This is an interview with Andrew Herrig from Wealthy Nickel.

Hey, Andrew. Tell us a bit about yourself and what you do.

I am a 35-year-old husband and father of two kids, ages 4 and 2. I am a financial analyst by day and a real estate investor and blogger by night.

My wife is also involved in our real estate side hustles, but it has allowed her to stay at home with the kids while they are young.

What made you take control of your financial future and what was the first step?

I’ve always considered myself the most risk-averse entrepreneur out there. I’m always thinking of new ideas I want to try, but with a young family, the allure of a steady W-2 paycheck and health benefits keeps me tied to my job.

Right before our first child was born, my wife and I were talking about the future and what we wanted it to look like. She wanted to stay home with the kids, and I wanted to have the freedom and flexibility to spend time with the family as well as work on my entrepreneurial ventures.

It was then that we decided that we needed to get on the fast track to financial independence and figure out how to generate enough income passively to replace my day job.

I had heard that real estate was a good way to produce steady cash flow, and by putting in more time finding amazing deals, doing rehabs, and other “side hustle” type stuff we could create instant equity and increase our net worth faster.

What’s your side hustle monthly income and what does it consist of?

Most of our side hustle income comes from real estate in some form or fashion. We have done many different things over the past 5 years, but have slowed down on many of the more active methods of generating income.

Month-to-month our income varies drastically, but last year we made over $100,000 from our real estate side hustles.

• $31,000 in net cash flow from our 8 rental properties
• $45,000 from a house we originally bought as a rental but decided to flip
• $6,000 from wholesales where we put a house under contract and sell that contract to another investor for a profit
• $17,000 from my wife’s realtor commissions
• $7,000 from passive real estate crowdfunding

In past years, we did a lot more active wholesaling and made anywhere from $30 – 80k just from that. But as the kids get older, it has become harder to do that on the side so we have transitioned to rentals and more passive forms of income.

I’ve also started to generate a small amount of income from my blog, but it is negligible compared to our real estate side hustles. I hope to continue growing the blog and sharing our experiences investing in real estate and helping others achieve financial freedom.

What are the best ways to earn passive income with real estate?

There are several ways to earn passive income with real estate:

• Rental properties
• REITs (real estate investment trusts)
• Private equity partnership or crowdfunding in larger commercial deals

When most people think of passive real estate income, they think of rental properties. While rental properties are more passive than flipping or wholesaling, they do still take some work – even if you have a good property manager.

A couple months ago, I had probably my worst month ever with $30k+ in unexpected expenses on my rentals, including replacing a roof, storm damage, and a tenant eviction. 

It caused me to sit down and really consider if investing in real estate is really worth it? Which is crazy because that’s where almost all of our net worth gains have come from over the last 5 years. But that shows you the roller coaster ride that real estate can be sometimes.

While rental properties are great over the long term, I think my favorite way to earn truly passive income is with real estate crowdfunding.

We have started to sell off some of our rental properties that have appreciated well and move that money into crowdfunded real estate.

I don’t like giving over control of my investment to someone else, but it is a completely hands-off way to get all the benefits of real estate – cash flow, appreciation, mortgage paydown, and favorable tax treatment.

Read also: How This Family Guy Made $1,250,226 Building and Selling Blogs

When and how did you get started with real estate investing?

After my wife and I had that initial conversation about pursuing financial independence with real estate, we jumped in with both feet and took action.

I can’t recommend Biggerpockets.com enough – I would read the forums for hours picking up everything I could about how to do real estate investing right.

We bought our first house (it ended up being a duplex) in 2013. Back then, it was a little easier to find deals on the market, and this one was a foreclosure. It had a tenant in one side and the other side was completely trashed and needed a full rehab.

We learned a lot of lessons on our first deal – such as don’t pay your contractor up front and let them run off with $15k of your money!

The nice thing about this particular deal is that it was a duplex and the tenant in one side paid the mortgage while we rehabbed the other side and got it ready for rental. We actually still have that tenant today, and he pays like clockwork.

We ended up putting almost all of our available cash into this deal, and we realized if we didn’t want to wait a year or two to build our cash reserves back up, we needed to find a way to get creative and learn how to invest in real estate with little or no money down.

That’s when we started learning as much as we could about finding below-market deals, wholesaling, and flipping to generate extra cash to put towards more rentals.

When did you cross the $1M threshold and how long did it take?

Our net worth crossed the $1M threshold when I was 32, or about 4 years after we started investing in real estate.

In terms of real estate alone, we were able to generate $1M in net worth in about 5 years through our various side hustles (wholesaling, flipping, and realtor commissions), cash flow from rentals, and real estate appreciation.

Read also: How This Dad Quit His Job 2 Years After Starting a Blog

How do you balance your side hustles with your full-time job?

Not very well sometimes!

When we were more involved with wholesaling and flipping, we were sending out thousands of pieces of direct mail per month. I would return calls during lunch and meet with potential sellers in the evening or on weekends.

At one point, we actually hired a friend to work for us on a commission basis to take all the phone calls, go see houses, and make offers.

One thing I’ve learned through all of this is that I can’t do everything myself AND work a full-time job. In some areas, we had to outsource, and in some areas, we decided to just cut back our activities.

We have also gotten better at establishing systems, especially for our rental properties.

All of our rent is collected through an online service, and we tell our tenants to text us with any maintenance issues. We have built up a stable of contractors that we work with and trust, and send the issue over to them to resolve. Unless there is a major issue, I rarely get involved in the day-to-day maintenance of our rentals.

Read also: Investment Advice Every 30-Something Needs to Hear

Are you planning to quit your job and work on your side hustles full-time?

At some point, I do plan to quit my job, but the timeline is a moving target.

We have settled into a good routine with our real estate investing where we lean on established relationships to buy a house here or there whenever we have time for it and come across a good deal, so it fits into our current lifestyle.

I would definitely like to build up the blog to provide a small monthly stipend in retirement to help cover costs such as health insurance that will skyrocket once I no longer have a full-time job.

Read also: How Kristin Larsen Earned $100K in Her First Full Year of Blogging

Is renting better than buying a home in today’s housing market?

The answer to this is a definitive it depends. 

For our own situation, we would probably be better off financially renting a house in our neighborhood rather than owning. But there are a lot of benefits to owning that have nothing to do with our financial position.

I like the freedom to do whatever we want and not have someone tell us what color we can paint a wall or how big a nail we can use to hang a picture.

For example, I am currently planning to design and build a home office shed in the backyard for when I’m working from home. A landlord would never let me do that!

Everyone has to look at their own situation and decide. I disagree with the philosophy often espoused that “renting is just throwing money away.”

If you do a true comparison of renting vs. owning, I think you will be surprised how many fixed costs owning has such as property taxes, insurance, maintenance, and of course interest on the mortgage.

As a general rule, renting allows you more freedom than owning, and if you don’t plan to stay in the same place for more than a few years it’s probably a better idea to rent.

If you do intend to put down roots (maybe you want your kids in a certain school district for the next 10+ years) owning can make a lot of sense.

What are the expenses connected to your real estate side hustles?

Real estate is a capital-intensive business. When we were doing a lot of wholesaling and flipping, we were spending up to $5,000 per month on marketing (direct mail, internet advertising, etc.)

But we certainly didn’t spend that kind of money when we were first getting started. Like a lot of things, if you have more time than money, you can substitute hard work and hustle for a large marketing budget.

Now, most of our expenses are for our rental properties.

There are several rules of thumb when it comes to real estate. One being the one percent rule of rental properties, that says that the monthly rent should be 1% of the purchase price of the house in order to break even or have a little bit of monthly cash flow.

This is because about 50% of the monthly rent goes to expenses – vacancy, maintenance, cap-ex, insurance, taxes, and property management. This leaves the other 50% for profit if you bought the house in cash, or if you did a typical loan, the loan payment will be a large portion of that other 50%.

What are some big financial mistakes you’ve made?

Where do I start?

As I mentioned above, on our very first rental property, we paid the contractor for half the work up front. He started off well and got a lot done, but then he started slowing down and not showing up every day.

It finally got to the point where he didn’t show up at all and gave us every excuse in the book. He eventually skipped town and took $15k of our money with him.

But that’s not even the largest sum of money we’ve lost. On another deal, we bought a half-duplex that ended up being illegally subdivided.

We didn’t know that when we bought it, and the title company didn’t catch it either. We spent hours with the city and a lawyer trying to figure out how to make it legal. It came down to getting some paperwork signed by the owner of the other side (who was the one who had illegally subdivided it).

After months of negotiating, begging, and pleading it was clear he was not going to sign anything to make it legal. We decided to sell it at a $30k loss to another investor, and let them deal with the stress of figuring out the situation (after fully disclosing the issues of course).

We could have hired a lawyer and gone after the other owner, but it wasn’t worth it to us for our own time and sanity.

While we’ve made a lot of mistakes, all of those mistakes have made us better investors. I like to think of them as learning opportunities, and the cost of doing business.

In real estate (and in life) you win some and lose some, but the goal is to win a lot more than you lose.

What’s your advice for people looking to buy their first rental property?

If I could start all over again on my first rental property, I would probably try to do a house hack instead of buying a purely separate rental property.

The idea of a house hack is you buy a 2-4 unit building, live in one of the units, and rent the others out.

This allows you to get favorable owner-occupied financing with as little as 3% down, and the tenants will be heavily subsidizing your mortgage if not letting you live entirely for free.

This strategy is great because it doesn’t require a lot of money up front and allows you more room to make mistakes and learn with “training wheels” so to speak. It also gives you a lot of room in your budget to save up for the next property if you don’t have a mortgage payment to come up with every month.

How important is saving money to you and how do you track your savings?

In order to eventually reach financial independence, we have a certain number we are trying to hit in savings (or investable assets). So increasing our savings rate is of great importance. 

It’s why we started our side hustles in the first place. I knew it would take 30 or 40 years to get to financial independence with just my day job income and saving 10-15% per year.

Since we have so many different side hustles and rental properties, we actually use Quickbooks to track both our personal and business finances.

This allows us to see our net profit for each of our side hustles as well as our personal balance sheet, which shows us our net worth growth over time.

Why did you start Wealthy Nickel and how are you growing it?

I started Wealthy Nickel for a few reasons:

• I wanted to share our story and help others reach financial freedom through real estate investing
• I wanted to start a business that could hopefully grow into something that would generate some monthly income after leaving my day job
• I couldn’t help myself and wanted to start yet another entrepreneurial venture, haha!

I have learned a lot about blogging over my relatively short tenure (coming up on one year).

Growing a blog is hard work, and one thing I’ve learned is that it’s as much about the relationships you build with other bloggers as it is the content your produce. Obviously I want to create great content that helps people, but there is a lot of strategy and tactics to actually getting people to your blog. 

Most of my traffic comes through Pinterest, but Google is slowly gaining ground as my site matures. I learned early on that I needed to focus on one or two marketing channels instead of trying to do it all.

Is early retirement your ultimate goal and how are you planning to get there?

I don’t think I’ll ever “retire” in the true sense of the word. Once I get the blog up and running, I have another idea for a semi-relate business (becoming a bookkeeper for real estate investors).

It ties all of my passions together – real estate, math, finance, and helping other entrepreneurs grow their business.

But I do want to get to a place where the passive income I bring in covers all of our expenses. That’s why we are heavily invested in rentals and are working hard to earn more money to invest passively in real estate crowdfunding.

I think at our current pace, we should reach our goal in the next 4-5 years.

Where can people find you?

Probably the best place to reach me is at my website, Wealthy Nickel. I would love to hear your feedback or any questions you have on real estate, financial independence, or anything related to personal finance!

Stock Photo from Puttachat Kumkrong @ Shutterstock