Reaching FI With Real Estate With Sunny Burns
Episode 139
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Episode Summary:
Episode Timestamps
ChooseFI Podcast Episode Notes
Episode Title: The Journey to Financial Independence with Sonny Burns
Episode Summary: Sonny Burns, at just 28, is on an inspiring path toward financial independence. Together with his wife, they manage a successful rental property business, owning over a million dollars in assets and generating more than $100,000 in annual gross rent. Sonny shares insights on leveraging scholarships, car flipping, and making strategic financial choices that prioritize family life over traditional employment.
Key Topics Discussed:
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Introduction to Sonny Burns
Sonny shares his background as a project engineer and rental property owner, revealing how he achieved 88.92% of his financial independence goal. -
Sonny's Financial Journey and College Experience
Discusses frugality during his upbringing, merit scholarships, and how he graduated college with a positive net worth through strategic financial choices. -
House Hacking Strategy
Sonny explains the concept of house hacking, their experiences living with family, and how it helped them save for their first property. -
Rental Property Success
Shares detailed insights into their rental properties, the growth in their net worth, and how they manage tenants effectively. -
ChooseFI Hot Seat
Quickfire questions that shed light on Sonny’s favorite resources, advice, and personal finance mistakes.
Key Takeaways:
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Financial Independence
Sonny achieved 88.92% toward his FI number by focusing on passive income through real estate and maintaining a frugal lifestyle. -
Calculated Choices
Living with family allowed Sonny and his wife to save significant amounts for their first property by minimizing living expenses. -
House Hacking Benefits
By purchasing multi-family properties, they not only reduced their living costs but also generated income from tenants. -
Effective Investing Strategies
Sonny emphasizes leveraging scholarships for education and diversifying income sources through real estate and passive investments.
Actionable Insights:
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Consider House Hacking:
Explore options to live in a multi-family property while renting out other units. -
Leverage Scholarships:
Research available scholarships and financial aid options to minimize education costs. -
Invest in Rental Properties:
Look into real estate investing as a means of generating passive income.
Important Quotes:
- "At 30, I won't be stuck in a 9-to-5 job!"
- "Choose the hard path today for an easy life tomorrow."
- "Living with family can be the best financial decision!"
- "Over $1.4 million in net worth, leveraging smart investments."
- "$50,000 in rental income replaced our living expenses."
Discussion Questions:
- What impact does frugal living have on financial independence?
- How can house hacking be effectively implemented?
- What are the advantages of rental properties in creating passive income?
Resources Mentioned:
- Bigger Pockets Podcast - A key resource that influenced Sonny's investment journey.
Episode Mentions:
- Episode on The Power of Scholarships:
Podcast Description:
Sonny Burns shares his inspiring journey to financial independence at just 28, highlighting strategies like house hacking and car flipping, which have led him to own rental properties generating significant income.
Call to Action:
If you found value in this episode, subscribe to ChooseFI on your favorite podcast platform and share this episode with friends who may benefit from Sonny's journey to financial independence.
Note: The timestamps indicated can help listeners easily navigate to specific sections of interest in the podcast.
The Road to Financial Independence: Lessons from Sonny Burns
Achieving financial independence (FI) at a young age is not just a dream for many; it is a realistic goal that requires strategic planning, frugality, and calculated risks. Sonny Burns, a 28-year-old project engineer, along with his wife, has set a remarkable example of how intentional choices lead to financial freedom. They have built a rental property business that boasts over $1 million in assets and generates substantial rental income. In this article, we will explore practical strategies and insights that can help you follow in Sonny's footsteps toward financial independence.
Embrace Frugal Living
Sonny grew up in a household that faced financial challenges, teaching him the importance of frugality from a young age. By living frugally and making conscious spending choices, he and his wife were able to save a significant amount of their income, allowing them to invest in their future.
Actionable Steps:
- Track Your Expenses: Monitor where your money goes each month to identify areas for cutting back.
- Prioritize Needs Over Wants: Differentiate between what you need and what you want. Focus on fulfilling essential needs first.
- Live Below Your Means: Cut unnecessary expenses and create a budget that allows you to save money consistently.
Leverage Scholarships and Financial Aid
Sonny graduated college with a positive net worth by skillfully using scholarships and financial aid. His experience in obtaining the Department of Defense SMART Scholarship not only covered his tuition but also provided a monthly stipend.
Actionable Steps:
- Apply for Scholarships: Research and apply for various scholarships as early as high school.
- Utilize Financial Aid: Fill out the Free Application for Federal Student Aid (FAFSA) to determine eligibility for financial aid.
- Consider Community Colleges: Start your education at a lower-cost community college before transferring to a four-year institution.
House Hacking: A Game Changer
A pivotal moment in Sonny's journey was his decision to house hack—purchasing a multi-family property, living in one unit, and renting out the others. This approach not only reduced their living expenses but also generated additional income.
Key Principles:
- Choose Multi-Family Properties: When looking to buy, focus on properties that can accommodate multiple tenants.
- Invest Locally: Analyze local real estate markets for potential investment opportunities.
- Research Financing Options: Investigate loan programs that require lower down payments, such as FHA loans.
Actionable Steps:
- Consider Living with Family: As Sonny and his wife did, living with family temporarily can help you save for a down payment on a house.
- Renovate Wisely: Make smart renovations that add value to your property and attract quality tenants.
The Power of Rental Income
Sonny's rental property business has allowed him to achieve significant financial milestones. By generating over $100,000 annually, he has positioned himself to approach financial independence.
Cash Flow Management:
- Calculate Expenses vs. Income: Understand how much rental income you need to cover all expenses, including taxes and maintenance.
- Maintain a Buffer in Cash Flow: Keep a portion of your rental income aside for unexpected repairs or vacancies.
Actionable Steps:
- Use Online Platforms for Marketing: List your rental properties on platforms like Zillow, Craigslist, or local real estate websites to attract tenants quickly.
- Screen Tenants Carefully: Establish rigorous screening processes to ensure reliable and responsible tenants.
Embrace Continuous Learning & Networking
Sonny emphasizes the significance of networking and continuous learning in his journey to financial independence. Engaging with the right communities allows individuals to gain insights and share experiences that can lead to greater financial success.
Actionable Steps:
- Join Real Estate and FI Communities: Participate in forums, local meetups, and online communities related to real estate investing and financial independence.
- Listen to Relevant Podcasts: Engage with educational podcasts like ChooseFI and Bigger Pockets to remain informed about investing strategies and financial literacy.
The Importance of Family Support
Sonny’s ability to pursue financial independence was greatly supported by his family, particularly his wife who embraced the journey and made sacrifices alongside him.
Actionable Steps:
- Communicate Financial Goals: Discuss your financial aspirations with family members or partners to ensure alignment.
- Involve Your Family: Engage family members in financial discussions and decision-making to foster a supportive environment.
The 4% Rule: Understanding Financial Independence
To measure financial independence, Sonny utilizes the 4% rule, which suggests retirees can withdraw 4% of their investments annually without depleting them.
Key Takeaways:
- Calculate Your FI Number: To determine your financial independence number, assess your annual expenses and multiply by 25.
- Invest Wisely: Ensure your investments are diversified to withstand market fluctuations over the long term.
Conclusion: Your Path to Financial Independence
Sonny Burns’ journey to financial independence is a testament to the power of strategic decision-making, frugality, and leveraging opportunities. By following these actionable steps and concepts, you can chart your course toward achieving financial freedom. Remember, the road may seem daunting, but with persistence and commitment, you can unlock the possibilities that financial independence offers.
By applying these insights and strategies, you too can transform your financial life and work toward the freedom and options that come with financial independence. It’s time to take control of your finances—let the journey begin!
Sunny and his wife are 88.92% of their way to FI at only age 28 while living just 15 minutes outside of New York City.
[elementor-template id="143609"]Sunny's Financial Beginning
As one of four children in a home with a below-average income, Sunny grew into a naturally thrifty person. That base of financial awareness has led to an extremely successful financial life.
Paying For College
After a successful high school career filled with good grades, Sunny chose to attend the Stevens School of Technology. The tuition for this prestigious school was around $35,000. Sunny was able to keep costs low by living at home, commuting on a motorcycle, earning many merit scholarships, and qualifying for a lot of financial aid.
Even with all of those scholarships, he had to take out student loans to cover the rest of his expenses for freshman and sophomore year. In total, he took out around $15,000 in student loans.
However, in his junior year, he applied and landed a scholarship that paid him to go to college. Not only was all of his tuition covered, but it also paid a cash stipend of $25,000 a year to go to school. He held that scholarship for his junior and senior year which allowed him to leave college with a positive net worth.
Department Of Defense Smart Scholarship
In order to get paid to go to school, Sunny landed the Department of Defense Smart Scholarship in his junior year. However, he says that it is completely possible to get this scholarship in your first year.
The scholarship was a recruitment scholarship for top talent into the military. The deal is that for each year you accept the scholarship, you are required to work for a year at the military facility that sponsored your scholarship. For Sunny, that meant working at Picatinny Arsenal in New Jersey for two years after graduation.
If you are in a STEM field, then you might be able to land this scholarship. It is a competitive scholarship, so you should maintain a 3.5 GPA or higher. Also, you can increase your chances by interning at the sponsoring military facility. Or you can find a reference letter from active military or retired veterans that you know.
When you are awarded the scholarship, it is well worth the effort. It includes full tuition, a stipend of $25,000 a year, and money for books each semester.
Plus, when you work for the federal government over your required term, you may be able to participate in student loan repayment programs. In some cases, the federal government will pay up to $10,000 a year in student loans. In Sunny's case, the government repaid his entire student loan balance.
Car Flipping
Another way that Sunny produced an income in college was by flipping cars. In total, he has owned 19 cars in his life and sold 17. The average profit of each flip was $1,000 and most were done in the span of three years as a way to pay for college expenses.
The side hustle began to unfold his senior year of high school. He worked at a Taco Bell for six months to save up the capital for his first flip. At the end of six months, he quit his job at Taco Bell and bought his first car to flip. It was a 1999 Mitsubishi Mirage with 115,000 miles on it which he bought for $1,400. Two weeks later he sold it for $2,850!
The idea to do this came after watching his dad occasionally flip cars. When he bought his motorcycle for well under market value, he knew there was an opportunity to earn money through this. On average, he bought cars for around $2,250 and flipped them within a few weeks.
I tried not to buy fixer uppers, I just tried to find cars that were really good deals...What I would recommend, is for people who really want to do this, is to have your cash and be the first one to show up.
He found these deals on Craiglist, but would also recommend Facebook Marketplace. Sunny claims that he is not a mechanic, but just looked for good deals.
How To Flip Cars
If you find a good deal, then you need to jump on it. Be the person who can show up with cash on the day you see the listing. Remember, good deals will go quickly so you need to be ready to call immediately and show up with cash.
Processing the sale is not as difficult as it might seem. Sometimes Sunny will go to the DMV with the seller to title, register, and inspect the car. By going to the DMV, it was a more expensive process due to sales tax.
However, his preferred way is to "inherit the title" by paying the title fee. In this case, the seller would drive the car to Sunny's driveway and sign over the title as the seller, similarly to a wholesale deal. Then when Sunny found a buyer, he would have the buyer sign the title as the buyer. Check out Sunny's resource on how to flip cars.
Listen: Finding Your Side Hustle Idea With Nick Loper
Real Estate On The Path To FI
After Sunny graduated college, he started listening to BiggerPockets which gave him many ideas about real estate and house hacking. Convinced they wanted to pursue this opportunity, Sunny and his wife decided to make the hard choice to live with his parents in order to save up for a down payment.
At the time, they were making around $100,000 together and with cheap rent of only $500 a month for his bedroom, they were able to save $75,000 in 2 years for a down payment. With a total of nine adults in a smaller home, it was definitely hard-earned savings.
[Moving in with family] was a sacrifice we made, kind of towards investing in our future. And eventually, in this plan to invest in a rental property.
First Property
Once they had the down payment, they started searching for their house hack opportunity. It took over a year of actively looking to find a deal in a competitive market.
The property had four units with three-bedroom apartments in Garfield, New Jersey. They were able to score this property because it was bank-owned real estate and was only available to buyers that would live on the property. The bank, Wells Fargo, offered this Home Path program at the time, which meant that for the first 12 days a property was listed, only owner-occupants were able to make offers, not investors.
Immediately after seeing the place, they contacted the real estate agent and put in an offer.
If you live on the property, [the bank] figures you're going to have pride of ownership. And you're going to take better care of it than an investor who's not really there.
Originally, the property was listed for $475,000 but they were able to buy it for $430,000 due to a decommissioned oil tank on the property. Sunny and his wife were able to secure a mortgage with no PMI with only 10% through a small local bank, Trustco, which also offered a competitive interest rate.
Listen: Real Estate Investing Strategies With Paula Pant
Finding Tenants
When the couple bought the property, it was completely vacant. Although it was great that they could place their own tenants, it was difficult to deal with the holding costs of an expensive mortgage and taxes. However, the couple made it work.
Sunny and his family moved into the worst unit on the property. His in-laws moved into the best unit on closing day for $1,000 a month instead of the market rate of $1,500. Immediately, they renovated the other two units to get them ready to rent out. It took three months to complete the renovations.
Once the units were ready, Sunny listed them on Craiglist and Zillow for $1,700. Each Saturday and Sunday they would host an open house. Plus, they offered a one-weekday showing of the unit.
The applicants had to meet a strict list of requirements set by Sunny. Their income needed to be 2.5 times the rent with a credit score of at least 630. Plus, they needed to pass a background check.
After finding tenants for both of the units, they were able to finally earn a small amount of cash flow while living on the property for free. Waiting for the right tenants paid off because it allows for a good tenant relationship.
Listen: Podcast Episode House Hacking with Coach Carson
Second Real Estate Purchase
After buying their first house hack in 2015, the house was appraised for $630,000 six months later. With the increase in value, they were able to take out $67,000 through a cash-out refinance to use for their next property.
With the hot market, it was still difficult to find deals. In 2017, Sunny found a 3 family home for sale by owner on Craigslist for $375,000. He contacted the owner the day it listed and bought it for $350,000.
That property has recently been appraised for $525,000.
Funding FI
The goal of investing in these properties was to produce an income to live off of in the future. The liabilities of two large mortgages can seem overwhelming, but with the rental income, it is a comfortable way of life. Currently, they are able to live for free and earn a net profit of $20,000 a year.
As a family, they spend around $51,000 a year. They hope to gap between rental income and expenses in the future as the mortgages are paid off and they find more properties to invest in.
Family And Financial Independence
On their current path, Sunny and his family will likely be FI when Sunny turns 30 in two years. However, these choices have already made a huge impact on their life. Sunny's wife is able to stay at home with their two children. Eventually, the goal is to become a stay at home family when Sunny leaves government work for good.
Check out the recap of this episode here.
How To Connect
You can reach out through his blog, FamVestor. Also, he is on the ChooseFI forums regularly and hosts events for the ChooseFI local New Jersey.
The Hot Seat
Favorite Blog: Bigger Pockets
Favorite Article: Sunny Burns and the Quest for a Frugal, Fantastic, Financially Independent Future
Favorite Life Hack: Go to the library!
Biggest Financial Mistake: I bought stocks in a brokerage account in a non-taxed advantage account instead of a Roth IRA, getting taxed twice.
The advice you would give your younger self: Wishes he was bolder growing up and take more action at a younger age.
Bonus! What purchase have you made over the last 12 months that has brought the most value to your life? Armed Forces Vacations Club week-long vacations for a BOGO vacation.
Related Articles
New to FI? Be sure to check out Episode 100: Welcome To The FI Community!
