Retiring 15 Years Early by Buying Rentals on Repeat (HELOCs!)

0:00This investor found a formula that works in his market and he's stuck with it for almost two decades. Now he has almost 30 rental units, which will give him the option to retire from his day job by age 50 without compromising his lifestyle in retirement. That's the power of real estate. You choose the strategy, you control the investments, and over time, they'll start putting life-changing money into your pocket. Let's hear how we do it.

0:30Hey, everyone. I'm Dave Meyer, head of real estate investing here at BiggerPockets. I've been buying rental properties for 15 years now, and on this podcast, we teach you how to achieve financial freedom through real estate investing. Today, we're bringing you the story of an investor named Tony DiGiacomo. Tony lives in Rhode Island, and he's invested through almost every era of the last couple of decades, starting before 2008, then continuing after the crash and buying properties consistently through the pandemic and up to today. And what I think Tony's career shows is that it's possible to buy real estate at almost any time.

1:08You just need to focus on a strategy, understand what a good deal looks like in your market, build the necessary relationships, and be willing to act when the right opportunity arises. Tony is doing all this and has been for a long time. He now has 12 different properties that are going to fund his retirement long before the traditional retirement age. And he's not doing any crazy direct-to-seller time-consuming marketing or risky financing strategies. He's just following the principles we preach on this show every single week. So if you're not sure how to get started buying properties, or even if real estate is right for you, Tony's story might change your mind.

1:47Let's bring him on. Tony, welcome to the BiggerPockets podcast. Thanks for being here. Happy to be here. Thanks for having me. Yeah, this is going to be a fun episode. I'm really eager to hear about your investing journey. It sounds really interesting. So tell us where it began. So where it truly began was when I was a child. So my father, who was an immigrant, came to America, a factory worker, heard from a coworker that he bought a rental property and the tenants are helping him pay down the mortgage and he's hoping that would be his financial freedom. So my dad thought that was a great idea for himself.

2:20So throughout the years, He bought a few of those properties when I was very young and I would paint with him. I would collect rent with him. I would be a property manager with him. That's really where it started. So it was something that I always planned to do. And right about once I finished college is when I started buying my first rental property, which looks very different from what I invest in today. But that's when I truly dipped my toes into real estate. So my early 20s. Wow. Okay. That's a really cool story. I imagine that getting exposed to the property management side of investing right away could take you to one of two ways, right?

2:57You could either really like it and say, wow, this is a powerful financial mechanism. Or, you know, there are some people who get a taste of that and just don't like it at all. But it sounds like you liked it from a young age. Yeah, I think that I enjoyed the process, but I watched it long enough to see the financial freedom part as well. I got to fully understand what time in real estate can do for you. So it was an obvious choice for me to invest in real estate. And you said you got your first rental property relatively young. Were you just straight into it, trying to do it full time or were you doing another job as well?

3:34I was doing multiple jobs. So I was that kid that would work breakfast at a restaurant, then go out. I started a landscaping business. I was mowing lawns in the afternoon. I was working at a pizza place at night. And I was living at home, so I was saving every dollar that I possibly could. And I put a huge down payment on a small condo, which in hindsight, I would have done things differently, but I'm glad I dipped my toes into the real estate game. And that was my first property. It was$110 ,000 condo that I rented for$750 a month. And I put like 50 % down as a young kid. And that was my beginning.

4:10And you stayed living at home. I stayed living at home. I actually at my fourth property. So I own three rental properties living at home and I'd go around and collect rent and go back to mom and dad's house. I imagine that really helped being able to save every dollar that you were earning from those other jobs and put it back into real estate must have really accelerated your investing career. Absolutely. So, you know, I was putting down as much as I possibly could to keep mortgage payments as low as possible. Again, like I said earlier, I think I would have known what I know today, I would have handled that differently.

4:44I would have leveraged things a little bit more, but there's no mistakes. There's only lessons learned. So I've learned from that and I've grown from that. Can I ask you what year this was when you were starting out? So that was in 2004. I bought my first property. Okay. And so these first three deals, it sounds like at least, or maybe more were prior to the crash, right? So how did that go for you? So you hit that perfectly. Yes. The first three deals were before the 08 crash. And then I started evaluating deals and everything seemed super exciting. So the three prior deals didn't look as great anymore.

5:24Now I'm trying to gobble up as many properties as possible. So now I'm putting down as little as possible and I'm buying two or three properties in a year. And really being able to pick and choose the properties I want to buy, people are reaching back out to you. Agents are asking you, how can we put this deal together? I had my real estate license during that time as well. So I built a lot of connections in the real estate game. So closing attorneys knew about me. They knew I'd like to invest in properties, real estate agents. So sometimes I was able to buy a property that they just couldn't move.

5:55And I'd name my price, and sometimes that would stick. So the next five or six deals I bought were incredible in hindsight. It's interesting because we were just talking about leverage. And I'm curious if you think that having put down a lot more money in that those first three deals helped you get through the 2008 situation? Because some people who are putting down three, 5 % during that time didn't make it through the other side. Sure. So on top of owning the rental properties, I've always had a stable job. So I own the landscaping business that started in high school and has grown to where it is today with eight employees, 200 plus accounts.

6:35And so managing and bringing that income in has allowed real estate to kind of grow on its own. So there was always a backup financial plan if needed. So there wasn't much of a fear of losing those properties or not being able to pay the mortgage there. I think even with small down payments, it would have been okay. Now let's talk about those deals you did during the financial crisis because everyone I'm sure is looking back at those times thinking, man, I wish I had bought. But it was also kind of scary during that time because the bottom was kind of dropping out of all these markets and there was no clear sign of when it was going to turn around.

7:13And at that point, I don't think anyone knew how quickly prices would recover over the next decade. So what were you looking for during that time period? Sure. So whether this is right or wrong, I was kind of looking for the cheapest multifamily properties that I could get my hands on. I did hear one time in a podcast, someone saying that that's often a mistake. People are looking for good deals rather than good properties. And I kind of wish I heard that earlier because those properties appreciated much faster in my local area than these rental properties. However, that's what I was after. So I was buying properties where a longtime landlord had a troubled tenant, the place was destroyed, they wanted nothing to do with it, they weren't going to put it on the market and they would say, just assume the worst.

8:00I mean, I bought properties where I wouldn't even look in some of the units and they told me to assume the worst in those units. And sometimes it was the worst. It's pretty rough. I purchased properties where like the radiators froze and the heating system was gone. I purchased a few inhabitable properties that just needed full gut job renovations. And that's where I started using line of credits as a huge tool. Still to this day, I think line of credits are most valuable tools that you can use in real estate. So being able to purchase these properties with a line of credit, renovate them with a line of credit, and then putting traditional financing on it, freeing up that line of credit again, and then just rinse and repeat.

8:39For those in our audience, Tony, who aren't familiar with the term line of credit and what it can be beneficial for, can you just fill them in? Sure. So a line of credit is typically equity that you have on a property that you can go to the bank and say that I want to borrow against this property without putting a complete fixed term on it. What you're looking to do is basically have the ability to borrow against it and pay interest only on it. And you only pay interest if you are borrowing that amount of money. I mean, you can kind of think of it like a credit card, right? You're basically only paying when you use the money that you are tapping.

9:17And so oftentimes what happens to real estate investors is you have this very fortunate problem where you build up a lot of equity in your properties, which is great, that's adding to your net worth, but sometimes it gets a little bit trapped in those properties and you can't use it then, that net worth that you've built up, to go acquire new properties and to scale your portfolio. And some people choose to either sell those properties, some people choose to refinance those properties, but a line of credit, I agree with you, Tony, is sort of this underrated way where you can hold onto that property, keep the equity there, but then use that asset with a bank to borrow against it.

9:55And you can use that either to acquire new properties or to renovate properties to to pay for construction is also a common way that it is used as well. One of the other ways that I've used that is for new construction. So I've done some spec homes. So you don't need to go into the construction loan route, which is typically pretty expensive. The bank is very involved. So now you have the freedom of basically acting like cash, right? So the line of credit is essentially using cash. So you can make cash offers on properties, you can build a house, you can pay your subcontractors through cash, and then put your fixed financing on it.

10:31Or if you're selling the property, taking those funds and paying down the line of credit to zero again and starting all over. Yeah, it's a great way to really leverage the assets that you already have in real estate. I want to sort of fast forward to 2020, the pandemic, how you've been scaling in recent years. We do have to take a quick break, though. We'll be right back. We hear it from investors all the time. They spend hours every month sorting through receipts and bank transactions, trying to figure out if they're actually making any money. And when tax season hits, it's like trying to solve a Rubik's Cube blindfolded.

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15:26Welcome back to the BiggerPockets podcast. I'm here with investor Tony DiGiacomo. Before the break, we were talking about how he scaled up from a very young age, made it through the financial crisis, accelerated his career at that point, acquiring a couple multifamily properties. Let's fast forward a couple of years, Tony, because I want to talk about how you're scaling in today's market. Let's just go to 2020. Where were you at that point? So at that point, I continued to invest. and some of the early properties just kept exploding in value. And so equity was there. So I continued to pull a line of credits.

16:01I was really gearing up to have the ability to purchase more properties, scale up. And I'm glad I positioned myself that way because once COVID came, there was a lot of uncertainty what would happen with real estate. And in my area, like many other local areas, real estate prices just went through the roof. So these two families or small rental properties were being gobbled up by first-time homebuyers because that was their only ability to get into real estate or buy a home. So now we're competing as investors with first-time homebuyers and we can't make the numbers work. So it was time to pivot and get away from two or three family homes and go into other things.

16:42So some of the more recent projects, I built an industrial garage complex. So renting out to contractors, which is a really great business. I wouldn't mind doing that again because the tenant pool is easy to work with. So contractors storing their equipment or whatever they need to store their business for their, you know, it's their livelihood. They're paying their rent. There's not much to maintain. It's basically a square box with a bathroom that has worked out really well so far. That's pretty cool. I imagine that being in the industry, you know, running a landscape company, you probably understand this really well.

17:20were able to see a unique market opportunity. I don't know, hosting the show for a while now, I haven't heard anyone do something like that. It seems like some like mashup of self-storage and industrial property. It's pretty cool. It's basically what it is. So the unit size that are 20 by 40, so they're 800 square feet with large oversized garage doors. I think they're 14 feet tall. So you can get larger equipment in there. And the tenant pool is a mix match of a plumber. you know, someone who stores cars in there, another person just stores household items in there. So just an oversized self-storage unit.

17:58It's a very clean business. I've noticed that the same thing you said, that in the last couple of years, the two to four unit segment has gotten extremely competitive, whether it's from homeowners, you know, it's basically the house hacker dream, right? And as Tony noted, the numbers for someone who's buying to use it as a house hack and as an investor are just different. Because as a house hacker, you don't need to cash flow to make that work for you. You just need to lower your overall cost of living. Whereas I assume, Tony, you are looking for a solid cash on cash return on par with your other investments.

18:36And two to four units just aren't there in a lot of markets right now. I am noticing that change a little bit in the last couple of months, but I definitely agree over the last few years. I'm curious why you went to sort of like a more of an industrial model instead of, for example, going into larger multifamily or single family homes, which would be a business that you sort of were already running? Sure. So on top of that, I'm still dabbling into other projects. So one other project I'm currently working on is taking an old commercial building and converting it to condominiums. Oh, cool. So we're probably about a year and a half into this project with approvals, some environmental stuff.

19:16It's along the river. So there's coastal resource management we're working with, town planning. It's a comprehensive plan. So I have an investor that I'm working with on that project. And we're basically going into a 14-unit condominium complex that we're going to be building out. Wow, that sounds like an awesome project. And what's the timeline going forward from here? So we are coming up for final voting at the town. So we had multiple planning and zoning meetings to iron out all the details. Our next meeting is for our final approval, which there was no request at our last meeting for updated details.

19:55So once that happens, we start the environmental work because it was a dry cleaners before we purchased it. So there was some chemicals that went into the ground. So we have to work with that. And then we start our project of renovating it into a residential complex. Nice. Well, good luck. It sounds like a super cool project. I'm curious, Tony, you know, you started buying a condo, you bought a bunch of multifamilies. What was the transition like to doing some more active work, whether that's heavy renovation or this ground up development kind of stuff that you've been talking about? Was that transition difficult?

20:31I think along the way, there was enough smaller projects that got me to this point. I did purchase a couple pieces of land that was just raw land that needed approvals. So single lots for a single family home that I work with engineers and architects on to put up a home to sell. And I think just those small projects pretty much gave me the background that I needed to scale up. Essentially, it's the same process, just at a larger scale. And in those smaller projects, did you get to know contractors in particular, subs, that kind of stuff that you could use in the bigger ones? Absolutely. So I feel like with every project, I constantly fine tune that list.

21:10That list of people has changed over the years. But when I find someone that I really enjoy working with that I can trust, it's so valuable to be able to call that person and say, hey, I'm doing this project. You're going to be the plumber for this project. And I know they're going to treat me right and treat me fairly. So I'm constantly trying to build that team so that I don't need to interview and shop new people every single time. I'm sure for a lot of people listening, the appeal of new construction and these conversions is pretty high. It's appealing to me too. Would you recommend sort of following the path that you have where you sort of started small and built incrementally rather than going from a couple of rental properties, jumping straight to larger multifamily or more hands-on construction type projects?

21:59Yeah, I would say growing slowly is probably the safest approach to it. There's a lot of things that can go wrong in real estate and you want to eliminate as many of those as possible. So through time and experience and projects, you hope to be able to eliminate as much of those as you can. Got it. Yeah. I think that's a really great sort of measured approach. And if you're in this game for the long term, this is just a really good way to mitigate risk. It may mean that you're not getting the upside of these like huge construction deals right away. But these construction projects are risk too.

22:36Like, you know, the reward comes with risk. And to me, at least the way to mitigate risk is to build up to that much in the way that Tony is talking about and taking a couple extra years, I'm not saying take a decade, but you know, building your way, building confidence, learning those skills can be a great way to enjoy some of the benefits of these bigger projects without taking on more than you can chew right up front. Tony, I'd love to talk to you a little bit more about what your portfolio overall looks like today, what your goals are going forward, but we got to take one more quick break.

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23:43Brandon Turner:A few weeks ago, I took a trip down to Pensacola, Florida with my dad and my kids. We spent our days at the beach and the pool. We cooked dinner together one night, and I got to experience the simple joy of just watching my dad suck up time with his grandkids. We played a round of mini golf that ended up being the best part of the whole trip. And it was one of those visits where you just slow down with the people you love and realize how much these ordinary days together actually mean. But while I was gone, my house was just sitting there empty. That got me thinking about something I hadn't really considered before.

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