As you know, I love creating a side hustle as part of a fast-track path to financial independence because it can make a huge difference (see this financial calculator), enough to actually get you to FI in 10 years.
If you have a side hustle and would like to be interviewed, shoot me an email and we can talk over specifics.
Today we are talking with Andrew from Wealthy Nickel.
As usual, my questions are in bold italics and his responses follow in black.
Here we go…
How old are you (and spouse if applicable, plus how long you’ve been married)?
I am 34 years old and my wife is 33.
We’ve been married for 7 years.
Do you have kids/family (if so, how old are they)?
We have two kids, a 3 year old girl and 1 year old boy. Life is busy these days!
What area of the country do you live in (and urban or rural)?
We live in Dallas, TX. We’ve been here since we got married.
What is your side hustle?
Between my wife and I we have several side hustles, but they mostly revolve around real estate:
- Rental properties
- House flipping
- Part time real estate agent
We also have a few other side hustles like cash back apps and credit card rewards that bring in a couple thousand per year.
Last year I started a blog to document our side hustles and journey to financial independence, but right now it brings in a very unexciting amount of money for the amount of work I put in.
Is there anything else we should know about you?
We are your typical frugal couple that lives a relatively modest lifestyle without subscribing to some of the extreme frugality practices a lot of lean-FIRE people promote. Not that there’s anything wrong with that, it’s just that I enjoy the challenge of finding ways to make extra money than I do on cutting our spending to the bone.
We got started with our real estate side hustles in 2013, and the past several years have been an undeniably lucky time to be involved in real estate. However, I think real estate is a great way to grow your wealth regardless of the current economic cycle. As you will see from the diversity of things we’ve done, we have pivoted with the market and there are always ways to make money in an up or down market if you’re willing to change and take a few risks.
Is this your first side hustle? If not, could you give us a bit of background on past efforts — both successes and failures?
I have dabbled in side hustles ever since high school (before “side hustle” was a term). I’ve mowed lawns, tutored, and done a little Facebook ad management, among other things.
Most of my past efforts were very part time just to make a little extra spending money to support myself while in school.
My first real side hustle that sparked an interest in real estate was house hacking. I didn’t know that’s what I was doing at the time, but in my mid-20’s I bought a 3 bedroom house and rented 2 of the bedrooms to my friends to cover the mortgage.
After I got married, I kicked the roommates out and my wife and I decided it was too much house for us and moved to a condo. I wish I had had the foresight at that time to hold on to the house as it would be worth almost double what I sold it for, but it wasn’t until a year or so later that I really started to seriously consider real estate investing as a side hustle.
How did the idea of starting a side hustle begin?
I graduated college with a degree in engineering and within a year of working full-time realized that I didn’t want to stay in the corporate world for 40+ years. I had been researching going back to school for a different degree, or perhaps some entrepreneurial venture that would allow me to be in control of my schedule.
In addition to that, after I got married, I discovered the FIRE movement. We had already decided that we wanted my wife to stay home with the kids whenever we got to that point, and so the idea of living off of only my income with a growing family was at odds with the 30-50% savings rate that allows you to achieve financial independence early.
We started talking about what we could do on the side that would be flexible enough for my wife to participate in once she was home with the kids so that we could boost our savings rate and trajectory toward financial freedom.
How did you come up with the idea?
I wish I could say that the idea to create a mini real estate empire with multiple different income streams came fully formed at inception, but it started off fairly slowly. I was still looking for side hustle ideas and was considering different options, but in the meantime, we decided to purchase a rental property with some extra cash we had set aside for investments.
I had been researching real estate for a while and realized that the timing was good and we could find properties in our city that cash flowed pretty well with good potential to build equity over time.
Many people look at rental property as an investment, and then become disillusioned and disappointed when they realize that it is not the passive income stream they thought it was. Luckily, we went in with the mindset that while yes, we were buying a (hopefully) appreciating asset, we were also signing up for a job.
We did and still do our own property management, and in order to get a good deal we bought a house that needed a lot of work. So we had to find and manage the contractors as well.
What made you think this particular idea could be profitable?
I think real estate is still one of the best ways for the average person to grow their net worth over time. It is certainly not a get rich quick scheme, but with that very first rental, I had done the research to know we could be profitable even if we made some mistakes (which we definitely did).
Our first property was a duplex that we bought for around $130,000. It came with a tenant that is still with us today, and their rent covered the mortgage while we fixed up the other side.
We figured we’d be all-in for around $160,000 and be able to collect monthly rents of $2,100 between the two sides. That easily beat the one percent rule, and we thought that after accounting for all expenses we could take home $300-400 per month. Not bad for our first foray into real estate!
What were the early days like — getting your side hustle off the ground, making your first dollar, etc.?
The first lesson I learned in real estate is that a pro-forma is just that, a projection.
We made several mistakes on that first rental property, not the least of which was letting one of our contractors skip town with $15,000 of our money. That was a difficult and expensive lesson to learn, and one that almost made us give up on real estate investing before we even started.
We still don’t know exactly what happened, but the construction project started off well enough. After a few weeks he stopped showing up every day and he was harder and harder to get in contact with. I think he was just a poor money manager, and was using future jobs to pay his subs for past jobs. It finally caught up to him and we were the ones left holding the bag.
Lesson learned – never pay your contractor for work not performed. We had paid for 50% of the job up front because we were naïve and didn’t know any better. Now we structure our contracts so that our contractors only get paid after certain milestones are met.
Because of that experience, the rehab took longer and was more expensive than we had planned. But at the end of the day, we ended up all-in for $180,000 and had it rented out in total for $2,100. Even after our mistakes, we were still bringing in money every month!
We had to learn many things to get that first rental property off the ground, and fortunately, we didn’t know what we didn’t know. If we did, we may never have gotten started.
But by the end of that first project, we had learned how to find a good deal, how to hire and manage contractors, how to find and screen tenants, and how to be good property managers.
What did you do to grow your side hustle? Were there any specific actions that resulted in major breakthroughs?
After our first project was complete, we realized we’d been bitten by the real estate bug and wanted to keep growing our portfolio. But that first rental had drained all of our cash reserves, so we started looking for ways to generate more money for a down payment on the next house.
That’s when we dove off the deep end of real estate investing and really started turning it into an active side hustle.
I read everything I could get my hands on about marketing to distressed sellers to get properties at a deep discount, and spent a lot of time on the Biggerpockets forums soaking up information.
We started sending out direct mail campaigns to neighborhoods we were interested in buying in, set up one of those “we buy houses” websites, and started networking with other investors. We got very interested in learning how to invest in real estate with no money, and ran a lean operation.
While I would never recommend getting involved in real estate if you are barely living paycheck to paycheck, as long as you have some reserves for emergencies there are a ton of ways to make money on a real estate deal without actually having any of your own money in it.
The more I researched, the more the risk-averse entrepreneur in me liked the idea of wholesaling real estate. If you’re not familiar with that term, it basically involves finding an amazing deal (through the aforementioned marketing methods), getting it under contract, and then selling that contract to another investor who will put up the capital to purchase the home, do the rehab, and either flip it or keep it as a rental.
Wholesalers provide a service to other real estate investors by sourcing great deals so that investors don’t have to spend the time doing their own marketing and running around looking at houses.
This was a major breakthrough in our side hustle, and allowed us to grow our income exponentially. Our very first wholesale deal came from a landlord who lived an hour away from his two rental properties. He had gotten into rental properties and realized it wasn’t for him. One of his tenants trashed his house and took off in the middle of the night, and the other had actually started a small fire in the kitchen.
While I was scared to death, I knew he had the motivation to give me a good deal, and I put both properties under contract with only a $200 option fee out of my pocket. I was able to find another investor who wanted these properties for more than I had them under contract for, and I made a $12,000 assignment fee in the process.
In our first year of taking our new side hustle seriously as a business, we were able to make about $50k in wholesale income, and another $30k on a flip we kept for ourselves. This is net of our expenses, which were around $6k for our various marketing channels.
What sort of time commitment did your side hustle require while becoming established?
At the beginning, I had my day job and my wife decided to get her real estate license mostly to save money on our own transactions, and worked part time for a real estate team helping them with their administrative tasks.
Our time commitment involved putting together direct mail marketing and getting a website up and running, and answering the phone when it rang. I would often return phone calls during lunch and go see houses after work in the evenings to make offers.
I would say that in the beginning growth phase we were spending 10-20 hours per week on the business. The nice thing about the wholesaling model is that the majority of the work can be done over the phone or email. We would go out to see a few houses a week and make offers, but we didn’t have to close on the house, manage contractors, or find tenants. Once we had it under contract and found an investor buyer, our work was done.
When the numbers made sense, we did occasionally keep a house to flip or turn into a rental. We probably flipped 1 house a year ourselves and kept 2 more as rentals. These projects took more of our time, but mostly over a short time period when we were managing the rehab or finding a tenant.
Where did you find the time to work on it?
When we first started, we didn’t have kids which made things a lot easier!
Since my wife and I were both involved, it allowed us to split up the work and get more done. I am more of the analytical researcher, and she is task-oriented and is amazing at actually getting things done.
At first, we were hand-addressing letters to send to houses that we wanted to buy, so we would spend evenings watching a TV show while stuffing envelopes to mail. When calls started coming in, I would usually have to let them go to voicemail at work, and I tried to return them during the day or after work.
Since my wife transitioned to a flexible job as a real estate assistant, she had time during the day to go look at houses and take pictures. I would analyze the numbers at night and see what we could pay, and she would follow up with an offer.
Were you the only one involved or did others help out?
As we got further into the business, we decided to take on a friend of mine to help with answering the phones, going to see houses, and making offers. We paid him strictly on commission, so he would get a percentage of whatever we made on a particular deal.
At one point, we were spending up to $5,000 per month on marketing! It was definitely more than one person could handle well.
Initially I wanted to build this into a full-time business and quit my day job, but as I got into it more I realized I liked it more as a low key side hustle than a full-time business. So about 2 years ago we decided to scale it down and we only occasionally send out marketing. We’re still out looking for deals, but only if it fits our rental portfolio or is such a crazy good deal we just can’t pass it up.
Can you give us specifics on what you earn with your side hustle?
From 2013 – 2018, we’ve made the following profit (after all expenses) in each of our niches:
- Wholesaling – $123,000
- Flipping – $85,000
- Real Estate Commissions – $111,000
- Rental Properties (Cash Flow) – $136,000
The best thing about real estate are the other benefits you get that add to your balance sheet through mortgage paydown, appreciation, and “sweat equity”.
Our tenants have paid down our mortgages by $32,000, we’ve added $115,000 in equity to our rental properties by buying under market value and fixing them up, and the hot real estate market in our area has added another $290,000 in equity due to appreciation (some of which we’ve cashed out by selling a few properties).
It would be difficult to give revenue and expenses for every category, but on average we make $300 per month on each of our rental properties after all expenses. So if a house rents for $1200 a month, we pay $900 toward the mortgage, taxes, insurance, maintenance, and capital expenses.
We’ve had up to 9 rental units, but currently are down to 7 as we sold a couple that had nice appreciation gains and no longer made sense to hold as rentals from a return on equity perspective.
At the height of our wholesaling business, we were spending close to $4,000 in marketing to find one deal we actually closed on, and we tried to make a profit of $8-10,000 per deal.
Real estate is obviously a capital-intensive business, but we started small and did things that required little to no money and then as we started to make money, put most of our profits back into the business to generate more income.
What impact has this extra income had on your finances?
The extra income generated through real estate has accelerated our path to financial independence. If you add up the income and equity gains, we’ve added close to $1M to our net worth in the last 5 years.
Since we decided to live off of my W-2 paycheck, all of this side hustle income has gone into investments. Some is locked up in our rental properties generating cash flow every month. Some has gone toward maxing out our 401(k) and IRAs.
And over the past year and a half, we have transitioned a lot of our extra income into more passive real estate investments – crowdfunding and private equity investments. Over the long term, I expect these to earn a 10-15% annual return.
Sure I could dump everything into the stock market, but I have developed some expertise in real estate and enjoy analyzing larger commercial real estate deals and participating in them as a limited partner.
What went well in this process?
When we first started out with our one little rental property, I had no idea how deep into real estate we would get. After spending all our cash on the first property, it kind of snowballed from there as we sought out other ways to generate cash to buy more rental properties.
Undoubtedly, we got “lucky” by starting our real estate side hustle near the bottom of the market in 2013. But it still required a lot of hard work and sacrifice to get to where we are today.
I think part of our success was due to the relationships we built with other investors and the homeowners we were buying houses from. First and foremost, real estate is a people business.
Wholesalers in particular tend to get a bad name because a lot of them are, shall we say, less than ethical. We always tried to treat every seller fairly, even if it meant losing out on a deal (and we definitely lost out on some to other wholesalers willing to be dishonest).
But that honesty and integrity also brought us business from referrals and repeat clients. We actually just closed on a house we put under contract over 2 years ago. It was tied up in probate court and contested multiple times, but we stuck around. The seller was appreciative of all the work we put in to finally close the house, and in return we got a house in 2019 at 2017 prices!
What do you wish you would have done differently?
We made plenty of mistakes along the way, but I don’t know if I would change anything. I see most of those mistakes as learning opportunities that got us to where we are today.
At a high level it seems like we were doing a lot of different things and should have focused a little more, but everything was interconnected. At the end of the day, all we were doing was marketing to find a good deal, and once we found one we either kept it as a rental, wholesaled it to another investor, or flipped it ourselves depending on the numbers.
One thing I wish we had done sooner was hire out some of the tasks I’m not great at or didn’t have time for (answering the phones and meeting with sellers). If we had done that earlier, we could have scaled faster and taken advantage of some of the great deals that were available in 2014-2015. By 2016 our market was getting highly competitive with a lot of hedge fund money coming in, so our profit margins were shrinking as time went on.
Financially, our biggest mistake was buying a half duplex that had been illegally subdivided. Of course we didn’t know that, and the title company didn’t catch it either. We worked with a lawyer and tried to work with the owner of the other side, but in the end we took a $30,000 loss to get out of that deal and let someone else deal with the legal issues. I don’t know what I would have done differently there, other than to be more careful in reading the survey and title work. It was an expensive lesson, but one I certainly will never make again!
Has it been worth it? Why or why not?
Our side hustles have definitely been worth it, and have allowed us to achieve financial independence far quicker than I ever thought possible. We are not quite there yet, but because of real estate we are 3 or 4 years away instead of 10 to 15.
When we started having kids, I had to take a hard look at our side hustles and realized I wanted to spend more time at home even if it meant slowing down our path to FI. Because of the hard work we put in 5 or 6 years ago, it has allowed us to continue generating income today even though we significantly scaled back the time we’re investing in our side hustles for now.
What are your future plans for your side hustle?
We are still self-managing our local rental properties and will continue to do so for the foreseeable future. My wife still has her real estate license and while she’s a full-time stay-at-home mom, she still takes on a client here or there and generates a nice side income each year from that.
We’ve scaled back the deal-finding aspects of the business, but with the relationships we’ve built over the years, it seems we still get 1 or 2 dropped in our lap every year.
As our kids get older, we are looking to potentially get more involved again, either in flipping/wholesaling or another aspect of real estate entirely.
I discovered I really enjoy the financial analysis aspects of real estate investments, and want to start a new side hustle helping real estate investors with bookkeeping and accounting for rental properties or flip projects.
I also recently started a blog to document our journey to financial independence and hopefully use our story to help others to do the same.
My wife said I had to pick one or the other (blogging or bookkeeping). So since I can’t do both, right now blogging it is!
What advice do you have for ESI Money readers who may be thinking about creating their own side hustle?
Side hustling can be a powerful tool to increase your savings rate and net worth. But contrary to everything I’ve said up to this point, you don’t NEED a side hustle. It’s become trendy to have a side income stream, but if you don’t have a solid “why” behind it, you are setting yourself up for failure.
I chose to pursue a side hustle to scratch my entrepreneurial itch, as well as provide an additional source of income so my wife could stay home with the kids.
As ESI has correctly pointed out before, one alternative to a side hustle is to focus on your career and increase your earnings there. If I had decided to focus on that path, I would probably be much further along in my career than I am now.
If you do decide that side hustling is right for you, then my best advice is to just get started!
There are an overwhelming number of possibilities out there, and I know when I was first researching ideas I got analysis paralysis and stayed in “education” mode for too long.
Nobody ever became a millionaire by reading hundreds of articles and books on how to become a millionaire. They did it by actually taking action on the advice they read.
So sit down and figure out one business idea you can start working toward today, and list out the steps to get there.
Then start checking things off the list – it may take you a day, a week, or a month, but actually making your first dollar from your side hustle is a great motivation to keep going.