From a $200K Duplex to Replacing His 6-Figure Salary with Rental Properties

BiggerPockets Real Estate Podcast

Investor Philip Henry recounts his fifteen-year journey from a single duplex house hack to managing a $20 million real estate portfolio. He

Key takeaways

• Philip used FHA loans and house hacking in 2003 to launch his real estate career with a $200,000 duplex.
• Seller financing was a critical tool for scaling, allowing him to acquire an 11-unit building with no personal down payment.
• A pivotal 31-unit deal grew from a $1.2 million valuation to a $5.2 million appraisal through strategic renovations and rent increases.
• The pressure of managing 46 units while working as a traveling engineer caused significant marital strain and personal stress.
• Philip advocates for a balanced life built on four pillars: faith, family, fitness, and fortune.

Main topics

• House Hacking
• Seller Financing
• Creative Real Estate Finance

Notable quotes

Real estate is not a get-lar-quick kind of game, but it is a get-rich-for-sure game.

Conclusion

The episode provides a blueprint for using creative leverage to build

Transcript preview

Speaker 1 (0:00) Real estate is not a get-rich-quick kind of game, but it is a get-rich-for-sure game. Keep at it, and it will eventually make you wealthy. Most investors get out too early, usually right before the big payoff. For 15 years, investor Philip Henry felt like he was treading water. He was doing all the right things. Buying multifamily property every year, renovating the units, raising the rents, and then rolling his equity into the next deal. On paper, he was building wealth, but it was not showing up in his bank account. The stress was mounting and the workload was taking a toll on his health and his relationships were suffering. But that's exactly when the breakthrough came. A real estate deal that would single-handedly change his life. Philip bought it with none of his own money, and then he created enough value in cash flow to replace his six-figure salary. Today, he's going to pull back the curtain on that deal and the strategies behind it, plus the patience and persistence it takes to win in real estate. What's going on, everybody? I'm Henry Washington, co-host of the BiggerPockets podcast. And today, we're bringing you an investor story with Philip Henry. So let's bring him on. Mr. Philip Henry, welcome to the BiggerPockets podcast. Well, thank you so much, Henry. Appreciate it. Appreciate you having me on. Why don't you go ahead and give us a little background? What got you into real estate investing in the first? What were you doing before that? Speaker 2 (1:22) Wow. Well, originally from Canada, I went to chemical engineering and then moved to the U.S. in 01 with my wife. And at the time, we had a new baby and started doing engineering work in Boston and then just started reading books about real estate. You know, you drive by a golf course and it's like noon on a Wednesday and someone's in there with a nice car and golfing. And my dad always. was working at that time. So I was like, something's different about what they're doing versus what my dad did. So anyway, that's how it started. And then I bought a two unit. That was how I got off the ground. How Speaker 1 (1:57) long ago was that? Speaker 2 (1:58) That was in 2003, I think. Speaker 1 (2:01) Oh, man. So you got a long investing history. Speaker 2 (2:04) Yes. Speaker 1 (2:05) I know it was a while ago, but it was your first rodeo in the real estate game. So why don't you tell us a little bit about that deal? What did you buy? How did it go? And then how did that propel your investing career? Speaker 2 (2:15) So a lot of the new engineers, new families starting up would get a single family home in Boston and then their mortgage poor. And I just, you know, I was broke. I had no money, started out salary with like 40 grand or something like that. And $200,000 price point, two unit. We bought it. I think it was an FHA. I would come home from engineering school, go up into the second unit, sand floors, paint. rented that out for 800 bucks so my costs went from 900 in an apartment to 450 and i owned the place and then a year later i sold it and left the closing table with a check and it said like 50 grand on it yeah i was like i paid off my student loans and that's when i was hooked i was like there's no way i just made a year salary by living in a house so So Speaker 1 (3:05) you did house hacking before it was cool, before it was a fancy name for it. You got it. How did that change or shape what you ended up doing next? Speaker 2 (3:15) Well, I think the first thing is it increased my belief. So like my belief that I actually could be a real estate investor, you know, that was huge for me. And then I got transferred up to Bangor and I did the four, I bought a four unit right out of the gate. Same way, FHA, three and a half percent down. The seller carried closing costs, so I had very little in it. And I started with that. That was my next acquisition. Speaker 1 (3:40) Okay. So you house hacked that one as well. The first one, it sounded like you had some renovation to do. You were doing some of the sweat equity. Were you doing the same thing on the next one or was it more of a turnkey deal? It Speaker 2 (3:49) was a little bit more ready to go, but it still needed a fair amount of love. So it was like you come home from the end of the day, pick up some supplies and grab your hockey buddy and tell them there's a six pack waiting for them and off I went. Speaker 1 (4:02) When we talk about owner financing, a lot of investors understand, well, yeah, I can go to the owner and I can ask them to give me a loan since they own the property. But owner financing is bigger than that. Owner financing can be something just like that, where the owner just carries part of the loan, like the down payment. So, you know, with that being your second deal and, you know, how did you know to do that or how did that come about? Speaker 2 (4:25) So one of the things that usually stagnates. people from getting off of their first unit is that you know you're capital poor you know it's hard to come up with 20 percent savings to get another unit so once i got that four unit i was tapped and then another like kind of worn down landlord had a and i had a two building 11 units and i don't know how i came up like maybe it was a book i read and that it was an option and he was a savvy investor he had a bunch of units so he He said like, okay, yeah, I'd be willing to carry paper. And Speaker 1 (4:54) I Speaker 2 (4:54) was like, carry paper? What the hell does that mean? Speaker 1 (4:57) But once we got Speaker 2 (4:58) through that, he was very open to doing that. So he carried the 20 % down payment that I needed. And he carried closing costs. So I ended up taking another 11 units under ownership. And I walked away with a small check for prorated rents at that time. It needed a ton of work, but that's all I had for options. I bought those two buildings for 200 grand and they just appraised for like 950. And I had no money in the game. Speaker 1 (5:25) My perspective on seller finance is that it has nothing to do with what you want and it has everything to do with what the seller wants. That's why it's called seller finance. And I have found it to be a more productive and successful conversation when I am focused on trying to figure out what it is that the seller needs. And then I try to structure the deal that gives them what they need. Now it's hard for them to say, no, you said you wanted a down payment. I'm giving you a down payment. You said you wanted a 7 % interest rate. I'm giving you a 7 % interest rate. But all of the other factors of the loan, I'm tipping in my favor. And so I found that to be the most successful strategy. How do you go about approaching somebody and offering seller financing? Speaker 2 (6:07) Really, it's to your point, you're trying to create a win-win. You're trying to understand the motivation factors of the seller. And I think it starts with a conversation, you know, like, hey, would the seller be open to that? Well, they're not really open to it. They don't really understand it. OK, well, now you have another roadblock to get through. And so every deal is different. But in order to grow when you lack capital, you have to be creative and you have to either leverage seller financing, get really good at approaching sellers with the idea of it and then being really good at explaining why it benefits them as well and not just you. And then it's so funny, Henry, once you get a track record of success and you have a few deals under your belt, like there's a lot of people that have money that is in the market making six, seven percent. And if you can get a down payment for a place and tell them that you'll just pay them 11 percent on their money until you pay it back or for two years or for three years to get into a deal, which I've done, too, it's it benefits them. It benefits you. And it's just another tool in the belt. Yeah. Speaker 1 (7:12) Your goal as an investor is to educate yourself, understand what are all of the ways that I could finance a deal so that when a deal comes across your desk and a seller is in a certain type of situation, you can go, ah, that's this type of loan. And I can underwrite it this way because it gives the seller what they need, it helps me get the deal done, and it helps solve the problem for me,