The Markowitz portfolio framework is widely used to determine static asset weights, while Merton’s dynamic approach allows allocations to adjust with changing market conditions but is mathematically challenging and less practical. We address this gap by applying machine learning to dynamic portfolio optimization in the spirit of Merton, incorporating economic regimes defined by the VIX volatility index. An artificial neural network is trained to learn optimal allocation policies across regime-switching environments and is compared with classical regime-agnostic and theoretical regime-switching Merton strategies. On synthetic data with realistic constraints prohibiting borrowing and short selling, the machine learning strategy outperforms traditional benchmarks. Two empirical backtests—using monthly data from 1990 to 2025 and annual data from 1928 to 2025—show that accounting for regimes enhances performance and robustness.

Aaron Murphy grew up doing free renovation labor on family flips that never quite worked out, and he walked away from real estate convinced it was a scam. 

Years later, sitting in a corporate sales meeting, a VP told the room they had to keep working weekends or they wouldn’t get paid, and something in Aaron snapped. He ran the numbers on dividend stocks, the 4% rule, and real estate, and real estate was the only path that looked mathematically achievable on a $30,000 salary. 

He bought his first house hack in 2016 with $11,900 down. Eleven years later, he and his wife have replaced both of their incomes, built a 75-unit portfolio with an in-house construction crew, and are currently traveling the world together while he runs the business remotely. 

Here’s how he built it.

Your first deal was an FHA house hack where you lived in the basement. How did that actually work?

D.C. home prices were around $700,000, which felt impossible on my salary, so I learned about FHA loans and found a more affordable area called Hyattsville just outside the city. 

I put down $11,900, about 3.5%, on a five-bedroom house, moved into the basement myself, and rented out the other four rooms for $700 each. My mortgage was about $2,000, so between the room rent and my mortgage, it basically broke even after utilities and maintenance. But it meant I stopped paying rent entirely, which let me save aggressively toward my next deal.

Your second deal, a $96,000 triplex, went sideways almost immediately. What happened, and how did it eventually help your growth?

The seller told me the property would be delivered with all three units occupied and paying rent. Two weeks before closing, they said only one unit was actually occupied and offered photos of the other two as proof they were livable. 

I insisted they honor the contract and deliver it occupied, since nothing specified how they had to screen tenants. They found people willing to move in immediately, and those tenants became my first two evictions. I put about 20% down, roughly $19,000, then put in another $20,000, turning over the vacant units after eviction. I eventually got total rent up to $1,900 a month across the three units.

I still own it, and years later, after it had appreciated significantly, I did a cash-out refinance and pulled out $50,000, which became half the seed money for my BRRRR portfolio.

Once you pivoted to BRRRR full time in 2022, what did a typical deal actually look like?

My wife and I moved into a $99,000 row house in Baltimore’s 21202 ZIP code to be closer to the deals. A typical BRRRR since then looks like buying for around $100,000, putting in $30,000 to $40,000 in renovations, and adding another $20,000 for closing costs on both ends of the deal, which people often underestimate in this price range. 

All in, I’m usually around $150,000 to $160,000, and I’m appraising properties between $200,000 and $220,000. I’ve kept at least one renovation going every four to six weeks since 2022. 

On my first two BRRRR deals, I went a combined $65,000 over budget using third-party contractors, which nearly wiped out my starting capital. On my third deal, I ended up working alongside day laborers myself for four to five months to finish it, learning construction hands-on, and that experience let me build an in-house crew that now works exclusively on my properties five days a week.

You’ve talked about a specific framework for getting mentors for free. Can you walk us through it?

The first step is reframing what a mentor even is. Most people want one person to hold their hand and absorb the emotional risk of a deal working out, but nobody actually wants that responsibility. Instead, treat a mentor as a network of people you can ask specific, practical questions to, people who are actually doing what you’re trying to do in your market. 

The second step is getting in proximity to those people at meetups, forums, or industry events and asking real questions tied to actions you’re already taking, like whether $1,500 sounds right for a two-bedroom in a specific ZIP code, instead of generic brain-picking questions. 

The third step, the one most people skip, is going back and telling them exactly how you used their advice and what happened. That feedback loop is what turns a casual contact into a real, ongoing relationship, and it’s worked for me in real estate, competitive debate, and software sales alike.

What does your portfolio look like today, and what convinced you to take an extended trip instead of continuing to scale?

We’re at 75 units now, mostly single-family and townhomes with some duplexes and triplexes mixed in, all long-term rentals across Baltimore and the surrounding counties. At the pace of one renovation every four to six weeks, I realized that in 10 years, I could have 200 to 250 of these properties, and I had to actually ask myself whether I wanted that. 

My wife and I built the portfolio’s cash flow specifically so we could take an extended trip around the world without derailing retirement savings or leaving us in a bad spot if we couldn’t find jobs again afterward. I’m still working daily during the trip, running property management and construction meetings remotely, but the portfolio is what made the trip possible without it feeling irresponsible.