Summary: The goal of our Investor Spotlight series is to provide you with stories of real doctors and high-income professionals who are at different points in their journey to reaching financial freedom through real estate investing. Today’s spotlight is on Kimberly. She grew her portfolio from zero to 24 doors in just 5 months after taking our Zero to Freedom real estate course. As a result, she is well on her way to achieving financial freedom!
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We interviewed Kimberly during our first annual Fast FIRE to Freedom Summit in August 2021. You can watch the interview hereto hear Kimberly’s real estate journey in her own words!
Kimberly lives in Portland, Oregon with her husband Jeff and their two children. She is an orthopedic surgeon in private practice. Jeff has owned and operated a martial arts school for almost 30 years.
How did you become interested in reaching financial freedom through real estate investing in the first place?
Kimberly: My husband Jeff has done real estate, sort of dabbled for a long time before he met me. He did house hacking before it got dubbed “house hacking” when he was in college. He bought a house and rehabbed it himself, then he rented rooms out to a bunch of his buddies and basically lived rent free and then sold it. Then, about 14 years ago, he bought his own building for his martial arts school in downtown Portland.
And then that was sort of it for a while. He was busy trying to pay down the loan and we had kids. I was building a medical practice. Jeff would always mention to me, “you know, some friends are real estate agents and they’re building these condo units and renting them out”. I would always say “that doesn’t sound like a good idea at all!’ Then, last year I got interested in real estate. I was looking for a way to use some money in a self-directed IRA that I had. The due diligence process and deal analysis part of real estate really interested me.
What is your “why” behind this? Was there a triggering event that led you to start your journey of achieving financial freedom through real estate investing? Once you decided to pursue financial freedom through real estate investing, how did you get started?
Kimberly: My best friend is a retired ophthalmologist. Now all she does is real estate, but on a much bigger level. She’s always been talking to me about her real estate endeavors and her adventures. And so it kind of sunk in like, hey, maybe I should look into this. Then COVID hit and my practice shut down and Jeff’s school shut down. So our income went to zero. We thought we were diversified between our two jobs, but everything shut down and we’re like, oh my goodness, we need another stream of income. Also, I was just looking for an avenue for when I get ready to retire, where I will still have other income coming in to have a comfortable retirement.
What type of properties make up your real estate investing portfolio? Were they in state/out of state?
Kimberly: Our first purchase was two fourplexes in Kaiser, Oregon. Which is just north of Salem. So it’s about a 50 minute drive from us. Then we bought a sixteen unit property in Beaumont, Texas.
How are you balancing gaining financial freedom through your real estate investing with your career(s) and your clinical work?
Kimberly: I currently have no plans to scale back at work. My husband is going for real estate professional status (REPS). The cashflow from real estate has enabled him to hire more employees at his business and devote more time to our real estate portfolio.
[If you’re interested in learning more about REPS, check out our guide HERE]
Can you tell us about any difficulties or failures you’ve had in real estate investing? Any big learning points you’ve taken from these experiences that you can share with us?
Kimberly: There was a property in Beaumont, Texas that we got under contract but didn’t end up buying. It turns out the seller had just purchased it and it needed a lot of work. He was trying to fix it up and then turn it around pretty quickly to sell it. When Jeff went out to Texas in March, to see what updates had been done, the seller really hadn’t done as much as he said he was going to do. Jeff has done a lot of his own rehabs, and he knew that things just weren’t done to his level of liking. In addition, the inspection turned up a lot of other issues. So we talked to the sellers about the numbers and all the work that needed to go into the property. We weren’t comfortable buying it at the listed price. The seller really didn’t want to come down in price.
While we were disappointed we couldn’t get the seller to come down on the price, it was still very amicable. A couple of weeks later, the property manager contacted us and said, “Hey, I have another owner out here who’s looking to sell a 16-unit for a 1031 exchange. And he’s a good guy. He’s really put a lot into the property and really fixed it up. And it’s in solid working condition.”
I had seen this property when I had been out in Beaumont, I thought to myself, “That’s what I want. I want a property that looks like that!” I spoke to the seller, and figured out what it was he was looking for and what the asking price was. We offered the full asking price. This was such an easy deal to get through overall. This transaction went pretty smoothly except for one thing, the appraisal. The asking price was $896,000. The appraisal came back at either $795,000 or $800,000. The seller was very indignant that his property didn’t appraise as high as his asking price because of all the work that he put into it. He replaced the roofs, siding and sidewalks and renovated half the units. He really treated the property well and did really good quality work.
I also thought the appraisers undervalued the rent for the units, but I figured that I would see if I could actually challenge the appraisal and did some research on how to actually challenge an appraisal. I found a good article online on how to write an appraisal challenge letter. It took a lot of work to go through the appraisal line by line and look at all their numbers. Then, I put together my own numbers and data to appeal their data and then give another comp for them to look at that had just sold for a lot more. Within two days of submitting the appeal, we got a revised appraisal back for a little over asking price.
I wrote the appraisal challenge on a beautiful Saturday morning. The kids were out playing and it was the last thing I wanted to do. I hate writing. I think it took about four hours to finally get it all done and sent off. But it was worth it, we saved about $80,000. The loan was an 80% loan to value. So, we would have had to put in 29% instead of 20% if we hadn’t won this appraisal challenge.
Kimberly’s 16-unit in Beaumont, Texas
How about any big successes? Anything you learned from good outcomes that you can share that might help other real estate investors?
Kimberly: I look at Redfin every day and keep a lookout at what’s coming up in our local market for multifamily properties. I saw this one particular property. It was listed as an 8-Plex. So it was going to be a commercial loan.
It had been on the market since August of 2020. They had listed it for a huge amount of money and it went pending a couple of times and then back on the market again.
We’d been in contact with a real estate agent here before about a property that he had listed for somebody else. So, I reached out to him to ask him to check into this property for us. And it kind of went from there. We got the financials and figured out how far under market the rents were. I ran the numbers and we made an offer and did a lot of really hard negotiating. We got them down a lot and then had the inspection and then asked for even more of a haircut. And between my husband, who’s a hard-nosed negotiator and our real estate agent, we got even a little bit more off the asking price.
We gave them two counter offers. One was our final and best offer. We told them sign or we’re out. At that point, I was on the fence about whether I wanted them to take it or leave it. We knew how much work this deal was going to be. But the seller ended up taking our offer and that’s how it started. However, this deal was a pretty long drawn out acquisition. We dealt with financing challenges and a few other things.
Then we figured out the property was actually on two tax parcels. We ended up splitting it into two separate purchase agreements. This was a huge benefit because this allowed us to go the residential financing route. I think it was really helpful that it was marketed as a commercial property because it kept other investors from considering it
In terms of the numbers, we were able to get a huge price reduction. The list price in August 2020 for both properties was $1.6 million. And then in January, they reduced it to $1.39 million. We got it under contract at $1.05 million and the final sale price was $975,000. The negotiation process took about four weeks before we got to the final price after inspections and getting bids from a contractor and stuff like that.
Kimberly’s 8-Plex in Oregon
Where are you now in your real estate investing journey? What are your goals for where you want to be in 1 year, 5 years, or 10 years from now?
Kimberly: I’m always still looking. Right now, we really just need to get our feet underneath us on the Kaiser property. But our goal is to get 25 doors a year, over the next few years. Ideally, in five to eight years, these doors will produce $200 profit each, monthly at the minimum.
Our big goal right now is planning for when I take my sabbatical in about eight years. We want to have enough passive income coming in to cover all of our living expenses. This will allow us to go do whatever we want during my sabbatical year. Ideally, it would be great to eventually have enough passive income to replace our current income. But I love what I do for work. I have no intentions of going part-time or retiring early. Though with that said, I used to think I’d work until I’m 65 but now I’m thinking 58 or 60! 🙂
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What advice would you have for someone considering real estate investing?
My advice for anyone else out there considering real estate is to read, read, read, listen, listen, listen, learn, learn, learn. Take action. Don’t get stuck in the reading and learning phase.
I think there are some things that you’re just not going to learn until you actually get in there and start doing it. But have a good base of knowledge to be able to talk to real estate agents and lenders. For example, learn the difference between a commercial loan and a residential loan before you speak to a lender. It just makes it easier.
[If you want an introduction to our preferred lenders, CLICK HERE]
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