SUCCESS STORY: Biophase (eCommerce, Real estate)

[biophase]

My story is not as intricate or exciting as the other ones on here and I'm nowhere near the $1M range yet. But, after reading the other ones I felt compelled to write mine. It's actually pretty boring and normal and it's not the fastlane or slowlane. I'd call it driving in regular traffic and luckily catching all the green lights.

I had a normal education at the University of Illinois which ultimately ended with a Master's in Engineering. I knew that I was in college to get the degree only because it meant getting a higher paying job. I got my first job out of college with a hefty $35k salary. After two years of measly raises, I jumped jobs and got paid about $42k. I was in the wireless industry building cell sites. I was there for one year when they were bought out by Alltel. The company was shutting down the Chicago office and moving everyone to Little Rock, AR.

This was my first realization that you can't control your destiny in the corporate world. Luckily I got 6 months severance and landed a job the next day. I took my 6 months severance money and bought my first home in 1999. I started remodelling my home from day 1 and found out that I was really good at it. I knew nothing about real estate investing at this time.

During this dot com era, I changed jobs every year. Every company I went to went under, usually due to crazy overspending on lavish things, but I wasn't going to complain about free health club memberships that cost $100/mo. Although I was changing jobs constantly and I knew that they were through no fault of mine I was having fun living the crazy dot com life, parties, cruises, beer trolleys...

I finally landed a job that felt like a lifer. It's one of those jobs where you retire. I worked with a lady who had been there 35 years!

In 2001, my friends and I took a mountain biking trip to Crested Butte, CO. We camped for one week at Lake Irwin. No electric, cell phones, running water, etc... The town had a speed limit of 15mph. I remember cruising into town and slamming the brakes like WTF? However, at the end of 7 days, 15mph actually felt fast in town.

There was a point during the trip that I looked at my watch and calculated that it was 5:30pm in Chicago. At the time I was sitting on a rock on top of mountain at about 11,000ft having a PBJ sandwich with my buddies just chilling and looking at the clouds. If I were at work this week, I would be running down the street trying to catch my train at this time. What a contrast in speeds. It was at this moment that I knew something was wrong with my direction.

Coming back to work the next week I had lost all motivation. I had a great week in Crested Butte and we were all talking about going back the next year. I remember thinking, just another 51 weeks? I work 50 weeks a year to enjoy 2 weeks. Thinking deeper I also realized that I only enjoy Friday and Saturday out of the 7 days of the week. Doing the math, something wasn't right. Why do we enjoy only 2/7 of our lives?

With this realization, my next thought was how do I enjoy life more. First answer, move to Crested Butte, CO. But homes there cost twice what mine does and salaries are 1/3.

I did a quick calculation on my finances at the time. Jeez, I had a huge house, 2 cars and all the materialistic things I could have ever wanted. I remember seeing on Oprah that families survive on $50k a year. Here I was single, making almost twice as much as that and I couldn't save a penny. Somehow, one day I picked up Rich Dad Poor Dad. Reading that changed my life. I realized that I was tied to my job. I also realized that it was completely my fault.

I started looking into shifting my income from active to passive. This meant real estate, CDs, money market accounts and high dividend stocks. Anything that put $1 into my account at the end of the month without me doing anything, I was reading about.

I had goals in 2002 to lower my expenses and to buy a rental property. I was following the Rich Dad passive income = expenses means you are out of the rat race. Living in Chicago, I quickly realized that there weren't that many positive cashflow properties out there. In addition, my mortgage on my huge house hindered my capabilities to get a loan on a rental property. I could not qualify for a investment loan so I failed my goals in 2002.

I knew I had to sell my primary residence to free up my cash. I completely remodeled the house in the fall of 2002. I also had to sell my Acura NSX. I loved this car so much, but I knew that selling was for a better future. I bought a pre-construction condo in Chicago that I calculated to have positive cashflow. It wouldn't be completed for 2 years. I sold my NSX and put the money down on that condo.

I sold my car and home and all my furniture in 2003 and moved back in with my parents. I came home with a hefty check for over $100,000. Added my to savings, I had a significant wad of money.

I had read almost every single Kiyosaki book and every real estate rental book out there the past two years. It was 2004 and now that my expenses were nil, I was really getting sick of my job. I obviously didn't want to stay at my parents house forever so I looked for a change.

I remember seeing on Loopnet that there were 4-plexes in Phoenix asking $150,000! I didn't know anything about Phoenix. I thought it was all brown and desert. I had a friend living in LA. He said that I could live with him. So I quit my job and moved to LA. On the way to LA, I stopped by Phoenix and bought 2 condos in Scottsdale and a preconstruction house. Talk about impulse shopping! I had 4 properties and no job!

These buys were all based on cashflow. I was a cashflow guy. If COCR was above 10%, I was buying. The condos had Section 8 tenants and would cashflow $183/mo at the price I paid with 20% down. One day from moving out of Chicago and I was cashflowing $366/mo! This was easy. LOL

I didn't really like living in LA. I was 30 minutes from the beach and real estate was crazy expensive. 4-flats were $1,000,000 and massively negative cashflow. I couldn't stay with my friend forever and the LA RE market was booming. Then one of my Section 8 tenants got kicked off of Section 8. It was reported that she was a prostitute and on drugs. I got her evicted and went to view the condo, which was of course, trashed. I had to fix it back up to get it re-rented. In the process, it occurred to me that I should just move into it. That's how I ended up in Phoenix.

The market in Phoenix went crazy during 2005. I literally hit the lottery. Homes were appreciating $10k per month. I made another preconstruction purchase based on the comps I felt I had $100k in equity at the purchase. My Chicago condo also closed with about $60k in equity.

In 2005 I had literally turned my networth into around $600k. However, I totally understood that this was pretaxed, pre-realtor commissioned money. Getting $600k cash in the bank was another story.

One day I was surfing craigslist when I came across an ad about preconstruction, cashflowing, mountain view townhomes in Salt Lake City. I made a call to the realtor, did some research online and decided that he wasn't bullshiting. I booked a flight the new morning to SLC, rented a car and met the realtor. I drove the areas, looked at the rents and bought 2 townhomes at $140k. I found a property manager and hired them and my first PM'd rental was born. My calculations didn't quite work out. My proforma rents were too high and I had accept lower rent. Turned out that both townhomes had break even cashflow. Well, one was -$7/mo. These townhomes have appreciated to $195k each, adding another $100k to my networth.

I also picked up a couple 1 acre lots in St. George, Utah. This was my first foray into land. In hindsight, I broke my cardinal positive cashflow rule. Buying land you are 99% assured negative cashflow.

2006 saw the downturn of the real estate market. This is where having positive cashflow or at least breakeven cashflow helps alot. I sold my lots in St. George at a loss of around $35k. I sold my condos in Scottsdale at the peak of the market. I sold one preconstruction house at about $65k below peak prices. My SLC and Chicago properties have held in value. My Phoenix properties have dropped huge. I've learned alot about value of geographic diversification.

My story doesn't have and ups and downs like the other ones. However, some months are bad and some are very good. During the bad months you wonder if you should have stayed in the comfortable cubicle and lived the easy predefined life. The biggest thing I've learned is that you should take risks in life.

I do sometimes wonder what my life and networth would be if I stayed at my job in 2004. I think about what I've experienced in the past 3 years since quitting. I'm not talking about the money. I'm talking about living in LA, PHX, traveling to SLC, St. George and dozens of other cities that I ended up not buying anything in. My ex-co-workers used to call me and the first thing they said was, "Hey, what city are you in today?" Before that I had spent 33 years in Chicago.

When I moved into my condo in Scottsdale, I experienced something for the first time in my life. I had lost the ambition for money. What I mean is the pursuit of making lots of money just to make money. I had a monthly payment of $600/mo which included all utilities. For all intents and purposes, I did not have to work for 10 years at my current burn rate. The need for money to pay bills was gone.

So now you wake up and what do you do? The answer is... anything you want! This is what many retirees face after 55 years. I faced it at 33. I had a new outlook on life. My main priority now was living life, I figure I have at least 50 years. Where does all the time go? LOL Money is important, but money is a means to live life. You shouldn't live your life to get the money. If I want to travel the world, I find out what it costs and then go make that money. I look at money with a purpose. It's purpose isn't to sit in a bank. It's purpose is for you to spend it on things that you enjoy.

I might have to look into joining that Lambo crowd on here... you guys are making them very appealing to me!

 

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[biophase]

Honestly, I didn't know what I was doing. I downloaded free software for my store, messed around with it, stuck some Paypal buttons on it, called a few manufacturers. I was just winging it. I launched with an imperfect store. But that's ok. If you wait until everything is 100% perfect you'll never open.

As weeks passed, I added Authorize.net, SSL, a toll-free number, a UPS account, a fax line, etc... Now my store is a full fledged legitimate online store with all the bells and whistles.

So I wrote the above back in 2008, about 6 months after my first ecommerce store opened. It's been a long journey and time to update this thread.

Back in 2007 I was on flippa looking to buy a dropshipping ecommerce store. I knew nothing about ecommerce so I figured I'd buy a store and then I'd get to see the back end and the inner workings of how a store worked. I found a store that I wanted to buy and made the guy an offer. Long story short, the guy was wishy washy and he ended up saying that his "partner" changed his mind about selling. By that time I had done enough due diligence to gain enough confidence to start my own store.

This was before the days of Interspire, Bigcommerce, Shopify and even Volusion. I downloaded OScommerce which was an open source shopping cart and began to fiddle with it. It took about one month to get my store up and running and within a week I had my first sale.

My store was 100% dropship and I had one supplier. I expanded to 3 suppliers within a few months and was still 100% dropship. With the success of my first store, I opened up several other stores in different niches. Many of them failed and I can't even remember most of them now. But I do remember in Oct 2008 I opened up my second store that I still have today. It was an instant hit, but I was PPCing $50/day and breaking even. I did this to get my store on the map. My dropshippers were very surprised that I sold so much on a new store.

Dec 2008 was the first year that I ran into supply issues. My dropshippers, who supplied many other online stores also, ran out of stock around Dec 5th. Obviously, this was very disappointing to me and I vowed not to have it happen again.

Dec 2009 I called my dropshippers and bought all the inventory that they had and shipped it to my house. This caused all the other stores to run out of stock. But of course my stores had plenty of stock.

About this time I realized the limitations of dropshipping. You have no control of inventory and customer service. When I customer called about a product, I had no idea if it was in stock AND if it could get shipped out today. I had to hang up and call my dropshipper and then call the customer back. Although dropshipping gave you freedom, it limited your potential. At some point you have to choose on freedom to work from anywhere vs. more money and control.

So I began to stock 75% of my store's items in my home. I started with 2-3 of each product. But being in business for 3 years now, I knew what my hot sellers were so I'd stock 10 or so of those. My margins were slightly better and I was able to provide much better customer service this way. But the big difference is that now I had to be home to ship out product. It wasn't bad work, I would wake up and have most things done by 12pm. But I also was lucky, because if I was out of town, I could still have my original suppliers dropship for me.

Then in mid 2010, I decided to try to import my own products. This would increase margins by at least 2x and I would be able to brand my own line. I started with an order of 100 products which sold out very fast. This was truly a huge but great step. You see, every year I would get the new 20xx price list in which the wholesale price for a product would go up by a few bucks. However, I could not raise retail prices, so my margins were getting eroded. I had no control over wholesale pricing. By going to China, I was now getting manufacturing pricing.

Business was growing and Sep 2010 was the month where it really started to take off. By Dec 2010, I was working all day packing boxes and dropping them off at Postnet.

In 2011 I made up my mind to hire people and also move the business to a commercial location. So I got a warehouse/office and hired a person. I also began to import more products from China. I was also now "dropshipping" my brand for my original suppliers and some others. I was now the person who would raise my wholesale price yearly!

Not much has changed from 2011 to the present. The ecommerce landscape changed alot due to Google updates and Amazon, but the business is still basically the same. So this is where I'm at right now with this business. I go into the office maybe once a week now. I can take a one month vacation and feel comfortable leaving my business for even longer.

I see many people on here trying to start and business and have freedom at the same time. But you have to sacrifice to get that freedom. Let's say you are making $40k a year, working from anywhere with 100% dropshipping. That's decent money, but you can't be sitting at a beach for long on $40k. You need to expand that business to $100k, but to do so, you may have to give up that freedom for a year. When you get to $100k a year, then you hire someone at $40k and take your $60k and sit on the beach. Better yet, wait until you are at $200k a year, then sit on the beach with $160k.

 

[biophase]

Thanks for commenting on this post! It made me re-read what I posted many many years ago!

Found this part from 2008 interesting...
biophase said: ↑
I realized that what I really wanted now was to be geographically free. This came from wanting travel to Chicago in the summers and live in Scottsdale in the winters. I also wanted to spend summers in Crested Butte, CO. In order for me to live there or live anywhere I wanted I realized that I needed an income stream that was location independent.

6 years later, I finally did it.

Stuck? Change Your Environment!

And 9 years later, I finally purchased a vacation home in Crested Butte, CO. This is my first purchase of pure leisure, bad investment, horrible ROI, etc... but it is as exciting as when I got my Ferrari. So 17 years after visiting this tiny town in Colorado, I've finally fulfilled one of my dreams of owning a place there. It took a long long time!

 

[biophase]

Hi Biophase, I saw someone was inspired by you and got financially free due to that, so I looked up all your post and found this one. I enjoyed reading this topic and was wondering how you proceeded. Could you share us an update about what changed in the last 2 years (since your post from October 7, 2013) business wise: What happened and what pointers can you give us due to your experience?

Thanks,

Rudy

Hi Rudy, it's only been 20 months since my last update and really nothing drastic has changed. Business is still going well. But really, I've just been through 2 Xmas cycles since the last post.

Amazon has taken over much of the Ecommerce landscape. They are just dominating in sales. Free shipping is pretty much the norm on any significant order size. You should sell on Amazon first and then move to your own store. I think it's more important than ever to build a brand and import from overseas. All I'm doing now is expanding my brand, trying to take it from 4 products to 30 products.

I think dropshipping is dead or at best a very hard way to make a living. It's just not sustainable and I think your dropshippers will ultimately compete against you. I probably dropship less than 5% of my orders now.

I took a trip to China recently and visited my factories and a few new ones. I recommend doing this probably within a year of getting your business going. I waited 5 years to visit them which was way too long. It's like going to the B&P/Fastlane summit. Once you meet someone in person, your relationship changes a little. They become a person with a face and voice, not just a person in another country that you email. Also, you can see what their factory capabilities are. They may make product X for you, but you see that they can make 100x more products just but looking at their raw materials and equipment.

Aside from ecommerce, I just got back into real estate and purchased a condo earlier this year. I've been paying down loans even though they are at 3% interest rates. I'm not interested in leveraging or getting optimal returns on my money. I am trying to increase my REI cashflow to the point where if my ecommerce stores and brand disappeared that I'd still be doing ok.

As I write this I am in Chicago, in the neighborhood that I grew up in. When I drive down the streets I remember what stores used to be around when I was growing up. The corner drugstore, became a restaurant, became a furniture store and is now for rent. The small hotdog place became a realty office, became a CPA office and is now a dry cleaners. I always wonder why they changed? Is it because they moved, sold, retired, or failed? Businesses don't last forever. My businesses won't last forever, so you need to put away that money and invest for the long term, even if your returns are only 3,5 or 10%.

 

[biophase]

From my original post in 2007

I also had to sell my Acura NSX. I loved this car so much, but I knew that selling was for a better future. I bought a pre-construction condo in Chicago that I calculated to have positive cashflow. It wouldn't be completed for 2 years. I sold my NSX and put the money down on that condo.

I drove the areas, looked at the rents and bought 2 townhomes at $140k. I found a property manager and hired them and my first PM'd rental was born. My calculations didn't quite work out. My proforma rents were too high and I had accept lower rent. Turned out that both townhomes had break even cashflow. Well, one was -$7/mo. These townhomes have appreciated to $195k each, adding another $100k to my networth.

Somebody asked for an update, so I was re-reading this thread again. I think you guys will find this interesting.

That Chicago condo I bought in 2005 with my NSX sale money is now completely paid off and cashflowing $1100/month.
The 2 townhomes in SLC that I also bought in 2005 cashflow about $1000/month total. I still owe about $80k on each of them.

I thought this was interesting because it's been 10 years since buying these and they will provide me $25,000 a year+ for the rest of my life.

So all you younger folks who want things quickly, make good decisions now and you will have it alot easier when you get older!

Update to come later!

 

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[biophase]

Kenric, what kind of investments you do now?
Can you share some details on your approach nowadays to creating passive income streams and maybe some vital lessons that you learned?

Sure, the biggest difference in my approach to passive income now is that I am not trying to maximize ROI. I am trying to minimize risk and headaches.

In the past if I had $100k, I would have bought 4 $100k properties with $25k down on each one. I may have cashflowed $400/mo total but if one property became empty I'd be -$500/mo. If 2 were empty I'm looking at -$1400/mo.

Today, I would just buy 1 property cash and let it cashflow $700/mo. If it becomes empty I'm only at -$200/mo. I don't sweat about not being able to find a tenant.

Also I've found that because I cashflow so much on a single property that I am much more likely to make upgrades and improvements. On the property that is cashflowing $1100/mo, I will gladly recarpet for $1200 because it takes me one month to recuperate that money. Whereas if I were making $200/mo, I may push the tenant to accept a carpet cleaning only. I have found that these improvements over time allow me to increase my rent prices and my tenants stay longer.

One of my tenants in Utah requested that I install a garage door opener in my townhome and we split the cost. This was about 2 years ago. I did not know that I didn't have one! I can't believe my tenants had been manually opening the garage door for 7 years! I didn't care what it cost. I feel that a garage door opener was a necessity in life. So I gladly had them installed them right away at no cost to them. Of course it made them real happy. Now I can advertise that my units have a garage door opener, because now I also know others do not. lol

I know I miss out on appreciation and leverage, but at this point I don't really care about that. I would much rather have less units and pay them down vs. using the money to acquire and leverage into more properties.

My goal is to own 10 properties free and clear worth about $1.5M which return 6-7% giving me about $100k/year passive. That income, plus my ecommerce business should be way more than enough for me to live happily. Such a simple goal right?

PS - I should mention that I may give vacation rentals and airbnb a shot soon. I'm looking to try it on one property and see how I like it.

 

[biophase]

My last update was June 2015 so it's only been 15 months.

Ecommerce and Amazon has pretty much been the same. Although I think that my update in 2018 may be different since Amazon just changed their review and giveaway policy. That did not affect me at all since I don't use those tactics, but I wonder what new strategies people will come up with now.

I've been doing this for almost 10 years now and my outlook has changed in the past year. Honestly, making money does not excite me anymore. After a while the sales numbers are just numbers and everything is the same. It's just like being at the same job for 10 years, except you own it.

I started a new business last July and its largest expense is its charitable portion. I am finding that the charitable portion is the most fulfilling part of this business. I don't look at the bottom line. The goal is this business is not to maximize profits or even to make money. My mind has shifted a little and I'm beginning to understand the likes of Elon Musk, Tony Hsieh and Jeff Bezos.

These guys are obviously not in it for the money. If you ever wonder how Amazon can afford to ship you a $10 order 2 day UPS air for free, the answer is that they really can't. They are losing money on your order. As an ecommerce person, that made no sense to me, until now. Think about how 2 day shipping is almost the norm now. In 3 years, same day delivery could be the norm. 9 years ago, I was charging $19.99 for ground shipping and people were paying for it.

My point is that Amazon turned 2 day shipping into the speed that we expect online orders now. They sacrificed profit to improve online delivery to the masses. Think about this value add for us as consumers as a whole. They did something that everyone thought was insane, and paved the way for all consumers to get 2 day free shipping from many other stores.

Because my goal is not profit per sale now, I am free to do things that sound crazy. For example, I can price my product at $5 and lose $1 on each sale and happily sell 2000 of these and lose $2000. Why? Because each sale is beneficial to my cause. So in my head I'm donating an extra $2000 to a cause.

This is problem for my competitors who are trying to make money because I can and am willing to lose money for months on a product now. How can they compete against a person who is not trying to make money? So when all my competitors are at $15 and I am at $5 and running $.80/PPC, they are probably wondering WTF?

I'm not doing all of this to lose money. I understand that I am building something here that may take 3-5 years. I am building a brand and an organization that will be counted on in the future for a steady stream of donations. It's not just about me and how much goes into my pocket. I can afford to lose money or break even now, but as the company grows and matures I will being to tighten the costs and make it profitable. Every order doesn't need to be profitable, but at the end of the year, the company should make at least $1.

I literally think years in the future now. I don't look at this year or next year. I try to picture what the company will look like in 2020. It's a very different mindset for me now.

There are things that I want to do with my current business that sound crazy and definitely will lose money per transaction. For example, I have a product selling for $60, cost is $35, shipping is $20 (it's huge). How could I possibly sell this on Amazon? No way right? But now I'm thinking, maybe I could run this at a loss for one year and figure it out during this time. Not sure, how I'll solve it but I need to try vs. just giving up right?

(more to come)

 

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[biophase]

This is what many retirees face after 55 years. I faced it at 33. I had a new outlook on life.

I had a conversation with my Dad last year about tearing down their primary residence and building a new home. In my estimation, it would take 2 years to do with a potential profit of $500,000. In the meantime, I could rent a condo for my parents to live in for 2 years. Then they'd have a brand spanking new house in 2009 to live in. To me there was excitement in living in a brand new house and making $500,000. He just said to me, "I'll be 70 by that time." It occurred to me then that he really didn't care about making an additional $500,000 and that living in a brand new house wasn't high on his list of priorities. I really think he was thinking about wasting 2 years living in a condo.

I live in an older community in Scottsdale. I am by far the youngest person on the block. My neighbors probably have an average age of 75. They are the nicest people and always invite me over for dinner. Being a piss poor cook, I always accept. I live in an old school community where I know all of my neighbors.

My dinner conversations with them seem to always confirm how I feel. Life after retirement is an awakening. All the things that made you tick for 30 years are suddenly gone. You were the very important VP of marketing one day. The next day, you're just retired Bob with absolutely nothing to do and all the time to do it.

I tell them my view on life and they say, "I'm glad you figured it out 30 years before I did." My neighbors are happy people. From our conversations, I don't believe that they worry about money anymore. They understand that their years are numbered and spend time doing things they enjoy.

I try to find out when that turning point was. I believe that everyone has it. There is a point where you determine that "time" is more important than "money." My neighbors can never answer this. They just tell me that you just know. One day the reality of limited time on earth becomes very real. Then time>money.

It's like in sports, every great player in starts off being the "hotshot superstar" on the team. He's scoring all the points, getting all the endorsements, MVP, big contracts, etc... At some point in their careers they begin to value "winning a championship" more than the "money" or individual stats. Look at how many great stars went to good teams taking pay cuts or becoming the bench support during the latter years in their career.

 

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[MJ DeMarco]

I thought this was interesting because it's been 10 years since buying these and they will provide me $25,000 a year+ for the rest of my life.

I'd like to point out for some who might be thinking, $25k/year isn't a lot of bread. $25,000 is a ton of cash if you have no mortage, no car payment, and no other debt other than living expenses (insurance, gas, food) -- not to mention Kenric's main eCommerce business which makes bank.

This $25K in effect, is "f*ck you" money -- R8, trips around the world, whatever else.

Thanks for the update Kenric.

 

[MJ DeMarco]

Awesome story !!! ... lots of LAC's (Life Altering Choices) as well as Life Altering belief changes. :icon_super:

Great points:
1) Again, choices you made, and took action
2) Geographical changes to supplement your vision
3) Educating yourself thru books
4) Realizing that "jobs" and the trap of corporate America's hamster wheel, are slowlane

Time to go faster! Speed++

 

[biophase]

Nice! If it's that close to the lifts then you have definitely arrived.
Congrats again!!

It's not super impressive. Just a simple 2 bed 2 bath 1 car garage condo. Hope to update in 3-4 years with something nicer!

 

[biophase]

My 2008 update

So let's see... I left off in 2006 where I was settling down in Phoenix. The real estate market had started to take its downturn.

Here my plug for why everyone should attend the Fastlane Beer and Pancakes Future Meetings...

In March 2006 I went to the first Rich Dad get together and met Robert Kiyosaki. It was great to finally meet the people who I had been chatting with on the forums for over 4 years.

During this meeting I learn alot about everything. I mean I had no idea what direction I was going. I just listened to all the presentations and talked to many people. I didn't learn alot of detail. But I understood concepts and got just enough direction to know what to search for on Google and what forums to visit.

Who would have actually thought that people made horrible, incoherent webpages on purpose? But guess what, if the user can't read your page, he'll click onto the ad which is the only thing perfectly legible and grammatically correct!

Before this meeting, making money online was foreign to me. But after this meeting, it opened my eyes to a whole new industry. I started the simple way and put Adsense on my blog. A few dollars later, I tried affiliate marketing, I tried a few simple sites here and there.

I can't sit at home all day. Since the real estate market was declining and I wasn't buying. I didn't do much during the days except read alot online. I actually went and got a job at the end of 2006. When I got the job I was envisioning the great benefits of it...

Being able to get full doc loans!

Isn't it crazy that getting full doc loans was the first thing I thought of? It really was. However, within 2 months, I went to my boss and told him that I just can't do a 9-5 and wanted to quit. We compromised and I was able to work from home and set my own hours. But after 8 months I left. I can't believe I lasted that long.

I realized that what I really wanted now was to be geographically free. This came from wanting travel to Chicago in the summers and live in Scottsdale in the winters. I also wanted to spend summers in Crested Butte, CO. In order for me to live there or live anywhere I wanted I realized that I needed an income stream that was location independent.

At this point, my blog and my little internet sites were pulling in a whopping $40/mo. It's not much, but the best thing about the $40/mo was that it was generated blogging. Of course, blogging only requires a computer and an internet connection.

BINGO! location independent income!

That was it. I wanted a business that can be run from a laptop and an internet connection. So I started looking online for an internet business to buy. Since I did not know anything about running an online store, I thought that buying a store would be the easy way to start out. But after a few months of looking and talking to owners who either asked for too much money or really didn't want to sell, I started my own.

Honestly, I didn't know what I was doing. I downloaded free software for my store, messed around with it, stuck some Paypal buttons on it, called a few manufacturers. I was just winging it. I launched with an imperfect store. But that's ok. If you wait until everything is 100% perfect you'll never open.

As weeks passed, I added Authorize.net, SSL, a toll-free number, a UPS account, a fax line, etc... Now my store is a full fledged legitimate online store with all the bells and whistles.

 

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[biophase]

Thanks for commenting on this post! It made me re-read what I posted many many years ago!

Found this part from 2008 interesting...

I realized that what I really wanted now was to be geographically free. This came from wanting travel to Chicago in the summers and live in Scottsdale in the winters. I also wanted to spend summers in Crested Butte, CO. In order for me to live there or live anywhere I wanted I realized that I needed an income stream that was location independent.

6 years later, I finally did it.

https://www.thefastlaneforum.com/community/threads/stuck-change-your-environment.52975/

 

[MJ DeMarco]

It's a great reminder to be patient

More than that, I think having a vision for where you want to go, and then working the vision every day. It's the small things daily that make threads like this ever evolving.

 

[biophase]

First regarding the above vacation home I bought in Jan 2017... Well, I just upgraded to another home a block away that I spent over $1M on. Yes, that sounds crazy, and it was a crazy ride so let me tell you how it happened.

Fast forward to a year later, price reduction to $1.35M. Still out of my price range, but it was just sitting. So I make a lowball offer not thinking that I'd get it. To make a long story short, after 2 months of negotiating, they accepted it. Oh shit, I just bought a $1M vacation home.

Honestly, I don't make enough money to be buying a $1M vacation home comfortably.

It's been almost 4 years since my last long update on this thread. It's just crazy when I go back and see how old those posts are! So much has happened since 2019. I wrote the above post in June 2019. Note, that I mention that I wasn't comfortable purchasing a $1M vacation home at the time.

Well fast forward to 2023 and I have purchased 3 homes over $1M since then. It was really just a mindset number. Once I paid over $1M, the second home was easy and the third, even easier. It's all just a numbers thing and being comfortable with the magnitude.

The Colorado vacation home I purchased in 2019 turned out to be a homerun. It now comps out around $2.5M. C0vid sure ran up the prices in vacation areas where outdoors is the priority.

I sold the original condo in Colorado for $450k in July 2019 that I bought it in 2017 for $323k. I should feel pretty good about it right? Well it's worth around $900k today. Who knew??

In Nov 2020, I purchased a home in Sedona for $1M. This was during C0vid and was intended to be a part time Airbnb. However, C0vid continued into 2021 and Sedona had a boom in tourists. So now this is a full time Airbnb and returns around 6-8%.

In March 2021, I purchased a home in Vegas which took 18 months to complete. I moved into the home in Oct 2022. This was my most expensive purchase yet at $1.7M. I got in at a decent preconstruction price, so it is comping at around $2.3M now. I still don't know if this purchase will turn out to be a good or bad one. I guess when I update this thread in 2027 we will know!

In between these purchases, I made a couple smaller ones and I also sold my Chicago and Utah homes. Partially to help pay for the Vegas house and partially because of the insane run up in real estate prices in Utah.

My original post in 2007, referencing the real estate I sold in the past 2 years.

I bought a pre-construction condo in Chicago that I calculated to have positive cashflow. It wouldn't be completed for 2 years. I sold my NSX and put the money down on that condo.

I bought this in 2005 and sold in 2022 at a $20k loss. Not all real estate goes up. But it was a net positive because it cashflowed. Ironically the NSX I sold for the down payment is worth $100k more than I sold it for today.

My Chicago condo also closed with about $60k in equity.

This was in 2007. Timing is everything. LOL

One day I was surfing craigslist when I came across an ad about preconstruction, cashflowing, mountain view townhomes in Salt Lake City. I made a call to the realtor, did some research online and decided that he wasn't bullshiting. I booked a flight the new morning to SLC, rented a car and met the realtor. I drove the areas, looked at the rents and bought 2 townhomes at $140k.

I bought these in 2005 and sold both of these condos in 2021 and 2022 for $335k and $420k. Both were great buys.

My ecommerce business that I started in 2015 is still going strong. It's been really consistent and just chugging along. It's growing at a small percentage a year and kind of stuck in the $5M-$6M range right now. I'm just not dedicating enough time to it to grow it more. But it is still doing it's thing and donating alot of good each year.

When I type this all out, it seems like I'm just into real estate these days! Real estate doesn't really take alot of time. I mean if I purchase 2 properties a year, it takes maybe 1-2 months for each one. But what is crazy is the magnitude of the returns you can get on it if you get lucky or do it correctly. It takes so much work to make $100k in ecommerce, compared to one strategically placed bet or one low ball offer accepted in real estate.

I guess that's it for now. Nothing else new to report.

 

[biophase]

Featured, congrats man!

I also think it's notable that you decided to BUY which is undoubtedly more expensive and less flexible than periodic renting -- controlling your ability to leave / go whenever you want sometimes has no price tag. I would do the same thing -- I would want my vacation digs to be MINE and under my direction.

So far I've been there 3 times since owning it for 2 months. The best benefit is that when I leave to go there, I don't need to pack anything! I moved some of my clothes there and now I have my tiny office set up. I can just hop in the car and as if I were going to a store that is 11 hours away! The only thing I forgot to account for last time was my contact lenses, but that problem is solved since I left a bunch there now.

 

[biophase]

Wow. Imagine someone just joining this forum and finds this story... that's me.
Time goes quickly, profitable or not.
@biophase , may I ask out of curiosity if you are still in touch with your friends from 2004-5? Did your changes affected that? If yes, do you have any regrets, or would have you done it differently?

Yes, I'm still friends with everyone from the original 2001 mountain biking trip. In fact, we still go there once a year for a week. People are amazed when they meet us on our annual biking trip that there are 10 friends from high school that still take a full week off to vacation together. I still keep in touch with most of my friends from high school.

 

[biophase]

And 9 years later, I finally purchased a vacation home in Crested Butte, CO. This is my first purchase of pure leisure, bad investment, horrible ROI, etc... but it is as exciting as when I got my Ferrari. So 17 years after visiting this tiny town in Colorado, I've finally fulfilled one of my dreams of owning a place there. It took a long long time!

Time for an update!!

Wow alot has changed since my last post in 2017.

First regarding the above vacation home I bought in Jan 2017... Well, I just upgraded to another home a block away that I spent over $1M on. Yes, that sounds crazy, and it was a crazy ride so let me tell you how it happened.

Ever since I bought the small condo in 2017, I've been mountain biking all summer passed a row of townhomes. I remember thinking, I would love to live there but I knew they were pricey, as the location although a few blocks away is 100x better.

An analogy would be a house with the ocean beach in the backyard vs. a home 400ft from the beach. Both are close, but one is exponentially better. So last year one of these townhouses became available for sale, but the price tag was $1.5M. Way out of my price range. I would literally ride by it everyday and think, some day...

Fast forward to a year later, price reduction to $1.35M. Still out of my price range, but it was just sitting. So I make a lowball offer not thinking that I'd get it. To make a long story short, after 2 months of negotiating, they accepted it. Oh shit, I just bought a $1M vacation home.

Honestly, I don't make enough money to be buying a $1M vacation home comfortably. But here's how I afford it. Because the home is "beachfront", it commands a higher rent and is in high demand. I calculated that renting this home out will help me cover 40% of the payments. So this equates to the same monthly payment as if I purchased a $600k home. In addition, I partnered with a friend of mine on this 50/50. So now my payment is as if I purchased a $300k home. Now, that I can afford. See, you can always find a way!

And what's even more awesome is that the condo I bought in 2017 has appreciated by 33%. So now that condo is on the market. Once it is sold, all the proceeds are going into this new townhome which would bring the payments down drastically. Funny that my pure leisure, no ROI purchase turned out to be a very good investment after all.

Another huge change is that in 2018, I sold my ecommerce business! This is the original business that I started in 2007.

In my last 2016 update I talked about the other ecommerce business that I started in 2015. In about 2017, I was running both businesses and realized that I was holding back both of them by splitting my time. So I decided to sell one so that I could devote 100% of my time to just one. So I sold the first one and am now running the second one. This second business is doing really well and I'm enjoying running it because it fits a purpose in my life, which is not just money any more.

I think the one constant is that there is always change. Actually, I am realizing that I need it. I never stay the same. There were points in my life where I would think, you know, if you never started this 4th business, or tried to buy a $1M home, you wouldn't have all this extra stress. But stress is what makes you grow.

For instance, this new townhome will be my first Airbnb. I'm assuming that I've got alot to learn here. I've never done a vacation rental. I'm sure there will be some headaches.

I'm also now partnering in businesses. By the end of this year, I will be involved in 3 partnerships. I'm sure there will be some headaches.

I started a new business last year in a very complicated industry. You guys can probably figure it out, but it's an industry that you can't advertise on Google, FB, Youtube and you can't sell it on Amazon. Think about how hard that is. There have been lots of headaches!

But still I try!

 

[Vigilante]

Marked gold.

 

[biophase]

Awesome update! Are you still using the Muni ETFs for income as well?

I still have shares of the fund FMN. I am hesitant to purchase more of this because I feel like real estate offers more control.

For example, the stock FMN pays a 6% dividend monthly tax free.

This means that if I buy $100k of it (6666 shares), it cashflows about $500/mo.
I can purchase a condo free and clear for $100k and cashflow about the same (but not tax free but I get depreciation).

If the stock goes down by $1, I'm down $6666. I have no control over its market value. You can make the same argument for the condo.
If the stock lowers its dividend, I can't do anything about it. Likewise, you can argue that my condo's market rent may drop.

However, with the condo I have some choices. I am in control of my rent, so I can get creative and find a way to increase rents. With the stock, I cannot do anything about their dividend payout.
With the condo, I can also remodel and improve it to increase its value. With the stock, it is worth what its worth.

I understand that the stock is a truly passive solution. So the choice between these two for me is difficult, but I lean towards real estate for now.

 

[biophase]

I just reread this tonight and realized that I wrote pretty much all of this before I even began doing ecommerce. I opened up my first store in Oct 2007. It's been 6 years! I'll write an update to this. It feels weird to me that I wrote a "success story" post even before I had really done anything. At least it feels that way to me!

 

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[biophase]

Hi @biophase - From you experience, do you have any recommendations or have seen successes for starters without much capital? I know there's different ways to leverage, but wondering if there's a specific way you've seen it work with others in the industry.

Appreciate sharing your knowledge with us. Thank you.

Sorry I can't say, I've always had capital to work with.

You need to ask yourself why you don't have capital. Then you will realize it is because you don't have skills that people pay for yet. It sounds harsh, but think about it for a second. If you could hit a ball or catch a pass, do you need capital? No, your skills will get you that capital.

If you can build websites, code, find cheap properties, design graphics, etc... that made people money, they would keep hiring you and you will eventually have that capital. It all starts with you.

 

[Yoda]

Just re-read most of this and realized I want to be @biophase when I grow up.

Congrats on the house!

 

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[JAJT]

Just re-read most of this and realized I want to be @biophase when I grow up.

I just re-read this whole thread and found out that in the last 4-5 years that I've been here I've managed to completely miss this thread. Somehow never read it before right now! I think I've read so much of your stuff over the years that I just assumed I had read this one too.

I always assumed you started with your online stuff and grew from there. I didn't even know you owned real estate! Hahahaha!

I love that this thread is both relatively short and that the updates are so far apart that you really get a meta-feel for how the progress and mindset has changed over time. Almost like an "active" time capsule that gets buried up, reviewed and added to every year so before being put back into the ground.

Well, great story all the same. Truly inspiring as always!

 

[MJ DeMarco]

And 9 years later, I finally purchased a vacation home in Crested Butte, CO. This is my first purchase of pure leisure, bad investment, horrible ROI, etc... but it is as exciting as when I get my Ferrari. So 17 years after visiting this tiny town in Colorado, I've finally fulfilled one of my dreams of owning a place there. It took a long long time!

Featured, congrats man!

I also think it's notable that you decided to BUY which is undoubtedly more expensive and less flexible than periodic renting -- controlling your ability to leave / go whenever you want sometimes has no price tag. I would do the same thing -- I would want my vacation digs to be MINE and under my direction.

 

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[MJ DeMarco]

Hope to update in 3-4 years with something nicer!

Looks damn nice to me. And I don't doubt it. And this thread will continue on ...

 

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[MJ DeMarco]

My last update was June 2015 so it's only been 15 months.

Ecommerce and Amazon has pretty much been the same. Although I think that my update in 2018 may be different since Amazon just changed their review and giveaway policy. That did not affect me at all since I don't use those tactics, but I wonder what new strategies people will come up with now.

I've been doing this for almost 10 years now and my outlook has changed in the past year. Honestly, making money does not excite me anymore. After a while the sales numbers are just numbers and everything is the same. It's just like being at the same job for 10 years, except you own it.

I started a new business last July and its largest expense is its charitable portion. I am finding that the charitable portion is the most fulfilling part of this business. I don't look at the bottom line. The goal is this business is not to maximize profits or even to make money. My mind has shifted a little and I'm beginning to understand the likes of Elon Musk, Tony Hsieh and Jeff Bezos.

These guys are obviously not in it for the money. If you ever wonder how Amazon can afford to ship you a $10 order 2 day UPS air for free, the answer is that they really can't. They are losing money on your order. As an ecommerce person, that made no sense to me, until now. Think about how 2 day shipping is almost the norm now. In 3 years, same day delivery could be the norm. 9 years ago, I was charging $19.99 for ground shipping and people were paying for it.

My point is that Amazon turned 2 day shipping into the speed that we expect online orders now. They sacrificed profit to improve online delivery to the masses. Think about this value add for us as consumers as a whole. They did something that everyone thought was insane, and paved the way for all consumers to get 2 day free shipping from many other stores.

Because my goal is not profit per sale now, I am free to do things that sound crazy. For example, I can price my product at $5 and lose $1 on each sale and happily sell 2000 of these and lose $2000. Why? Because each sale is beneficial to my cause. So in my head I'm donating an extra $2000 to a cause.

This is problem for my competitors who are trying to make money because I can and am willing to lose money for months on a product now. How can they compete against a person who is not trying to make money? So when all my competitors are at $15 and I am at $5 and running $.80/PPC, they are probably wondering WTF?

I'm not doing all of this to lose money. I understand that I am building something here that may take 3-5 years. I am building a brand and an organization that will be counted on in the future for a steady stream of donations. It's not just about me and how much goes into my pocket. I can afford to lose money or break even now, but as the company grows and matures I will being to tighten the costs and make it profitable. Every order doesn't need to be profitable, but at the end of the year, the company should make at least $1.

I literally think years in the future now. I don't look at this year or next year. I try to picture what the company will look like in 2020. It's a very different mindset for me now.

There are things that I want to do with my current business that sound crazy and definitely will lose money per transaction. For example, I have a product selling for $60, cost is $35, shipping is $20 (it's huge). How could I possibly sell this on Amazon? No way right? But now I'm thinking, maybe I could run this at a loss for one year and figure it out during this time. Not sure, how I'll solve it but I need to try vs. just giving up right?

(more to come)

And this is what "I have enough money" looks like.

Cross referencing this thread...

https://www.thefastlaneforum.com/community/threads/how-much-money-is-enough-for-you.70285

 

[JAJT]

Congrats!

I don't want for much in the way of material possessions but a vacation home (or cottage) is one of those few things that I really can't wait to be able to properly afford. A place to invite friends and family and build fun memories and really kick your feet up.

Glad you got yours! You certainly earned it

 

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[Niptuck MD]

Hello I'm a new member of this community, honored to be here! My goal here is to motivate You how to become a successful person with a lots of experience, happiness and strong mind through quotes, pictures and videos that I learned over the few years. I hope It will help you to overcome anything and become best version of yourself.
1. quote:
Words Of Wisdom, read this It could change your whole life: Life Is a Journey not a destination. " If we thought of life by analogy with a journey, which had a serious purpose at that end, and the thing was to get to that thing at that end. Success, or whatever it is, or maybe heaven after you’re dead.

But we missed the point the whole way along.

It was a musical thing, and you were supposed to sing or to dance while the music was being played. "

 

[biophase]

My goal is to own 10 properties free and clear worth about $1.5M which return 6-7% giving me about $100k/year passive. That income, plus my ecommerce business should be way more than enough for me to live happily. Such a simple goal right?

Thank you @htown for bumping this thread. I’ll have to make a longer update post as my last post was pre-pandemic.

We all know what the pandemic did to real estate prices. I made the above real estate goal in 2016.

Now in 2023, I own 5 properties worth about $5.5M. I’ve consolidated and traded up the smaller properties for large, more expensive ones. 2 of the homes are vacation rentals. 2 are long term and one is my primary.

My first thought looking back at this post was that I aimed way too low. It’s just interesting how your brain can sell yourself short. I’ve had many thoughts like these in the past years. Goals that were good at the time and now seem like I set a low bar. And now I’m wondering if I’m doing it right now, today.

 

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