In many ways, Todd Baldwin’s story feels like the stuff of real estate dreams. At only 28 years old, he owns six properties and is a self-made millionaire from the income he makes renting them out.
After growing up poor, Baldwin has long viewed real estate as the way to break out of that cycle and build wealth. He and his wife, Angela, got their start by building their first home and renting out rooms to friends. Once they paid off their debt, they looked to expand their reach and bought more property in their home city of Seattle.
“If you are interested in it or have the means to do it, just start,” Baldwin advises those curious about renting out multiple properties. We spoke to Baldwin about setting real estate goals, being a landlord during the coronavirus pandemic and navigating the current market amidst uncertainty.
Inman News: Tell us about your properties. How many do you have and what are they like?
Todd Baldwin: Right now I own six houses in Seattle. Five of the houses are single-family homes, and one of them is a duplex.
How did you first get into the real estate industry? Tell us about your first rental.
Shortly after dropping out of college, I was making six figures at a sales job. I actually rented a room in a house and was being super frugal, just saving every penny I could for a down payment on a house of our own. My girlfriend and I weren’t even married yet, but we were looking at condos for sale.
We realized that we could build a brand-new house in South Seattle for the price of a 30-year-old condo that’s maybe 500 square feet in the greater Seattle area. So we decided to build a new construction home. It was too much house for just us, so we occupied the master bedroom and rented out the other bedrooms to my old college friends.
And then things started taking off?
Absolutely. So nine months later we built the second house. And that was a six-bedroom, three-bathroom house. We rented that out all by the bedroom. The logic behind that was that in the greater Seattle area, a studio apartment can go for $1,800 or $2,000 a month. So we had these bedrooms that we were renting out for $800-$900, all utilities included. We were able to make quite a bit above market value for rent while the renters were leasing out a bedroom and paying less than half of what they would pay for an apartment.
And then we just kind of kept buying houses. Over the course of four or four-and-a-half years we ended up buying six of them. Now, I just do real estate full time. We gross around $38,000 a month in rent and about $13,000 of that per month is pure cash flow and profit. It got to the point where I didn’t really need to have a day job and could just double down on real estate.
Sounds like the dream for so many. Is this something you were working towards from an early age?
I grew up really poor. I was raised by a single mom, and I got my first job when I was 12. And I had always known that I wanted to build wealth, and real estate was a big part of that. I had no idea I would do it by the bedroom, I just assumed I would own apartment buildings. But real estate’s been in the plan since I was a kid.
Has the coronavirus pandemic affected your business?
Yes and no. We live in a duplex right now, and we have the other half of the duplex on Airbnb. We also converted one of the garage spaces into a studio apartment. When the coronavirus hit, we went from 100 percent bookings — like literally every night of the month being booked — to the booking rates dropping like flies. People were canceling right, left and center. So we pivoted from Airbnb, and we decided to rent out those two units in a more traditional model.
So that has changed, but as far as not collecting rent, that hasn’t happened to us. We’ve collected 100 percent of rent every single month. It sort of happened that my tenants were folks who can work from home. The ones that can’t work from home… I think out of 35 tenants, I had four or five that got furloughed or laid off but had their unemployment benefits. I’ve seen no disruption, at least financially speaking.
But the pandemic did show you that outside factors can influence a business in ways you can’t even imagine?
Absolutely. Being able to pivot is huge. If we hadn’t had the idea that we were going to pivot from the Airbnb model, we would have no money coming in from those two units. And I do feel very blessed that the business that we decided to start with is housing, because if we owned the most common bar in town, we would be done. I do feel very fortunate and very blessed, but this was an awakening to always be prepared.
What advice would you give someone who is your age and wants to get into the industry but doesn’t have a lot of money to invest? Many millennials in big cities feel pushed out of the market.
When I bought my first house, I only had to put 3.5 percent down. If you can, take advantage of a first-time homebuyer program. And honestly — a lot of people will turn their nose up at this — but I would highly recommend “house hacking.” You get into the place, live in the master bedroom and rent out the other rooms. It is a roommate situation, but when you can live in your own house completely for free, it changes the game.
If you are interested in it or have the means to do it, just start in however a small way you need to start. Get it started and you can become financially free pretty quickly if you know what you’re doing.