EP 11: From $130,000 In Debt To $60M Multifamily Assets: Tim Little's Inspiring Journey Part 1

And I think people need to understand when you're looking at that much debt, it feels like there's a dark cloud hanging over you at all times. Like, oh, I can't afford to save because I have this debt. I can't afford to invest because I have this debt. And those kind of things keep going through your mind. Me and my then girlfriend were just getting our start because I had just gotten my job after grad, grad school and that's the other important piece. You know, you have to get a decent job in order to have any expectation of paying it down and paying it down quickly. So I was lucky to get, you know, a decent job in the D.C. area. Making, I think it was like 90,000, which allowed me to be able to both buy a house and still be able to pay my loans. Now, did I put 20% down on my house? Absolutely not. I did like an FHA loan that was like, I think like 3.5%. So very minimal investment upfront on that house. Of course that that makes your mortgage higher, but still it's what I needed to do at the time because I just didn't have that kind of cash sitting around.

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Welcome to Think Outside the Stocks podcast and I'm your host, Madhavi Jain. Back again with a great story today with our guest Tim Little. And we have actually a lot to share Tim today. So first of all, welcome to my show.

Yeah, thank you for having me. I appreciate you bringing me on.

Absolutely. So most of us, what we have built today from scratch and we know how much effort went behind that. But think about starting from negative $130,000. Yes, you heard it right. Negative $130,000 in student loan. And that's where Tim started building his real estate journey. We often think about it as a Real estate as an al to stock market investment. But we are afraid to step into it. That first step into it, it's a gut wrenching feeling. And if you are getting that gut wrenching feeling, I completely understand because I was there too. The first time to invest in the real estate was such a punch in the gut because not everybody around was doing it. Everybody was investing in stock market and I was just tired of that stock market volatility that up and down. But to take that first step into something in estate, especially the syndication that, you know, me and Tim are big proponent of, just because you haven't heard about it, it could be challenging. Tim Little is here today to share his journey, what he could achieve in his life with real estate. And if it was not real estate, what could happen? This life, right. What could have been this journey of starting from negative 130,000. I mean, Tim, just thinking about it, it gives me goosebumps. It's just such a nightmare. So welcome. You are now you have gone multiple levels of real estate investments. You have done the passive real estate investments, you have done the active real estate investments. And now you are a syndicator. So kudos. First of all, congratulations. Somebody has to say this to you, that you have done phenomenal. So congratulations to you for having this fabulous journey and I hope our audience today are inspired by it.

Yeah, no, and thank you. It certainly has been a long road though. Despite what anyone may tell you, this is not a get rich quick endeavor. It's taken a long time and there's been a lot of learning and bumps in the road. But as you talked about, I, like so many people in this country, made some questionable decisions when it came to school loans and not necessarily proud of that, but that's the situation I found myself in. Right.

So let's talk a little bit about that student loan. When you say the questionable decisions. So what was the situation and how did you end up with so much student loan? Student loan, unfortunately, is the sad truth of our country. There is people who just can never come out of it. It's just not the loan. But their credit gets impacted, so they're set for a disaster to start with. So tell us that situation that how did you get into it?

Sure. And so I was just coming out of the army. I had been on active duty for about five years as an officer, you know, doing multiple deployments. And I was like, you know, I'm ready to get out for now. And I wanted to go back to school. And if I was going to do that I wanted to go to the best institution for what I was studying. Because when I went to undergrad, you know, I went to what was called a party school, right? I went to Florida State. And I went there because it was close, it was convenient. I knew someone there, and I thought I'd have a lot of fun. I didn't go there because of its academic accolades. And so when I went to grad school, that was something that I said, I want to go to a top 10 school for international studies master's programs. And luckily, my last duty station on active duty was at Fort Carson, Colorado, which is in Colorado Springs. And not too far away was the University of Denver, which had the. The Corbell School of International affairs, which was at the time, you know, like a number nine, according to, you know, Foreign Policy magazine in their schools. So I was like, there you go. The, the challenge with that is it's a private institution, it's not a state school. So the, the ticket for entry is much, much higher. At the time, it was about 50,000 a year. And so, needless to say, that adds up very quickly. Another dubious decision, perhaps, that I made was that I was not going to work while I was going to grad school because I wanted to fully devote myself to my studies, right? And I worked all through undergrad, you know, whether it was, you know, being a dishwasher or a cook at Cracker Barrel, you know, I did all these things just to, you know, pay the rent and stuff. And I was like, no, I am going to focus on my studies, because that's the most important thing of that time. But that necessitates taking on a lot of loans, because now you're not just getting loans for school, but you're also getting loans for your rent and stuff like that.

So just survive just to keep your head above the water.

Right, Exactly. And so, you know, you kind of, at a certain point, you just bury your head in the sand and say, I'll, I'll look at the. I'll look at what I owe at the end. I don't want to worry about it now because what's, what's, what's the point? So that whole time you're not looking, that number is quickly escalating. And what happened is I found, luckily I did get one year paid for, which was huge to get 50,000 knocked off. And that was through the yellow ribbon program and a post 911 GI bill, which I only had one year left on the issue. I thought I had the full thing. Misunderstood Some of the rules and regulations, because I had used it in the past, so was still able to get one year knocked off of a three year, which is huge.

Which is still huge. Yeah.

So I'll say it could have been worse. But I wound up doing a three year program at the University of Denver because in 2010, you know, we were just coming out of the, the economic collapse and jobs were still not great, and I saw the opportunity to do a dual degree program with the business school and only do one additional year and come out with my mba. So while additional debt, I thought that might make me much more marketable than my current degree and also increase my income once I, once I did get a job. So I took that chance and the debt. And by the time I graduated in 2011, all said and done, I was looking at, like you said, about 130,000 in school debt, 10,000 from undergrad, which I wasn't concerned about. It was like 2% interest rate, you know, but that, that 130,000 was what just kind of knocked me back to reality. And I was like, oh, okay, yeah.

So how did you from that 130,000 to paying it off and real estate entering in your life, how did you come to that fork where you said that, okay, this is how I'm planning to pay this off? And by the way, going back to your decision on taking that loan, right. And taking that, you know, for the education, spending that much money that's on a lot of people's mind is either for themselves or for their kids, right? They, for kids, we want the best. I mean, I have a 19 year old, right. So for me, I want that best education for her. And I'm ready to spend that even, you know, 50,000 a year or something more than that. So it is essential. It's essential. It just the system that it has created, the amount of money being invested into the financial institution, it's outrageous. It's crazy. So it just builds up really quickly. So you're not wrong thinking about it, that you want the best for yourself. But coming back to it, tell us about how real estate entered your life.

Yeah. And the only thing I'll add to what you just said is I think it's really important for people who are weighing that decision to pay tens of thousands of dollars to go to school is return on investment, investment, investment on your education. And not all degree paths have the same return on investment. So yeah, that's, that's the biggest consideration.

That's a good nugget there, Tim.

Yeah.

And I completely agree with that.

Yeah. That that philosophy degree is probably not going to, you know, return as well as, like that business degree, for example.

Yeah.

In terms of how real estate came into the picture, it goes back to something else that you said, which was plan. Right. And that's exactly what I did. After I accepted my situation, I said, okay, let me understand it better. And you have to think about. I had several loans. So I had like six or seven different loans, all with different interest rates, ranging anywhere from like 5 all the way up to 80% or. Oh, my God, I'm sorry, 8%.

5. 8%. 130,000 total. How did you sleep at night?

Yeah, so. So like I said, I came up with a plan because the first thing that I wanted to do was kind of get a handle on it all. And so I was able to find an organization that would do a consolidation loan. Right. Because I was like, it's. It's untenable for me to just be paying like, oh, I have this one do this date and this one do that date. And again, the fact that there was such a range with the interest rates, you know, having 30, 40,000 at 8% and another 20, 30,000 at 5%. So I was able to do a consolidation loan and get all of it wrapped together and get a rate of. It was like 5.25, I think.

Okay.

Something along those lines, which did a couple of things.

Better terms and just one payment going out of your pocket every month.

Exactly.

Great start.

It made things much easier to handle just in terms of tracking, but it also significantly reduced what would be my overall payments by having that one interest rate, which was lower for most of those loans. So that was the start. The next was to develop a plan like, okay, how am I going to attack these? And I knew I wasn't going to do the minimum. That just wasn't an option because I wanted to get rid of it as quickly as possible. And I think people need to understand when you're looking at that much debt, debt, it feels like there's a dark cloud hanging over you at all times. Like, oh, I can't afford to save because I have this debt. I can't afford to invest because I have this debt. And those kind of things keep going through your mind. So.

And every time you're spending something, you're buying something, you're doing something for yourself, you're even going to groceries. I'm sure that this is back of their mind that, you know, can I do this or can I put this $10, $20 towards my loan instead.

Right, exactly. And so, you know, I looked at how much I had to pay and it was, I think it was like 1200 was the minimum payment.

Okay.

And so I was like, okay, at least as a start, I'm gonna pay 1500amonth. You know, just right off the bat. And I would tell some of my friends that, and they'd be like, that's a mortgage payment. And I was like, yeah, yeah, I know, but. And you know, me and my then girlfriend were just getting our start because I had just gotten my job after grad. Grad school. And that's the other important piece. You know, you have to get a decent job in order to have any expectation of paying it down and paying it down quickly. So I was lucky to get, you know, a decent job in the DC area making, I think it was like 90,000, which allowed me to be able to both buy a house and still be able to pay my loans. Now, did I put 20% down on my house? Absolutely not. I did like an FHA loan that was like, I think like 3.5%. So very minimal investment upfront on that house. Of course that makes your mortgage higher, but still it's what I needed to do at the time because I just didn't have that kind of cash sitting.

Around, which is very important. Not many of the listeners, especially if there's a younger generation listening into it, they need to understand that you don't have to save so much. Like that's put in 20% of the down payment. But you know, the first time, there are a lot of programs available for first time buyers. That 3.5% program is available. So that's a good nugget there. So, yeah, just moving on. So you purchased your first home in the D.C. area.

Tell us more about it. And that was. And that's the other thing. Right. So sometimes you have to do what other people are unwilling to do. And while most of my friends in that area were buying houses that were 350, 400,000, because that was the going rate in much of the area.

Right.

My girlfriend, slash now wife, we bought a house in an area that most people weren't willing to move into. Now we were able to get that for a lot less. So we paid like 250,000 for a house in downtown D.C. it was in a, you know, I'll say up and coming area that just hadn't up and come yet.

Right.

And that's okay. Right. You know, we're young, we didn't have Any kids. So we didn't have those concerns. And that was our. Our focus. We knew the area would appreciate, and we knew that because all of Washington, D.C. was appreciating even the worst neighborhoods. Now, was it going to gentrify and would we double or triple our money? Maybe, maybe not. But you still have to look at the trends and think about your house as an investment when you're buying. And if you do that, then you can count on certain things, like appreciation. Otherwise, I wouldn't tell people to go into an investment assuming they'll get appreciation. But there's. There's definitely signs and signals that could tell you that you have a better chance of getting. And so, long story short, on. On that specifically, when we went to go sell, was it like six, five years later, you know, the value of the home had. Had gone up by more than a hundred thousand.

Nice.

And so we were able to, you know, we got it checked for like, I think it was like 85,000. And that was one of the biggest checks I'd ever seen. And I was like, great. And so we talked about it, of course, but then we decided, like, hey, the best move for us is to just pay off that debt. Because at that point, because of my aggressive payments, it was down to like 83,000.

Oh, nice.

Which still sounds like a lot, and it is. But I was literally able to write a check for $83,000 and clear it out to zero. And I. I can't tell you what it's like to have that weight lifted off your shoulder.

Oh, my God.

I mean, you're starting anew, right? Like, all that money that you could have put towards something else or some other investment or into a new house is gone. But at the same time, that weight is lifted. So I would do it all over again.

I'm getting goosebumps. I'm really getting goosebumps. Tim. This is the. I mean, I cannot imagine that night, how well we would have slept that night, just getting this big burden off your shoulder for both of you, not just you. Right. For both of you. So, you know, kudos for doing that, getting rid of the student loan. And yes, you are saying that people could look at it differently and say that you could have used this money that you've gotten for buying a house, or this was your equity in your house and, you know, primary home and this and that. There are many ways that you could have done that, but at that point, that was the most important aspect for you to get rid of that student loan. And anyway, by doing that 3.5% down, you had gotten in a home much earlier than typically what other people will do, right? So instead of paying that rent and creating a wash for that five years, I look at it that you actually took that decision to move into house faster, got that five year appreciation and took that money to pay off what's the biggest thing that was weighing you down. And now you have a fresh mind. You have a fresh mind to restart. You have a little bit more tools and techniques and experience under your belt. So you moved a little bit ahead. So what is that moving ahead journey for you was, I know you became a landlord at certain point, so let's talk about you being a landlord. And again, I just cannot repeatedly say congratulations enough for getting rid of that student loan. Because I mean, trust me, for many, many, many people in this country, that is the sad truth that they are just pressurized under that burden. Sometimes they cannot even make the interest payments. And they are just, it's just expanding. It's just expanding exponentially. And it's something that doesn't need to be grown exponentially, grows exponentially and just, you know, they cannot get over it in 10 years, 15 years, 20 years down the line as well. Congratulations again. Tell us about your landlord journey.

Yeah, so this is actually while we were still in dc, I had started getting interested again in real estate and, you know, reading all the books, listening to all the podcasts. And so I was determined to get an investment property. The problem that I bumped up against was this requirement for 25% down for an investment property. And I was like, there's, there's no way around that. Like, you know, so again, it's that challenge of saving. Even at a time when you have this, this, these loans hanging over your head. I think people, you know, make a lot of excuses for why they can't do something versus trying to find a way to do something. And we lived below our means, right? That's, it's a, a choice we made so that we were able to save more and then put it into things like that. So I didn't let the fact that I had those loans stop me from saving to invest. And that's what we did. Saved up, it was like 20, 25,000 and use that as a down payment for a duplex in Richmond, Virginia, because there was nothing in the D.C. area that we could afford, obviously. So we came, you know, became, you know, geographically separated landlords at that point. And I did, I did hire a property management company. So that helped to insulate Me a bit from some of the, the things that happened. You know, my first tenant there, they just stopped paying. And so you're like, hey, what's going on? And then they just left in the middle of the night, right? Well, because they did. They didn't want to deal with eviction. They, they obviously didn't have the money to pay. And so then you, you know, you find yourself paying $1,000 for someone to come and just move all their stuff because they left everything in there and it's a mess, right? Even down to the toothbrush and it's like just gone in the middle of the night. So unexpected costs and stuff like that. So you learn a lot of valuable lessons. Those, those early years when you're investing in single family, small, multifamily. And then what I decided to do was after we moved from the D.C. area to Florida, I didn't want to be that far from my investment property. So we started looking at stuff more locally and I was foolish enough to say that I wanted to manage it myself. And we did a 1031 exchange from our first duplex into a triplex here in the St. Petersburg area. And that was, you know, kind of the economies of scale. I was able to get a lot more cash flow because there was three units being rented as opposed to two. So that worked out well from that perspective. But then I was the landlord and the property manager and everything kind of fell on me. All of this while I had a full time job too. So it just becomes awkward when you try to play it off like, oh, I'm just the property manager and all the tenants are like, yeah, we know you're the owner, let's be serious.

That's true. So before we start talking about your landlord journey, let's step back a little. So you have duplex and you have that triplex. Any of these properties, did you do the house hacking or what? Were they completely just the rental properties?

No, they were completely just rental properties. And that's probably one of the few regrets I have that I didn't, you know, house hack before I had kids when it, you know, would have made sense. You know, if you discover that, you know, when you already got like two kids and a dog and stuff like that, it's just not practical most of the time. But yeah, so those were strictly investment.

That's great too. But just for the listeners, what I'm referring to, a house hack. And especially for those people who are starting fresh, students with loans and stuff like that, you can look into getting into A house much sooner than what you think you can get into a duplex. One part for you to stay in, the other part rented out. So that pays for your mortgage, your expenses and stuff. And you end up, you know, maybe at the most pay for the property taxes or insurance, so practically for free while you build your savings. So that's another aspect that you would want to consider if you're building from scratch. Now, going back to the landlording, right, you mentioned that you had property management team, but it still does not free up, you know, from that task at hand. As a landlord, what is the property management team going to do when they just leave overnight, leaving to the last toothbrush in the house and you have to empty this house. And I completely understand this, Tim, sadly, because unfortunately I was in this position where my tenant left, picked up few things, but this was a dump yard, the house was dumpyard. And they, they paid their, you know, rent on time. If they were delayed by a couple of days, they paid the, the kind of late fees. It was not like he was a concerning tenant. He was paying well, but it was just a dumpyard. I had to pay $5,000 just to get their stuff out. I'm talking about wall to wall, garage to garage, complete massive junkyard. They were hoarders, essentially. And to bring this house back to its glory, where I can rent it again, I totally spent about 20,000, 19,000 plus something on this house. And that was one of my first few journeys as a landlord. I mean this pictures, if I share with you, it is a nightmare. It is absolutely nightmare of a tenant. And the situation I was getting, I think about 250 to $300 cash flow per month. So can you imagine that 20,000 I spent just to bring it back to its glory and you know, to rent, to be able to rent again. It was horrible. So many people think that let's just become landlord, it's easier, it's direct. I have control over it. I have full control over. Well, you just have to get that one tenant. And I think in your case you had multiple of such. So let's talk about that story. What was your the worst nightmare tenant and that, you know, even despite of the fact that you had this properties giving you excellent cash flow and creating that, you know, passive income for you. Tell us a little bit about that landlord story that you had. Tim's story about his worst tenant got very interesting. And in the next part of this episode we would like to continue talking about it. So listen to the part two of this episode. Just around the corner available to you right now.

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