Duane invested in his own backyard. He leveraged his engineering background to make sure the numbers made sense and then jumped right in! After buying one duplex, seeing the cash flow, and learning along the way; his next properties were like a domino effect.
He harps on the fact that there is no better way to learn than doing. And as an engineer with a numbers-savvy background, he was able to navigate around possible pitfalls.
What is your engineering background?
I work in the field of electronics engineering. I work as a field engineer for the local power company here in New Jersey PSEG. We do electrical testing with respect to, substations, power plants, transformers, big circuit breakers. As well as auditing and data analysis.
I have an uncle who is an electrical engineer. My father was an electrician for 40 years. I started out as an electrician 15 years ago and it was cool, but with working in those elements, I realized I was going to be laid off and stuff like that.
I figured I should go back to school. Went back to county college, got an associate’s degree, then went on to a four year and got a bachelor’s. I started out as an electrician and transitioned to electrical engineering.
What got you interested in real estate investing?
I guess just looking for more flexibility and more freedom. I have a couple of buddies who I have a bunch of houses here in this area. With having an engineering background with respect to numbers, it just made sense. Just looking at returns, looking at tangible investments, it just made sense to invest.
With having an engineering background with respect to numbers, it just made sense. Just looking at returns, looking at tangible investments, it just made sense to invest.
Once I began to analyze deals, I started to say, “okay this makes sense”. I just jumped right into it.
How did you get started?
I just began to research by looking at my area. I listened to a lot of podcasts and webinars. And then, I just took action by saving up some money and also by leveraging my 401k.
I ran some numbers on a deal here in my area and it cash flowed. I wasn’t really nervous because the numbers just made so much sense. I just went out and I said, “okay, I like this”. I put in the offer. It took months to close. And I just went full-blown after that.
What was your first investment? Was it single-family or multi-family?
It was a duplex here in Ewing, New Jersey, on the borderline of Trenton. That was about a year ago. Since then, I’ve closed on five other deals. Once I started I just kept going. I’ve taken a little break now, but right now I have eight total units, and it’s so far so good.
All tenants are paying, which is good. I do self-manage now and some do call me a little more than I would like. But it’s natural for the course.
What did you learn from the first deal that got you wanting to acquire more properties?
In the first deal, I learned that you need to ensure that you account for everything. One thing I didn’t run in my numbers was the landscaping. That’s something I just assumed since it was a duplex and the tenants had two separate entrances, they were going to take care of the maintenance. But I found out that it falls on the landlord for this. It doesn’t cost me that much for the season. It can run me about $500 for the season, roughly. But the deal still works.
So once that began to cash flow and I was making a few bucks, I just figured if I can obtain more deals that fit these criteria, eventually, I’ll be able to replace my six-figure income with my real estate income. So that’s my goal.
What was the purchase price for that first property and how did you finance it?
It was $125,000. I did a normal investor 25% down financing. Right now, that property rents for $1,950 and the PITI (principal, interest, taxes, and insurance) is $900.
So in what ways did your engineering background help you?
I think it helped me with respect to analyzing the numbers and just looking at the logistics with respect to “does this make sense”? I’m a very number-savvy type of person. I like to look at numbers. I like to write notes and scribble to make sure the cash-on-cash return is there.
It helps me know if something’s going to fit my criteria, having the engineering background.
What is your long-term goal for your real estate business?
I want to replace my six-figure income with my real estate portfolio’s passive income. I’m 34 now. I plan to keep obtaining assets for the next, five to six years to replace my income with real estate income. The long-term goal is financial freedom and more flexibility to relax and get off of the grind.
Right now, I work a lot. I do 1000 – 1500 hours of overtime.
What advice would you give other engineers that are thinking about investing in real estate?
I would say if you have an engineering background and you’re nervous or you’re anxious, just take action. Just do it.
I would say if have an engineering background and you’re nervous or you’re anxious, just take action. Just do it.
Look if you know other people who are like-minded and you’re looking to partner, do it. Or if you have the financial capability to purchase something and own it, just do it. Run the numbers.
And if you’re a little apprehensive, if you are able to invest in your own backyard and the numbers make sense, do it. It’s cool because you can actually see the asset, you can put your hands on it, you can see what’s going on to maybe make your decision a little easier.
But if you live in certain areas like California or New York, it can be expensive and cash-flow negative. So, it’s tough to invest in your backyard then.
And if you don’t like the deal you invested in, there are so many exit strategies too. You can sell it; you can rent it out. It’s an asset, so I think for people who are nervous and not sure, I say, just take a chance. You only live once.
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