On my recent adventures to St. Louis, I had the pleasure of meeting DJ from Rags To Nicer Rags. DJ is a fine human who is doing some cool things with his life. If DJ lived in Longmont or I lived in St. Louis, we’d be barbequing at each other’s homes regularly. See you next time I’m in town DJ!
Why did you start your blog?
I have been reading about a dozen or so personal finance and real estate blogs over the past few years. I have learned so much from these blogs, and I wanted to pay it forward and try to help others. I decided to give it a whirl and started my own blog: www.RagsToNicerRags.com. It’s a bit of a weird blog name, but it truly is who I am. I am not looking to be a “lifestyles of the rich and famous” type of person. I am not trying to be a “rags to riches” story. I am the guy who is happy with his current rags but wants the freedom to upgrade them at any time. A good portion of the financial blogs are written by people who are much further along their path to financial independence, or they have already reached FI, which is great. I have seen the light, and I know that I will be there in 4-5 years. I have a long way to go, and I think that I can show a bit of a different perspective on the FI journey. My wife and I have 401k’s and mutual/index funds totaling around $100,000.00. In other words, we are a long way from being able to retire early (or have the option to retire early). We also started investing in real estate about five years ago. We purchased three properties: a four-plex, and two single-family homes. They have all done well, and we plan to continue purchasing real estate. We actually sold our four-plex in January 2019, and plan to redeploy that money into another real estate project this year. I don’t plan on selling any services on my blog. I just want to help others who are getting started on their FI journey. Plus, I have too many entertaining stories that need to be shared with the world!
My wife and I also wrote and self-published a book this year: Landlord Life, The Diary of a New Real Estate Investor. I read dozens of books before we got started purchasing rental properties. I realized that I still wasn’t getting the full picture about what investing in real estate was all about. I was interested in the day-to-day operations. I wanted to know what we were really getting ourselves into. I started writing the book six months before we purchased our first property (yeah, I may have jumped the gun a bit). Over our first 3.5 years as real estate investors, I kept a diary (the book) of anything and everything that happened in our business. From fixing toilets to chasing down rent to filing for an eviction. If it happened in our business, it is in the book. I am proud of how it turned out (all 406 pages). I feel like it can really be helpful to people looking to get into real estate investing, and it has some humor that all current and former landlords can appreciate. Once I finished the book, I realized how much I enjoyed writing about the subject, and rather that trying to start another book, I decided that my next step would be to start a blog that I could provide some free insight regarding real estate, personal finance, and life.
Where do you live? Do you love it, hate it or just meh.
My wife and I are from a fairly small town. We live in Bethalto, Illinois. We are located about 25 miles from St. Louis, Missouri (Go Cardinals!). The most important thing to us is our family. That is probably the only reason that keeps us here in the Midwest. It would be hard to ask 20-30 family members to all move away with us, wouldn’t it? I would love to live near the beach/ocean. I have only seen the ocean a handful of times in my life, and that makes me sad. All things considered, I still like the Midwest. The temperature swings are crazy. Back in January, we had a 72-degree Monday followed by 8 inches of snow on Wednesday. I guess that is all part of the deal. Here in the Midwest, home values are low, compared to most places in the country, but rents are pretty strong. An example would be the last single-family house that my wife (Erin) and I bought. We paid $55,000.00 and put $12,000 into some cosmetic repairs. The house is now worth around $80,000.00, rents for $950 per month, and has around $250 per month in cash flow. I’d love to have about 10 more of that deal!
Do you rent or own? What are your thoughts on home ownership?
A lot of the personal finance bloggers seem to lean towards renting. Some of the biggest names in real estate also feel that way. I feel that owning is the best option, at least for me. We don’t plan on leaving the area, so we might as well capture some of that mortgage paydown while we are here. With rates as low as they have been over the past few years, owning can be cheaper than renting. Our personal mortgage has a rate of 3.5% and a 15-year term. Just to put that into perspective, every 5 years or so, the balance pays down enough that we could use a home equity line of credit to purchase another rental property. We are more focused on just paying off the loan right now, but that is an option we could pursue if we decided to go that route. Not bad, huh? Just by paying to live in our own house, we could buy a rental property every 4-5 years. Real estate can be a very powerful tool when used methodically. I love it.
What is your FI number? How close are you?
A good portion of the blogs out there have an FI number based on net worth. The 4% rule is awesome, but it doesn’t work that great in my personal situation. Salaries are lower here in the Midwest. We make roughly $100,000 per year combined, and are both college graduates. I’d say we are probably in the upper half of incomes for our age group (mid-thirties) and location. That being said, we have a mortgage payment, car payments (yeah—I know), student loan payments, etc. We try to save as much money as we can, but if I am using the 4% rule, it would take us roughly 25 years to get our investments to the level that they need to be at. We are combing real estate and our stock portfolio to get to our end goal. Since real estate is kind of my thing, my FI number is a cash flow amount, not a net worth. My goal is $6,000 per month in cash flow, between all investments. Our three rental properties were all cash-flowing at around 15%, which gets us to our goal much faster than the 4% safe withdrawal rate. Our monthly cash flow was around $700 per month from our rental properties (lower right now since we just sold our four-plex). We have a long way to go, but things really start to pick up steam as you go. We are a few more years from our goal, but I can see the light (if I use binoculars). We will get there!
What is one post that you’ve written that you wish would have gone viral?
To be honest, I have only been a blogger for since late January 2019. I have about 10 posts online, and I have a number of other posts that are either already written or in process now. I have a list that I made that still has over 100 topics that I plan to write about, plus any interesting stories that pop up along the way.
To me, the most important aspect of investing is keeping your options open. My favorite post to date talks about investing like a chameleon. You can see it here: https://ragstonicerrags.com/be-a-chameleon-my-investment-strategy/ Having options is the whole point of the FIRE movement. Having the option to leave your job to retire, or to start volunteering more, or start a business, or move into a fun part-time job, or if you are happy with your job, keep on working and let your investments continue to grow. A chameleon investor keeps their options open. You might like to invest in small multifamily properties, which is great. They are a great investment. But a chameleon adapts to its situation. Just because your focus in on small apartments, don’t be so focused that you let a smoking hot single-family deal slip past you (or a car wash, or storage facility, etc.). It is great to be focused on a certain type of investments, but keeping your options open can really benefit you in the long run.
How is the world going to be better because you lived?
My wife and I swore that we would never buy a rental property that we would not live in ourselves. We want them to be nice, fairly updated, and safe. We want to provide a good place for our tenants to call home. We want to be understanding, fair, and respectful landlords. I honestly feel that we have done that, and all of our tenants’ worlds are in a much better place now, compared to their previous renting experiences. I also hope that my new-ish blog will turn into something that can help people reach their own financial goals. If I can help even a handful of people to gain the courage to get started investing or the courage to save more and go bigger on their investments, then I feel like their lives will be changed for the better.
If you could change one thing about yourself, what would it be?
I don’t really have that killer instinct. I guess I am just too nice of a person. A few of our tenants have figured that out and taken advantage of me over the last couple of years. I feel like I am a pretty good dude, and I hope to keep it that way. I just need to learn to tweak my business personality a bit. We are looking into hiring a property management company, so that should negate my weakness.
What is something you read that changed your life?
It’s funny because I never really was a big reader until I got the real estate bug. Five years later, and I am an author. Life is crazy. I can name several books and blogs that have made a huge impact on my mindset and our business in general.
- The Book on Investing in Real Estate with No and Low Money Down, by Brandon Turner
- Set for Life, by Scott Trench
- Build a Rental Property Empire, by Mark Ferguson
- Retire Early with Real Estate, by Chad Carson (just finished this one—really good)
- The Simple Path to Wealth, by J L Collins
Blogs that I follow:
- 1500 days
- Root of Good
- Millennial Money
- Abandoned Cubicle
- Afford Anything
- Coach Carson
- Retire by 40
- Mad Fientist
- Early Retirement Extreme
Also, I have learned a ton from the community over at BiggerPockets. I am sure I am leaving out a few, but these are all great!
If you were a dinosaur, what kind would you be and why?
I have always thought my spirit animal was a bird. Other than eating worms, what a great life! Free airfare, plus you can crap on anyone you don’t like. I guess I would have to go with a Pterodactyl. Post “Big Bang” of course. Can you imagine what life would be like as the only Pterodactyl in the sky? Woah.
Favorite beer? Favorite pizza place? (this is a throwback to the original series)
Mr. 1500- As a fellow connoisseur off all things hoppy, I feel like I need to answer this question for you. First of all, I love all pizza and all beer. That is my disclaimer. Now, there is a fairly new brewery in St. Louis called Urban Chestnut. I have loved everything they have put out, but my favorite beer is called: Schnickelfritz. If you can’t get it in out in Colorado, let me know. That would give me an excuse for a road trip/vacation to deliver you some!
Thanks DJ for your answers today!
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