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SHOW NOTES FOR EPISODE 319: STARTED INVESTING AT 50 – STILL FINANCIALLY INDEPENDENT AT 72
He was nearly broke at age 50. With a new marriage and not much promise for his future, Rennie Gabriel remembered what his mother told him at 8 years old, “Buy apartments and let your tenants pay off the apartments for you.” In today’s podcast episode, Rennie Gabriel shares his story of how real estate investing took him from pauper to philanthropist in less than 6 years.
What You Will Learn
- Why wealth creation is a “team sport”
- How remembering his mother’s real estate investing advice when he was only 8 years helped pull him out of poverty and into prosperity
- Why traditional financial planning misses the mark on what is really required in retirement
- How he leveraged a simple little triplex into a real estate portfolio that would fund his retirement and income for the rest of his life
- The power of a 1031 Exchange as part of your real estate portfolio leveraging strategy
- Why a property’s unpermitted units doesn’t have to be a deal breaker
- The advantage of seller financing as a tool to accelerate your portfolio growth
- Why there never has to be a bad time to buy real estate as long as you “buy right”
- Why you should never rent to attorneys (or their mistresses)!
About Our Guest
Rennie Gabriel
Throughout his career, Rennie Gabriel has been a Certified Financial Planner (CFP), Chartered Life Underwriter (CLU) and book publisher with about 80 titles published and in distribution on consumer education, in real estate and finance. (http://GabrielBooks.com). Since 1996 he has taught an extension course at UCLA based on his book, Wealth on Any Income. Locally, he owns and manages several apartment buildings through various corporations and limited partnerships. His extensive knowledge on real estate and finance is useful to not only those who own or invest in real estate, but to anyone striving for a better life by trying to achieve financial freedom.
More About Rennie
- At age 50, after two divorces, failure at in the art gallery business and being flat broke, he met his third wife at age 50
- He was starting his life over from scratch
- Fortunately, his wife was experienced in and understood real estate as an residential real estate agent
- Her real estate partner was her ex-husband, who also understood real estate
- His new wife and her ex-husband owned a couple of single family home rental properties
- Rennie owned a home that had about $10,000 in equity after refinancing it to pay off his last divorce
- He had no cash
- He was 50 years of age, had basically nothing
- He knew that if he was going to have a decent retirement (at age 65), he had to get his act together
- He suggested to his wife and her ex-husband that instead of buying another signle family home rental, why not buy an apartment and he would invest too with the equity he had in his primary residence
- Rennie’s mother owned a little fourplex in Los Angeles that allowed her to have a nice retirement
- Rennie’s mom told him when he was 8 years old to buy an apartment building because your tenants are actually the ones who buy it for for you and that stuck with him his whole life
- He even took a class at UCLA in the 80s on how to manage apartment buildings
- Rennie got his CFP and CLU in his 30’s and sold pension and profit sharing plans, so he had a salary from that
- He did something called “paying yourself first” that he got from the book “The Richest Man in Babylon” by George S. Clason.
- He was making $5,000 per month and also doing business coaching for financial planning and accounting firms
- He was also setting aside $500 in savings per month, investing in stocks from the Dow Jones 30 and, over a 3 year period, he had grown his savings to $18,000
- He believes that “wealth creation is a team sport, not a solo sport.”
Becoming a Real Estate Investor
- His wife’s ex-husband found a triplex in Toluca Lake area for the three to invest in that would require a down payment of $72,000. It costed about $100,000 per door
- Rennie invested his $18,000, his wife $18,000 and her ex-husband came up with $36,000
- The triplex was under rent control, meaning, they could only raise the rent 3% a year. However, if someone vacated the property, they could fix up the unit and increase the rent up to market
- When they bought the triplex, one unit was already vacant so they fixed it up and rented it at market rate
- Over time, the other tenants moved out so they were able to bring all the rents up to market rates
- Rennie saw that they were getting $1,000 cash flow per unit
- After six years, the property went from around $300,000 to over $800,000. so they sold it
- He finally pulled out the binder he had from the UCLA apartment management class he had in the 80s and started to use it
Buying Up
- They used a 1031 exchange (so they didn’t have to pay capital gains) and bought a bigger apartment – a 15-unit building in Burbank
- They found the property on Loopnet, which Rennie calls “a needle in a haystack” because Loopnet is a marketing forum for brokers, that lists properties that are not available, but can connect you with brokers who have multifamily properties in the areas you are interested in
- Saw the property on Loopnet, went out on a Friday to see it and they loved it (this was in 2007)
- The property was built in the 50s by a music teacher
- They called and called trying to reach the broker all weekend and he finally calls back on Monday but told them the property was already under contract
- Someone else had put in an offer on Friday and were going to come see the property on Monday
- He said they were going to show the property to the buyer on Monday and that they could come see it if they wanted to
- They went to see the property and the original buyer didn’t show – he backed out of the deal. Rennie thinks the guy didn’t show because he was scared off because some of the units weren’t permitted
- Rennie didn’t care that some of the unite weren’t permitted. He knew they would pay the money to rehab and get it up to code
- They bought the building for $1.1 million. Rolled the $500,000 profit from the triplex into it (around 40% down). Spent $250,000 in remodeling
- They increased the rents from $6,800 per month to $16,000 per month in 18 months
- In 24 months, everything they invested was returned to them
- The great thing about apartments, according to Rennie, is that even if the building loses value, it doesn’t matter, as long as you aren’t selling. As long as you aren’t over leveraged and the rents are good, you’re still in great shape
- Rennie said he almost failed high school math but he could handle the simple calculations in this transaction to see just how profitable real estate investing is
Financial Independence
- By the end of their eighth year of investing, they had accumulated 50 units that they owned and managed
- All properties were cash flowing
- Plumbing bills weren’t wiping them out any more
- He now had a multi-million dollar net worth
- He no longer had to work anymore but he chose to continue working because he enjoyed what he was doing
- Rennie and his wife bought out her ex-husband, sold off some properties, are now down to 27 units and net $20,000 per month in cash flow
- He earns more than they need to live on
- They are saving
- In December of last year, they donated $50,000 to charity
Biggest Mistake
- He has learned a lot over the 20 year time period he has been investing, learning things that you couldn’t learn in school
- His biggest mistake was violating there own rules/policies they established in the beginning about how they should screen/vet tenants
- They would:
- Run credit reports
- Meet with the people
- Call previous landlords
- Biggest Mistake
- Rennie rented out an apartment to an attorney from a boutique law firm where he kept his mistress
- He used a credit card voucher check to pay the second month’s rent that took 11 days to clear the bank
- By the third month, the rent didn’t come in at all
- The mistress said there were fleas in the apartment
- Burning candles caught drapes on fire
- Rennie filed for eviction for not paying the rent
- The attorney hires another attorney to represent him in court who doesn’t even show up
- Two days before the final court date where he was going to be evicted, he moved everything out of the apartment
- There was damage in the apartment that was more than the security deposit would cover so Rennie sues him in Small Claims Court
- Two days before the Small Claims Court hearing, the attorney writes out a check for what he owes
- Attorney keeps his credit clean
- What he learned: When you set up policies and procedures to protect yourself, do not violate them!
Biggest Successes
- Not giving up when things got tough
- Buying the apartment they bought in Burbank
- Buying something that was mismanaged and had deferred maintenance
- Completely turning it around
- Using owner financing
- Because the Burbank apartment had units that were not permitted, they couldn’t get bank financing
- Didn’t have to to worry about qualifying for a bank loan
- They still have the loan with the seller today
- When interest rates went down, he went back to the owner, asked for a reduced interest rate and got it
- It was a 10-year loan and when the 10 year due date came around, Rennie asked if the seller wanted to renew for another 10 years and he did
- Because he had always paid on-time the seller had no problem. He just asked that the payment amount be the same so, now, Rennie will have the building completely paid off in 5-6 years
- Rennie always pays his bills early or on-time
- This has helped in many ways
- Vendors are loyal
Advice for Old Dawgs Considering Real Estate Investing for Retirement
- Real estate investing is a team sport, not a solo sport
- You don’t have to do it by yourself
- Real estate is the the greatest supplement to retirement that he has ever seen
- He was a Certified Financial Planner
- He’s seen stocks, bonds, insurance, annuities
- They are all sold to people for their retirement in their “golden years” for a decent retirement
- The problem is that these things never grow
- When you buy an annuity, for example, the income amount remains the same
- When you buy a rental property and the rent increases – your income increases
- As inflation increases, your income increases with real estate
- He’d rather outgrow a growing income than a static income
- He had to give up his securities licenses because he was advising against those things for real estate
Current Business
- He will continue to provide free resources on his website: WealthOnAnyIncome.com
- Free information on starting a business
- How to take care of your money
- Free 3-page summary of his book Wealth on Any Income
- 100% of any of the profits he makes on his wealth coaching goes to charity
- His current goal is to become a philanthropist
- Rennie and his wife support various animal-related causes. A favorite is:
- Shelter to Soldier – Rescues dogs from local shelters and trains them to become service animals who are given to veterans who come back from battle suffering from Post Traumatic Stress Disorder (PTSD), Traumatic Brain Injury (TBI) and/or other psychological injuries associated with traumatic service experiences
Rap-It-Up
- Favorite real estate book: Nothing Down by Robert Allen
- Favorite business book: Think and Grow Rich by Napoleon Hill
- Most valuable web site for success (other than your own): BankRate.com
- Favorite app: Venmo, PayPal, Uber & Lyft
- Favorite quote: “Of the billionaires I have known, money just brings out the basic traits in them. If they were jerks before they had money, they are simply jerks with a billion dollars.”
– Warren Buffett - If you had to start all over, knowing what you know, and you only had $1,000, what would you do to launch your real estate investing business? Go to network meetings, meet others who have money and develop a partnership or ask them to invest.
How to Reach Rennie
- His website: WealthOnAnyIncome.com
- Google his name “Rennie Gabriel”
- His eMail: Rennie@WealthOnAnyIncome.com
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