Dr. Joseph Asamoah arrived in the United States at age 24 with just $100 in his pocket. After receiving his Ph.D. and MBA, Joe reached financial independence just 18 years later through investing in real estate.
But Dr. Joe isn’t just saving as much money as possible for himself. He is living proof that real estate investors can create a positive impact on the communities where they invest. “I strongly believe that we can make money and make a difference in other people’s lives,” he says. “This is why I love what I do. I don’t think anyone has to choose between one or the other.”
Dr. Joe recently unveiled his latest property renovation at a ribbon-cutting ceremony. The occasion? He officially handed over the keys of a $750,000 property to a Section 8 tenant, a single mother of five, who survived abuse and homelessness. It’s part of his “Tier 1” model for Section 8 housing: Roll out the red carpet for the best voucher holders.
Coming to America
“I arrived in D.C. with two suitcases, $100, and only knowing one person in the United States at that time. It was a sink or swim situation,” he says. “And I opted to swim.”
Before coming to America, Joe was enrolled in a Ph.D. program designed to bridge the gap between engineering and business disciplines. As part of the program, he had to complete a research project within an established company, so he found a telecommunications company in the states and moved.
After completing his Ph.D., he went on to work for several major U.S. companies including Verizon, HP, and IBM—where the newly minted doctor had his first brush with real estate investing.
First property: The D.C. house
Joe’s first house was a complete disaster. “I did everything wrong and got burned big time,” he says.
After living in the states for just two years, Joe bought his first property in October 1987 at age 26. “My boss at that time was fired from his job due to a reorganization, and he encouraged me to consider investing in real estate because of the passive income potential.”
In order to learn everything about investing he could, Joe attended a local real estate investing association.
“I met someone that wanted to sell me a tenant-occupied house in Washington, D.C. He assured me the tenants were fantastic so I bought the house for $47,000 and forecast the cashflow at $50 per month.” That comes to $111.44 in today’s dollars.
“After closing, I found out the tenant hadn’t paid rent for more than three months and had racked up a $5,000 water bill.” In today’s dollars, a horrifying $11,143.71. Dr. Joe eventually managed to turn the situation around and the property is now worth $750,000. The current cash flow is more than $4,000 per month.
“Everything was going wrong and I felt like calling it quits with real estate investing entirely,” he says. “In hindsight, I am grateful I had such a bad experience so early on—it taught me exactly what not to do in all my future deals.”
Dr. Joe set about investing in additional rental properties, using another strategy that hadn’t yet been named in the late ’80s: the BRRRR strategy (buy, rehab, rent, refinance, and repeat). He purchased most of his properties at courthouse auctions and trustee sales in Maryland. Competition at these venues wasn’t as cutthroat as it is today: A few usual-suspect buyers would attend, and it was hit or miss whether you’d come away with a winning bid.
He renovated these auctioned properties, which created enough initial equity to pull some of his cash back out to repeat the process.
“I have always focused on appreciation and cash flow,” he says, which works well in the D.C. area. “I’ve never purchased a property that started with negative cash flow, but I’ve purchased homes that broke even with a calculated risk that the area would appreciate in both values and rents over time.”
Luckily, for Dr. Joe, those bets paid off and the properties quickly started generating positive cash flow.
First encounters with Section 8
Both Dr. Joe’s nuts-and-bolts investing strategy and his personal mission entwine around a single core: Section 8 housing.
Section 8 can come with a bad reputation, but Joe wants to set the record straight. In wealthy D.C., Section 8 sets far higher rent ceilings than it does in impoverished areas, like Baltimore. That, in turn, means Dr. Joe could place Section 8 tenants in solid working- and middle-class neighborhoods—not just blighted neighborhoods.
“During the mid-1990’s real estate downturn, I was having difficulty renting a property in D.C. and a prospective Section 8 tenant (with a net worth of zero dollars) scolded me because my house didn’t have hardwood flooring, stainless steel appliances, and a Jacuzzi tub,” he says. “She felt my house—where I lived—was not worthy of her and her family!”
After more showings, he realized that there was a group of Section 8 tenants that, unlike the stereotypical images, take tremendous pride in their neighborhoods. Immediately, Joe sensed an opportunity in this subset of voucher holders so he took a chance on a pair of Section 8 tenants, and it paid off.
“There is typically huge demand and long wait lists for Section 8 vouchers and housing—in good times and bad,” he says. “Many landlords overlook these tenants, to their own detriment, but it creates an enormous opportunity for me if you follow the strategy.”
Building a Section 8 strategy
“I started targeting these high-quality, low-entitlement voucher holders and developed a business model and formula,” he says of his purchasing properties in desirable areas. “I select, renovate, and stage my properties specifically to attract quality voucher holders.”
Believe it or not, in times of uncertainty, voucher holders are some of the most reliable and stable tenants, so you want to take care of them.
Though his real trick lies in passing every annual Section 8 housing with certainty. “At eight pages long, my rental application is daunting. In it, I let the applicant know I will be pull credit, talk to their previous landlord(s), and go to their current home to see how they live,” he says. “Is it intrusive and extra thorough? Of course! But for the quality of my BRRRRs, I have no shortage of applicants.”
Dr. Joe also uses a $50 incentive for each tenant if they pass their annual inspection the first time around, with no work orders or reinspection required. This strategy embodies Dr. Joe’s beliefs perfectly: He takes oft-adversarial relationships and finds a way to align the other parties’ interests with his own.
His long-term strategy also involves three sets of skills needed for any Section 8 investor:
“You need to know how to find good deals, to run the numbers, and to renovate properties profitably,” he says.
Most of the job involves nurturing and managing tenant relationships. “If you treat your quality voucher holders well,” he says, “they take good care of your property, pay their portion of the rent on time, and continue to renew for a long time.”
He focuses on minimizing tenant turnover, which is a landlord’s greatest expense. In fact, Dr. Joe’s longest tenant has been renting from him for more than 23 years on a 15-year mortgage! In short, screening is the key: While it may be easy to get someone into your house, it’s a lot harder to get them out.
Building relationships with the housing authority staff
Dr. Joe developed a strategy of taking the time to get to know housing authority staff and management by attending their meetings and becoming a member of their landlord advisory group. “What I’ve realized,” he says, “Is that many housing authority staff are just as frustrated with their bureaucracy as I am.”
Every investor, no matter how accomplished, has made countless mistakes along the way—Joe is no different. “If I had to do it again, I would have sold some houses in lower- appreciating areas sooner,” he says, “And kept more homes in desirable areas.”
Even still, it hasn’t been all smooth sailing: Dr. Joe has had to evict tenants whose rent was $0, employed contractors that arrived on the job drunk, and worked with terrible lenders who had closings fall apart the day of settlement because of their mistakes. All experiences that taught him lessons for the future.
Evolving investment strategies
At 42, Joe was achieved financial freedom and quit his full-time job at IBM. He wanted to spend more time with his family and less time traveling for his job.
The truth that Dr. Joe has learned since then, is that the ten- ant is your real asset. Keeping that in mind, he’s learned to nurture his relationships with tenants and truly takes care of them so that they would never dream of moving.
“My tenants become part of my family, and they feel it. I send flowers to all my tenants on Mother’s Day, gifts around Christmas, and I give a $50 gift certificate to kids who can show me a report card with straight As,” he says. If you roll out the red carpet for your Section 8 tenants in this way, they will take care of you by paying the rent without fail, showing “pride of rentership” by taking care of the property, and they will stay a long time.
6 tangible steps to succeed in real estate
- Work on yourself first. Allocate time for education and training in order to understand your strengths, weaknesses, competitive advantages, and disadvantages.
- Decide on a strategy. Based on your goals, finances, risk tolerance, and availability, choose a strategy.
- Learn the basics of your chosen strategy. While it’s not necessary to be an expert when you begin, you still need a foundation in the basics to avoid losing money.
- Identify and work with a mentor or coach. As the saying goes, a wise man learns from his mistakes, and a genius learns from others’ mistakes. Find a mentor that is knowledgeable in your area of focus, able and willing to provide guidance, and has a proven track record of success and real- world experience.
- Proceed immediately to your first deal. Education alone will not make you wealthy—it takes action. Do whatever it takes to get your first deal under your belt! Don’t wait for the “perfect deal” or “perfect time” to start, because neither exists.
- Respect the Golden Rule. Treat your tenants and vendors with respect, dignity, and fairness. His tenants are the reason Joe has been able to achieve financial independence and build real wealth. “Without them, none of this could have been possible,” he says.
Today, he finds all his deals from referrals brought to him through his Joint Venture (JV) program that Dr. Joe created to uniquely differentiate himself from other investors. Joe believes the best way to learn how to invest is to simply to do a real estate deal.
Of course, new investors often find their first deal to be an expensive education where they inevitably make mistakes. So, the next fastest way to learn is by shadowing a successful investor to watch how they execute a transaction from start-to-finish and to witness the good, bad, and ugly of real estate—this is where his JV program comes in.
“In the end,” he says, “it’s important to always remember that real estate investing requires hard work, patience, and a strong business system more than anything else.”
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Republished with permission from the BiggerPockets Wealth magazine April/May 2020 issue.