How I purchased my first investment property from Japan

Intro

First, I would like to say thanks for the opportunity to share my story and hopefully to provide a little encouragement along the way.  I know this is a long read, but hopefully it will provide some useful information.

To briefly introduce myself, I am in the Air Force and currently stationed in Okinawa Japan. I have been stationed here for about 6 years now and will be returning to the States early this summer. I have been in the military for about 11 years, and this year was my first time purchasing an investment property; below I will describe how it all started and how I put the deal together from Japan.

Why Real Estate?

If you are reading this, I assume that at some point you have been or plan on being stationed overseas and have an interest in real estate investing.  If that’s the case, then you are probably aware of the great opportunity living overseas provides for saving some extra cash, but you probably are worried about the difficulty of investing while living out of the country.  I will just say it is possible, and this is the story of how I was able to do just that.

That said, while living in Japan I was able to save some extra cash, and my wife was working in a good paying job herself, putting us in a great position financially, all with no debt!  The problem for me though, was I had no idea what I should do with my money; I always wanted to invest, but had only thought of doing so through the stock market.  Even then I had not invested much since I wasn’t well informed and didn’t want to risk losing all our money.  Fortunately for me I happened to be working with someone who was well versed in real estate investing and saw the magnificent opportunity that had to invest some savings.  After many weeks of casual conversation, my friend realized that I was open to the discussing my finances and potential moves for the future; he asked me point blank what I was doing with all the money we were making.  He knew it had to be a pretty decent amount and wondered what plans we had for securing it towards our future.  As he suspected, I didn’t have a plan and was just stockpiling the cash in savings…little did I know I was losing money in doing so (some little thing called inflation…who knew??).  This is where the education began.  My friend then introduced me to the world of financial education, real estate investing, and how to obtain financial freedom, all the while walking me through his own long term plans and how he started investing himself.  Conversations have continued ever since, and I am very grateful he took the time to get me interested in investing and pointed in the right direction.  First thing he suggested was to read “Rich Dad Poor Dad”, a relatively quick read…maybe you’ve heard of it.

The Education Begins

So now with where it all began…it was August of 2015… I read “Rich Dad Poor Dad”.  After reading the book, we began discussing in further detail how to formulate an investment strategy and how I could get started. All the while more books followed, I couldn’t stop, the books were addicting; first “Rich Dad Poor Dad”, then “The Cashflow Quadrant”, “The ABCs of Real Estate Investing”, and then “Real Estate Riches”. One book led to another, sparking more and more in-depth conversations with my friend, and finally I started to have a picture in my mind of how I wanted to get started. The books were a critical part of my education, but more important were the conversations with a now like-minded individual.  My friend already had a lot of his own experiences to (he owned 4 properties at the time), and through his mentorship and assistance things started coming together.  Not only did my friend get me going with these books, but he also introduced me to Bigger Pockets, where I started reading the forums, I read the Ultimate Beginners Guide, as well as posted my own introduction. This is where I learned the importance of networking.  Following my educational phase (misleading as it is still on-going), I started thinking about my goals and putting together an actual investment plan. I would like to share my story as it occurred, looking back through the lenses of my goals. Everything following is my original investment plan outlying my goals.  I will provide commentary in bold to reflect the current situation as it compares to the originally stated goals.

Mission Statement

To get out of the rat race and become a B/I (business/Investor) instead of an employee, I have decided to invest in real estate. The initial investments will focus exclusively on multi-family properties until further experience is gained. The purpose of this “business” plan is to map out my way to financial freedom, so that after retirement from the military I will no longer HAVE to work another day in my life, as my money will work for me.

This is all still true, but my main purpose is to provide my family with a stable financial future, something that I never had as a child.  I want to be able to fund my daughter’s education, as well as set her up financially for when I am gone.  Through all of this, I hope to provide her with a solid financial education by including her in as much as possible from an early age.  Lastly I want to be able to actually retire when I when it comes time, and not have any financial worries.

Goals

Long Term

1.By the time I retire in 10yrs from the military the primary goal will be to have over $100k in residual income from my investments, thus allowing me not to have to “work” ever again.

I know this is rather ambitious, but I would like to have 50 units by then with a goal of $200 cashflow per door.  I know it is doable, but of course there will be obstacles. But that’s my goal and I am going to shoot for it.

2.Learn about other facets of real estate investing and branch out from just multi-unit rentals

Still learning, still will continue learning, and some day I will be looking to get into some commercial investments.

3.Eventually get into commercial real estate

More than just a quad…potentially bigger apartment buildings, or even some other commercial unit I can lease out.

4.Consider building a business

I would like to be able to provide financial education to young adults, as well as having a venture capital firm.

Short Term

1.Initially start investing in multifamily homes with a goal of improving my real estate knowledge and learn how to create/find better deals.

This is where I am at today, closed on my first deal in January.  It is a multifamily in Decatur, GA (quadplex), and has been a tremendous learning experience along the way.

2.Within 1yr from Aug 2015 I want to have purchased my first rental property (duplex/3-plex/or 4-plex)

I exceeded my original time limit by 5 months.  It was not for lack of trying, although there were times when I could have been more aggressive in my search.  It has been difficult at times, considering I’m living in Japan, but not impossible.  I would say that the biggest challenge has been the market, and the competitiveness of the market and class of property I chose to invest in (not living overseas).  Finding the right deal took some time, but with patience and perseverance, but it paid off.  I should be getting my first rent checks by the time you are reading this!

3.On my first investment I would like to gain at least $10k income from the property annually.

We will see how things stabilize out once, but as of right now I think I will come in a little shy of that.  I am expecting to get around $670/month in cashflow, but once again I need to see that stabilize over time to bank on it.  That would bring to about $8k annually, missing the mark just a little bit. Still $8k more than I would have had before! I’m well on my way to meeting my residual income retirement goal; $92k to go.

4.Create multiple contacts spanning across at least 2 markets

Looking back on this, I think this was overly ambitious…Focusing on the one area has proved difficult enough, and I think doing that would have set me back.  I think more experience would be required to make this goal. I do have some solid contacts in my market area though!

5.Continue to read at least 2 books per month on investing

I have not stopped reading! Although, not all the books are about investing I must admit.  They have all been useful in some shape or form with regards to investing though, and I have learned much along the way through reading.

Strategy

Look to build passive income through investments in small (2-4-plex) multi-family homes. Through strategic research invest in up and coming markets with foreseeable upside in the future. Also through thorough review of the numbers, make sure every investment makes money UP FRONT. The strategy will also require an exit strategy for each property before committing to a purchase. Preferably each investment will have a minimum of 2 exit strategies.

As for my market, I chose Atlanta.  This was decided through a lot of research and some personal knowledge of the area.  A lot more to discuss there, but we will save that for another time. As for the property, as previously mentioned I purchased a quad @$200k, with 25% down, about an 8.7% CAP and about $670/month in cashflow; this brings my CoC to about 14.5%.  

As far as exit strategies are concerned, my goal is to rent the property out while building equity, and then eventually use some of that equity towards purchasing another property, and then doing it all over again.

Timeline

Starting now and continuing through the next 10 yrs until reaching retirement and beyond!

Like I mentioned I was about 5 months behind my intended purchase date, but I finally got there.  Now over the next 6 months or so I would like to see this property stabilize, and then look to get into another property by the end of the year.

Market

As I am currently living in Japan, my market will of course be away from my home area. I must rely on building relationships and finding experts whenever I am in a perspective market. Through comprehensive research and mentorship, the target market is Southeast United States. As this is an up and coming area with a lot of investment opportunities, I will look to further narrow down my market from there. As it stands, the three perspective markets are Raleigh, Atlanta and Nashville. As the market climate shifts, so will my targets. I will continue to become smart on certain market areas through continuous research. 

Atlanta

Criteria

Do not become emotionally attached to the property, but rather the deal. My initial investment should not exceed a loan value of $200k. This puts my initial investment of cash upfront of no more than $50k with a total purchase price of $250k max. The target CAP rate will be anything greater than 7%, with a target ROI of 10%. This should put the Cash on Cash per month at or around $400 or greater. Ideally there should be less than $2000 of rehab amount. Lastly I would like to be able to close on the house within a month of starting the process.

Loan value of $200K would put me at $66k upfront at a 25% down payment, but hey you learn. What I should have said is a LOAN value of no more than $150k which would have been more accurate.  At any rate, I am in at $150k loan/25% for $50k and about $5k more in closing costs, appraisal, and inspection, etc. 

I am at about 8.7% CAP with about 14.5% ROI and $670/month in cashflow.  There will probably be about $2k in repairs upfront, with some CAPEX looming on the horizon in the next couple of years.  Good thing I planned for the CAPEX in running my number’s! 

Team

Investing Real Estate Broker – I found a great Commercial Agent through Bigger Pockets. I introduced myself with some of my goals, and he reached out and made the connection.  It has been great working with him and I look forward to continue to do so in the future.  There is true power in networking. 

Mortgage Broker – Found through a reference from my Agent…also been very helpful and easy to work with.

Property Managing Company – Once again through referral from my agent (He referred several and told me I needed to do my own due diligence to find the right fit). Which I did on all accounts.

Contractor (repairs) – I have started working through PM. I will continually evaluate to see if I like that approach.  This is probably the toughest thing about not being in the area…I can’t vet every person who is doing work at the property.  I chose a property manager though with a long history and matches very closely with my vision.  I will trust, but verify as the adage goes.

Other investors in market area (mentors) – Met several other investors through my Agent (who is also an investor).

Insurance Agent – Once again through referral from my agent (He referred several and told me I needed to do my own due diligence to find the right fit).

Bottom Line

It has been a long and fun journey, and even difficult at times, but not impossible.  It is a pretty incredible feeling to make things happen from half way across the world.  And now I am on my way to creating financial freedom.  It all started with some mentorship and education, followed by creating some goals for myself.  I approached it like this:

1. Get educated
2. Set investment goals
3. Decide on investment area
4. Network and make connections in that area
5. Start analyzing deals in the market and learn the market
6. Evaluate deals against my criteria
7. Start building my team
8. Make offers on properties which met my criteria
9. Due Diligence
10. Finally, close on my property

All in all, this would not have been possible without the mentorship of my friend.  I was very clueless when it came to having a good understanding of investing, probably much like most young guys who enter the military.  Therefore, I feel it is so important to establish networks like MOREIC; it provides us an avenue to help educate those who may have never received such an education, and overall helps people to better the quality of their lives and those around them.  Hopefully this will inspire you to act yourself, and if you already have, then maybe you can help someone else starting a new journey all their own.  I am thankful for the opportunity to share my story and if I can help anyone else work towards their financial freedom, I am happy to do so.  Please reach out.

Questions, Comments, Concerns?  I will take them all.  I look forward to meeting more of you in the future.

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Written by Adam Treece, U.S. Air Force

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