Quitting Corporate with 8 Paid-Off Rental Properties ($100K Passive Income)

0:00Brandon Turner:Eight rental properties. That's all you need to retire early. While it may seem like you have to own dozens of rentals to reach six figures in passive income, today's guest proves that a small rental portfolio can be just as powerful. Vicente Garcia had no experience in real estate investing at 41 years old, but he decided to turn his primary residence into a rental property to help him build a college fund for his kids. Now, in his mid-50s, a portfolio of just eight properties not only pays for his kid's college, but it has also retired him with six figures net cash flow. The secret? A simple but incredibly effective payoff plan.

0:37Brandon Turner:With just a handful of paid-off rentals, Vicente was able to leave his corporate job, retire with six figures of income, and spend more time with his kids, work for nonprofits, and ask the big question, what's next? Follow Vicente's strategy, and in a decade, you too could be retired early with fewer rentals than you think.

1:00Brandon Turner:What's going on, everybody? It is Henry, co-host of the BiggerPockets podcast. Today, we're speaking with investor Vicente Garcia from Dallas, Texas. This is an incredibly inspiring story, so let's jump right in. Vicente, welcome to the show. Thank you, Henry. Thanks for having me. Oh, happy to do it, man. You've got an interesting story. So let's start at the beginning. Tell us about your background and how you first got into this real estate thing. My background is, I would say, it's more like the traditional corporate world, working several companies. And I started in real estate. I don't know if that's a coincidence, but the original plan when we were trying to have a college fund, that was the first idea.

1:40Let's try to build a college fund for my kids. So fast forward, we started investing, bought more properties. then I became a realtor. So I was kind of first an amateur and then became professional somehow, if you will. So all in, I've been investing for 16 years about that in realtor for the last 10, you know, so that's kind of been a quick for the journey.

2:05Brandon Turner:I think that's amazing. And by your standards, I'm still an amateur because I don't have my license, but that's okay. I'll take the amateur status unless we're talking about taxes. I am a I am a real estate professional for tax purposes. But I think you're so successful. I think you glossed over a few things. You said, I just bought a couple of properties. That's, I would say, oversimplifying it. So tell us about what that looked like. When was it when you bought your first one? Why did you buy it? How did you buy it? Yes, yes. We bought our first home 20 years ago, 2005. Started home, first kid.

2:43Stayed in the home for four years. They didn't get to a point, hey, we wanted to move to a bigger home, have the second kid looking for changing the schools. So we bought the second home. But that was a point that, as I mentioned before, we decided, hey, right now we don't need to sell this house to buy the second one. So the idea, hey, let's start as a college fund. So that was the idea. That was 2009. Fast forward another four years, 2013, tried to invest something in the stock market, really got burned down. And all fairness, that was the times of the financial crisis, correct? Maybe not the best time to invest in the stock market.

3:22But either way, they said, hey, you know, have the real rental home for four years. And there were good opportunities back then. So, again, you need to go back in time, 2013, coming out of the financial crisis, great deals. And we decided, hey, let's have also some friends that were doing the same thing. Let's now buy a home as just pure rental, correct? Instead of the first one that was kind of a first home, then transition to rental. And that's how we started. And it went pretty quick. In that first year, we bought three homes. And the reason for that is, for me, it was like, okay, let's see how it is.

4:00Let's try it. It's working. Let's repeat it, correct? Raise and repeat a little bit on that first year, three homes. And then, of course, we continue for the next few years to continue building the portfolio.

4:13Brandon Turner:Okay. So 2013, you bought your first three as pure investments. But you started where I think a lot of people overlook starting, which is, you know, sometimes I talk to people, some of my students, or I just talk to aspiring investors. And they say, I'm looking to buy my first rental property. And I say, okay, well, tell me about where you live. And they say, oh, you know, we just bought a starter home. We got a three-bed, two-bed, single-family home in such and such a market. And I go, so you want to buy a rental in that same market? And they go, yeah. And I said, well, what if I told you you already own one?

4:46Brandon Turner:You're just living in it, right? Like, that's a great path because if you bought a home that would make a good rental, there's nothing stopping you from buying a second home. You're probably going to do that anyway at some point. But instead of selling the home, which is what most people do, you can rent the home out. And remember, most people are broke. So why would you continue to do what most people do, right? Rent the home out, which is a great idea. It gives you some perspective on if you want to be a landlord without having to go take a giant risk because you already own the asset. I think that that's a phenomenal way to start.

5:20Brandon Turner:And I love hearing stories of people who started that way. Can you remind us what market this is in where you were buying these properties? I'm in the Dallas Fort Worth area, which again, is being a great market in the last 10 years, I will say. So you bought those three homes in 2013. What was about the price point there? The price point was between$150,$160. So you bought three homes and the way you explained it made it sound like you kind of had a plan that you were following. So what was the strategy you were following with purchasing these properties? What was the goal? The original goal was the cottage fund then getting into buying more immigrated.

5:56And the idea was to have our own retirement fund. So we're very passionate about the whole FIRE movement and all that. So I said, hey, let's try to start building our own 401k, if we build our own retirement fund, because we wanted to retire. The new definition of retirement. Financially independent, I think it's a better word, sooner. And that was exactly the goal. And then start building that one house after the other.

6:22Brandon Turner:And a lot of people, I mean, let's be real. Well, most people get into this business so that they can, you know, retire from their jobs. I think retire is a word that people use kind of frivolously because technically I'm retired from my job, but I work harder now than I've ever done before. But the concept is you don't have to go to work if you don't want to. But what I think you're saying is like true retirement, no job, just money coming in. And for people that want to get like that, like they build the strategy typically. And oftentimes that strategy involves them scaling some massive portfolio.

6:57Brandon Turner:But that isn't what you've done. Talk to me about what your plan is and how you've executed it. Okay. We bought three. It was working and we continue buying. So pretty much in a span of, I would say, three years, we bought eight properties. Okay. Now, one of the things we decided, because we were fortunate to have our regular jobs, is we're not going to touch that money to start spending on something else, correct? All is going to stay in their own bucket. Let's not start buying a new car. That was also, I would say, the disciplining foundation that we had to then allow us to start paying back those properties.

7:39Brandon Turner:So instead of buying 100 doors, you wanted to buy 10, 20 doors, but focus on paying them off with the cash flow instead of growing your portfolio or buying liabilities. Is that what I'm hearing? Yeah. And to be honest, it was not like we thought about it from the beginning. Between 2013, 2015, what several properties. 2015, I got my license. As I say, now I have things to manage. Maybe it's easier for me when you need to have the house rent or buying something else. And that was to the point that we said, okay, do we keep growing, take money from that equity that you have in there, correct? And have that house, buy you another house, correct?

8:18And to your point, then you just start on preparing that. So, I mean, my personal situation is I wasn't doing this full-time. I mean, I still have to do my full-time job, you know? So think about it, three jobs, you know, my regular job, managing the properties plus the realtor, correct? So a lot of hustle. So it was a personal decision. Hey, now, okay, I think we're getting where we are. I think in a good path. What do we do now? Okay, if we're not buying anything else, you have some clashes that are coming in, and that was the plan. And the way we did it, it was kind of focusing one property at a time.

8:52We decided, okay, property A, this is the one we're going to pay first. And then kind of redirecting all the spawns. And, of course, there's also sometimes like you might get, I don't know, a bonus from your job, something like that again. anything that is extra, you know, try to start paying down. And I don't know, to be honest, if it's a cultural thing, you know, that we Latinos, we don't like that. We were kind of raised with that. Hey, you know, debt is bad, you know, and try to pay it. And I don't know if there's something into that, but I don't think there's, I mean, there's good debt, bad debt, but I think in general, you know, it's a strategy change, you know, and that's what he decided to do at that point.

9:31Brandon Turner:All right. We're going to jump into how Vicente purchased his first three rental properties, but before we do, we have to take a quick break. We'll be right back. As a real estate investor, the last thing I want to do or have time for is to play accountant, banker, and debt collector. But that's what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out who's late on rent. Then I found Baseline, and it takes that all off my plate. It's BiggerPockets' official banking platform that automatically sorts my transactions, matches receipts, and collects rent from every property.

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13:03Brandon Turner:All right, we are back with Mr. Vicente Garcia talking about how he built his rental portfolio. Let's jump back in. Mr. Vicente, so you bought the three properties in 2013. 2013 what's the financing method you used or how did you find the funds to buy these properties i would say for the first one very simple correct okay traditionally 20 down for second second property investment so okay that's the first thing okay how much money down you need correct which is and also making sure you have the financing for that back then the first property was uh well we have some personal savings and again it was a different price point for what it is right now that now 20 % to your point is much higher, you know, but at that point was a 20 % about the 150.

13:46But this first property, then is when you start getting created.

13:49Brandon Turner:So what I hear you saying is you bought the first one with savings. And when you wanted to buy the second one, the savings hadn't replenished itself yet. Exactly. Okay. So how did we do the second one? In my case, something that I did is I had, I have my 401k, you know, for my job. And many people don't know that you can borrow money against your 401k, pretty much you're borrowing money to yourself. So that's how we go to the second one, where I say creative, because again, sometimes people don't know. Not many people explain you that. The companies don't explain you that. They don't want you to take money.

14:27They sure don't.

14:27Brandon Turner:They sure don't. And this is cool, because this is what I did to buy my very first one. I, unlike you, didn't have any savings. So I had to get creative from day one. And that's what we did. We borrowed against, well, we borrowed against my wife's 401k because I didn't have one. So we borrowed from hers. But yes, exactly. That's exactly right. If you borrow from your 401k, traditionally you pay yourself back because it's your money and you pay yourself back with interest. And if you're renting a property out and it's cash flowing, then technically your tenants are paying back your loan, which you used to purchase the property.

15:03Brandon Turner:Now, the caveat is you've got to be really smart with that money. It is your retirement savings. So if you borrow the money and then you buy a bad asset, you could find yourself in a world of hurt. But if you buy a good asset, it can be very financially beneficial. So yes, I think that that's a good tool in the tool belt to use for the right people in the right situation. In 2021, you know, COVID years, everything hit equity, went through the roof, the appreciation peaked. So what we did is we refinanced our existing home, our primary house, primary residence. We took a cash out refinance it and paid two of the rental properties.

15:44And the reason to do that is because we trade an interest rate of, let's say, 4.5 now to an interest rate of 2.75.

15:55Brandon Turner:So what you're saying is you essentially arbitrage the debt. So So you had a 4.75 interest rate on the rental property, but you could borrow money so cheap on a line of credit. So you borrowed at 2.75, paid off the house that was at 4.75, but you still got the money coming in. So you're paying back the line of credit with the money coming in from your rental, but you're now paying off 2.75 % debt instead of 4.75 % debt. Exactly. That is super cool. Lots of people borrowed money and bought homes in 2020, but I haven't heard of somebody arbitraging the debt like that to pay off a rental property.

16:31Brandon Turner:That's a really cool, really smart thing to do that the market provided you. And don't want to get too technical that I'm not a tax advisor. You are still able to deduct some of that interest on those rentals. That is something I hadn't thought about. And now that I'm looking back, probably wish I would have done something similar. Yeah, you need to wait. It's not going to happen again, buddy. Never say never, you know, but yes, not in the short term. That's true. So I've got a few more questions around this strategy in this portfolio. First being, how old were you when you bought those first three-round properties?

17:1340, 41. It's not immediate. It was not like a ride out of college, correct? And plus we're immigrants, correct? So we came here when I was 30 years old. It's been 23 years since we came here. So for us, it was kind of, hey, you need to restart or reset a little bit. But yes, to your question, you know, 41 years.

17:31Brandon Turner:I love how relatable your story and your method is. I think people here invest in real estate and they automatically think I have to be this huge landlord that owns hundreds of assets and runs this multi-million dollar real estate business. when you can just buy a few homes, have a strategy that focuses on paying them off and you can live a wonderful life. And I just love, I love talking to people who have used real estate in ways that maybe the normal investor doesn't even consider or think about anymore. The next question I have for you is, were these value add or distress properties or were you buying them basically turnkey, they were ready for a tenant?

18:15It was a mix. I would say the majority, they were pretty ready. I mean, existing homes, you know, of course you have to do some minor work to get it ready. A couple of times I did short sales, you know, and those were very, very interesting. It takes more time. You have to be patient.

18:34Brandon Turner:Yes, it does. But they're great. They were great. Did some minor renovations to get it ready, but it's been a mix. My approach on that was I'd rather pay more for something that is ready, but because at the end, everything is going into the loan, into the down payment, correct? So paying$10 ,000 more for a property when you go to the down payment is only maybe$2 ,000 versus paying less. But then you need to take that money out of your pocket. That's something I tell my clients. Sometimes people, hey, this house is$20 ,000 a year. Yes, but then do the math. How much do you need to put on? I don't know.

19:12I went to see a house the other day, foundation. Okay, so how much is it going to cost you? It still might be a good deal, but you need to have the cash for that.

19:19Brandon Turner:All right, I'm talking to Mr. Vicente about his plan, and we're going to dive into where he is today with his portfolio. But before we do, we're going to take a quick break. If you own a large or complex rental property, congrats, and I'm also sorry. One day you're building a portfolio, the next you're reconciling six accounts, five states, four LLCs, three partners, two property managers, and running your portfolio starts to feel like running a median size accounting firm. And if you got into this to get your time back, that's not ideal. That's when you need Stessa Pro. Stessa Pro is built for investors who've outgrown other tools.

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