\n<\/p>\n
Most people know that investing in real estate<\/strong><\/a> is one of the best ways to reach financial independence<\/strong>, but very few ever take action. Once today\u2019s guest discovered the potential of real estate, however, it became his obsession<\/em>. Despite starting out on a low military salary, he built a million-dollar net worth<\/strong> in just THREE YEARS<\/strong>!<\/p>\n In this episode, we\u2019re catching up with entrepreneur<\/strong>, investor<\/strong>, and repeat guest Jabbar Adesada<\/strong>. Since we last spoke with Jabbar, he has only doubled down on his real estate dream and journey to financial freedom<\/strong><\/a>\u2014dabbling in several different investing strategies<\/strong><\/a> and teaming up with a partner<\/strong> to get more deals done. Today, Jabbar owns a slew of short-term rentals<\/strong><\/a> and long-term rentals<\/strong>, has completed several BRRRR<\/strong><\/a> projects<\/strong> (Buy, Rehab, Rent, Refinance, Repeat), and has more than a dozen construction projects<\/strong> in the works.<\/p>\n If you want to reach your <\/strong>FIRE<\/strong><\/a> goal<\/strong> as soon as possible, tune in to hear how Jabbar used real estate to expedite his journey. He shares how he was able to save up for a down payment<\/strong> with a low income<\/strong>, get his first home loan<\/strong> with almost no credit history<\/strong>, and rapidly increase his income<\/strong>!<\/p>\n Mindy: Scott: Mindy: Scott: Mindy: Scott: Mindy: Scott: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Mindy: Jabbar: Scott: Jabbar: Mindy: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Mindy: Jabbar: Scott: Jabbar: Scott: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Scott: Jabbar: Scott: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Scott: Jabbar: Mindy: Jabbar: Mindy: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Scott: Jabbar: Mindy: Jabbar: Mindy: Scott: Mindy: Scott: Mindy: Scott: Mindy: Scott: Mindy: \u00a0<\/p>\n \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes<\/a>\u00a0by leaving us a rating and review! It takes just 30 seconds.\u00a0Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Check out our <\/i>sponsor page<\/a><\/i>!<\/i><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
Hello, our dear listeners, and welcome to the BiggerPockets Money Podcast where we are speaking with Jabbar Adesada today, who you might remember from episode 257.
Hello, hello, hello. My name is Mindy Jensen, and with me as always, is my real estate investor co-host, Scott Trench.<\/p>\n
Thanks, Mindy. It\u2019s great to be here with my, you know the drill, money sergeant, Mindy Jensen.<\/p>\n
Oh, I like. That was good. Scott and I are here to make financial independence less scary, less just for somebody else.
To introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.<\/p>\n
That\u2019s right. Whether you want to retire early and travel the world, go on to make big-time investments in assets like real estate like Jabbar, or start your own business, also like Jabbar.
We\u2019ll help you reach your financial goals and get money out of the way, so you can launch yourself towards your dreams.<\/p>\n
Today\u2019s show features a 22-year-old enlisted Marine sergeant, who also just so happens to be a real estate entrepreneur with a $1 million net worth.
He also built a business that generates hundreds of thousands of dollars per year since graduating high school, with a combination of flipping, short-term rentals and long-term rentals.<\/p>\n
Yeah. This is the story of what energy, hustle, self-education, discipline, frugality and the interweaving, the interrelation of real estate investing into your personal life, can achieve for you in just a few short years. I know I had a similar experience to Jabbar in many ways, 9, 10 years ago when I was getting started.
Just how that foundation can set you up to absolutely see your business and personal wealth explode in the out years. It\u2019s a real treat to do this now, because we last recorded with Jabbar in December 2021, when he had just purchased his first two properties. Actually, it was Dan Sheeks who recorded with him then, I was very jealous.
But he had purchased his first two properties by the age of 20, about $850,000 in real estate, and laid a really strong foundation of frugality and income from those properties. You\u2019re in for a treat today, as we learn about how that set him up to absolutely explode heading into 2022 and 2023 from a business and personal wealth perspective.<\/p>\n
Scott, I think what I\u2019m hearing you say is everybody should be just like Jabbar.<\/p>\n
Let\u2019s be like Jabbar.<\/p>\n
Let\u2019s be like Jabbar. Let\u2019s not waste another second, let\u2019s bring in Jabbar. Jabbar Adesada is a 22-year-old US Marine and real estate investor. We last spoke with him on the BiggerPockets Money Podcast in December of 2021.
At the time, Jabbar was new-ish to real estate and had the stated goal of becoming a millionaire by the time he turned 30. Today, we\u2019re bringing Jabbar back on the show to update us on his journey and how he was able to, spoiler alert, beat his millionaire goal by nine years.
Jabbar, welcome back to the BiggerPockets Money Podcast. I\u2019m so excited to talk to you today.<\/p>\n
Oh, that was an amazing introduction. Thank you so much for having me.<\/p>\n
That\u2019s your life. That\u2019s not an amazing introduction. That\u2019s just like, \u201cHey, here\u2019s Jabbar.\u201d<\/p>\n
But you said it so cool. You made me sound cooler, I thank you so much.<\/p>\n
Well, was any of it not true?<\/p>\n
No, it\u2019s true. It just sounds awesome when you say it.<\/p>\n
Jabbar, before we jump into this, I wanted to recap a little chat we were having before we started recording.
I said, \u201cOh, so you\u2019re a millionaire now?\u201d Your response, what was your response?<\/p>\n
Finally.<\/p>\n
Finally, and how old are you, Jabbar?<\/p>\n
I\u2019m 22.<\/p>\n
22, so finally. I thought it was hilarious and I was laughing like crazy, but also I want to point out that you\u2019re 22. Don\u2019t compare the beginning or middle of your journey to the middle or end of somebody else\u2019s journey, because there\u2019s different circumstances surrounding all of this.
I\u2019m a couple of years older than you, Jabbar. I\u2019ve been investing since longer than you were born. That doesn\u2019t make me a better person, but it does make me a really bad person for you to compare your story to, because I had a head start that you didn\u2019t. I was investing in the \u201990s. You weren\u2019t around in the \u201990s, right?<\/p>\n
No, so I could be 45 secretly.<\/p>\n
I just wanted to point out that yes, you\u2019re finally a millionaire. There\u2019s this idea around the FI community that, \u201cOh, I\u2019ve discovered fire. Now I want to be a millionaire as fast as I possibly can.\u201d
That\u2019s a great goal, but it\u2019s not going to happen overnight. Jabbar, how did it happen overnight for you?<\/p>\n
No. I think that really for me on my goal and my journey to financial independence, one of the things that I was intentional about at the beginning, was investing and then being extremely aggressive on my defense, which is my saving. I started off first focusing on setting up my financial foundation, which was increasing like, \u201cHow can I maximize my saving rate? How can I make sure that I am saving X amount of dollars every month?\u201d
Then I\u2019m just investing every single, last penny in excess of what I need. Then I started to focus on investing, but because I didn\u2019t have a lot of money. Being a Marine just not making a lot, I was netting from my job between $1,500 to now $2,300 a month from the Marine Corps take home pay. Because I wasn\u2019t making a lot of money, when I was looking at different real estate investing strategies, I was a lot more focused on cashflow.
Even though I was investing in assets that were increasing my net worth over time, I was increasing my income as well, because now I have a bunch of cashflow from the short-term rental properties that I had. It was a combination of just starting off with the defense, which was the saving. Getting into the offense, which was the increase of my income.
Then that also doubling as my investment side of the road, of just being able to increase my overall net worth. I\u2019m excited to dive deep into that.<\/p>\n
Jabbar, we last chatted with you and I\u2019m very jealous. I did not get to chat with you, it was actually one of our other co-hosts, Dan Sheeks, author of First to a Million, who got to interview you back in December 2021.
At that time, you had purchased your first rental property house hack that you were crushing it with a rent by the room strategy. You had just purchased your second property, which is a Smoky Mountain vacation rental for $630,000, $650,000 odd dollars with a partner.<\/p>\n
$600,000, yeah.<\/p>\n
Yeah. Would you mind just giving us a quick recap of the journey, getting to that point?
Then I\u2019d love to hear and pick up the conversation from there. How did that vacation rental go and what have you been up to since?<\/p>\n
Yeah, absolutely. At the very beginning, I had that amazing house hack that started off as just my industry of rejection, because it was really difficult to be able to get that loan to be able to purchase that property so young. I bought that property when I was 19, making very little money, but I had, I think, around $25,000 or $30,000 saved up. I just had gotten my six months of credit history.
I had six months, so very slim credit history, and there\u2019s just a bunch of roadblocks with me approaching different lenders to finally getting that one. With that one, I eventually was able to buy that property. That property ended up being something that basically matched my military income. All of a sudden, I was making my military salary and then cashflow from that. Which I think that year, my net cashflow year over year from 2021 on that property was $1,500.
It ended up being a little bit higher than I expected, $1,500 a month. At the time in the military, I was making around I believe $1,600, $1,700 a month by the end of the year. I was basically seeing, \u201cWow, I just literally gave myself almost 100% increase of my income by purchasing this property.\u201d By seeing that being successful, I was able to partner with somebody on my next property.
Which basically was I didn\u2019t put up any of the money, but I put up all of the work, the knowledge of finding the deal and putting the deal together, and managing everything. That property actually propelled me into not only getting more cashflow and additional net worth increase from that property. But it also gave me the credibility to start working with other investors to continue partnering. I did that for a little while.
I think I got up to I have five partners now on, I think, five additional of those, you put up all the money, I put in the work and then we split profits 50\/50, because I found the deal, I\u2019m managing the deal for lifetime. Then you guarantee the debt and then you also put in the money to investing in the project. Just like to wrap up today, before two years ago, I was at two units. Now, I have 25 units that I own.
Five of them are with partners, the other additional 20 of those are just solo me. Then I have also a bunch of properties, we have 12 or 13 construction properties. Flips, things like hotels, when I\u2019m buying the property and immediately putting it on the market. I ventured off into several different strategies of real estate investing in business, to do what I was talking about with the offense.
Which I think has made the most meaningful impact and increase to my journey to becoming a millionaire rapidly, was just overall being more focused on increasing my income, because you can only save so much. But when you\u2019re able to turn the offense or the income ladder or meter up, you have an exponential amount of room to grow there.<\/p>\n
Well, let\u2019s dive into we\u2019re in December, late 2021, and you just bought your next vacation rental.
At that point in time, you\u2019re earning $18,000 a year in your military salary as an enlisted man. Did you even have BAH or BAS allowances at the time?<\/p>\n
No.<\/p>\n
No, okay. Those are basic allowance for housing and basic allowance for sustenance. Basically, they\u2019re after-tax benefits that many military folks get, yet you weren\u2019t even eligible for those at the time, I think at that point.
You\u2019re really making essentially minimum wage and you have these two properties here. What was the next step on your journey and how did you get there following the last conversation we had?<\/p>\n
Yeah. The next step on my journey was, so I went into a space between December of 2021, and then I didn\u2019t purchase my next few properties until June of 2022 actually.
Because I was having a really hard time finding deals. That was something that just got really difficult for me.<\/p>\n
Your first property was in Savannah, Georgia and your next property was in the Smoky Mountains as a rental.
Where were you looking for those deals leading up to that June 2022 mark?<\/p>\n
Oh God, it was terrible. I was looking all over the country. I remember I was looking in the Smoky Mountains. That was difficult. I was looking in the Blue Ridge, Georgia Mountains. I was looking in the Crystal Beach, Crystal Beach. I was looking at the Gulf Coast. I was looking at the Florida Panhandle until finally, I realized I just need to pick a place and focus on it.
Because I knew I was eligible to do another house act in Savannah, I decided that I was going to just focus in the general Savannah area, like Buford, Savannah, that type of deal so within an hour of Savannah. My next property actually ended up being a subject to property, which I had a Marine who was getting out of the Marine Corps, because he just had some difficulties with maintaining standards.
He was in a pretty distressed situation where he was going to be going back home to Texas, and he was losing his income and he also had a baby on the way. His property, he had bought it and he didn\u2019t really have much equity, so it didn\u2019t really make a lot of sense for him to sell at the time. I convinced him to let me do what\u2019s called subject to or take the home over at subject to.
Meaning the mortgage stayed in his name, and then the deed, the title of the property, was transferred to my name. Now I controlled the property, and then I make the mortgage payments on the property. What I essentially did there, was I negotiated zero money down with a 10-year balloon. In 10 years, I\u2019m going to be paying him I think it\u2019s $80,000, either via sale, cash out, refinance.
Or he just has a note on the property, a secondary note on the property for $80,000. Then that allowed me to basically hold an asset at a 2.5% interest rate, at the time when interest rates were starting to go up significantly.<\/p>\n
Now this property was a military property. I assume that the seller, when they originally bought it, used a VA 0% down loan on the property. VA loans, to my understanding, are assumable.
Why did you choose to do the subject to and not move into the property and assume the mortgage into your name? What was the thought process there?<\/p>\n
Now, I hope people don\u2019t think this is where Jabbar is greedy, because I knew that I could use my VA loan on an additional property. It would allow me instead of using my VA loan in locking it in for that year on one property.
I could get this property subject to, and then I could do zero down on another VA loan house hack, and then I\u2019ll just have a two for one. I ended up buying those properties within 30 days of each other, which is even more awesome.<\/p>\n
What was that second property, the one that you used your VA loan for?<\/p>\n
That second property was what was a triplex in Savannah, Georgia. It\u2019s my most valuable possession. A lot of people don\u2019t know this, but in Savannah, the short-term rental regulations are extremely strict. Maybe a lot of people do know this, but when you live in the property, the rules are very, very laxed and easy.
What I basically did, was I used my VA loan on a triplex that had an additional storage space to turn into a quadplex. I basically bought the property zero money down. I used a HELOC from my first property to fund the renovation of the fourth unit. Then I turned the three units and furnished them, and then turned them into cashflowing Airbnbs.
That significantly increased my net worth, because the valuation of that property, I haven\u2019t gotten it appraised. This is just based off of the comps, is between $1.1 and $1.2 million. I bought that property for $695,000.<\/p>\n
Wow. You were able to qualify for that on an enlisted Marine income, because of the income you were generating from your first house hack, which was rental income on your tax return. The Airbnb portion of the income that you were generating.
Then because of the history, you were able to use the anticipated, perhaps long-term rental income from the additional units, to help you qualify to purchase a $600,000, $700,000 piece of real estate with a 0% down loan as a Marine.
That\u2019s the power of house hacking getting started. If you bought a house first, you would\u2019ve been totally ineligible for the next 10 years to qualify for another property. Am I getting close?<\/p>\n
Yeah, pretty much. The income from the Airbnb, that duplex I took over subject to, that just helped with just more additional savings. The income also from the property that I had left, was just also counted savings. It canceled out the debt that I had from the first property.
Then what really helped was the long-term, projected rents of the other three units was high enough that 75% of that was what allowed me to qualify for that loan. I got that loan at like a 5% interest rate, so really good now. Yeah.<\/p>\n
Yeah, yeah. What I\u2019m hearing is just the continuing tale of clever, think outside the box, creative ways to buy real estate, creative ways to add value to these properties.
I\u2019m assuming you\u2019re not buying beautiful, perfect properties that have in no way, any way to increase the value. It\u2019s from $600,000 to $1.2 million. You didn\u2019t get $400,000, $500,000 in equity because you added one unit. You did a lot of things to this unit, right?<\/p>\n
Yeah, the property\u2019s beautiful. It was my first venture into renovating a property and that thing, let me tell you, drained my bank account at the time. I spent a lot of money on every single unit. Not just making that 14 unit, even though that was the biggest difference was getting those two bedrooms in there.
But really renovating the entire property, the property being a little bit on the more dated side, that all that stuff contributed to the increase in valuation. Because now it\u2019s a beautiful, all new, renovated 2022 property.<\/p>\n
We talked a little bit about the valuation increase of this property. Can you give us the numbers around monthly income from a short-term rental basis?
What would the cashflow be if you converted them all to long-term after moving out of this property? Because the short-term rentals only work because you\u2019re living in it right now.<\/p>\n
Yeah. Pretty much the way basically each unit, each unit is a two bed, one bath, and then I live in the one bedroom, one bath. If I basically got, man, pen and paper, because I haven\u2019t done this in a while for the long-term rental math. But for the short-term rental math, each unit rents out between $4,000 and $6,000 a month between Airbnb and VRBO. My total expenses for the property are usually between $6,000 and $7,000 a month.
On the low end, if I\u2019m doing $12,000 a month in gross rents, after everything is said and done, I\u2019m usually at a cashflow of around, was it $4,000 or $5,000 a month? $4,000 or $5,000 a month after putting away for CapEx and maintenance things and things like that. If I converted them all to long-term rentals after me living out the property, I\u2019d probably get $1,500 for mine and then $1,800 for the two bedroom. What is that?<\/p>\n
It\u2019s about 6,900 bucks.<\/p>\n
Thank you for your help. It would be roughly about $1,000, almost $1,000.<\/p>\n
What\u2019s your principal interest, taxes and insurance on the VA loan?<\/p>\n
It\u2019s $4,500.<\/p>\n
Fantastic. Thank you for sharing all that. That\u2019s awesome. You\u2019re crushing it right now on this. It\u2019s way more profitable to live there than to move out, it seems like.
I\u2019ll be interested to see what happens next there, but fantastic. Can you give us the numbers on the other property, the one you bought subject to?<\/p>\n
That one, I got a really, really great deal. I took over that mortgage and since it\u2019s a 2.25% interest rate, the total mortgage payment is $1,250. It\u2019s $1,250, and then the total rents on that property are between $5,000 and $6,000 a month.
My total expenses are roughly around $2,000 before CapEx, maintenance and vacancy, and then $5,000, $6,000 a month. I\u2019d roughly give it about $2,500, $3,000 a month in pure cashflow after everything.<\/p>\n
Okay. Coming out of June 2022, we pick up these two awesome deals. What happens next? What happens between then and now?<\/p>\n
This is where I believe real estate investing, I realized a strength that I had. My strength is I\u2019m a really good operator. I\u2019m able to find good deals, but I\u2019m better at managing them, figuring out how to fund them, and basically the whole managerial aspect of it. I had a friend, my best friend, Marcel, who was in Myrtle Beach about three and a half hours away.
He was doing wholesaling and he was also becoming a real estate agent there. What I decided to do was I was like, \u201cHmm, my friend is doing this deal finding thing over there, and people are paying him assignment fees. What if he could just do the same thing here, and then we could just do business together as friends?\u201d I can even expedite his journey here because I have a lot of connections.
I understand the market, I can teach him, I can help him. Basically, what I did was I moved him from where he was living in Myrtle Beach, to my very first property, that rent by the bedroom property. Then he became not only like a wholesaler, but then a real estate agent. Then what he started doing was he helped me buy three additional properties. Was it three or four?
That year, by the end of the year, time sometimes gets wonky. I believe it was three properties he helped me find as a real estate agent. I basically did the whole scenario again, where I had someone put up all the money, guarantee the debt for the property, and then he found the deal. But because he\u2019s my resource, I was the one bringing that to the table to my partners\/investors. Then we basically split the profit and cashflow and equity in that property 50\/50.
That was another way where I was basically able to own more real estate without using my own capital, but by using my brain. That contributed to not only more net worth increase, but more cashflow. They\u2019re all in Savannah, Georgia.<\/p>\n
Okay. Can you give us a breakdown on these deals? What are the deals that you found and who was your partner on them? How\u2019d you qualify for them? How\u2019d you finance them?<\/p>\n
Yeah. Pretty much what I did was I had, so for the first one it was a $200,000 property. Basically, the beautiful thing about being in a really strict area, and one of the reasons I decided about Savannah is because in the areas where everyone can do short-term rentals, guess what? You\u2019re competing against the top short-term rental investors in the country.
People with more money than you, people who are more creative than you, people with more time than you a lot of the times. Whereas in Savannah, because it\u2019s universally known as one of those cities that are really strict, not a lot of people know and take the time to study the market, to find where in Savannah you can legally and easily do short-term rentals.
In Savannah, I can say this on a podcast, because I\u2019m just not afraid of giving value. Most people won\u2019t take action on it anyways, just statistically is just in the county of Savannah, the regulations change drastically. All you need is to be outside the city limits and you need to apply for a short-term rental license. I\u2019ve never had one that was denied.
I think it just couldn\u2019t have been like a crime house or have any history of crime, I believe. That\u2019s the biggest like, \u201cThis is the rule that if that property has been involved, it can\u2019t qualify for a permit.\u201d What I would do, basically being able to explain this to investors, I found people actually on Instagram who reached out to me to partner.
Because I did a lot of different podcasts and a lot of people knew me doing this with the cabin, and would reach out to me and say, \u201cHey, I want to basically do that same exact thing with you.\u201d What I basically did was when I found a property and an opportunity, I basically go back and reach out to them, and Marcel would just find these deals on the MLS.
We\u2019d just keep on putting offers in until one stuck, and then Marcel would sell me the property. The investor would be the one qualifying for the loan, whether it was a second home loan or a DSCR loan. They would be the ones who were putting up all the money for buying the property and then also furnishing the property.
Then another thing we did, was because I did have my cabin and I had the experience of being in an area that was highly competitive, is I knew how to be more competitive in a market where there\u2019s not as much professional competition. I did things like add hot tubs to properties. I did things like hire a professional designer.
I did things like make sure that, now it\u2019s a little bit even more advanced with my team, but I just did things that people in Savannah didn\u2019t think were necessary. Because of that, I have an unfair advantage with my properties perform very, very great.<\/p>\n
Okay. You said that your strength was running properties. Your strength is your creativity. Your strength is seeing a property and not taking it at face value. It\u2019s, \u201cOh, what can I do with this? How can I make this into what I want it to be? How can I finance this when my income on paper says I can\u2019t qualify?\u201d
I\u2019m going to partner with somebody who\u2019s going to take on the debt for me. I\u2019m going to add a second room or add a second unit. I\u2019m going to live in the small unit. I\u2019m going to do\u2026 That\u2019s what makes you so amazing, Jabbar. How are you only 22?<\/p>\n
It\u2019s just literally all the learning and education I got, was literally just listening and reading books by BiggerPockets. It\u2019s like the perfect part, is that I learned how to think this by the ideas from other investors who have been on podcasts.
It\u2019s not only BiggerPockets, it\u2019s all the other ones as well, but it was just all that massive amount of just consumption, consumption. These things, I didn\u2019t just think of these things, I just copied them from what other people were doing elsewhere.<\/p>\n
Jabbar, we have these three deals, and this is wonderful. This is an awesome story I hear. You\u2019re buying them outside of the city, but inside of a county of Savannah.<\/p>\n
Yeah. Yes. Now I\u2019m excited to talk about what I\u2019m doing now and what\u2019s completely different.<\/p>\n
Okay. But is there anything else between end of 2022 and these three or four properties and now that we should cover before we get to now?<\/p>\n
I could talk about lessons. I could talk about just pretty much I learned basically just with any investment, things are not always going to be immediately like your pro forma states it\u2019s going to be. For one of the properties, we immediately had to do a capital call, which I\u2019m also responsible for 50% of the risk. If the property, let\u2019s say, loses money or there\u2019s a huge expense that is not going to be covered by the money in our bank account, I have to come up with 50% of that as well.
We have a $8,000 plumbing issue at one property. We have a $6,000 HVAC unit at another property. Then at another property, just the increase in budget was so much over what we initially expected, that I had to actually come out of pocket even though it was supposed to be a zero-down deal just because it was off. I had to actually come out of pocket for the addition in construction costs for that final one in 2022.
It taught me why you want to have money when you\u2019re investing in real estate. Real estate\u2019s not a game where you can use everyone\u2019s cashflow, cashflow, cashflow until you have several HVACs go out. That really changed my mind entering into 2023 realizing that I need to get actual cashflow from business. If I\u2019m not going to get it from my job, I need to get it from business. Otherwise, I\u2019m going to have all these properties and nothing to show for.
Or I could potentially go out of bankrupt if so many different, unexpected costs keep coming out. Because you get to $10,000 a month in cashflow but if you have a month of $50,000 in expenses and you only have $10,000 a month coming in, well, what are you going to do?<\/p>\n
I love that you\u2019re bringing this up. I wanted to ask about reserves. Honestly, I\u2019m glad that you\u2019re sharing that you had some issues, because you can go on YouTube and find no shortage of videos that talk about how great real estate is.
Then they just gloss over the fact that they had a $6,000 HVAC system that they had to do, an $8,000 plumbing. They just don\u2019t tell you about that. That doesn\u2019t mean it didn\u2019t happen. They just didn\u2019t tell you about it. I love that you\u2019re sharing this with us. Thank you for your honesty. I really appreciate that.<\/p>\n
It changed my life.<\/p>\n
Yeah. It\u2019ll really like, \u201cBoy, it\u2019s awesome to have a great deal that doesn\u2019t have any problems,\u201d but you learn so much more when you run into these problems.<\/p>\n
Yeah. I actually was recently traveling, and I\u2019m glad that you said that because everyone\u2019s wanting things to be sunshine and rainbows. I met this millionaire, who lost his million dollar net worth, not once, not twice, but he lost his million dollar net worth five times, five times. Imagine you went from being a millionaire to not being a millionaire. It was all for different things and different lessons, but he did this example that was really cool.
Imagine you have a piece of paper and with that piece of paper, it\u2019s nice and smooth. This piece of paper represents your journey to, let\u2019s say, becoming a millionaire, becoming financially free because that\u2019s what we do. It\u2019s not for the titles, but it\u2019s really for the time freedom. When you have a smooth piece of paper and the road to your journey is smooth, and you hit a roadblock at the top of that piece of paper, guess what happens?
You go all the way back down to the bottom. You don\u2019t go back to $700,000, $500,000, you could go back to zero because you didn\u2019t have any of those lessons. When you have a journey and you crumple that piece of paper, there\u2019s all these divots. There\u2019s all these divots in that piece of paper, that literally stop you from hitting rock bottom.
Those divots and crunches of the piece of paper represent all the journeys, all the trials and tribulations. Those $10,000 CapEx issues that you go through when you\u2019re investing. You want to have a crumpled piece of paper. You want to have a lot of these different adversities on your investing journey, because that makes you a smarter investor.
When you have an issue, you don\u2019t go back to rock bottom or back to square one, you\u2019re just going back a few paces. You know exactly how to climb out of there and get back to where you were, and even go further because of all those mistakes and errors that you made. You should be grateful for them.<\/p>\n
Yes, yes, yes. I could not agree more. I love it. Okay. You just mentioned a word that I want you to define for us. You said CapEx, and you\u2019ve said this a couple of times.
Can you share what that means for our listeners? And while we\u2019re at it, you said vacancy when you were throwing in CapEx a while ago, so explain what those are and why you want to take into account those?<\/p>\n
CapEx is going to be, it stands for capital expenditures. That\u2019s all of your costs in the property that are going to affect it over time like the roof, the HVAC, the electrical, the plumbing, the foundation. These are things that maybe might not be an issue today, but over time these things tend to deteriorate and become issues that you have to initiate cash outflows for in the future.
That defines CapEx. It\u2019s not like your immediate maintenance problem. Someone broke your, I don\u2019t know, like your faucet. That\u2019s maintenance. CapEx is going to be those things in the property, that you need to have in the property that just over time deteriorate. Then when you talk about vacancy, vacancy, everyone knows this, is your property\u2019s not going to be 100% rented all the time.
If you see a pro forma and it suggests a pro forma meaning like an analysis of the property that\u2019s going to be rented 100% of the time, you should be very, very skeptical and concerned. Because there\u2019s going to be times where you have to stop maybe renting the property because of CapEx. You might have to stop renting the property because you have a tenant turnover, meaning a tenant\u2019s moving out of the property.
There\u2019s different reasons why you wouldn\u2019t be receiving rents because different things happen with the property. Those expenses are things that you want to account for when you\u2019re analyzing the property, because you want to be very realistic with your expectations for how the property will perform. These things are just things that will help you have a more accurate assumption of how good of a deal you\u2019re actually buying when you purchase a property or an asset in general.<\/p>\n
Awesome, thank you. I have a couple of questions for you. Are you still in the military?<\/p>\n
Yeah, I\u2019m still in.<\/p>\n
How do you have time to work?<\/p>\n
Well, because of just additional ventures, I do have a team now. Before it was all me and it was a lot. I never went out. Literally, the only time I would go out was to meet other real estate investors and I would miss a lot of sleep, honestly.
It was just me just running myself, just trying to take care of as much as possible and I was doing it, but then things just started getting out of reach for me. Then that\u2019s when I started hiring people and taking a step back from having cashflow to invest in different things, to help me manage everything.<\/p>\n
I would love to hear about the process from getting these three properties to the current state that you\u2019re in right now, what you\u2019re currently doing.<\/p>\n
Perfect. Like I talked about before, I had that realization that CapEx is real. I don\u2019t want to say cashflow is a myth, but cashflow I believe now, is truly meant to be a defensive mechanism to help you maintain and keep that property. I no longer believe that it\u2019s something that I personally, for my long-term investing strategy, am comfortable with just solely relying on for different things like living.
If so, it should be a very small percentage. What I decided to start doing starting 2023 was I realized, I was like, \u201cOkay, we\u2019re not in a problem. But eventually just seeing the rate that we want to keep purchasing, we need to have some way to have larger cash injections into just my business, just to protect myself against all these unexpected expenses.\u201d
Because it just seemed like I would have more and more, even on the properties that I had bought in 2021, I was having CapEx challenges. That\u2019s when I decided to start flipping properties as a way to create more cash outflow. Then that also taught me about how I could renovate properties and managing contractors and things of that nature. The first month of 2023, I actually bought four properties in one month.
I bought three flips, a condo and two single-family homes, and then I bought another one of those partnership properties. That really one, the three flips ended up being profits of $54,000, $89,000 and $35,000. Those were just all me. Instead of me getting money partnering with investors and giving them equity, I would go to the same investors with similar investors. I\u2019d have them purchase the property in cash, or loan me money to purchase the property in cash using debt.
I\u2019d guarantee them an interest rate of between 10% and 12%. Sometimes I\u2019d even offer points to make it more enticing to them, because I was now more so focused on that cash outlay, like that cash outflow coming back into the business. With that, I just started flipping properties. I went and I started buying a flip at the beginning of 2023 every month, one or two a month.<\/p>\n
Okay. Now walk us through, how long does a flip take for you? How many have you completed so far and how many are in process today?<\/p>\n
The average flip, it depends on the type of deal we\u2019re doing because we\u2019ve had some, and when I say we, is in June, I decided to partner with my best friend that I moved down here. But a flip, if we\u2019re renovating it, it takes between three and five months from purchase, and it depends on a myriad of things, from purchase to sale. Three to five months is our average timeline from purchase, construction and sale.
Then if it\u2019s a property that we\u2019re just buying and immediately selling, we will close on the property. We\u2019re not wholesaling it. We\u2019re buying it and we\u2019re immediately selling it to another investor, or we\u2019re buying it and immediately selling it or putting it on the open market to be sold as is. We\u2019re not touching that property at all. Those take about one to two months from purchase to sale typically.
We\u2019ve done about eight of those purchase and sales, eight of those purchase and sales. We\u2019ve also done about nine flips from purchase, sale and rehab. Purchase, rehab and sale, sorry.<\/p>\n
You\u2019ve mentioned your best friend is a real estate agent. Who else is on your team that\u2019s allowing you to flip so quickly?
Because three months is amazing start to finish. Five months, that\u2019s still a really good flip, but that wasn\u2019t your first flip.<\/p>\n
My first flip took five months, but my second flip took three months total.<\/p>\n
Who\u2019s on your team that you\u2019re able to flip so quickly, because it\u2019s hard to find contractors? I don\u2019t know if you know this, you can\u2019t find them.<\/p>\n
Yeah. We\u2019re having contractor issues actually right now. Pretty much I would say the biggest thing with what we had, was we had already identified or I had at the beginning it was just me. I had already identified a contractor, and that was the contractor I was using to help me renovate some of these properties that we\u2019re keeping. That actually gave me the idea and then the confidence to start flipping.
Because I already had a relationship with this person, I had an idea of what their costs were and I started with that contractor. Then that contractor had several crews to where he was able to work on several different properties at once for us. I\u2019m sorry. With that, we\u2019ve ran through two different construction companies. But with them, they have usually a project manager and then a general contractor attached. Then they manage all the subs that are working on our properties.
Then for now, I also have a quality control manager that is on my payroll that is managing the project manager, and then who manages the general contractor, just to make sure that everything\u2019s on the same page. Then my best friend is responsible for going to the projects and actually making sure that things are happening. If an update is sent from them or sent from my quality control person, he\u2019s actually verifying with his eyes that these things are going on.<\/p>\n
Do you have any issue mixing friends and business?<\/p>\n
Yes. From me and my best friend\u2019s perspective, it\u2019s like our business is split 50\/50 and that wasn\u2019t a business decision. That was very much a friend decision, but from a perspective of holding accountable, when someone makes a mistake, we don\u2019t beat around the bush. It\u2019s like, \u201cHey, this is what happened. You can\u2019t do this again.\u201d But it\u2019s immediately solution oriented.
Everything just has to be solved. We don\u2019t really have time for emotions, and sometimes that plays to our detriment because we work with other people who want to hear, express those things. But for us, like me being a Marine and then my best friend being very understanding the level of risk that we\u2019re taking, we don\u2019t have time to for anything that\u2019s not a solution.
It\u2019s very much so if you make a mistake, we address it and then we immediately just go after what can be done to address this mistake.<\/p>\n
Well, last question before we wrap up here is what\u2019s next for you? Where\u2019s all this lead for Jabbar?<\/p>\n
Sorry. For me now, it\u2019s getting away from being side hustly, to more so actual business. Learning how hiring people and building out my team and building, out SOPs and different things to manage the business and keep track of things. Because it\u2019s gotten so much to where sometimes there\u2019s properties that I don\u2019t even know the right address for. Sometimes there\u2019s address discrepancies, so it\u2019s just overall organizing the business.
Then also I would like to get into doing things like online, not guru-ish, but online education, helping other people who are young achieve and go along the same side of success. I haven\u2019t had time to even think about that yet, but those are just future plans and just having fun. I get out the military next year, it\u2019s super exciting. I\u2019m finally going to be free to do what I love doing. Yeah. I was talking to Mindy before this.
I travel to Columbia. I\u2019m a frequent Columbia South America visitor, so I\u2019m excited to do a lot more traveling when I get out the military.<\/p>\n
Because the military doesn\u2019t offer you enough options to travel?<\/p>\n
Yeah, it\u2019s crazy. I travel a lot too with them. Not so much lately because I\u2019m getting out, but I\u2019ve been to a few countries with them.<\/p>\n
If somebody is listening who is 18, what is one piece of advice you would want them to walk away with?<\/p>\n
I would say that just from what I\u2019ve realized, just growing as an investor and just going on my journey, is you just have to obsess over the education side of things first and then the rest will take care of itself. I noticed with a lot of young people, because I\u2019ve helped quite a few young people in the military, and just as friends invest in their first property.
They want to escape the grind of just learning and just understanding what is CapEx, what is a cap rate? What is cash on cash, what are the different principles and different types of ways that you can invest? All of these, understanding the operations behind different strategies in real estate, I noticed that people want to escape that. I think that is where opportunity lies, is understanding those things very intimately.
Then when you\u2019re taking action, you can confidently do so knowing that you\u2019ve done all of the background education that\u2019s needed, instead of trying to wing it or skip that. Then you\u2019re not going to feel confident to move forward because you haven\u2019t prepared. I guess it\u2019s just a preparation for me. It\u2019s something I look back to of being extremely grateful for, because I didn\u2019t have to do 100 hours of education to become a house flipper.
I had already done it. I had already done the research before, and I just had to brush up and then start doing it.<\/p>\n
How much work have you done on the properties in your portfolio in the form of actually fixing things up, swinging a hammer and doing work on the property over the last couple of years?<\/p>\n
I\u2019ve painted once. My very first property, I painted a fireplace.<\/p>\n
So that\u2019s it?<\/p>\n
Yes, that\u2019s all my experience. I painted a fireplace one time, I didn\u2019t even paint it myself.
I took some Marines one weekend and we went to go paint, and they did probably like 75% of it, so I assisted with painting a fireplace.<\/p>\n
Well, Jabbar, where can people find out more about you, if they want to follow your remarkable journey?<\/p>\n
Yeah. On Instagram, @Jabbar_Investar. On TikTok, @Jabbar_Investar. That\u2019s J-A-B-B-A-R_I-N-V-E-S-T-A-R. Investar instead of investor.<\/p>\n
This has been absolutely fantastic. What a wild ride you\u2019ve been on the last couple of years. I look forward to seeing what you do when you\u2019re released from your full-time job as a Marine right now, and seeing where this adventure leads, because I love the way you\u2019re going about it.
I think you\u2019re thinking about all the right things and you\u2019re obviously taking on a lot of risk, but you know you\u2019re taking a lot of risk and are trying to play the right amount of defense. I just really admire what you\u2019ve been up to, Jabbar.<\/p>\n
Thank you so much, guys, for having me. It\u2019s honestly a pleasure to be back and update everyone. I\u2019m excited to be back again with hopefully some more exciting lessons to share.<\/p>\n
Yeah. I can\u2019t wait to see what you can do when you have time to invest.
All right. Jabbar, thank you so much for your time today. This is always fun to talk to you and we will talk to you again soon.<\/p>\n
See you.<\/p>\n
All right, Scott. That was Jabbar Adesada and his amazing, wonderful, fabulous story. By the way, I want to remind everybody, he\u2019s 22.
He did all of this stuff by age 22. I cannot wait to see what he has by age 23. What did you think of the show, Scott?<\/p>\n
Oh, just a fantastic human being and individual. Look at the energy and excitement he brings to his business. This guy, he\u2019s somehow getting by with four or five hours of sleep, building a million dollar net worth, didn\u2019t go to college, enlisted in the military out of high school, made 18 grand a year.
Didn\u2019t even qualify for the actual benefits you get in the military like BAH and BAS that make life a lot easier for the first couple of years. Still bought his first couple of properties. Again, this self-imposed discipline. This is not a guy who\u2019s going out and spending like a sailor even though he\u2019s in the Marines.
I love using that joke. This is a guy who\u2019s really frugal, and directs his energy and the best part of his attention to building a life for himself. He\u2019s going to come out out of the military at the same age most people graduate college, not only with no student debt or things holding him back.
But with a multimillion dollar potentially net worth, and a thriving business and a reputation for discipline, industry, frugality, all of the things that you can want. The world\u2019s his oyster in a way that it isn\u2019t for a lot of folks. He did it the hard way without any advantages backing him up. Just total admiration for Jabbar. Let\u2019s be like Jabbar.<\/p>\n
Let\u2019s be like Jabbar. If you did not catch his first episode, please go back and listen to episode 257 of the BiggerPockets Money Podcast where Jabbar tells his beginning story. Then go back and listen to this one again so you can catch all of his excitement, because he really is so in love with life and so excited at all the opportunities that he has available to him.
His superpower is his creativity and his willingness to learn the rules, and learn how to work within the rules creatively, to be able to make the most money he can make by investing in cashflowing assets. Doing what other people aren\u2019t doing and really just knocking it out of the park. I love Jabbar. I love his story and I can\u2019t wait to talk to him in a few years and see what he\u2019s doing then.<\/p>\n
One thing I\u2019ll also call out is in that enthusiasm and passion, there\u2019s also wisdom, right? I\u2019m hearing parts of it and I\u2019m like, \u201cOh boy, how leveraged are we here? What\u2019s the relative risk that we\u2019re taking in this business relative position?\u201d But when you think about it, he\u2019s not that leveraged. He\u2019s bought two house hacks and he\u2019s bought one subject to deal. Everything else has been with a partner or inside of this large business.
He\u2019s building up his cash reserves. He\u2019s learned lessons that some people don\u2019t learn for decades longer. I\u2019m not going to say that his position isn\u2019t without risk. He has serious risk in his portfolio, but he\u2019s also got a very reasonable debt to equity position. He likely has most of his portfolio financed with long-term debt outside of the short-term projects that he\u2019s working on.
He\u2019s respectful of the risks that he\u2019s taking here. He can lose, but he\u2019s also got such a good chance to win, and I wouldn\u2019t bet against him.<\/p>\n
I would definitely not bet against him. All right, Scott. Should we get out of here?<\/p>\n
Let\u2019s do it.<\/p>\n
That wraps up this fantastic episode of the BiggerPockets Money Podcast. He is Scott Trench and I am Mindy Jensen saying toodle-oo, caribou.<\/p>\n
If you enjoyed today\u2019s episode, please give us a five-star review on Spotify or Apple.
If you\u2019re looking for even more money content, feel free to visit our YouTube channel at YouTube.com\/BiggerPocketsMoney.<\/p>\n
BiggerPockets Money was created by Mindy Jensen and Scott Trench, produced by Kailyn Bennett. Editing by Exodus Media, copywriting by Nate Weintraub.
Lastly, a big thank you to the BiggerPockets team for making this show possible.<\/p>\n