One of my favorite ways to find off market deals is by mowing my own lawns. Sure, it's not for everyone, but you can't beat the exercise as seen by my latest fitness summary.
This was after mowing 6 lawns last Saturday.
Currently, I'm clipping and weed whacking 25 lawns excluding my house. Some of the lawns are so small, I consider them a single location. Others are fairly large and forced me to invest in some bigger mowers to speed up the process.
If I were to pay someone to do this, it would cost me around $2,625 per month. Being that I love to work and also have excess time on my hands due to the passive nature of real estate income, I figure it is better to save the money and do it myself.
As an added bonus, mowing my own lawns has allowed me to acquire over a million dollars in off market deals while adding to my passive income streams.
I never would have found these deals if I weren't mowing my own lawns. This is why I like to call my little lawn mowing side hustle "Mowing to a Million."
Here's how I did it.
My first mowing to a million deal presented itself after purchasing a 1500 square foot town house in September of 2002. I found this deal on the MLS and the price was right. The poor seller was deployed overseas and his dad was representing him with a power of attorney.
Being motivated sellers, I was able to strike a deal at a $10,000 discount if I could close quickly. Plus, I represented myself and this allowed the realtor to keep the entire commission since I was not bringing in my own realtor. A true win-win for all parties.
Purchase price was $63,000 and it cash flowed $300 per month with a 30 year mortgage excluding maintenance and repairs.
Outside of the purple kitchen and nasty baths, it was in sound shape. If memory serves me correctly, it only took about $7,000 to turn it into a solid cash flowing cow.
At the time, I already owned 6 properties (including my residence) and had a small Toro mower to cover the lawns. It was similar to this.
As I began to mow the lawn each week, I introduced myself to the neighbors who owned the other 3 adjacent properties.
One of the neighbors purchased their townhouse as a way to recoup the housing expenses of their son attending college. The other two neighbors were retired.
Being that my lawn was so tiny, I decided to mow their lawns as well. They all thanked me of course and would sometimes offer me some homemade lemonade.
Over the ensuing years, I was able to purchase the one with the college kid, followed by the ones owned by the retired folks. This all took place over a series of six years or so.
Once again, for all three sales, I represented myself and we agreed upon a fair place with no realtor or appraisal. You'd be surprised how motivated a seller becomes when they don't have to pay a commission to a realtor.
All the closings took place at the local title company and the sellers always had a family member involved to ensure a fair transaction.
For some strange reason, a lot of sellers think the title company is just for realtors. Trust me, this is never the case and will save you money versus closing with an attorney.
Of the 3 deals, 1 was purchased with a 30 year conventional mortgage and the other 2 were purchased with seller financing with 10% down.
Here are the combined numbers for my 4 town homes.
Current Value $456,000
Purchase Price $249,000
Down Payment $21,219
Closing costs $7,045
Annual cash flow $19,337
On a side note, I refinanced two of these before the real estate bubble burst since valuations and bank terms were generous. This allowed me to purchase a 13 unit property (along with using equity from other properties) while recycling what I like to call "dead equity." In real estate, the more equity you have in the deal, the lower your internal rate of return.
The next deal was a nice up and down brick duplex with a deck overlooking a small city park. Whenever I would mow my property next door, I would see the owner sitting on the 2nd story deck taking in the sights and sounds of the neighborhood. I would always offer a friendly wave and strike up some random chit chat.
Every time I asked him if he would ever consider selling the property, he would shout from his 2nd story perch "I'm never selling!" Granted, he never screamed the latter, but seemed dead set on keeping his duplex forever.
Brian was a young professional who bought the property from his Dad. He was house hacking the upper unit while letting the lower tenants cover his loan. He never mentioned what he paid for it, but I'm sure it was way below market since it was a family transaction.
One day, I ran into my contractor at the big box home improvement store. He mentioned his friend was selling his duplex. After describing the property, I asked him if the owner's name was Brian. Sure enough, it was the same guy. I got a kick out of this since 'ole Brian always told me he would never sell.
As luck would have it, Brian met a sweet girl.
The sweet girl did not want to live in a duplex.
She wanted to get married and live in a nice house with no neighbors.
The rest was history.
Brian got married, bought a nice expensive house in the country and sold me his duplex without a realtor.
Too bad Brian sold the Duplex. If he were looking to build more wealth, he could have refinanced the duplex and let it offset the payment on his new residence. He easily would have cash flowed $600-$800 per month and would be building equity on two homes versus one.
Oh well, humans are perfectly imperfect.
Here are the numbers for the Brian Duplex.
Current Value $155,000
Purchase Price $130,000
Down Payment $13,109
Closing costs $4,718
Annual cash flow $3,522
This property was financed conventionally in March 2006. Again, due to the liberal lending environment, I was able to purchase it with a 10% down 30-year fixed mortgage where I paid extra for mortgage insurance (PMI).
Today, I'm still paying the $840 per year in mortgage insurance since the big box bank won't let me refinance the loan to remove it.
Let's face it. If you have 10 conventional loans plus a VA loan, the new rules makes it difficult to refinance.
Still, the PMI allowed me to purchase it with little down. I'm not whining. Hopefully, the lending environment improves soon so I can refi out of that pesky PMI.
Let's do a quick "Mowing to a Million" recap.
From Sept 2002 to March 2006, I purchased 5 properties for $46,091 down when you include closing costs.
The total value today is $611,000 and the annual cash flow is $22,859.
Thanks to my buy and hold philosophy, the value increased by $232,000 and I was able to strip some equity from two of the properties to purchase another property while maintaining positive cash flow.
Each property was purchased without a realtor and was never listed on the open market via Craigslist or the MLS. By simply staying in touch with the sellers, as part of my weekly lawn mowing schedule, I more than made up for the opportunity cost of cutting the grass.
My next deal was a 6 unit right before the market crash. I was loading up my lawn equipment, after finishing my last lawn for the evening, and went home for the night.
I was beat.
Unfortunately, my cell phone must have fallen out of my pocket. As luck would have it, Ireceived a serendipitous call the next day.
Long before the iPhone and the Samsung Galaxy, the first smart phone was the Palm Treo. I had purchased this fancy phone since my Samsung flip phone could not hold all the tenant data I needed to run my side hustle rental biz.
Today, life is waaaay easier thanks to my AppFolio property management software. My entire rental business runs off the cloud and can be accessed from my iPhone 7 or iPad Pro.
One of the neat features about the Palm Treo back in the day was the lock screen. After it locked, or during a reboot, you could add a message to the screen. In my case, I had it set to "If lost call Mr. Ten at xxx-xxx-xxxx for a reward."
When I got the call about my lost Treo, I immediately knew where I lost it. It was in the alley behind my 13 unit property and the neighbor happened to live across the street.
After flipping him $50 for the reward (he politely refused my offer of $100), he mentioned the property next to him might be for sale. Being that I always admired the property, I called the seller and lo and behold, we came to terms 60 days later.
Once again, a motivated seller. He was having health issues and his wife didn't want to manage the property. At 6 units with lots of deferred maintenance, it was easy to see why he wanted to sell.
Unfortunately, I had to pay up for terms. I bought the 6 unit for $350,000 at $50,000 down with a seller carry. Being that I just closed on a 13 unit that year, I was willing to pay more for a seller carry since the banks were getting squirrelly at the time. My biggest fear was not being able to close since I was highly leveraged.
Fortunately, I was able to overcome paying too much for the property by slowly raising rents, upgrading all the units and refinancing out of the seller note for better terms 6 years later. It was ugly but eventually worked out.
On a side note, the seller turned out to be a nightmare. He was constantly riding me about how the property was doing, making sure the taxes and insurance were paid on time and being a pain in the …bleep…compared to my other sellers who financed me.
Keep this in mind the next time you get excited about seller financing.
To add insult to injury, the day I paid him off (4 years early mind you), he was furious. I had to hire an attorney to force him to close.
What a jerk!
Today, the property is stabilized and cash flows like an ATM machine.
Here are the numbers for the lost Palm Treo 6-Unit.
Current Value $365,000
Purchase Price $355,000
Down Payment $50,000
Closing costs $3,250
Annual cash flow $14,661.
While the appreciation doesn't look as good as the others (I envy you San Francisco investors ), the new loan is a 20 year commercial which allows me to pay off the mortgage even faster.
Plus…I ended up buying a bigger mower!
Best if all, the property is at a point where it takes little time to manage due to low turnover and a prime location.
Sometimes is pays to buy quality.
My last "Mowing to a Million" deal was from my neighbor Antonio.
I first found this deal while house hacking next door to his property back in 2000. Over the years, I would mow part of his lawn on the boulevard to help him out.
One day I ran into Antonio while mowing my lawn in the summer of 2010. He asked if I would buy his property next week. I told him I'd love to buy it, but would need more than seven days to close!
Worse, it was the depth of the financial crisis and banks weren't lending. I asked if he would consider a seller carry and the next thing I knew, I owned a large duplex for 3.6% down.
Just like the other properties, it needed some love.
I ended up investing another $15,000 or so upgrading the units and turned it into another cash flowing ATM machine.
Today, I continue to send Antonio $900 per month as part of our Contract for Deed. He has long since retired to Corpus Christi, Texas and his savvy sale continues to pay him dividends during his retirement.
Nice job Antonio!
Here are the numbers for the Antonio Duplex
Current Value $175,000
Purchase Price $140,000
Down Payment $5,000
Closing costs $500
Annual cash flow $11,136
This deal was definitely a home run. I only needed $5,500 to close and the cash flow is huge. The terms were favorable and I was able to purchase a property right next to the one that helped launch my "Ten to a Million" journey.
Sometimes I run into people who can't believe I continue to mow my own lawns. Yet, I continue to enjoy cutting the grass while listening to my favorite podcasts on my Bose noise canceling wireless headphones.
Little do they know how profitable mowing lawns can be.
Can you say 1 million dollars?
Here are the numbers as I write this post while heading to closing on my next Mowing to Millions deal-a sweet 5 plex on a block where I own virtually all the rental units. My maintence guys call it Mr. Ten street.
Combined value all the deals: $1,151,000
(Excluding upcoming 5 unit)
Total Units 13
Annual rents $140,940
Purchase price $874,000
Down payment $101,091
Closing costs $15,513
Annual cash flow $48,656
Monthly cash flow $4,054
Cash on cash return 42%
(down payment plus closing divided by annual net cash flow)
For those of you who are finance nerds, all numbers are after maintenance, capital improvements, vacancy and all expenses associated with owning a rental portfolio.
These are REAL numbers!
By the way, I set up my own management company. This saves me 10% of gross rents per year and the cash flow would be lower if you hired a 3rd party property manager.
Keep in mind the numbers do not reflect the benefits of deprecation which would push the percentage return higher and help lower my taxable earnings from my day job.
Moreover, the numbers don't reflect the cumulative cash flow from the initial purchase to now. This offsets any major improvements I made like kitchens, baths, roofs, etc.
What are the key takeaways from my experience?
Sometimes it pays to do it yourself versus outsourcing all mindless labor.
This is not for everyone. If you don't have time to mow your lawns, you should definitely hire it out.
If you wish to grow your real estate portfolio, it pays to befriend your neighbors. While they might not be interested in selling today, things may change and the only way you can be positioned for their change is to stay in touch.
You need to give to receive. Random acts of kindness coupled with a belief that the universe is conspiring in your favor pays both cosmic and financial dividends.
Plus free lemonade!
Always ask for seller financing. You never know what will happen. In the case of Antonio, had I paid him the $140,000 purchase price in cash, he would only receive about $4,200 per year from the bank. This assumes a 3% average interest rate from time of sale to today.
Instead, he receives $900 per month, or $8,400 per year plus the balloon payment of $108,000 at the end of the term.
Real estate is a long game. Contrary to the media, this is not "get-rich-quick." While all of these deals were not profitable over the short term. Over the long term, they turned into solid cash cows.
Don't bank on appreciation. In my case, appreciation was a non event. I focus on cash the flow. This is why I never lost any properties in the financial crisis. The banks were getting paid and never had to foreclose.