Lisa Phillips isn’t your typical real estate investor.
She’s not interested in flipping properties or nabbing a deal on the most expensive home in town. When she buys properties, she takes care to invest in the surrounding community — and is teaching other people to do the same.
As the founder of Affordable Real Estate Investments, she helps Black professionals with middle-income jobs understand how to buy and rent out homes whose value has sunk to under $30,000, typically in majority Black and brown neighborhoods. “[My clients are] putting money back into their communities, which brings up everyone’s value. They’re not just talking the talk. They’re walking the walk.”
But it took a few hard lessons to get where she is today.
Going From Foreclosure to Real Estate Investor
Her story starts in Las Vegas in 2005. Phillips was an electrical engineer who had just purchased a $400,000 home with 0% down, during the real estate boom when banks were practically printing money. But her mortgage payments ended up being more than she could afford, and she fell behind. “When I rented it, I couldn’t get what I was paying [in mortgage payments]. I had to pay $900 extra per month so the mortgage stayed current,” Phillips says.
Later, when the housing bubble burst, the home was valued at $160,000 — but she still owed more than half that. Phillips learned a valuable lesson: “Just because they give you $400,000 doesn’t mean you should take it.”
In 2008, she moved to Ohio after being laid off and bought a $35,000 condo in a diverse, working-class neighborhood, but was still hemorrhaging money on the Las Vegas house. When the tenant moved out, she foreclosed on the property rather than continue to pay back an investment that didn’t make financial sense. But surprisingly, the $35,000 condo, with its $340 monthly mortgage payment, started to pay for itself — and Phillips saw a new kind of potential.
Phillips, who now lives in Hampton Roads, Virginia, purchased two more rental properties under $35,000 in Baltimore, Maryland, and Richmond, Virginia. What did these properties have in common? Both were multi-unit properties in majority Black and brown neighborhoods. And for Phillips, that’s made all the difference.
“The reality is, when you find info on real estate investing, those investors tend to be white. I had to quickly realize there was a disassociation from the working-class mentality,” Phillips says. Within the mainstream real estate community, was a rash of racist and classist stereotypes, with people calling the neighborhoods drug-infested warzones. “I am from these areas and I was low income. What they’re saying about people isn’t jiving with what I know.”
Investing in Black Homeowners, as a Black Woman
Out of her years of experience, Phillips built Affordable Real Estate Investments — essentially a one-woman show teaching first-time investors how to begin their real estate journey. Through training videos, podcasts and YouTube videos, courses, and consultations, she helps investors who want to replicate her success. Now, Phillips’ clients are typically Black professionals with white-collar jobs who were first in their families to go to college, a background that echoes her own.
When she began investing in real real estate, she said the experts in the room seemed unaware of their own racial and class privilege, assuming that she, like their affluent white clients, must have family members she could ask for $80,000 loans. Phillips, raised without generational wealth, was taken aback by this easy assumption.
“As a Black American, the reality is I get paid 82 cents on the dollar,” Phillips says. “[White real estate investors are] making more money, they’re not redlined, they don’t pay more for insurance, they probably have more equity in their home. I’m 20% more likely to get rejected even if I have the same credit profile and [make] the same amount of money. I know those studies because I have to know them. The people giving [real estate] advice have no clue.”
What Phillips has built is different. Instead of buying low to sell high, she prepares her students and clients to purchase properties affordable to both them and working-class families who could live in them long term. That means no flipping houses and not trying to appeal to wealthier, usually white homeowners who tend to displace their Black and brown neighbors while in search of trendy neighborhoods. “Some people don’t have feelings toward the community,” she says. “They don’t see it as an extension of them.”
Part of Phillips’ business and community is a Facebook group with 11,000 other like-minded investors. “A lot of people talk about going back into their neighborhoods and investing in them. That’s what we are doing.” Her investors are spread across the U.S, from New York to Atlanta to Southern California, and many of them invest out of state because they live in expensive cities.
Investing in real estate in other states is considered by some to be risky, but it can be done, says Lisa Phillips. It requires more due diligence and finding the right property management company.
How to Invest in Low-Cost Homes
There are many resources online to help you become a real estate investor, but much of that information is not geared toward people who don’t make six figures and who don’t have generational wealth or pre-existing connections to the real estate world. Phillips has a more specific, accessible focus: helping Black professionals with middle-income jobs buy and rent out homes under $30,000. Here’s the advice she gives to her students and clients.
1. Build savings
“I work with people who want to invest but have $4,000. We need them to [reach] $12,000 to $15,000,” Phillips says. That amount can buy an income-generating duplex in a working-class neighborhood, she says. “We are definitely not trying to wait 30 years or save for a big property,” she adds.
To reach that goal, she recommends looking at what you can realistically save in a month, both easily and aggressively, and then pick the amount in the middle. From there you’ll be able to tell how long it will take to save. For example, if you know that you can reasonably save $400 per month, then getting to $12,000 saved will take two and a half years. During that time, you could educate yourself on real estate investing, research housing markets, or even take up a side hustle.
2. Use the CPR technique
Once you’ve decided on an affordable market, then you can start to look at individual properties. Phillips suggests using the CPR technique, a three-pronged approach that involves looking at crime statistics, photos in the online listing, and how much rent can be generated from the property.
“Put them together in context,” she says. You can find crime data online or ask the local sheriff’s office. Photos can be reviewed on sites like Zillow and Redfin, but be cautious. “If there is only one photo, it’s probably a mess inside,” she says. As for rent, make sure that the potential rent collected will meet or exceed the mortgage payment so you’re not losing money on the investment.
3. Pay less than half of what you can afford
Here’s where people tend to get lost, Phillips says. Many stay in the homeowner mindset, thinking they need to save up tens of thousands for a down payment on a single-family home worth hundreds of thousands. But you don’t have to buy one expensive home in an expensive neighborhood. If you have a healthy amount of savings, you can maximize your investments over multiple units. “If they have $50,000 saved up, we can buy a couple duplexes in that price range in working class or low-income neighborhoods,” Phillips explains.
4. Buy multi-unit properties
Multi-unit properties allow you to generate income from multiple families, making your investment more profitable. But don’t think you have to buy a whole apartment building. “This can look any way you want it to look,” Phillips says. “Most people want something modest, they don’t want to buy 60 units.”
5. Pick the right property management company
Phillips says one of the biggest conceptions about rental property investments is that you must become a landlord. “I do not take phone calls,” she says. “My property management team does.”
A property management team handles all tenant interaction, which includes finding renters, negotiating leases, hiring plumbers, and maintaining the building. You typically pay a property management company a percentage of overall rent. This can range from 7% for a small town to 10% to 12% for a city, so you’ll need to factor that cost into your expected cash flow. Make sure the area has multiple lost-cost property management companies, or you could be stuck with a subpar landlord. Finding the right one is important because they’re “an extension of what takes care of your investment,” Phillips says.
Though her journey to real estate investing was long-winded, Phillips is thrilled to have built a community of first-time investors. She sees her method of investing as a way of “reaching back” into working-class communities that are typically underserved. Many of her students and clients have found meaning in this work, especially since they never thought purchasing a rental property (or multiple) would be possible on their middle-income salaries.