duplex that year. And within two years, we scaled our real estate portfolio from zero to 38 units. When people hear that they make some assumptions. So I'll get those out of the way. I'm not a trust fund baby. And I never made six figures from a job or career. So let's see, where am I? Now I am now investing in syndications. I've invested in eight syndications as LP as a passive investor, and I'm now financially independent and living off $20,000 per month in passive income.
Sam Wilson 01:35
Wow, that is really cool. Congratulations and a job well done. Zero to 38 units in over how many months was that?
Rachel Richards 01:43
24.
Sam Wilson 01:44
24 months. Okay, so you're buying a property? We're actually more than one and a half properties a month.
Rachel Richards 01:50
It was six buildings. 38 doors.
Sam Wilson 01:53
Six buildings. 38 doors. That helps. So you're not, one and a half transactions every single month. Got it? Six buildings. 38 doors. That's cool. Absolutely. Love it. Is this tell me? Is this all you're based in Denver, Colorado? Is this all in Denver?
Rachel Richards 02:06
This was all in Kentucky where I lived for 20 years.
Sam Wilson 02:10
Okay, cool. So you had some experience, obviously, in the local market there? What did you do? I mean, to identify that many assets and that short of a time, what were you doing to do that?
Rachel Richards 02:21
So I've always been a finance nerd. And my whole life proud of it. And I read Rich Dad, Poor Dad in high school. I, after college, I was a financial advisor. I also took a couple of jobs, working with a real estate investor and learning from him, and then working under a realtor. So I did have some experience in the industry. And I read every book I could get my hands on. One of my favorite ones is this book called Hold by Steve Chader. That one was really helpful in learning how to analyze properties. One of the important things I think, for people to do right now is look for off-market deals because the market is so intense. The MLS is saturated and competitive. And it's really difficult to find good deals if all you're doing is looking at the MLS. One of the ways we found our first duplex was pretty much an off-market deal. So we looked at the withdrawn and cancelled and expired listings on the MLS. And I was reaching out to those list agents to find out what happened. You know, why did the seller take it off the market? Did they change their mind? Are they is it going to come back up? And I remember feeling like I was pestering this one list agent about this duplex for months. But really, I was just trying to be polite and stay top of mind. And when the seller was going to relist it, she reached out to me first and she said, Hey, this is about to come back on the market. Would you like to make an offer, which was really beneficial because I could make my offer before anyone else did. And that is how we got that first duplex.
Sam Wilson 03:45
Wow, that's cool. Now, did you self-manage these? Or do you self-manage these? Are these be plugged in the property management company? How do you handle that?
Rachel Richards 03:54
We self-managed until we got to about 26 units, I think. And here's the thing, my husband and I were working full time. So we were working 40 to 50 hours a week, I was writing my book in the evening. And we were acquiring and managing our rental properties on our own on the weekends and everything. So once we got to 26 units, we were like we definitely need a property manager. And we've made our share of mistakes, hiring property managers as well. But now to this day, we're back to self-managing.
Sam Wilson 04:20
Okay, that's really Yeah, that's interesting, because you at some point, you're right. You need that outside help. But it sounds like there were some mistakes made along the way where that help wasn't so very helpful.
Rachel Richards 04:30
Absolutely. This is our biggest mistake to date. So my mistake is that I tend to be too cheap and being cheap can cost you a lot more money in the long run. This is not the place to cut corners. When you hire people like contractors and property managers. You don't cut corners here. So what we did is we were looking for a property management company and we you know, they charge you anywhere from 10 to 12%. And we had this couple that was working for us doing things like maintenance lawn care, they were so hard working, some of the hardest working people we've met, and they always went above and beyond. So we figured let's make them employees of our company, and they can be our property managers. We can save some money and be a little more hands-on in the way that we are training them and managing them to manage our properties, felt like a win-win, right? It was not, it was not a win-win. It was a win-lose. So everything started off great. And then about six months in my husband went to pick up rent from the onsite lockbox is one weekend, and he noticed a lot of rent was missing. And it was not just the normal tenant or to paying late, it was a significant amount. So come to find out this couple had stolen $6,000 in rent that weekend. And we found out they had been squatting in vacant rooms and units in our properties for almost a year. Devastating. Yeah, it was one of those occurrences where I was like, we should quit. This is not meant for us. This is awful. And that lasted for a few days. And I got over it, but it was devastating and such a violation of trust. And the moral of the story is that, again, this is not the place to be cheap. You need to hire a licensed, insured, properly-permitted, you know, everything reputable property management company, because if we had done that, and one of their employees had stolen rent from us, they would have been liable for the damages, not us. So it's embarrassing to share. Because in retrospect, it seems so obvious. It's so naive of us to have done that, but I share it in the hopes that others will learn from my mistake.
Sam Wilson 06:24
Yeah, no, thank you for taking the time to share that that is painful. I mean, I'm curious, you said your husband had gone to pick up rent from the on-site lock boxes. Now you live in Denver, and these properties are in Kentucky. So were you flying back to go pick up rent monthly?
Rachel Richards 06:39
No, we were still living there at the time. So we only moved to Denver a couple years ago.
Sam Wilson 06:43
Got it. Okay, cool. Wow, that's really intense.
Rachel Richards 06:46
Yeah. Now, we're not quite that dedicated. But the great thing about moving away is that we've been forced to streamline, and systematize all of our processes. And doing that has made self-managing so much easier. I was so afraid to move away. But owning real estate in another state is so freeing, and it's a lot easier than I thought. So if that's anyone's hang-ups if you're listening, that don't be afraid to invest out of state, it really forces you to be an efficient property manager and owner of real estate.
Sam Wilson 07:16
You know, I've heard that and I, let's see, do I own anything? I own stuff that's four hours away. So it's, you know, I guess that's, I mean, obviously involved as a general partner on deals that are much further away than that. So I get it. Yes, I'm trying to remember what that state where you're mentioning, we're allowed to and maybe hearing this and going, Gosh, I can't quite wrap my head around it. But you does all the things you just mentioned, where it's like, oh, you know what, I've got to find a way to solve this without going to the property. Got a way, to find a way to solve this, we're now taking all electronic payments, there's no checks, there's no cash being dropped off, like this is the way we do business. That's, in fact, a very freeing, freeing thing to get in place. I think once you've done that, tell me about your self-publishing journey. I know you've written the book. And I know I read the title out here and we kick this off, and I can't remember what it was now. But tell me about the title of that book. And then tell me about what's in the book and why you wrote it.
Rachel Richards 08:08
Yeah, so one of the great things about passive income is that you don't have to own rental property to create passive income. And so a lot of the things that I hear from people is like, well, I don't want to be a landlord, Rachel, I want to create passive income, but I don't want to be a landlord. And the great thing is, you don't have to be a landlord to generate passive income. There's a lot of other ways to do it besides investing in real estate. I have found self-publishing to be an amazing way to generate passive income. So in 2017, I self-published my first book Money Honey and it was the thing I did because I used to be a financial advisor. All my family friends came to me for financial advice, which I loved. At the same time, I thought, Well, why aren't they learning on their own? You know, why aren't they reading books, listening to podcasts? And I had this aha moment where I realized, oh, yeah, personal finance is boring, right? It's overwhelming. It's complicated. It's intimidatin for most people. No wonder people don't like to learn about it. So I thought to myself, How can I make this topic sassy and fun and simple? And that's where the idea for Money Honey came from. So I wrote it. I was really excited. Something I felt very compelled to do. I didn't really think I was gonna make money to be honest. I was so hesitant to invest in it. So I spent like $560 on the book launch thinking I would never make that money back. It was just a passion project. But I published it in September 2017. And to my surprise, to this day, it just took off. It resonated with female millennials, it started selling, spread by word of mouth. I was making $1,000 a month in profit for the first year. And I launched another book. And last year, I believe I made about $99,600, or something and profit from my two books. I was like, so close to becoming a six figure author, but it's still really amazing to think you know, these books now bring in anywhere from four to $10,000 a month in passive profit and it's just an example of you know, you don't have to invest in real estate to create passive income streams.
Sam Wilson 10:05
Right. No, that's absolutely true. I mean, it can be books, it can be other businesses. It can be, you know, a variety of things that you do. Tell me on, since we're talking about the money side of things. I know you said you're making about 20,000 bucks a month off your rental property off a 38 units. That's over 500 bucks per month profit per unit.
Rachel Richards 10:26
Yeah, and it's not that's including all my passive income streams. Okay. Yeah. So at one point, when we had 38 units, we were making 10 grand a month from those 38 units. It was about $260 per door.
Sam Wilson 10:26
Got it. Okay. Yeah, I was gonna say that's, it sounds pretty incredible. 500 bucks a door in profit every single month. So that's really, really awesome. Now, you're a limited partner in eight syndications, why are you going this direction, and not buying more active real estate?
Rachel Richards 10:55
So great question, real estate investing for my husband and I was always a means to an end, we never wanted to build this huge empire. And our goal was to get to 10k a month in profit from our rentals. And once we did that we wanted to stop, that was sort of our fat fire number. We could become financially independent and not have to work anymore once we got that number. So in 2018, we achieved that, and we stopped acquiring real estate and it shocked some people, you know, they were like, Well, why not build an empire of 200 doors or 250 doors? And we were like, well, that's not what we want to do. So we stopped. And I'm proud that we were able to do that, because you can really get caught up in you know, enough is never enough. And sort of always moving that goalposts further, but we were able to stop and be intentional about what we wanted to do with real estate. So that was why we stopped acquiring. Now why we've transitioned things is because the goal is to always make the income streams more and more passive. And back then when we were building up this empire, we had a lot more time than money. We started off pretty broke, in my opinion. Again, we didn't have, like I wasn't a trust fund baby. I wasn't making six figures, we were just scraping the money together to get 20% down payments, right? We did have time and we were willing to hustle to make cash flow. Now that we have a lot more money, we would rather invest in syndications, which are a lot more passive. So last year, we sold three of our big multifamily buildings. And we've transitioned that money into syndications. And it's a much more passive way to directly own and invest in real estate. So that's why we sort of change strategies.
Sam Wilson 12:31
Gotcha. Let's talk about what you are investing in right now. Are there certain asset classes you're favoring? Where do you see opportunity as a passive investor?
Rachel Richards 12:42
So I favor multifamily, just because I'm so familiar with it. And I can easily analyze those syndications. So that's my comfort. However, I really want to invest more in self-storage and mobile home parks. Because I think there's a supply-demand thing with self-storage right now. And definitely with mobile home parks, because it's a scarcity thing. It's a limited resource. And there's only so many and you're not allowed to build any more mobile home parks. So I'm really wanting to invest in more mobile home parks.
Sam Wilson 13:07
Right, you obviously talk about mobile home parks, you know, commonly on this show, and you've hit a lot of the highlights that kind of go into why that's still a great asset class, a great asset class to be involved in how have you gone about picking the sponsors that you are working with?
Rachel Richards 13:24
Great question, because picking the sponsor is almost more important than picking which syndication you're investing in. Because really, when you're deciding to invest in a syndication, you're placing your money with the person, you're trusting the person, and you need to find somebody that has enough knowledge, who's done this before successfully, who has the experience, and who's trustworthy. I've heard horror stories of syndicators running off with you know, 50k of somebody's money. And yeah, they'll eventually get caught and get thrown in jail, but someone's not gonna get their money back. So I definitely want to find good trustworthy people. I was making the mistake at first to try to go on Facebook groups and LinkedIn and reaching out to people. But the problem with cold contacting somebody is that no one can speak for them. No one can vouch for them for me. So the best way in my opinion, to find good sponsors or syndicators is to be connected to them through a mutual contact or friend who knows them and trust them and has already invested with them. So that is what I now do. I have a good network. And a book that I really recommend is the Hands-off Investor by Brian Burke. It is so good. It's very dry. It's very technical, even for me, and I'm a finance nerd. But it's something if you read it, like have everything you need to know to screen syndicators and to do due diligence on a syndication.
Sam Wilson 14:43
Righ. Yeah, I think I've read that book before. It's been a while, but I'll put that back on the list. And we'll certainly make sure we reference that. And also the whole book by Steve Chader. Yeah, we'll reference both of those there in the show notes. Questions for you. You said earlier when you guys had hit you or number that you said, Hey, we had units, X number of dollars in passive income. And we don’t want to grow any bigger. That's not what we want to do is go bigger. What did you want to do?
Rachel Richards 15:11
We wanted to just live a free lifestyle, we wanted to work when where and if we want, a lot of people get bothered by my use of the word retire, because I still work. I still work on my business, I teach women how to invest in real estate, I have books, I have courses, I have programs. But the thing is, I work now because I want to not because I have to. And we now spend a lot of our time hiking and traveling. And we have free time. And we work again, because we have the choice to work. And that's because we want to do so it's about having the time to do what is fulfilling to us and not have to trade our time for money anymore.
Sam Wilson 15:52
Right. Absolutely. So what does the next five to 10 years look like for you? Because let's presume I mean, at some point, forgive me for my projects, you might be like, I hate this guy. You know, at some point, you know, the book sales may drop off that income stream may dissipate. And then if you're doing courses or some other stuff along the way, do you just keep building some other things that are generating passive income along the way? Is that really the plan? Or is there something there that you guys are shooting big for?
Rachel Richards 16:18
There's I have a lot of ideas, I have a lot of ideas and not enough time to implement them all. But one thing I know about myself is if I'm not building and creating something, I'm bored, so I don't see myself ever stopping or slowing down from that regard, I want to make an impact. And I want to make a big impact and help as many people as I can. That's what I'm passionate about, especially helping women. So I want to write more books, that's for sure. One of my dreams is to write a fiction book, actually, I've thought about becoming a general partner and being a syndicator myself or helping to raise capital. So that's a thought that I have, I definitely want to continue finding ways to invest in real estate, maybe as a silent partner, hard money lender, just continue to find ways to just do more things and challenge myself.
Sam Wilson 17:02
Got it. I love that. I think that's the fun part about it. And I really appreciate how you guys have defined what it is that you want. I think a lot of people, you know, they keep doing like you said they keep adding on to keep moving the goalposts because they see, well, that guy has a billion dollars in assets under management, why shouldn't I? Like, you know, why should I go out and do this or do that. But in the end, it was not what it is that it serves you or the people around you, it's probably not that fulfilling. So you got to do what it is that's in your heart and in your goal list of things to do. So I really admire you and your husband's ability to set limits on it and say, This is what we're building. And then we're done. At least with the real estate, you know, portfolio part. Yeah, obviously, like you said, you're either building or you're bored. You're always gonna be building something.
Rachel Richards 17:47
I think that's my new tagline. I like that I'm either building or I'm bored...
Sam Wilson 17:52
Guys, that's me. I wrote, building or be bored. So yeah. So that's really, really cool. Rachel, I've certainly enjoyed this. Thank you for taking the time, really to come on today and share with us your story of what you have done, are doing in real estate, publishing and everything else. I think it's a really cool story. It's certainly inspiring to the rest of us. If our listeners want to get in touch with you, or learn more about you what is the best way to do that?
Rachel Richards 18:15
Yeah, thank you, Sam, you all can follow me on Instagram @moneyhoneyrachel. And what I'd love to do for your listeners is if anyone wants to download my passive income starter kit, I will give that for free so they can go to moneyhoneyrachel.com/passiveincome to download that.
Sam Wilson 18:33
Awesome. And we'll make sure of course that we put that also in the show notes. Rachel, thank you again. Appreciate it.
Rachel Richards 18:40
Thank you.
Sam Wilson 18:41
Hey, thanks for listening to the How to Scale Commercial Real Estate Podcast. If you can do me a favor and subscribe and leave us a review on Apple Podcasts, Spotify, Google Podcasts, whatever platform it is you use to listen, if you can do that for us, that would be a fantastic help to the show. It helps us both attract new listeners as well as rank higher on those directories so appreciate you listening. Thanks so much and hope to catch you on the next episode.