Should We Invest In Real Estate?

Real estate investing can be a way to build up a passive income, but is it the right move for you? Learn about some of the different options you have and what you need to discuss before jumping in!  

Is Real Estate Investing Right for Us? 

We've been talking a lot this season about building and diversifying your income streams. 

Part of it is in reaction to the past year or so we’ve had. With some industries being hit hard with job losses and hours cut, having another source of income – even if not full-time- can soften the blow. 

We spoke about working from home with Modern Frugality creator Jen Smith. We also talked about entrepreneurship and building a portfolio of income streams with author and entrepreneur Michelle Jackson.

Today we’re talking about another opportunity to build an income stream – real estate investing.

If you’ve ever watched shows on HGTV or followed DIY influencers on social media, it looks fun and exciting, right? 

These transformations can be dramatic and then when they go ahead and sell those houses, sometimes those numbers look tempting. Or the idea of owning properties and having rental income looks like a passive way to earn more. 

But is that really the case? What does real estate investing really involve? How can we get started? How can we be smarter with how we invest? 

I’m happy that Rachel Richards is joining this episode. She’s an author and real estate investor with over 30 properties. With the income their properties are generating, she and her husband are able to be financially free. 

In this episode we get into:

  • different ways to invest in real estate
  • Understanding what’s really involved with investing and finding properties
  • A peek of how one couple got into investing and how they grew it 

Are you ready? 

Let’s get started! 

Resources on Real Estate Investing

Are you thinking about getting started with real estate investing? Here are some handy resources to get your finances in shape and learn more about it!

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Different Ways to Invest with Real Estate

When you're talking about real estate investing, there are really so many different avenues you can take. Some of them are very passive while others require a lot. With finances time. And in some cases, sweat equity.

I thought it would be handy to give a high level quick overview of the different types. So that you can sit down and discuss which options appeal to you the most based on your goals and circumstances.

Let's start off with something that many people are familiar with, especially if they watch HGTV which is flipping houses.

This is where you take a property, you fix it up, and renovate it so that you can sell it for a higher price and make a tidy profit.

On TV and on social media, this seems exciting. And yes, the transformation is looking credible in some cases, but you really have to know your skillset and run the numbers.

Now, if you're skilled with the trade, this can be fantastic. But if you are relying on contractors, you have to be on top of it to make sure. Not just that you're staying within budget. But that it is passing inspection and that there's quality work involved.

This is a very hands-on process. So if you're just starting out. It might not be the best fit for you.

Another way to earn income with real estate investing is rental properties.

You can either buy a property that is move-in ready for tenants or buy one that you fix.

Within that space of rental properties, there's also house hacking. For example, you could buy a duplex live on one side. And rent out the other.

Another situation is where you buy a property and you live in it for a certain amount of time. And then later on either because you're moving to a different area. Or need a different space you keep that property and then Let's say though that you're more, the hands-off type. You're not really interested in getting into the weeds in the day-to-day of managing properties. There are still options out there for you.

Are you the type of person that loves the low key aspects of investing in index funds? Then you might be interested in real estate investment trusts or REITs.

Greets are great to be in your investment portfolio. They can be publicly traded and you don't need a lot of money to get started. Plus. If you want to get out, you can sell at any time.

Then you also have real estate investment groups where your money is pooled with other investors as they buy properties. This can take a lot of research cause you want to make sure that you are investing in a reputable incredible group.

And then finally, another way that you can invest with others is with real estate limited partnerships. And this is like an investment group that you're pulling your money with others, but it is for a limited time. At the end of it the properties are sold and you benefit from that.

So they already have it. High level view of some of the different options you have when it comes to real estate investing.

It's one thing to read about real estate investing and another to actually go do it.

I want to share a recent chat I had with Rachel Richards about how she and her husband got started, the lessons they learned along the way and how they built up enough cashflow to hit their financial freedom number. And for her to quit her job at 27.

Achieving Financial Freedom Through Real Estate Investing

Elle Martinez: I been talking about diversifying income and why it's so important. This past year and a half has been really a great reminder of well not great circumstances, but just a reminder that you don't want to depend on one income stream when something happens.

Real estate investing; a lot of people have questions about that. What does that look like? And you've become quite the expert on this owning properties. You were able to retire at 27.

Rachel Richards: I was able to retire at 27. We actually started investing in real estate when I was 24. So it took us three years.

Elle Martinez: That's an incredible. I know that didn't just happen by accident. You had to have a plan and you had to put that in place. I want to take a step back and ask what made you look at diversifying your income particularly through real estate investing?

Rachel Richards: Yeah. It really started at a pretty young age. In my childhood. I grew up in a very wealthy county. It was a very unrealistic bubble to grow up in.

So my family was not in poverty. We weren't poor. Like we always had food on the table, but compared to my peers, I always felt poor because there were kids in my high school that were getting brand new BMWs when they turned 16.

Right. My family was not operating that way. I mean, we weren't going out to eat at restaurants, let alone, driving new cars or going on family trips. So at a pretty young age, I felt like I didn't fit in and that's not the way you want to feel in middle school.

In high school, I remember thinking to myself, I don't want to end up like everyone else struggling with money. I don't want to have to operate on a strict budget or borrow money from family and friends to make it to my next paycheck. I want it to be different.

I realized then that what I did then could either set me up for wealth or for poverty. This realization, which I'm sure took the place over the course of a few years, but this kind of lit a fire within me.

I had a lot of limiting beliefs growing up because of our household like money was always a stressor. There was a never enough, it was always a bad thing. We didn't like money and they do say that fear can be motivating or paralyzing. Luckily for me, the fear was motivating and I took that situation and I said, I don't want to end up like this.

I want to become financially independent. And I never, ever want to be in a place where I have to make a decision based on whether I have enough money.

Discovering Financial Independence

Elle Martinez: I can completely relate to that. Just having that freedom and flexibility is definitely one of those things that pulled me towards the financial independence space, but I have two questions based on what you were telling me.

First off, do you remember the first resources, whether it's a book podcast, blog, where you encountered financial independence?

Rachel Richards: Yes. The first one where I encountered money management was actually, I was in sixth grade. I was in a summer camp and I was the little nerd, like reading a book by the pool instead of playing, I've been a nerd my whole life.

I love it. I read the Motley fool's guide for teens, how to have more money than your parents ever dreamed of something like that.

So that was exciting; that set me off on a path of learning as much as I could.

The first book I read about real estate investing, where that started to click for me was when I read a rich dad, poor dad in high school.

And I was like, this is it. This is my way out. This is what I'm going to do.

Elle Martinez: It's fascinating how you click that together to take sometimes people well into adulthood to figure out, Hey, I just want to go on a different path.

So when you met your now husband, what were those initial conversations? Did you know from the get-go I want to pursue financial independence, do you want to join me? Was he already on board or did you have to have some conversations to get on the same page?

Rachel Richards: Yeah, so I was already on board and, and learning and trying to work towards that from past relationships that I'd had with other guys that I dated, I kind of knew.

Well, here's what I don't want. Right. I think that's important too. Yeah, exactly. So I specifically wanted somebody that was ambitious and was entrepreneurial and like-minded like I was, and interestingly, when I met my husband, Andrew, I learned.

A few weeks after we started dating, but he had tried to do this t-shirt printing business on Etsy, where he was trying to make these t-shirts and designs and sell them.

And it didn't work out. I think he lost some money on the inventory, but I thought it was amazing. I was like, this is great. Like, I don't care if it didn't work out, but like you're out there trying, you're trying to make something happen. And clearly you have the same values and mindset that I have. So once I told him about real estate investing and the power of that.

He was immediately on board. He was like, this is great. Let's do it. So I didn't have to convince him. I'm more, I'm more so just had to educate him.

Elle Martinez: Well, that's great that you guys were able to get on the same page fairly quickly.

One of the draws of real estate investing is this idea of, it's going to be passive, but you, and I know even with those income streams, initially there has to be some investment time, finances, whatever it is, might be some skillsets involved.

For you and Andrew, what did you have to do to get started with real estate investors?

Rachel Richards: Yes. Absolutely. I'm glad you bring that up because there's so many misconceptions now about passive income. So I like to talk about what it is, what it's not the way I define passive income is that it's money that is earned with little to no ongoing effort. Okay. Is it a get rich, quick scheme? Absolutely not farthest thing from it.

It takes a lot of time or money to invest, to create the passive income stream. I like to look at it in two stages in stage one, you're investing a ton of time, a ton of money. Maybe you're looking for rentals, learning how to do rentals. You're making offers, closing on a property, renovating get you're getting your tenants and that's all stage one.

That's a lot of work, but then once you have it going or you have your income stream launched, then it becomes a lot more hands on.

That's when you enter stage two where it's a lot more passive. Okay. But there aren't a lot of things that are truly 100% passive. Most passive income streams will require a couple hours a week or a few hours a month to maintain them.

With real estate specifically, I always tell people you have to have a property manager if you want it to be anything close to passive income, because once you get a lot of units, It will be a full-time job and none of us want to quit our full-time job to become a full-time landlord

Elle Martinez: through true.

So a little bit kind of into the numbers and the process, because obviously, buying property, you have to put a down payment of some sort. Like you mentioned, sometimes it means, renovating a property or getting it up to standard so you can get a good cash flow from it first. How did you adjust your budget?

So you could start saving, I'm assuming a significant amount of money to start putting that down payment.

Rachel Richards: Yes. I'm glad you asked. A lot of people see that I scaled my empire so quickly and they assume I'm a trust fund baby. I like to clarify that I'm not a trust fund baby, and I never made six figures from a job or career ever in my life.

I started off after I graduated making $36,000. It wasn't like I was making some huge income where I could save a ton of money, but even then I was very frugal and I was saving 50% of my income.

I was living off something like $1,500 a month in Louisville, Kentucky. Another advantage I had is that I paid my way through school by selling Cutco cutlery.

Have you heard of Cutco knives?


It's a direct sales company. I did that and I paid my way through school and I graduated debt-free and my husband also graduated debt-free because he is a veteran and he used his military benefits to pay for his school.

Elle Martinez: So it sounds like you guys took any opportunity you could one, on the income side trying to earn some extra income pay as you go for college, but then any advantage, like being a veteran, that bill to keep your costs. That's commendable.

So how did you stay motivated? Cause like you said, you were living, pretty frugally. How do you, when you might have friends that are, you know, getting a new car or they're upgrading because they finished school and now they want to get a bigger place.

How did you keep each other in check and keep each other motive?

Rachel Richards: Yeah, it was so difficult because at one point we were making progress more money than any of our friends cause we were both working full-time we had this rental income and then when I released my books, those were making money, but we saw all of our friends passing us by in terms of lifestyle.

They were upgrading, getting fancy houses and buying beautiful new cars and doing all these things that we weren't doing. Because we were trying to save money. So that was difficult. I knew that in the long run it was going to be worth it, but it was hard to continue to sacrifice and feel like I was missing out on certain things.

So that was definitely difficult. I just think it's so important to have it. Yeah. Single-minded focus on what your motivation is. To always be able to go back to that, because if your motivation for achieving something is strong enough, nothing's going to stop you or get in your way.

I'm actually reading this book called I think it's called the compound effect by Darren Hardy.

It's so good. He talks about this and he's like, if I can do a $20 bill to walk across a plank between two buildings, Would you do it?

Most people wouldn't right. It's 20 bucks. It's not worth it, but if your child was on the other building and it was on fire and you had to walk across to save them, would you do it?

It's like, of course any parent would do that. So it's a great example to illustrate how is your motivation strong enough is your why strong enough, where nothing's going to stop you from getting in the way? If you know that for sure, then everything else will be okay.


Elle Martinez: I agree. I think that's the step that we kind of gloss over. When I talk to couples and they're trying to figure out their plan, the first thing I said is like it, can you describe to me what you guys are trying to work for the next year and the next five years?

Try to avoid the general like I'm gonna, you know, just retire.

Well, what does that look like? Would you like to travel? What are your plans? Do you want to stay in the same place?

We think, well, that's not a big deal I'm just going to, you know, figure it out as I go, but having a plan and having your why, as you said, your motivation makes a huge difference.

Absolutely. I want to dig in a little bit more about that with real estate investing, your first property was a duplex,

Rachel Richards: correct?

Yes. It was a duplex that we found in Louisville, Kentucky.

Elle Martinez: Okay. Can you take me back a little bit? Like what kind of work involves, like how did you find it? What were the biggest surprises your first property buying it and then getting it ready

Rachel Richards: to rent out?

Oh, for sure and I'm happy to go into numbers too, but in terms of how we found it. I had my real estate license and I still do.

It was never for the purpose of having my, of having clients. I just had it for my own purposes as a real estate investor. I had MLS access that other people don't typically have.

Okay. One of the things I did though, it wasn't like deal I really found on the MLS that it was listed there. It was an expired slash canceled listing.

I was looking through all the expired and canceled listings on the MLS to see if there was anything intriguing.

Sometimes the owner just can't sell it cause they're asking for too much or they take it off the market and they're going to relist it or whatever reason. I was like, well maybe if I follow up with some of these where there's less competition, I'll look up and I did.

I found this duplex. I was like, this one looks great. I wonder if they're going to realist. I reached out to the listing agent and I asked her and I basically followed up with her on email once a month or so for six months.

Oh wow.

Top of mind. A lot of people are afraid to do that cause they w they don't want to be seen as being annoying or whatever, but it was just a friendly email.

It was just, Hey, you know, I'm super interested in this. If your seller's going to be putting it back on them soon I'd love to make an offer. It was just me politely reminding them that I'm interested to stay top of mind and it worked out because right before they were going to relist it, they reached out.

They said, Hey, we're going to put it back on the market that you want to make an offer. I was like, yes, I'm going to make an offer.

That was a huge advantage because I didn't have to beat out all of these other buyers that would have been interested. I made a reasonable offer and they accepted.

I think the lesson to be learned for for other new investors is be patient because it can take a long time to find the right deal.

This is after we've made an offer on other properties. This is after we even had an accepted contract on another property that fell through so this was months and months. It took us nine months. We were discouraged by then, but because we didn't settle.

This first deal that we did is still the best deal we have ever done to date. And that's because we were patient. So I like to just share that story as a reminder, that you will find a property. Eventually.

I love that.

Elle Martinez: I think. I mean, whether you're buying a home to own it or to rent it, I made it really does pay, like you said, to be patient and just, you don't want to let your emotions get to the point where you're not making financial sense.

I've seen people rushing to buy. Like I just have to have it. If I don't have it, I'll never get a house, you know, or I really want to get into real estate investing and it's hot market and they're like, I can't wait or it's going to get worse than that.

Like fear of missing out really just sabotages what could be a great deal down the line if they just waited a little bit longer.

Rachel Richards: Exactly. And you said a great thing. Yeah. You said to not let your emotions impact you, which is so, so true. Cause you don't want to be, you don't want to be acting in a place of desperation when it comes to your first property.

So yeah. I like the way that you.

Elle Martinez: Yeah, and I want to talk about how you built this up. You seem like someone who's like very strategic and you have a plan. So that first property was like 500 a month cashflow. How did you go from there for your second property? Was that nine, another nine months?

How did that accelerate where you reinvesting in the business taking that cashflow for the next down payment? Or how was that arranged?

Rachel Richards: Let's start with that first one, which is that duplex. Okay. This was a hundred grand. By the time we bought it, my husband and I had both been working for a few years.

So we each had 10 grand saved that we put together to get to the 20% down payment.

Yes. So for that first one, we essentially depleted our savings. So we were, we were willing to take on that level of risks, cause that is risky.

We depleted our savings, but because I was the buyer's agent on that deal, representing myself, I immediately got a commission check back for a few thousand dollars.

So having my realtor license was an enormous advantage that allowed us to scale quickly. And not only was I saving all the commissions. But we were still, and by then we were making more money. So we were still saving 50% of our income and all of the cashflow we were now generating, we were saving a hundred percent of that.

So one thing we did well is that we didn't allow lifestyle creep to impact us. We weren't saying. Oh, we're making $500 a month more. Now let's spend this and let's let off the brakes a little bit. We can live it up. We were very strict and disciplined. Between all of those different things, we were able to come up with down payment after downtown.

Yeah. The more rentals we got, the more cashflow we were making, the quicker we could save money. So it was kind of the snowball effect gained more and more momentum.

After that first property, it took us, I think it was nine or 10 months to close on the second property and then like six months after that. And then three months after that, something like that so it kept getting faster and faster.

Elle Martinez: With the two of you, when you were creating this plan and your portfolio of properties, was there a point where you're saying this is the goal for cashflow. Like when we hit X amount a month, we're good with this, or was this more of a certain amount of properties?

Like what was that goal or metric that you guys have for this passive income or this income

Rachel Richards: stream?

Our goal was $10,000 a month. We came up with that because I think at the time living in Louisville, Kentucky, our living expenses were six or eight grand a month, something like that.

We were wanting to have 10 grand a month in passive income so that we could still save a decent amount and just have that buffer room. Like we didn't want to be cutting it too close. So that's why we aimed for 10 grand.

A lot of people ask me, you know, why am I not buying more rental properties? Why am I still not building out this empire and becoming this huge real estate mogul?

I always answer, that was never the goal. We were never so passionate about real estate investing that we wanted to build this huge empire. It was just a means to an end for us.

Once we got to the point where we were making 10 grand a month in passive income, that's when we were financially independent and now we can work when, where, and if we want because of it.

So we stopped then and now we're able to enjoy our lifestyle because of that. But that's kind of why we, we haven't wanted to create some huge empire.

Yeah. I

Elle Martinez: think that should be mentioned, but a lot of times people are like, Hey, I have X amount of properties are making this up this amount.

It's like, every year it grows and there's nothing wrong with that if that's what they want, but there's not enough discussion about here's our enough in terms of we're happy here.

If it grows another opportunity, but you guys are in a great spot where you have that flexibility and freedom, take your foot off the brakes and kind of just coast a little bit, especially this past. Right.

Rachel Richards: Yeah. And I think it's easy to get caught up in this sense of like enough is never enough.

And once you make this amount, it's like, well, let's make this amount, let's make this amount. You kind of lose sight of the initial reason you're doing it in the first place. And it's fine to, to want to make more and more money if that's truly what you want. But it's really all about living intentionally and knowing what you want and why, and sticking.

Elle Martinez: Yeah, absolutely. I know there's going to be a couples listening and they're thinking, this is something I want to look at into more.

I know you have a book specifically about this, about passive income and aggressive retirement. What other first steps would you recommend for couples interested in learning more about real estate?

Rachel Richards: Yeah, for sure. And thanks for mentioning my book, passive income, aggressive retirement.

Another great resource is bigger pockets. They are like the real estate experts. They have a blog, a podcast, a website.

There's another book called hold by Steve Chader that I think is amazing. So those are some resources, but in terms of next steps, I would say the first thing to ask yourself is, do you have more time or money?

To invest into creating passive income because you need one or the other. Now, if you're anything like I was a few years ago, you would say, well, I have neither. I don't have time and I don't have money.

The next question to ask yourself, Which one will be easier for you to create more of, will it be easier for you to free up more time or to create more money?

And then you can go from there because real estate investing is not the only type of passive income. There are tons of others in my book, I talk about 28 different types. So there's plenty out there.

There are some that require a ton of time upfront and very little money. There are others that require a ton of time, a ton of money and no time.

So you have to get clear on which resource you have more of and narrow it down from there.

Elle Martinez: Okay, well, I love this.

This is fantastic, Rachel, thanks. Not only answering my questions, but being open and transparent about the work that's involved to build and diversify your income streams. So if anyone wants to learn more from you, I know, I believe you have a course as well. Where's the best way they can find?

Rachel Richards: Yes. Thank you so much. Well, I'd love to give your listeners my passive income starter kit for free so they can hit the ground running. Yeah. So they can go to money, honey, to download that. And then there'll be, you'll be on my email list. So you'll get notified if I come out with any new courses.

Elle Martinez: Oh, that's fantastic. Thank you so much.

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