First Rental in 2016, Financially Free in 2026 (Every Strategy I Used)

0:00Before real estate, Erika Brown was working at a bank, raising three kids, paycheck to paycheck, just trying to climb the corporate ladder. Now, a decade later, she owns an entire portfolio of very different rentals, has reached financial freedom, and is doing what nobody expects, selling off her houses. But Erika's not going backwards. Far from that. She's actually about to unlock an even better lifestyle, one with fewer rentals, lots of cash flow, and way more freedom. Over the past 10 years, she's tried every strategy in the book. Section 8, house hacking, renting out rooms, short-term rentals, burrs, and more.

0:36Today, she's explaining her favorites and why some of the ones you're told to avoid are actually the best rentals to own and nobody's paying attention to them. So how do you, like Erica, have the fewest number of rentals with the most cash flow and freedom? Listen up, you're about to find out.

0:57What's going on, everybody? I'm Henry Washington, co-host of the BiggerPockets podcast. And today's guest on the show is my friend, investor Erica Brown. So let's bring her on. Erica Brown, welcome back to the BiggerPockets podcast. Happy to be here. Thanks for having me back. I love chatting with you. I love hearing more about your story. Interested to hear what you've got going on. So for those of you who may not have heard your previous episode on the BiggerPockets podcast. I want you to tell us a little bit about your story again. Take us back to the beginning. How'd you first get into real estate?

1:30Oh man, that's a fun story. It has now been 10 years. I have officially been investing in real estate and also a full-time businesswoman for 10 years. It's crazy. But yeah, previous to being in real estate full-time, I was a banker and I was in the finance industry. and just was trying to figure it out. Had three young kids, husband, you know, starting out, brand new city. I live in Atlanta, Georgia. And we were trying to get out of that paycheck to paycheck cycle and bought our first property using a FHA loan, 203K. During times when it was pretty scary, it was right after the recession. Bought a house, renovated a basement, and became a house hacker before you guys turned house hacking.

2:23For us, it was, can we make some money to pay these, you know, child care bills? This used to be called hustling back then. Yes, it was hustling. And then I started reading books. I read Rich Dad, Poor Dad and all the things. And I just got the bug. I moved to a neighborhood that was up and coming in Atlanta and fell in love with real estate that way as well. And next thing you know, I had helped like 10 people buy houses through the local real estate agent. So my journey was I started investing in real estate after becoming a real estate agent. I knew the end goal wasn't to be a real estate agent, but I knew that I could sell houses clearly because I had already referred all this money,$100 ,000 worth of commissions.

3:11So we have a portfolio of businesses now. outside of real estate in within real estate. And it's been pretty amazing, the journey. All right. So this was 2012 when you did the first house hack. Yes. Right. And then in 2016, you moved and got all your friends to buy houses and you didn't get paid for any of it. Yep. I'm sorry. I said, how much does real estate agents make in commissions? Wait. And is that, did you get your license that same year? Did you do, or was that after? Yes, I got my license that same year. And it was really hard, but got it done. And then when did you do your very first, like official real estate deal?

3:55So I believe I left my job March of 2016. And we did our official first real estate deal that fall. I was working for an investor. You know, when you're a new agent, you got to take everything that you can get. Yeah, you get all the trash leads. Whatever. Okay. And I had an investor, which I love working the investors because they're always buying, you know? And so I had an investor who was like, drive this neighborhood and write down these addresses and try to find these owners. And if you find some deals, I'll buy them. And so I knew that this thing called the Atlanta Beltline was coming and it was supposed to completely transform the entire city.

4:35And I seen that there was one property that was listed on there that was right by the future belt line. And so I was like, let me buy this one for myself. And so I cashed in my 401k and we bought the property. It was it had previously been a Section 8 property. So in my mind, I'm like, it was at least livable. Right. so you know we bought it and then we uh did a very minor renovation and at the time airbnb was very new i had met another investor that had had some success doing airbnb so i was like well let's do this and um we set up that property and we were able to make our full investment in our down payment back within the first year oh wow that's incredible so you you got in right during the Airbnb boom.

5:27So yes, that's cool. That's amazing timing too. So you cash out your 401k and paid cash is what you're saying? Use a portion of that as a down payment. And then we got a conventional loan 20%. It was my husband's name because I left my job and no one was giving me a loan. I didn't know anything about DSCR commercial loans or anything like that. So yeah, so got our first property and we just bought, we just got like a standard conventional loan. We funded the renovation with a credit card, got 0 % interest for 12 months. So it was pretty risky, but I knew that we could do it because we had already did it with the house hack.

6:07And I made a decision that I wanted to do it. So we were going to make it happen. Making a decision, regardless of if you know how it's going to happen, helps you figure out how it's going to happen, right? Because you've turned your brain on to helping you figure out how. It's like a mindset hack, right? People call it manifesting. You can call it what you want. It's you simply telling your brain to help you figure it out, right? Yes. And so when you make that decision, all of a sudden, you find ways to get it done. And then you talked about a 0 % interest credit card to fund the renovation. These are things that we've talked about before, but they're absolutely options for people.

6:50If that 0 % interest timeframe allows you more than enough time to finish the project where you get into trouble is if you got a 0 % interest for 90 days or six months and you can't get it done, then you're getting slapped with 25 % interest because you can't pay off that credit card yet. Right? So when you do that, you have to A, make sure that you're financially responsible enough to use the money appropriately. B, you have to have enough time not just to get the job done, but to be able to get that property refinanced or sold so you get the cash to pay that off before that 20-something percent interest hits you because they backdate that interest to your very first purchase on this 0 % interest.

7:34So if you're responsible enough with money and it has enough time horizon for you to like lots of cushion, don't assume it's a six months. I can get it done in four. No, no, that's not enough. No, not enough. This was a very minor cosmetic renovation that ended up taking about two months. So we we had more than enough time to pay it off. Cool. So you did your first one. And then I mean, I know this about you. You've you've done a litany of things. Yeah. Since then. So kind of give us the somewhat quick version of like, what kinds of deals did you do? And then what does your portfolio look like now?

8:15For the first few years, it was just kind of like buying properties, doing minor renovations after I had leftover money from commissions type of thing. Then I learned how to do a BRRRR. I reached out to one of my investor clients. It was like, how are y 'all buying some properties so fast? and you're doing this and doing that. And so then he introduced me to a banker and I was able to get a portfolio loan. And so I learned how to leverage equity. And again, because I forced appreciation in a market that was massively appreciating, I had room to conservatively do this. And so then we went from buying like one property to buying seven in one year, leveraging a portfolio loan.

8:58What year was that when you bought seven? It was probably like 2019. It was before COVID. Woo. Got it, girl. That's a great time to have bought seven. So then I started like, OK, I want to challenge myself. Let's do two units. Let's do duplexes. Let's do quads. In between that, I bought a 20-unit apartment complex. I learned a lot, a lot with that deal. I learned that bigger isn't necessarily more money. Say that again. Because we hear the opposite all the time, right? Like, I'm going to buy multifamily. It's less problems. It's all under one roof, right? And I'm not saying that multifamily can't be more profitable.

9:43It absolutely can. But it's not. I think when people say this, it almost sounds like they're saying it's the same level of effort as owning a single family. And so you might as well own multifamily. Like, I've heard people say that. So what's your take on that, given your experience with that deal? If you're thinking about it from like just economy of scale and you think it's that simple, it's not that simple. I remember our first year owning the 20 unit, we had to replace like six AC units in one summer. That is four thousand, five thousand a pop. You know, so you have to multiply your reserves.

10:25You have to multiply your manpower. Or if you happen to have a lot of vacancy all of a sudden, in my market, I'm in Atlanta, which is similar to a lot of the major markets like Austin and Phoenix, where during COVID, there was a huge housing shortage. So what happened? Developers built a ton of apartments. And so when you start to see the brand new apartments dropping their prices, and I have the older apartments that I've renovated from the 50s and 60s. If you have the option to rent for the same amount, the brand new apartments with the concierge and the gym, which one are you going to choose?

11:05And so we had to make some pretty good pivots really fast. And so I just learned a lot. And truth be told, I had some properties when I do what's called a portfolio audit once a quarter where we review our portfolio to figure out what's making money, what's not making money. And I had some what I call single family conversions where, you know, we converted a basement to another unit. I had some single family conversions making more money than my apartments. And so at the end of the day, for me, it is about the check. It is not about the amount of to say I have X amount of units. I think that that brings you the credibility as a successful investor.

11:48But at the end of the day, you have to realize what are you in this for? I'm in it for freedom of time, of options, of money and not for my ego. And again, I don't want people to think that I'm bashing on multifamily. I'm not. I think multifamily is amazing. All I'm saying is it's not the same as single family. You have to treat it different. And one thing you said that I have to repeat is you said you have to multiply your reserves. I think people forget about that part. Like you should have cash reserves for a single family home and that those cash reserves should increase the more properties you own.

12:32A 20 unit building, you need some substantial cash reserves because you're right. And I had a similar thing. That happens to me too. Like when weather changes from cold to hot, I don't just get one HVAC unit going out. I get five, six, seven of them all at one time, right? Because the season change, they all get hit hard. People just crank them things up, right? So I just want people to understand, like, make sure that you actually plan appropriately. It's not the same level of effort. Yes, there are some economies of scale. There are some things that aren't going to be that much more difficult, man, with the 20 universe as a single family.

13:12But it's just a different ballgame, and it requires a different kind of marketing. Erica, you've done a ton of different things. Obviously, you've done small multifamily. You've done short-term rentals. You've done co-living. You've done Section 8. And I want to talk to you about some of the lessons that you've learned with those strategies, and then which of those strategies seems to be one that's still working in this current real estate market. But I want to dive into that right after the break. If you've ever run rentals, you know this feeling. Your maintenance guy quits, two turnovers hit at once, tenants are texting you at midnight, and suddenly you're the plumber, the leasing agent, and the bookkeeper.

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17:11All right, we are back on the BiggerPockets podcast. I am talking with my friend and fellow investor, Erica Brown. She is, you know, I don't even know if jack of all trades is the right because that makes it seem like you're a master of none. But you have done well with many different strategies. So you've done short term rentals. I would say that's changed in the past two to three years. You've done co-living and you've done Section 8 and you've done small multifamily. Of all of those strategies, are you still doing all of them today or have you narrowed that down? I am still doing all of them today.

17:48So here's the thing. I've learned that when you first buy a property, it's important that you buy a property with multiple exit strategies. Say it again. When you first buy, you have to have multiple exit strategies because you have no idea what's going to happen with the market. So I don't subscribe to buying a property because I want to put it on short term rental and I'm only basing the numbers off of short term rental. Right. I've been doing this for 10 years. I have some properties. I probably have used three or four different rental strategies because that's what makes sense for the market.

18:24That makes sense for the team. I have the time, et cetera. When I first started, I was heavy, heavy short term rentals. And I began diversifying our portfolio probably about five years ago, right before COVID, which is really interesting. So now I'm in a place where I have a very diversified portfolio because I believe that that is what's going to help to keep me going through this time. And also I've built out my team to where we can support that. So all properties aren't going to work for short term rentals. We have two short term rentals right now and they work really well for that particular property.

19:02We pivoted to co-living. Co-living works too for some. We've had a couple of properties where, quite a few actually, that the insurance has skyrocketed, property taxes have increased. And then also because of local conditions, rents have went down. So what do we do? Because those particular properties work really well, they're in metropolitan areas, they're near public transportation, they've been doing very, very well on co-living. So right now we look at them from what's best for that particular property, what's best for that particular area and market condition that's going on. And also, what do we have the capacity to handle?

19:43So I just believe in diversification all across the board. And it sounds like you still do all of the strategies, but maybe you've shifted the volume of one strategy to a volume of another strategy. I want to ask specifically about the co-living properties. So co-living does best in major metropolitan cities, especially if that property is near some sort of public transportation, because essentially this is workforce housing. So for those of you who don't understand what this is, this is where you're essentially renting by the room. So each tenant has a room in the house that they can lock. They've got their own stuff in it.

20:18And then the shared spaces are the kitchen, the bathrooms, and then the living room, if there is a living room. So what I wanted to ask about the co-living is these were obviously either short-term rentals or long-term rentals before they were co-living properties. Yes. Did you modify them to add bedrooms to make it bring in more income as a co-living? Or are you just renting the rooms in the property as it sits? Great question. I'm really glad you asked that. So I believe in testing, whether it's just important business one-on-one. I believe in testing before just going all in to a strategy. So for the first property, what we did was we just rented out by the room with the existing rooms.

21:00OK, we did not modify the living room. We added furniture, very basic. And we said, let's see how it goes. And so we did that. We rented up the bedrooms pretty quickly within 30 days and had a little bit of turnover probably the first couple of weeks. And then after that, we had about 60 days worth of proof of concept that it works and that it's profitable. And we figured out the systems. So then when the next property came available, we did modify the living room and the dining room and added two additional bedrooms. And so I invest in a little bit of a conservative way because, you know, I want to make sure that I'm being careful, I'm being profitable, and I don't have a lot of backup plans.

21:47Like I don't I'm not expecting like a huge inheritance. So we got to figure this out. And so I definitely suggest someone testing versus going all in and just trying something new. And again, the reason that you were able to test a strategy is because you have other exit strategies for that property. In the event that this new strategy you're trying doesn't work. Right. It allows you to be careful in your investing. So we're all just going back to never buy a property if you can't get out of that deal in more than one way. Because the market shifts, especially if the strategy that you're using can be hindered by somebody else.

22:30Right. So like with short term rentals, midterm rentals and even rent by the room, your ability for that strategy to work can be hindered by your city or local government. There are rules in certain cities with how many unrelated people can live in a house. You need to understand those in your city and see what the plans are for the future of that before you go spending a ton of money converting living rooms to bedrooms. So, again, benefits of having multiple exit strategies. All right. So Section 8. I know Section 8 gets a bad rap, right? Because I hear both sides. I hear that Section 8 can be a pain in the butt with the tenants, which I feel like is a myth.

23:12And I also hear that the local government can be a pain in the butt to work with in order to pass the inspections and get qualified. And then the third point I'd like you to touch on is we've had some government shutdowns recently. How has that affected your income in Section 8? So at the end of the day, we have to realize that we're in the people business, right? So we own real estate, but we're in the people business. And we want to recognize that our tenants are our customers or our clients. I'm sorry. I keep telling you to repeat that, but you keep, these are things that I harp on. Like this business is one of the only customer service businesses that I feel like landlords don't operate as a customer service business.

23:53Like if you walk into a store or you're buying a product or service from someone, you expect to be treated a certain way. You expect to be treated well. You're the customer, you're bringing the income for that store. And so you want to be treated as such. But for some reasons, landlords don't treat their tenants that way. And why would you not? All right. I'm going to get off my high. I don't know. I don't know. So this is the mindset that I start off with. Like, this is how I feed my family, you know? And so I take it very seriously. And so from a Section 8 standpoint, I, again, because I lived in these communities, the same communities that I had properties in.

24:33And so you get to like really learn people and humanize people. And so in the same way that I'm going to have expectations when I'm finding a regular tenant for a regular long-term rental is the same way I'm going to have expectations whenever I'm looking for a section eight rental. So my goal is to try to find the best tenant possible for that property. And what I've learned is that low income people have the same desires that we have. And so because I focus on picking the right tenant, I haven't had as many issues. I think sometimes people forget that with Section 8, you could still deny a tenant.

25:13You still have the option to choose the tenant that you want. And so because I'm choosing good tenants and following the proper screening processes and things like that, I haven't had a bunch of issues. A lot of times it's single moms just trying to do what's best for their kids. So I think having that mindset and recognizing that and humanizing the tenants has helped us to have a relationship, be able to work together. Also, yes, working with the city of Atlanta is not easy in any municipality. Okay. And so it's all about relationships. You know, I've learned from Dr. Joe, which is at this point, one of my mentors, he is the section eight guru.

25:52And he's taught me it's about relationships. It's about, you know, really showing your value as a landlord. At the end of the day, the housing authority wants your business. They want my business. They want me to continue to choose them to provide housing, especially because I provide good, safe housing. And so recognizing the dynamics of the relationship, they need me, I need them, build that relationship, affirm them when they do do something well, brag on them to their bosses when they do something well. And that has helped me to be able to navigate the process, you know, effectively. But at the end of the day, even when the government shutdowns happened, you know, I was nervous at first, but because I surround myself with other investors that have been doing it for a really long time, I'm like, okay, so investors have never not been paid.