November 2023

Dave:
Hey, everyone. Welcome to On the Market. I’m your host, Dave Meyer, joined by Kathy Fettke, Henry Washington, James Dainard, fresh back from BPCON 2023.
Henry, what was your favorite memory of the conference this year?

Henry:
Oh wow. My favorite memory of the conference? Man, I had a lot of favorite memories. I think one of the best moments was getting to meet so many fans of On the Market. So I had a couple of pieces of feedback. One, tons of people said, “Hey, this is the show. This is the one I listen to. This is the one that gives me the information I need,” which is great feedback. And the other thing I heard multiple times was that there’s a lot of people in my camp about investing in the unsexy markets, as much crap as y’all give me about it. They were like, “No, we’re with you. We get it. We like these unsexy markets. There’s cashflow out there.” And I’m like, “That’s what I’m trying to tell people.”

Dave:
Well, if people agree with that feedback, they’re going to really like this episode because we’re going to be talking about a bunch of unsexy markets today.
Kathy, what about you? Any favorite memories from the conference?

Kathy:
Dave, your keynote was fabulous. You just looked like a pro up there and you simplified complicated topics and put them in little cartoons. It was a big comparison from last year where it was very heady and big graphs that no one understood. So just loved it. Loved it.

Dave:
James the emcee did a great job emceeing the conference. Do you have any highlights?

James:
Well, I agree with Kathy. Your keynote speech was incredible. You absolutely killed it.

Dave:
Oh, thank you.

James:
But it was hard to compete against the Velociraptor and Universal Studios.

Dave:
Dude, I can’t believe no one else said that yet.

Kathy:
That was amazing.

James:
I was talking about it, watching everybody scream, be terrified. Best ride I’ve ever been on. When I heard BiggerPockets rented out Universal Studios, I was like, okay, this will be kind of cool. I thought it was going to be like a mellow kind of meetup group thing. Way better. No lines. We got to rip the roller coaster. I don’t know if my voice was blown out from talking in the hallways too much or screaming on the Velociraptor, but either way, it took a full day for me to recover from BPCON.

Dave:
If you guys didn’t see this on Instagram or anything, BiggerPockets, for the conference this year, literally rented out all of Universal Studios. So I guess, probably normally, 50,000 or a hundred thousand people are there in a day, and we had 2,500 people. The whole place was open. There was bars everywhere. Free food, free games. It was so much fun. And the whole On the Market crew, we were obsessed with rollercoasters and we were just lapping rollercoasters for four straight hours. It was extremely fun.
Well, if y’all didn’t hear, BiggerPockets Conference was awesome this year. Next year, they’re doing it in Cancun. It’s going to be at an all-inclusive resort, and every year, they just keep getting better, so highly recommend it if you haven’t been yet. And if you have feedback similar to Henry’s where you think that On the Market is the best real estate podcast, best BiggerPockets podcast, best anything, we really appreciate reviews. So if you love this show, please give us a review on either Spotify or Apple.
Now today, we are going to get into a really, I think, helpful topic for a lot of people. We’re going to be talking about a boring old strategy, long-term rental property investing, and we’re going to identify eight different markets where you can still find cashflow. They also have really strong fundamentals like population growth and being under the median home price for the United States right now. And so these are markets that, honestly, most investors can get into. So hopefully, this information will help you if you’re sort of stuck trying to figure out how to invest in 2024. We have some markets and strategies that are going to work for you.
Before we get into this, all of these markets, the eight markets that we pulled, have to be under the median home price in the United States because, at least if you agree with me and a lot of us on this show, affordability sort of reigns right now. I want to quiz you all about what you think the median home price in the country is right now, according to HUDD, the Housing and Urban Development Department.
James, so what do you think the median home price is in the US right now?

James:
I think, last time I checked, it was around $410,000. But that was a few months ago when I looked, but $410k to $415, right in there.

Dave:
Henry?

James:
$475,000.

Dave:
Kathy?

Kathy:
I’m just going to go with a clean $420k.

Dave:
Classic California answer.

James:
Malibu lifestyle.

Dave:
Kathy, you won though. It is $430,000, according to HUDD. And these estimates, just so you all know, they vary a bit based on the source. So HUDD has one. Zillow has one. NAR has another. But they’re all, from my observation, between about $400k and $440k right now. And that is up somewhere between one and 3% year over year. And so when we get into the eight markets we’re covering today, all of them will have the median home price, and I think all of them are pretty well under that mark, so they’re relatively affordable for people to get into.
We are going to take a quick break, but then we’ll be back with our eight excellent markets for investing in 2024.
All right, James, kick us off with your first market. And again, just to remind everyone, these are markets that we think work for most investors, even in a high interest rate, somewhat riskier environment like we’re in right now, because they are highly affordable, they have great fundamentals, and they offer cashflow. So, James, what’s your first one?

James:
All right. So I’m excited to talk about this one because I was just there. I was on my conquest of the Carolinas and I was checking out North Carolina, South Carolina, all the coastal communities. And my first market I want to talk about is Myrtle Beach, South Carolina. I was there with my daughter and my family. We had an absolute blast. She got henna tattoos, great time. But more importantly, it’s a very solid market to look at.
And what we’ve seen is we’ve seen a lot of these coastal community towns, the vacation towns, after the pandemic, people have just been like, “Forget it. I’m just moving to where I want to hang out and have fun.” And this is one of those towns that people have been moving to. It is a very, very strong investing market. The average home price is at $336k, so it’s below the median home price. I feel like it has growth and it could easily get to the median home price over the next couple of years.
And the population is growing. It is grown nearly 4%, 3.87% year over year. And it is that whole pandemic lifestyle. People are like, “I want to live where I want a vacation, I think,” and it is growing. And I don’t blame them. When we were there, the beaches were awesome. The weather was great. It was very good people watching on the strip, had a good time. So I think people have learned that they want to live where they want to live and that’s why it’s growing so much.
And as far as an investor goes, back to that 1% rule, we all know about that 1% coverage rule and it’s been very hard to achieve the last couple of years with the pricing going up, and then interest rates are helping a little bit. And it’s kind of became an outdated metrics, but it’s close. It’s at 0.67%. It’s closer than most market is to get you to that 1% rule. So it’s got high growth. It’s got good income. And not only that, it’s below the median home price and it’s a great place to live. So based on quality living, I think it has a lot further growth and we’re really seeing this in these coastal community towns.

Dave:
Nice. That’s a great one. I just want to provide two points of clarification for everyone. First of all, population of growth of 4% is insane. The national average is about 1%, so four times the national average. And, James, I think in your research, you said that it was named the fastest growing city over the last year by US News and World Report, so that is obviously strong fundamentals.
Then I just wanted to follow up on the 1% rule that James just mentioned. What he’s referring to, if you haven’t heard, is something called the rent to price ratio. You divide one month of median rent by the median home price for a given market, and what you get is usually somewhere between 0.5% and 1.5%. And back in 2010, 2012, some investors came up with this rule called the 1% rule where you had to get it above 1%, which signified that you could probably get great cashflow. Now we all know, it’s not 2010 anymore, and so finding markets that average 1% on that rent price ratio is exceedingly rare. There are probably less than 10 in the entire country.
That doesn’t mean that you can’t find cashflow in these markets. You still can, because we’re in a different type of market environment. And I’ve actually done some research into this, and if you have a rent to price ratio of anywhere from 0.6 to 0.7 or above, there’s usually cash flowing properties in that city. Now remember, if I’m saying that the rent to price ratio for that market is 0.6 to 0.7, that is the average. So that means there are deals worse than that, and there are deals better than that in that market. And as an investor, it is your job to go find the ones that are better than the average one. So just when we say a rental price ratio is 0.7%, go out there and find yourself the 0.9% one because that means that they exist there. So I just wanted to go on that diatribe and explain those things.
But, Kathy, I think you had something to add here.

Kathy:
Oh, I just want to say I had to rewrite my book because of that 1% rule. People were like, “I’m not going to buy anything because I can’t get it.” But I wrote that in 2014, so I had to revise it, came out with a new one.
We are actually getting 1% in our fund, but that’s active. If you’re an active investor, you can probably still get it, meaning you’re buying something that’s not very expensive. You can improve it and still get it way under market, but they’re strong rents. It’s just not easy to do, especially if you’re investing from afar. That can be difficult to do. Unless you’re someone like Henry, he’s probably finding that, but it’s probably harder.
Anyway, Myrtle Beach, back to that. Love Myrtle Beach. The southeast is my jam. This is so underpriced. The entire southeast coastal market is so cheap. Find me somewhere in California where the median price is $336,000 for a coastal property. It doesn’t exist. So that’s why it’s growing so quickly. And the Carolinas specifically, they’re kind of referred to as the boomerang states because, a lot of times, the northeastern people who are just done with cold weather and they’re able to retire or live remotely, they’ll go to Florida and then sometimes think, “Wow, it’s too hot and too humid,” and so they boomerang back a bit to the Carolinas where it’s a little bit less hot and humid and still so affordable.
Darling town. I surfed there when I went to check it out. It’s still so affordable. Considering what we just said, that the median home price in the US is higher than that, and you could get coastal property in a really cute town, I mean, it’s great. I don’t invest there, but I could see where that would be a great opportunity.

James:
Yeah, and the beaches are awesome. I know we’re talking about unsexy markets, but definitely, beaches are stacked full of good looking people. I don’t know how that works for investing, but it’s a bonus. It is growing. Rents are up 33% over the last three years. I mean, it’s a growing town, it’s quality living, and it’s fun to go to. So I definitely will be back.

Dave:
I’ve always wanted to go because I’ve heard there’s great golf there. And I’m not great at golf, but I enjoy playing, so maybe-

James:
That is not true. Dave said he didn’t golf, and Dave crushed the ball all day long. I was lucky I was paired up.

Dave:
Very, very inconsistent. But James and I played two other investors and we crushed them. So that’s all that matters. We crushed them.
All right, James, what is your second market that you’re bringing us today?

James:
So the second market is Tallahassee, Florida, which I have never been to. To be honest, I don’t have a whole lot of desire to go there unless it’s for an FSU football game. I think that would be pretty fun. But it’s a very affordable market in Florida, and as we know, Florida has gotten very expensive and it’s been hard to get cashflow in a lot of these locations. Pricing’s way up in Florida. It’s hard to make deals pencil, but there’s still a lot of good markets around, like Tampa, Tallahassee, that you can invest in.
And what I like about it is the average home price is $272,000, so it’s really, really affordable. And as these rates keep staying persistent and the money seems like it’s going to be a lot higher than we thought, a lot of us were predicting that the rates were going to be down middle of next year, that might not happen. It’s a good market to be looking at because the pricing is so below the median home price and the quality of living is really good. So it has some runway, in my opinion.
The population growth, not as strong as Myrtle Beach, doesn’t have the same trend. It’s 0.72%, so it is growing below the national average. I don’t really like that as much, but it does have steady growth and the overall investment. But I think there is other potential here. The rent to price is at 0.54, so it’s below Myrtle Beach, half of the 1%. But like Dave said, that’s the average and who wants to be average?

Henry:
Yeah.

James:
You can find value in any market, but I do believe that this market has growth potential because it’s so affordable. The quality of living’s good. They would rank the ninth best quality of living in Florida. And so people do want to live there.
In addition to, there’s a lot of college there. College towns are great for steady rent income. And as college pricing and the cost of college goes up, so will housing. They’re going to go up one and the same. We’ve seen that in our Seattle market, we own a lot of rooming houses. So I do like college towns. I like the quality of living, and I think it’s very dependable for an investor to be looking at.

Henry:
Yeah, I like this because of, I just think college towns are great investment areas, especially when those college towns are surrounded by other major metropolitan areas. And so Tallahassee definitely ticks those boxes. People think of Florida State when they think of Tallahassee, but you’ve also got Florida A&M University and a host of other small universities that are out there. And so you’ve got a large student population. That means the universities are employing a large percentage of the people who are working there. And so housing, affordable housing is needed.
And when you can get property in a college town, the average home price retail is $270k. That means if I go in there and start looking for deals, I’m going to be buying stuff for sub a hundred, just over a hundred thousand dollars for properties because I want to get really good at finding good deals. And so going out to a college town and buying a property for between 100 and 150 grand, and being able to get the rent you’re looking for because college students need a place to live, man, that’s a dream.

Dave:
Knowing what I know about being a tenant in a college town has always scared me away from being a landlord in a college town.

Kathy:
Totally.

Dave:
But what you’re saying makes sense.

James:
And I think they rage at FSU. I heard they like to have a good time, so you kind of want to get bulletproof rental specs. Just make sure it can handle the durability.

Dave:
Yeah. I went to a pretty nerdy engineering school and we destroyed properties, so I can’t imagine what it would be like at FSU.
All right. Well, it sounds like a very interesting market. Again, yeah, so it sounds like Myrtle Beach has growth potential and a little bit more cashflow. Tallahassee may be lower cashflow potential, still possible, but might have more room to run because it’s really just very affordable in a state that is absolutely booming right now.

James:
Yeah, I think the equity can grow a lot quicker, and that’s going to make a big difference in your overall return. And if you can get that equity growth, that will offset your cashflow that might be a little underperforming.

Kathy:
100% in Myrtle Beach for sure. But I think also in Tallahassee, you might look at short-term and midterm rentals. We actually have a college in my town, and what I’ve noticed is that a lot of parents want to come and visit their kids. And so having a short-term rental, you’re still kind of getting the benefit of having students in town, but you have parents living in the rental if it’s a short-term. If you’ve got a big party house, Dave, like you do in a ski area, well, then your short-term rental might be a party house. But if it’s little, just enough for the parents, that can stay rented.

Dave:
All right. Well, moving to another state that is absolutely booming, Henry, what’s your first market?

Henry:
My first market is Jonesboro, Arkansas. So this is a town maybe not a lot of people have heard of, but the numbers are kind of ridiculous. So check it out. Average home price of $188,000. So you’re sub-200 on the average home price. So now we’re talking retail, which means if you’re looking for deals, you can get screaming deals. You’re talking sub a hundred thousand dollars, finding good deals out there. That’s crazy.
But population growth is 1.29%, so people are moving there. And that’s due to the economy. It is an economy that hosts a lot of manufacturing. So that’s what’s most of the workforce is doing out there. So you’ve got Nestle, Unilever, Frito-Lay, Riceland Foods and a couple of others. But as well as healthcare is big out there. So you’ve got a couple of big hospitals that are also employing a lot of the people out there. And so you’ve got population growth. You’re not too far from Memphis, and so you’re not too far from a major metropolis. You’ve got unemployment at 2.9% and your rent to price is 0.74. So there is cashflow.
And if you think about it, I was looking, the average rent for a two-bedroom or for a three-bedroom is just over a thousand dollars. So if you can get a deal and get average rents, then you’re going to be able to cashflow, especially if you’re finding a really good deal in this market.
The other thing about Jonesboro is, the vacancy rate is 6.7%, which means most everything is getting rented. So it’s got all the right stats. Definitely, definitely really good numbers. I’m surprised, because I’ve gotten leads for deals in Jonesboro and I’ve turned them down just because of how far it is proximity wise to where I live in Arkansas. And now, I’m thinking I might need to take a second look at some of these leads I’m getting out in Jonesboro.

Dave:
Okay. So this is not northwest Arkansas. I’m looking it up on a map right now. This is northeast Arkansas.

Henry:
Northeast Arkansas, yes.

Dave:
Yeah. Okay. And as you mentioned, closest major city is Memphis. It’s actually quite close to Memphis, yeah, as you said. So, Henry, do you hear about Jonesboro? Is it a big town? Yeah. Is it a place it’s commonly talked about in Arkansas?

Henry:
Yeah. People talk about it all the time. I’ve just avoided it because of how far it is from me. It’s about, I’d say a five-hour drive from where I currently invest. And so I just like to be able to get to my properties, it’s just a personal thing for me. But I mean, the market dynamics sound pretty good. Like I said, I get leads all the time coming through my website from this area and I just pass them on to investors I know that invest out there, but I’d never looked into it until this. This is cool.

Dave:
I mean, a market that is under $200,000, so less than half the median home price. Population growth is above the national average. The unemployment rate is below the national average. It has really good rent to price ratio. I mean, those are pretty tough to find these days. This one’s pretty good. Yeah.

Henry:
Pretty solid.

Kathy:
I’m sold.

James:
You know what also sounds nice is the price of a hundred grand. That is our earnest money check to write hundred deals. It’s like, Kathy, I think we might be doing this wrong. I’m like, I’m listening to this. I’m like, why not go out of state? But you got to get outside your comfort zone when you get to long distance investing and you got to set up the right systems. And it’s hard when you’re, like Henry says, I’m a backyard investor too, looking at these markets. But the math is saying that you should really explore it. And it’s for investors to figure out the systems that’s going to work. And so as these markets are getting more and more affordable compared to what the other markets, it is something I think everyone should be looking at. Yes, you have to set up new systems, but those are great metrics to get good cashflow.
And also, it allows you to invest very low risk. When you’re buying properties at a hundred grand and they sit vacant for a little bit, you can stomach that hit. But when you’re dealing with expensive stuff and expensive metro right now, you really have to make sure you’re on it or that debt cost, that vacancy cost, all these things can compound. I definitely think I need to get some operators in different states and just start partnering up. It’s a hundred grand. That would be nice. What’s your earnest money amount? Like $1,500 bucks. That’s awesome.

Kathy:
Oh man. The grass is always greener, right? We look it, James, but do you make hundreds of thousands of dollars on one transaction. And they’re so sexy.

Henry:
You’d have to do 10 deals.

James:
But you can also lose a hundreds of thousands of dollars on one transaction.

Kathy:
This is definitely my kind of market. I love that it’s kind of off the radar, but it’s got all the things that you need in a good buy and hold market. So yeah. Hey, Henry, James, you guys set something up there? I will be your buyer.

Henry:
I got you.

James:
Ditto.

Henry:
I got you.

James:
Yeah.

Dave:
All right. Well, Henry, you got another fire market for us next?

Henry:
Yeah. This is a market that I actually currently invest in, Joplin, Missouri. So this is about a 50-minute drive from Northwest Arkansas where I live, and I currently invest there. I have seven doors there now and I have another 16 doors under contract there now. So I am growing my portfolio in this market.
And why I’m growing my portfolio in this market is because of these pretty strong market dynamics. So average home price is just over $200,000, at $205k, $206,000. It’s got population growth of 1.1%. Now I know it’s not the highest population growth on this list, but for a small market in southwest Missouri, that’s pretty good. Low unemployment, 3% unemployment. And rent to price is at 0.65. And I’m buying cashflow deals in this market left and right. I just closed on a house in Joplin two days ago. I paid $67,000 for the house. I’m going to put $30,000 into it, and it is going to rent for over $1,500 a month. And it has an extra lot next door that I’m going to either be able to sell for about $15 to $20 grand, or I can build a new construction home on because so many builders are building homes out there to infill, because there’s not enough homes for the people who live and work in that Joplin market. And so I love Joplin.
Another reason I love Joplin that you’re not going to hear about or see about if you just do the research on your own is, because it’s about a 50-minute drive from Northwest Arkansas, as Northwest Arkansas is expanding because of all of the big companies out here, a lot of people are starting to feel like, hey, this is becoming a little bigger and busier than I like, and people are starting to spread out and go a little further out. And so, I think that that’s driving some of the population growth in the markets like Joplin as well. And so you’ve got people moving there, trying to get away from the hustle and bustle of Northwest Arkansas, if you can even say hustle and bustle in Northwest Arkansas in the same sentence. So I really, really do like this market, and I am growing and expanding in this market because of the solid dynamics.
As far as the economy goes, this is another manufacturing town, so there’s lots of different manufacturers out there. You’ve got General Mills out there. But it’s a really, really big healthcare community. So many hospitals. There’s a St John’s. We’ve got Ozark Medical. There’s Mercy clinics. There’s tons of different healthcare out there as well. So it’s a really solid market with solid market dynamics that’s growing steadily, not super fast, but growing steadily, and you’re just getting a lot of quality tenants because they have good jobs and they can actually afford the rents in the market.

Dave:
I had never heard of Joplin before the show Barry on HBO, if anyone watch that. But I’ve long liked the idea of finding a tertiary city outside a main area that’s like 50 to 60 miles away. When I was investing primarily in Denver, you saw Longmont, which is a city where Colorado State University is, but no one invested there, and Denver just got so hot. To Henry’s point, people just wanted to move somewhere a little quieter or maybe somewhere even more affordable. And these places that are sort of, they’re not like satellite cities, but it’s nice to be close to a place with a big airport, for example, or be able to go to a big city within an hour, hour and a half drive, but has more of a small town feel. So I’ve always just sort of liked that approach, and it sounds like Joplin fits the bill for that strategy.

James:
And look how wired Henry is on the market he invest in. Talk about market research. He generally passionately loves the market. He knows everything about it. A lot of times, people are just going in and buying that thing because they were told in a book or a podcast to do it. But Henry really dug into the market, knows it like the back of his hand, and that’s why he can grow is because he knows it. He believes in it so he can invest kind of carefree. So kudos to you, Henry. I mean, you definitely have this market down.

Henry:
Thank you, brother.

Dave:
All right. Well I’m going next and my first market is somewhere I’ve never really even been close to, but it is Tuscaloosa, Alabama, and the average home price there is $211,000, so less than half our median home price. Population growth, 1.4%, so just over the national average. And just as you’re saying, I think any market that’s growing is pretty good, but it’s always nice to be above the national average. The unemployment rate is at 2.4%. And the unemployment rate is pretty low everywhere in the country right now, but 2.4% is about 30% lower than the national average, so that’s great. And the rent to price ratio is excellent at 0.8%. So I think this is really strong fundamentals for Tuscaloosa.
Now, I looked all this up because I’ve never been here, but it is a small city. It is a college town, which we’ve just been talking about the benefits of. The University of Alabama is from there, so is Stillman College and Shelton State Community College, which contribute about $3 billion of economic impact to the area, which is about 25%. So that’s really interesting.
Normally, I always like to say, you want to look for an economy that’s well diversified, but when you have an economy that maybe, feel free to disagree with me, that is based on something really solid like a college or public sector jobs that are really stable, I think that is a relatively good foundation for an economy. So I really like that tourism has really been picking up. They also have one of the biggest, or maybe the biggest Mercedes-Benz assembly plant in the country. So there’s a lot that’s probably leading to that really high employment rate. And that’s all I know about Tuscaloosa. Have you guys, any of you ever been there?

Henry:
I have. I went to an Alabama-Arkansas football game a few years back.

Dave:
How awesome was that?

Henry:
At Alabama. I mean, it’s a thing. The whole everyone is there.

James:
So jealous.

Henry:
Everything else is closed. It’s only the stuff at the college that’s open. It was just a super intense environment.
But to kind of piggyback on your point, when this represents about 25%, you said, of the economy there, I think that that’s okay in this situation because University of Alabama is not going anywhere. Those people would start a war.

Dave:
Their fans are very passionate.

Henry:
If that school went anywhere. It is safe and sound there. But no, it was a great place. I enjoyed it. It didn’t feel that small to me. I was surprised to see it’s only 100k people because it felt much bigger than that.

Dave:
Well, I think a lot of times, these college towns, they don’t count students because they’re not full-time residents. I know, Boulder for example, Colorado, where the University of Colorado is, says it’s like a hundred thousand, and then when students are there, it’s like 140,000. So it goes up by like 40%. I bet Alabama’s even bigger than [inaudible 00:30:00]. But it makes you think, based on what you’re saying, Henry, that in addition to student rentals, short-term rentals probably do really well if it’s that big of a draw and people are coming for sports, among other things. The university obviously has other draws. I actually saw that they just broke ground on a $50 million performing arts center at the university. So there’s obviously a lot of attractions in the area that might warrant different types of rental strategies.

Henry:
Yeah. And I think that’s a good call out too about the short-term rentals because one of the things I like about my market, which is a college town as well where University of Arkansas is, is just, there’s not a ton of hotels. There’s a few. There’s definitely not a bunch of nice ones. And so, when you’ve got football season and people coming from all over to come to these football games, they got to have a place to stay. The hotel sell out super fast, and so these towns need Airbnbs because their economy is dependent on these people coming to visit.

Kathy:
That’s such a good point. That’s why I like these sort of off the radar markets because you don’t have builders flocking to them. They don’t even know they exist. So you’re not seeing new hotels and new homes, but when you’re seeing the kind of growth, population growth that this area is seeing, yeah, it’s going to be good for short-term, medium term, long term. It seems like, either way you go, you could make it work in this market.

Dave:
Definitely. Just make sure you have a big enough parking lot for people to tailgate in at your short-term rental.

Henry:
I wonder how much of the average home price Nick Saban’s house drives up that number.

Dave:
Add like three zeros to that number.

James:
I think we need to explore the market and do a live podcast at a football game. Like the college football set.

Henry:
Like college game day?

Dave:
That would be so awesome.

Henry:
We could put one of those school mascot hats on you when you-

James:
I’m a hundred percent in.

Dave:
Well, my next market does have a college in it. It’s the University of Wisconsin-Oshkosh. I don’t know if they have the same level football team as the other ones that we’ve been talking about.

Henry:
I feel like you just made that up.

Dave:
I actually didn’t. It’s a real thing. But the next market I have is Oshkosh, Wisconsin, which I have only heard of because, as a kid, did you guys wear OshKosh overalls or OshKosh?

Henry:
Yeah. OshKosh B’gosh, yeah.

James:
It reminds me of Chucky.

Dave:
Yes, exactly. Yes.
So Oshkosh, I’ve learned, is a really interesting town. It actually used to be known as the sawdust capital of the world because it has the most sawmills, I guess, in the world. No longer, but it did at one point. But really, they actually have really strong fundamentals. So just to go through the stats, average home price is $265,000. Population growth at 0.9%. Unemployment rate, 3.5%. And a rent to price ratio of 0.6%. It’s a small city of 67,000 people.
But I started looking at this because, I don’t know if you guys have seen this, but when you look at lists of places with hot housing markets, even during this weird market we’re in, Wisconsin is one of the places that’s always up there. Obviously, you see a lot of places in the southeast, but Wisconsin, consistently, for a year or two now, has been up there.
And so I looked into it. I literally just Googled, “why is everyone moving to Wisconsin?”, and found out that there’s just a lot to like about it and really ranks high in terms of education, in terms of healthcare and health, one of the highest states for quality of life and safe places to live. And so it seems that a lot of people are moving to Wisconsin, and I think Oshkosh is getting swept up into that. So sort of in our theory of auxiliary cities near big cities, maybe like near Milwaukee or Madison, Oshkosh is near those and also near Green Bay, and so might be one of those secondary cities where you can get cashflow now, but in a state that seems poised for growth, given the recent trends.
Wisconsin obviously is one of the hottest cities in the entire country. Sheboygan, Green Bay, it’s near all of those. So it’s kind of sandwiched in there and could sort of benefit from the tides that are raising all those ships, so to speak. It’s also on Lake Winnebago. It looks very beautiful from the pictures I saw. I really don’t know any more about it, but it seemed like an interesting market.

James:
I’m picturing a Lego town where everybody’s wearing Oshkosh, walking around.

Henry:
Everyone is a train conductor.

James:
Everybody’s a train conductor.

Dave:
Is that company still in business?

Henry:
Oh, they got to be.

Dave:
I bet it is.

James:
It’s timeless, Dave. That does not go out of style.

Dave:
Yeah. I hope not. Well, I would go check it out. I’ve been to Lake Geneva in Wisconsin. It was very beautiful, so I’m sure it’s really nice up there.

Henry:
So there is a lot of smaller cities in that Wisconsin, Illinois kind of region that are growing right now where you can get amazing cashflow, places like Racine, Wisconsin, which is smack in between Milwaukee and Chicago, which is perfect, because as those cities spread out and affordability gets worse there, you can buy duplexes there for $150 grand in cashflow. It’s insane these markets.

Dave:
And on the lake, really nice.

Henry:
Great dynamics out there.

Dave:
All right. Well, that turned into an advertisement for the entire state of Wisconsin, which we’ve barely been to, but on paper, it looks very good.
All right, Kathy, what about you? What’s your first market?

Kathy:
Well, I started to get a little hair standing up on my arms or whatever when I saw this one because I don’t like investing in places where it’s really dependent on one economy, specifically oil, as you know, my heartbreak story buying in North Dakota. So Odessa, Texas, it’s in the Permian Basin. There is a lot of oil there, so that’s good. There’s a couple of employers there you might’ve heard of. Halliburton, Schlumberger, these are massive oil companies there.
The average home price is $212,000, so that’s far below the average. Population growth, not so impressive, 0.64%. Unemployment rate, 3.8%. Though I looked at other sites and some said it’s not, it’s much higher than that. So again, it’s hard to get the actual information. Zumper said that rents increased 17% year over year, maybe in certain areas. That’s the thing about these oil towns is it’s really volatile. And right now, I don’t even know where prices are in oil, it just goes up and down.
But I know the Permian Basin is doing better than North Dakota. But here’s right off the bat why I would not personally invest in this area. 114,000 people. In the whole Permian Basin, it’s 500,000. I like to be in larger markets. I like to have a larger rental pool. So to me, it’s just too small of a market, too dependent on one economy that is an economy that is manipulated by not America. Well, also America, depending on politics, it’s manipulated. But then oil industry is manipulated in general. So I don’t like it. I wouldn’t invest there.
With that said, I bet people are making a ton of money investing in this town. So just like you said earlier, if you know your town and you know where to buy and you know where the jobs are there to stay, you’re going to do just fine. And the price point’s right.

Dave:
Just to clarify, the way that we came up with this list is, we came up with criteria, which is under the median home price, population growth, a good RTP above the national average, unemployment rate below the national average. And so what happened was, our analysts at BiggerPockets pulled that data and we were each assigned to look at one. So Kathy is presenting this, but that does not mean she is endorsing it, just to clarify.

Kathy:
And like I said, you could make money in any market, so you don’t have to worry so much about being in the right market if you know how to buy the right real estate. I know there’s locals in this market who are killing it because they know.

Henry:
You know how I know Kathy’s not into this market. Because she’s saying it wrong. Because if you’re into it, it’s not oil. It is ole. There’s an ole.

Kathy:
That’s right.

Henry:
There’s a ole town. There’s ole money out there.

Kathy:
Yeah.

Dave:
Does that mean you’ve bid down there, Henry?

Henry:
No. It just means I live in the south.

James:
But that is something to look for is the energy. We’re seeing a lot of different global things going on right now. There’s global conflicts. There’s supply chain issues. A lot of these major countries, we’re not getting along with a lot of major countries that do supply a lot of oil. And the US might need to start generating more energy. And there could be some runway in these oil towns, ole towns. There we go.

Kathy:
Are you saying I should hold onto my land in North Dakota for the day that someday we decide that we might need to have some oil here?

Henry:
Do you have minimal rights?

James:
Just hang on.

Kathy:
Okay. Because you said so.

Henry:
You’d be like the Malibu hillbillies.

Dave:
All right. Kathy, was your second market we assigned you a little bit more inspiring to you?

Kathy:
Yes. The second market is more diversified. It’s a very good, in my opinion, stable cashflow market. Oklahoma City, Oklahoma. This is a market where, if you just want cashflow and no surprises and not a volatile market, it’s going to be here. I know a lot of people who have invested in Oklahoma City and have been happy they did.
Population growth is just so, so, 0.94%, so about average. Average home price, $228,000, that’s way below what we saw in the median and you can probably make the numbers work there. Unemployment rate, 3.2%. And the rent to price ratio, about 0.6. But again, if you buy right, you can do better than that. Rent growth unfortunately has not been too impressive in Oklahoma City this past month, down 0.3%. But year over year, up 0.3%, so flat. Let’s just call it flat.
But that may be because, in 2022, rent growth was massive, one of the most and highest in the country actually, 24%. So something happened there, I would call it a pandemic. So rents went up massively. But that means that you can’t look at the past. You got to look at what’s next. And with rents going up that much so fast, it may stay flat for a bit so that wages can catch up.
But one of the issues is lack of housing and lack of affordable housing that we’re seeing everywhere. So if you are interested in more Section 8 housing, apparently there are 30,000 people on the wait list for Section 8 housing in Oklahoma City. And that can be a great investment, steady income from the government. 330,000 new jobs created over the past decade. So supply is low, but demand is high, which is why 40% of residents say they much rather rent than own because owning just doesn’t make sense for them right now. So a strong rental market, very diversified.
Now, I like to be in markets where there’s going to be a boom of some kind. I don’t want a boom market dependent on one thing, but I do want something that’s going to make it boom. And something that might make that happen and is very exciting, and one of the reasons why our new rental fund is in Oklahoma is the governor is pushing to get the state income tax to zero, like Texas, to compete with Texas. If that happens, I really think we’re going to see quite a boom.

Dave:
Interesting.

Henry:
Yep. So I love Oklahoma City. It’s another sleeper market because it is a major metropolis, but you can still get smaller city economics there, smaller city numbers there. Also, there is a little bit of a tech boom happening in Oklahoma City. Lots of tech companies are opening offices there, and so there’s lots of tech jobs which bring in younger employees. And so that creates growth over time. They did lose a lot of people to the Texas or Dallas area during the pandemic. A lot of people moved over to Texas, and that may be what’s pushing some of this. We’re trying to get to the zero income tax like Texas there. But it’s also, not only technology jobs, but it’s the home office for Sonic the fast food restaurant.

Dave:
Nice.

Henry:
So lots of good stuff happening there.

Dave:
I’ve never been to Sonic in my whole life and it’s one of my biggest regrets.

Henry:
Oh, the food isn’t worth it, but the drinks are great.

Dave:
The commercials of those two guys-

Henry:
They’re hilarious.

Dave:
Seared into my brain for the rest of my life, telling me to go to Sonic. Yeah, I’ve known a couple of people who invest in Oklahoma City and actually some of the cities around it, and it just seems like an excellent place. There’s just not a lot of downside or risk that I see. It just seems like pretty strong fundamentals everywhere.

Kathy:
Just tornadoes would be the risk and you have insurance for that.

Dave:
Just tornadoes.

Kathy:
Just tornadoes.

Dave:
Something never having lived in the Midwest or the South have ever thought about. But yeah.

Henry:
It’s about an hour and a half west of Tulsa, which is another decent market for cashflow. And then about three hours from here in Northwest Arkansas. So I mean, I like it.

Dave:
Cool. All right. Well those are our eight markets. And again, what we’re talking about here is markets where, even during a confusing market, where some markets are going to do well, some markets are not going to do as well, we think these eight markets offer strong potential, there are no guarantees, but strong potential to do well over the next year, even as affordability is low and there are some questions about what’s going to happen over the coming year.
And as we talked about a lot at the BiggerPockets Conference, if you’re going to be an investor, it’s okay to change tactics. It’s expected to change tactics based on what’s going on in the economy. But at least for, I know the four of us and for many of the people I talked to there, what people are not planning to do is to just stop investing altogether. It’s to try and figure out, like Kathy said earlier, what is working in this market and adjusting your strategy accordingly. So we hope that this is really helpful for you. We’d love to hear from you in the comments or reviews. If you invest in any of these markets, tell us a little bit more about them. Obviously, if you’re listening on YouTube, you can put those comments in there as well.

Henry:
Specifically OshKosh, is that still a thing? Can we still get overalls?

Dave:
Yes. Next episode, we are all going to be wearing OshKosh B’Gosh overalls and going to Oshkosh.

Kathy:
Really? Okay.

James:
I mean, the Minions still wear it. The Minions still rock Oshkosh. We love Minions.

Dave:
All right. Well, thank you all so much for listening. We really appreciate it, and we’ll see you for the next episode of On The Market.
On The Market was created by me, Dave Meyer, and Kailyn Bennett. The show is produced by Kailyn Bennett, with editing by Exodus Media. Copywriting is by Calico Content, and we want to extend a big thank you to everyone at BiggerPockets for making this show possible.

The VC-method to build a growth venture is to come up with an idea, develop a plan and a pitch, go to a pitch competition or an incubator, seek access to angels and find angel capital, launch the venture, and get venture capital (VC). The VCs then hire a professional-CEO in up to 85% of the ventures, after which the investors exit the venture through a strategic sale or via an initial public offering (IPO) if the venture is successful.

This VC-method helps about 20 out of 100,000 ventures and was used by about 6% of billion-dollar entrepreneurs (Truth About VC).

Unicorn-Entrepreneurship: How Billion-Dollar Entrepreneurs Took Off

Among 85 billion-dollar entrepreneurs, who built companies with sales and valuation of more than $1 billion from an idea, more than 9 out of 10 took off without VC. 18% of them got VC but stayed as CEO. 76% avoided VC. Those who delayed VC kept 2x the proportion of wealth created compared with those who got VC early, and the VC avoiders kept 7x.

These 94% of billion-dollar entrepreneurs used Entrepreneur 360 skills, i.e., 9 skills (each skill representing 40 degrees) they needed to grow from idea to billions. The set of skills include 6 skills to takeoff with control of the venture, and 3 skills to scale up from takeoff to dominance.

Skill #1 to Skill #5 to Takeoff without VC

You may not want to build a unicorn, but if you want to build a growth venture and control it to keep more of the wealth created, these 6 skills can help.

Skill #1. Technical skills in an emerging industry.

Nearly every entrepreneur from Sam Walton (Walmart) and Bill Gates (Microsoft) to Mark Zuckerberg (Facebook) and Travis Kalanick (Uber) had the technical skills to start a venture in an emerging industry. Sometimes it is possible to find the right partners, like Jobs and Chesky did, but without the tech skills, you may be left behind.

Skill #2. Sales skills for the emerging industry.

There are 2 main ways to sell in a new venture – with lots of capital, or with skills and little capital. Most billion-dollar entrepreneurs from Dick Schulze (Best Buy) to Joe Martin (Boxycharm.com) had skills to sell with little capital.

Skill #3. Venture (not corporate) finance skills to maximize productivity per dollar.

94% of billion-dollar entrepreneurs took off without VC. They knew how to use each dollar to grow and launch their unicorn. This is what entrepreneurs like Niraj Jain (Wayfair) did.

Skill #4. Venture financing skills to raise capital for an unproven venture, to keep control, and to reduce dilution.

To keep control of their venture, billion-dollar entrepreneurs need to know how to finance growth and keep control. That is what entrepreneurs like Michael Bloomberg (Bloomberg) had.

Skill #5. Bootstrap strategy skills to find the key weapon to succeed and bootstrap elsewhere.

Finance-smart billion-dollar entrepreneurs knew how to grow more with less and build a real unicorn by using their edge to dominate and by bootstrapping elsewhere. That is what Bob Kierlin (Fastenal – Bootstrap to Billions) did.

Skill #6. Bootstrap launch skills to takeoff with a limited runway.

The most difficult phase of a venture is to takeoff with limited capital. These skills involve finding the right sales driver, growing at the right speed, and controlling the industry. That is what Richard Burke (UnitedHealthcare – Bootstrap to Billions) did.

3 Skills from Takeoff to Unicorn.

The next 3 skills to build ventures from takeoff to dominate include:

· Control skills to monitor your growing venture.

· Organization skills to build a competitive business.

· Leadership skills to dominate your industry.

The Final Degree: Entrepreneurship 361

Luck. Success in an evolving industry requires more than just skill; luck plays a role. Without at least a stroke of luck, you might find yourself competing with entrepreneurs like Bill Gates, Jeff Bezos or Elon Musk.

MY TAKE: Finance-smart billion-dollar entrepreneurs acquire 360-degree skills to start growth ventures, build strong companies, and lead them to dominance. These skills are the building blocks for successful and sustainable ventures where you control the business and the wealth created.

MORE FROM FORBESFrom $375 To The Newest Unicorn In Beauty: How Joe Martin Built Boxycharm.com Without VCBy Dileep Rao

David:
This is the BiggerPockets Podcast show, 839. What’s going on everyone? It’s David Green, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet every week, bringing you the stories, how toss and the answers that you need in order to make smart real estate decisions now in this current market. And boy, do we have a show for you. Rob, what are some of the things that people should keep an eye out for in today’s show to help them on their investing journey?

Rob:
Darius is a very relatable, very inspiring fellow. He comes from humble beginnings, and I think a lot of people will just be a little relieved to know that he was able to achieve so much by taking baby steps and scaling accordingly. He doesn’t have a crazy story where he had trust fund parents, or he didn’t raise money. I mean, he was funding all this while he was working an hourly job. So I think for everyone at home, just to understand it is a marathon, not a race. And so, for Darius, he took steps.

David:
100%. Not only did he take steps, but he actually did the work. Darius was able to do this in a market that most people would’ve said, “Don’t invest in,” at a time when everybody was saying don’t invest. Basically, he had a lot of resistance and people going against him, which is the same thing that happens when you lift a weight, and it builds strength. This will all make sense later as you get into today’s show. But before we bring in the amazing Darius to share his story, today’s quick tip is simple. Go ask a question on one of the BiggerPockets forums. This was a game changer for Darius. He talks about how it really helped him in his own journey and stay tuned for some clever ways that he optimized his forum questions. Rob, anything you want to add?

Rob:
I guess I will say, quick tip number two, make sure you always bring a sewer camera to an inspection, because one day you might walk into your bathroom and find ramen noodles in your bathtub.

David:
All right, let’s bring in Darius. Darius Keller, welcome to the BiggerPockets podcast. Very glad to have you here today. Darius has been investing for nine years, owns eight rental properties, mostly single families, lives and invests in Michigan near an Amazon center, has used the BRRRR Method to snowball his gross. Currently makes $66,000 a year in gross rents and is on track to make over $100,000 in gross rents in 2024. And as a fun fact, Darius is an elite powerlifter that also played college basketball. Darius, welcome to the show.

Darius:
Thank you. Thank you for having me today.

David:
All right, before we get into your backstory, can you paint a scene for us about what you discovered when you bought your first property?

Darius:
Yeah, so when I bought my first property, it was back in 2014, and the thing I discovered was, there was no copper in the house. Assuming that there was a sink and stuff, and there was switches, and the walls were up, you would assume that there’s electrical in the house. But when I went to the basement, there was no furnace, no hot water tank, no electrical panel. What do I do at that point?

David:
Wait, wait, wait. So they had light switches on the walls, but no electricity running to them?

Darius:
Yeah, and homepath.com is much different than today. Back then, it was an auction setting type of purchase that I did.

David:
What was going through your mind when you saw that?

Darius:
At first, I didn’t realize how expensive it was, so that was actually a good thing. I didn’t put myself into shock, but I was questioning myself, like how am I going to get this done? So what I did is, I just kept a good mindset and reached out to people. So I had my wife’s dad, who was real handy, not real handy with the mechanicals, but he knew people who knew how to put work in with mechanicals.

Rob:
Wow, that’s awesome, man. I cannot wait to hear how you resolve that and how you built your portfolio to over $1,000,000 today. It’s pretty crazy, man. But before we get there, and before we get this beautiful resolution, can you paint a scene for us about what your life looked like before you found real estate? What was your job? What was your living situation? Give us a little bit of a taste here.

Darius:
Yeah, so right before 2014, before I made my first purchase, I had to move in with family. I went from paying rent, into moving in with my wife’s dad. It was a two bedroom house, six other people in the house. You can imagine that it didn’t have a basement or nothing. So it was just one floor, two bedrooms. And during that time, I hit rock bottom financially. So I ended up totaling my car right in front of the house, and I was still a janitor at the time, so I was only making $10 an hour. I even keep my pay stubs still, just as a reminder of what it looked like before I started. That’s essentially what it looked like, and I was still getting my master’s degree at the time, so I can relate to a lot of the people that are out here watching today.

Rob:
Yeah. Well, what did it feel like? I mean, I know you said you were making $10 an hour. Was that at all a comfortable living at that time? Was it super, super tight, were you able to save money?

Darius:
I was able to save a little bit of money. I was doing little side jobs here and there, and while I was living with other people, everybody was sharing the bills, so that kind of helped me as well. So I ended up saving almost $10,000, and that’s when I went into my first home, and I purchased that at a $9,100. So it was just a single family, three bed, one bath colonial, and that was the one off of homepath.com.

David:
Did it have electricity or water?

Darius:
Yeah, so just to paint the picture of what it looked like, it had the sink, the walls were up. Like I said, there were switches in the walls. The exterior was pretty new, everything but the siding. So you had a new roof, new gutters, that kind of thing. I thought it was a move in type of situation. I bought it off the auction, I won. That’s it. Hooray, that kind of thing. But it wasn’t.

David:
Do you think the builder just decided it’s not worth putting money into it, or was it intentionally supposed to be a scam? How do you think this happened?

Darius:
I think it was listed for sale, and then somebody came in during the sale and-

David:
Stole everything.

Darius:
… stripped it out. Yeah.

David:
Okay, that makes more sense. It sounded at first somebody built a house and put light switches, but never actually ran electrical to it, because they intended just to make it look like something. But you think somebody came in and they stole the pipes, and the electrical, and everything while it was sitting there?

Darius:
Yeah, during that time, Pontiac was much different. There was a lot of vandalism in that time. It was going downhill. It wasn’t getting better during that time.

David:
This was during around the time of all the auto companies leaving or getting shut down, is that right?

Darius:
We were hit by the recession hard, so we had a lot of blight, boarded up homes, there were schools that were boarded up. It was more of that kind of situation. GM Chrysler were still here, but things got significantly better when Amazon showed up, which was in 2019 roughly.

David:
Well, I’m glad you made it through that. That’d be enough to make most people say, “I want nothing to do with real estate.” You’re clearly somebody who had been through some difficult times before, so you’re able to handle adversity like this. But I am curious, what got you willing to jump into an asset class that you didn’t know a ton about? What was going through your mind that made you want to do this?

Darius:
Well, I had a nothing to lose mindset. So getting a master’s degree, you are going to run up the debt. So I had $100,000 worth of debt at the time. So I was just trying to survive, that was literally my goal. I just needed a house to cut the cost. So I figured, if I owned my house, didn’t have to pay the mortgage every month, didn’t have to pay any rent, that was enough cushion for me to be financially stable. So I had no intentions of investing or anything like that. I was just trying to buy a home that I could live in. And that kind of pushes me into the second home, because that’s when I started to think, man, these homes are cheap. So like I told you, the first home was $9,100. The second home I bought for $2,500, which is two streets away. So what I did is, I moved my wife’s family into that home.

David:
You’re the first person I’ve talked to that actually bought real estate at that time. I remember hearing about the stories that houses were $2,000, $1,500, that basically the state just wanted someone to pay property taxes on these things. A lot of them had been foreclosed on by the state, and because they didn’t pay state property taxes, and they would give them away almost if someone’s willing to pay. What was the prevailing wisdom at the time? Were people telling you that this is a great idea to buy these houses, or were people thinking, why would you ever want to buy any of those things?

Darius:
So I had family members say, “Why don’t you just get a mortgage and pay the mortgage every month?” And actually, I couldn’t get a mortgage, it was very tough to get financing during that time.

David:
Well, yeah, you can’t get financing on anything that’s that cheap. Banks aren’t going to finance a $9,000 house. You can’t get a mortgage that low, which is also probably a big factor in how you ended up buying a house that didn’t have electricity or water, because normally that would’ve come up during the appraisal. They would’ve realized that was the case. But when you’re paying cash for it and it’s your first home, I can see that that being something that slips beneath the cracks. You were living in a two bedroom property with six people, right?

Darius:
Yeah.

David:
Was that just a powerful motivating thing that you’re sitting there, sleeping in a room with other people, and cramped that you were just thinking, “I really want to get my own spot?”

Darius:
Well, no, you don’t think of it like that. You’re living and you’re saying, “Hey, you’re a man. You’re living with your wife’s dad.” It’s like a moral kind of thing. Just, you don’t want to do that.

David:
It doesn’t feel good.

Darius:
Right. But to go back to your question, there were a lot of people that just were shaking their heads, like, “You’re just wasting your money.” There was no value to the properties I was buying at the time.

Rob:
Yeah. And Darius, you mentioned that you were $100,000 in debt. Was that all student loan debt or was it other debt as well?

Darius:
No, it was only student loan debt at the time.

Rob:
And what were you studying? What was the reason for even going and getting your master’s?

Darius:
Yep. So I started off in graphic design, and then I moved to business administration, and it was simply because I needed a boost in income. I understood that $40,000, $50,000 just wasn’t enough. And I’m one of those guys, I take things to the extreme. So somebody told me that I needed a master’s degree, so that’s what I went and did. That was my instinct. That’s what I was taught at the time, to go get as much education as possible.

Rob:
Nice. Did you end up finishing that master’s degree, just out of curiosity?

Darius:
Yeah. Yep, yep. I finished the master’s degree. The graphic design helped me get into the engineering area, in the corporate world, and then what happened is I became a design engineer. So that’s what I’m doing now at a Fortune 500 company.

David:
Okay. So you bought this first deal at an auction in 2014. You paid $10,000 for the property and you had to go through a bidding war. You show up to see your prize and you realize it’s got no water, no electricity. Walk me through what you were feeling and thinking when you go to look at the house, you’re flipping on the switch, and nothing’s coming on. You kind of realize that you’ve been had.

Darius:
Like I said, I talk to a lot of people. I don’t shy around, so I go outside my door and there’s other young guys who are investing as well. And what I did is, I was friendly to him. I asked the guy if he needed any water, I had water bottles and stuff available. If he needed anything, just let me know. His home was in the same condition as mine. Like I told you, there was a lot of vandalism at the time, there was a lot of boarded up homes, a lot of investors out there.
So what happened was when I introduced myself to him and was kind to him, he offered to look at the property. And he happened to be an engineer as well, an electrical engineer. So he ended up assisting with the furnace, the hot water tank, because this was my primary residence at the time, I was able to go through the permanent process myself. They allow that here in Pontiac if it’s your primary residence. And that’s really where, that initiated my learning experience, making friends with the guy across the street. I pretty much learned everything. Once you learn the electrical, the plumbing was like, I learned the plumbing within a day. And then I was able to learn the gas within a few weeks after that, learned how to do that as well.
So I learned all the trades pretty quickly. And then, like I said, when I bought that second house, you pay what you get, you get. So I bought a $2,500 house at the time, and it looked like a $2,500 house. And once I did that house, I pretty much could remodel the entire house by myself at that point. I had all the skill. Do I want to? No, but like I said, I had the skill. That pushes me up into 2017. It takes time to fix up the houses. I had no money at the time, I still had no money. So in 2017, that’s when I started moving up the corporate ladder. I started making a little bit more money.
I ended up quitting my janitor job at the time, and then I financed. Well, I took a HELOC on my primary residence and I bought my third property, and I bought that third property from auction.com for $35,000. And that’s also in Pontiac as well. So I’m harvesting, I’m a farmer in Pontiac, essentially. That property now is probably worth about anywhere from $150,000 to $180,000. So you can imagine purchasing that for $35,000 and the homes being worth nothing, to what you’re seeing them now. Just to give you some stats in the house, it’s like a three bedroom, two bathroom colonial. And at that time, again, back in 2017, the websites were not as sophisticated as they are today. Today they’re a lot more competitive to purchase properties on. So when I tell people the prices on the websites, they’re in shock, because they’re only seeing what the Zillows, Redfins, and auction.coms look like today.

David:
So you’re doing this sweat equity, you’re doing some of this work yourself on the property. What did that do for your confidence as a real estate investor, as you learn new skills you didn’t have before, and you realized that you could solve some of these problems?

Darius:
So once I learned how to fix everything, that took a lot of pressure off me, because like I said, I went to auction.com and I bought that property blind. I couldn’t go inside the property. So here I am, I pulled $40,000 of equity out of my primary residence, and that’s what I use to purchase the third property. So if there’s no pressure on me for repairing the property, then I can put all the money up to assume the property.

David:
So from there you use the BRRRR Method so you could get more properties. So you’ve got some confidence, you also know where to go get these properties. You kind of know what you’re stepping into at this point, so you feel more comfortable going big. What was the pace that you started acquiring properties at and how were you funding them initially?

Darius:
So I would say the second property took me almost two years to redo. Like I said, I bought it for $2,500. The third and fourth property, things got a little bit faster, but I would say on average it would take me about eight months to repair a property, then put a tenant inside, and then take maybe another month to get the financing to pull the equity out the property.

Rob:
So the order of properties, the first one was $10,000. That’s the one that you bought, I guess, at the auction that didn’t have all the stuff in it. The second property was $2,500. The third properties, did you say it was like $35,000 or $60,000? Which one of those?

Darius:
Yep, so the second property, the $2,500 property, the third one was the $35,000 property.

Rob:
Got it. Okay, cool, cool, cool.

Darius:
So that’s when I learned all the financing. I was really stuck in how the financing goes when I got to that third property. But also, I hit a wall during that third property. It had a big plumbing issue. So when I got to the third property, that’s when I assumed my actual non-family member tenant as well. So I would consider myself a real investor at that point, where I started to deal with a lot of the problems that normal investors deal with. So the plumbing issue I had was, the pipe had the snake coiled up inside of it in the yard. So we had to pay $5,200 for them to dig and put a T in the yard from the pipe. So we would call it a clean out drain.
And within that same two month timeframe, I also had another pipe break in my primary residence. And when pipes break, everything stops. The kids in the house can’t use the restroom, I can’t use the restroom in my own house. So that’s when I was like, “Okay, from now on when I buy these properties, I really have to take a sewer camera to the auctions, into these showings with me, when I do inspections.” Because I was doing my own inspections as well, just to cut costs.

David:
So what’s the process like of using a sewer camera to actually scope the line?

Darius:
So I use Forbest, it’s a cheap $500 camera. You can actually get a used one. It’s disgusting to say, but you can. It comes with a battery. You pull the screen out. As long as you have a fly trap, you can easily fish the camera from inside all the way out to the street. And you can see the cracks, you can see roots. It comes with an LED light in the front of it. You can record it and send it to the seller, to bring the price down. I mean, essentially it’s extremely important to have one, because in some cities it could cost $7,000 to $10,000 just to get the permitting, just to cut out the street if you have to repair a pipe. So that’s where I was going at with that. If I’m going to lose in this game, it’s going to become from construction, not because tenants didn’t pay me rent, or I bought a bad deal.

David:
What we’re talking about here is also called the sewer lateral. This is where the sewer line that runs to your house from where it ties into the city, typically goes under the front yard and you’ll get tree roots that can climb into that, or you can get different things that cause a problem. So when your house is trying to flush the waste out too tight into the city plumbing system to have it taken away, it could get back up. It can start leaking into the front yard and then you can’t use the plumbing at all.

Rob:
Darius, I relate a little bit to this, because when I bought the house that I’m in right now, there was an issue with the sewer. We got it scoped and they said that they agreed to fix it, and we did not get it re-scoped afterwards, because we’re like, “Well, they fixed it, so we’re good.” Well, they lied about it, and so we’re settling in, it’s been a week, we’re into this house, we’re enjoying it. And then I walk into my bathroom and there’s ramen noodles inside my bathtub, along with a few other non-aesthetically pleasing things. And man, yeah, when you don’t have a working bathroom, shower, kitchen sink or anything, oh man, it is pure agony and chaos in the household with kids.

Darius:
And of course, if they can’t use the bathroom, tenants can’t, you know they’re not paying you rent. They’re going to be fighting that.

Rob:
Which I think is not unfair.

Darius:
Right.

Rob:
So at this point, you said you had sort of learned a lot of lessons from your first properties, and you had worked on the electrical and the plumbing with your neighbor. Did that knowledge transition to this third house and this problem? Were you pretty aware of how to do it yourself, or were you outsourcing sort of right from the get go?

Darius:
Yeah, so the plumbing issue, you have to outsource that, just don’t have the tools to do that. But after the third property, that’s pretty much when I hit the ground running at that point. That’s when things got real interesting. I had an appraisal issue as well with the third house, the Quicken Loans. During that time, again, you had some houses that were appraising high and some that are low, but it’s still very tough for an appraiser when half the neighborhood is just distressed. So I would say it is like the baby Detroit. If you’re from the outside, you’re right.

David:
That’s a great point there. So you’ve got a property that you bought at a low price because it’s distressed, and now you put money into it and you fixed it up, and then it’s cash flowing really well. If you were to build it from the ground up, it would be way more expensive than what you’ve actually put into it. So there should be some equity here, but the appraiser’s looking at a whole bunch of abandoned houses in this same neighborhood that are maybe worth $2,000 or $3,000, that does look at their valuation, because how do they know what to compare this to? If you’ve got the only house that’s fixed up, is that kind of what the problem was?

Darius:
Yeah, they came back and said the house was worth $55,000. I’m looking at them, like there’s no way. Absolutely no way. And so what I did is, I went and got a second appraisal, and it was worth that little $500. It was worth the money, because they said it was worth $85,000. So I was able to take the 75% loan to value. That got me around $63,000, and I bought a fourth property, which is a condo, which was pretty much what we would call a turnkey at that point. And I bought it at HOA.
I mean, I had that thing rented out within a few months. Literally. I had issues with the HOA and the ticketing, and I didn’t understand that they were giving the tenants nearly the same amount of power as the landlord. So the tenants could actually show up to the board meetings just like the landlord could and stuff. That rubbed me the wrong way. So what I did is, I sold the condo and I replaced it with a single family home. And I got the single family home from my actual wholesaler, and I got this right on time. It was like in 2019, the same month as Amazon came in, and I bought it for $42,900. Like I said, the wholesaler got it for $10,000, and it’s worth probably about $150,000. It sits next to a $200,000 house. It’s literally less than a quarter mile away from Amazon, less than that.

David:
Now, appraisals can be tricky, and part of what makes it even trickier is, real estate is worth what someone’s willing to pay for it. Which means that that doesn’t fit in as a value on a spreadsheet very well, and people don’t like that. They want to have a number attached to what something is worth in dollars, preferably. But with an appraisal, it’s so subjective, the appraiser gets to decide. I have a cabin in the Blue Ridge Georgia Mountains that I bought, and I basically built a second cabin on the property. The appraiser came in and gave me an additional $50,000 of value when I doubled the square footage of the property that was on that lot.
It doesn’t make any logical sense, but that’s just what the appraiser gets to say. I think that they look at what you bought it for, and they try to keep the new price as close to that as they can. So for everyone that hears this, it’s easy to get discouraged by that. It’s easy to think you did something wrong. Oh man, I never should have done this. I only got $50,000 of value. That’s not true. If I were to sell this thing to someone else, they would pay way more than just $50,000 more than what I paid for it, and I’ve doubled what the property will be able to generate in revenue. So there’s lots of different ways to value property, appraisals can be tricky. What do you think, Rob?

Rob:
Yeah, definitely. When I built my tiny house in Joshua Tree, it was really tough, because I was like the first tiny house, so I actually had to fight for three different appraisals. The first one, they’re like, “No, that’s way too high.”
The second one was insanely low, and I was like, “Listen, we’re tied here. We got to get a third appraisal.”
And they were like, “Okay, that’s fine.” So third appraisal came in right at the amount that allowed me to take 100% of my money out. I would’ve been fine leaving some in, because that’s just how the nature of the game with BRRRR is. Sometimes you might leave $10,000, $15,000, $20,000 in the deal, but man, yeah, appraisals, it’s not as objective as you’d think.

David:
But in areas where there’s a lot of comps, you can start to get an appraisal that’s somewhat predictable. That’s maybe a better thing than saying accurate, because who knows what the house is worth. It’s just worth what someone will pay for it. But when it becomes predictable, it could benefit you. So areas like Phoenix or Las Vegas, they have a lot of track housing. The appraiser’s like, “There’s a million 4 bedroom, two bathroom houses for me to pick from.” They get a very tight number that comes in, and then you can kind of plan your BRRRR or your flip based off of that. That’s one of the reasons that you just want to understand the area that you’re investing in. I’ve said you don’t have to invest in your backyard, but you got to understand the backyard you are investing in if you’re going to do long distance. So Darius, you’re in a specific area. How do you feel that just buying the majority of your portfolio in that location has been a benefit to you?

Darius:
Oh, I mean, you’re creating an infrastructure around you. I’m using the same contractors though, the populating tenants in the properties, it becomes like word of mouth. I have a good eye of the rent flow, so I know exactly how much the rent is for each property that I’m buying. At that point in 2019, that’s when I took off, because I don’t have to do as much of research as anymore. I don’t have to rely on Zillow, and Redfin, and stuff for the data. I’m getting the data live, because I’m actually in it.

David:
I know you had mentioned that you were working as a janitor when you bought that first house, which I love. Because I had a same blue collar approach, where I just worked blue collar jobs, saved my money, worked as hard as I could, put it into real estate, and started to climb my way out of that hole. At what point did you switch from being a janitor to taking that corporate position that you mentioned, and did real estate play a role in helping you make that jump?

Darius:
So in 2014, I was still only making like $14 an hour. I was a contractor at the time at Chrysler. When I made the bigger jump in income, it was probably in 2017, so that was right after I bought my third property, which makes sense because you need income to qualify for the loans. Real estate helped when I refinanced that third property, because now I had the equity plus I had the monthly net profit to use for repairs and purchases.

David:
I’ve noticed that, in my journey, I think Rob’s might be a little different, because my understanding is that Rob scaled his initial portfolio with partnerships. So that might not be the best example, but I’ll let you weigh in a second here, Rob.
I noticed that there is a relationship between the money that you make at your job or your business, and the real estate that you buy. And what I mean by that is, when you develop some kind of passive income, you can take risks in the job that are not as risky. If you go for another job and it doesn’t work out, or if you leave the security of a W2 to go to a 1099 opportunity or whatever, it’s easier to do when you got a little bit of cashflow coming in.
And the same is true for some of the risks that go with real estate. They’re easier to handle when you’ve got a steady paycheck coming in and you live beneath your means, right? There’s this kind of, both hands work together to make the wealth building journey a little bit easier. Did you notice a dynamic like that, Darius, in your world, where you’re working as a janitor, you’re getting some momentum getting real estate, then you’re doing some physical labor on the house, your confidence is going up because of what you’re learning, you buy another house, you’re learning stuff about the loan process, now that’s giving you confidence in the job again, or did you see these as completely different independent tracks?

Darius:
No, I saw them completely independent tracks. I didn’t look at it that way. I looked at my nine to five as something that gives me stability, and I still look at the real estate like, okay, if this thing turns out well, it could give me the financial freedom. The job is great, but when you turn on the Instagrams and the YouTubes, and you see people buying the cars and stuff, they’re using passive income. They’re not using the money that they’re working for, earned income. So I really pushed that. I just spent over $50,000 in a year on vacations, and there’s no way my nine to five would be able to support that. The passive income is what supported that. So I look at it separately, yeah.

David:
But you were getting loans by these properties, so having some kind of steady income helps you get the financing that you were able to use to build a passive, right?

Darius:
Yes.

David:
Okay. You also have a perspective here on live data. So when you’re at an auction and you’re bidding, you’re looking at live data versus someone on Zillow that’s looking at stale data. Can you go into your perspective on that?

Darius:
Yeah, yeah. So between 2021 and 2022, I bought five properties, okay? I went to Flint, I went to entire 40 miles out from Pontiac. Flint is not, it is very distressed. They had the water crisis, they had the recession, we had COVID out there. I mean, there’s a lot of things that hit Flint. They got different kind of problems out there. So I went to a high risk area to buy properties. I had a lot of people out there who were saying, “Oh, don’t buy in Flint because it’s a bad area.”
And what I did is, I actually went to the auction, stood in line, saw how many people were waiting for the properties, and I started telling people, “Hey, that data that’s on Zillow is not real. That’s not live data.” The live data is when you’re in the auction, you’re actually seeing it happen right in front of you. The live data is when I’m in the auction online, getting beat and putting blind offers at $60,000 for two bedroom houses in rough areas.

David:
So what’s the advice that you’d give to somebody who tends to make their decisions about where to buy, what to buy, what to pay off of data that they get from the internet, like sources like Zillow?

Darius:
I would say actually go and see the properties. People think they can sit behind the computer and do everything. You can’t fully inspect a property from behind the computer, you actually get up and go to the property. And sometimes it pays off too, because you may see something to use as a negotiating factor to bring the price down with you and the seller. So sometimes I’ve been able to take the price down by like $10,000 on a property because there’s some minor repairs that are needed that are not shown online.

David:
Are you still buying properties at auctions?

Darius:
Yes. Yes.

David:
Okay, what about that? If somebody isn’t sure about it, hasn’t done it before, can you just describe how that’s different than buying properties traditionally using a loan, and maybe who this is good for and who it’s not good for?

Darius:
Yeah, so there’s some auctions where you can use a loan. The auctions I go to, generally you cannot use a loan. You have to use used hard, hard cash. The auctions, for example in Flint, the good things about those is that you can actually go and see the property. Many times the online auctions don’t allow you to physically go and see the property. So there’s a disadvantage to those types of auctions.
The prices of the properties, they’re not evaluated, so they’re just pretty much, they get the properties and they put them up for sale for whatever they’re owed to the city, because they know the city owns the properties. Where if you’re going to Zillow, or if you’re going to MLS, the open market, you look at a property, at that point, the point you’re starting at, somebody has already evaluated the property, they evaluated the condition of the property, that kind of thing. So you’re likely to not get as good of a deal.

Rob:
I mean, buying four properties, or I guess four or five properties in a year, that’s pretty crazy, man. A lot of people work their whole lives to just get four to five properties in general. So the fact that you were able to scale at that level, that quickly into your career, I think it shows that you figured it out. But from my understanding, when you were trying to figure out how to scale, you took that question to the BP forums. How did that help you?

Darius:
Yeah, so really when I go to the BiggerPockets forums, I’m looking for reassurance, and I think that’s how other people can use the BiggerPockets forums. If you’re investing in real estate, you’re already a smart person, that says a lot about you. But if you’re looking to know if you’re doing things right or if you’re organizing your portfolio correctly, you can go to the forums to find credible people for help. My issue was, I didn’t know how to scale, and somebody told me what they did is they refinanced their four unit and bought a bunch of single family homes. I didn’t have a four unit, I only had single family homes. So what I did is, I did multiple refinances and then I bought a spread of single family homes in a smaller period of time, which is what I did in 2021 and 2022.

Rob:
And can you recap for us what your cashflow in your portfolio is looking like now, and what’s on the horizon?

Darius:
Yeah, so nine total properties, one I live in, three are currently being remodeled right now. They should be finished at the end of the year, and then five are actually occupied and rented. So those five bring in about $66,000 annually. And after those other three are remodeled, we’re looking at a total of $102,000 roughly a year from the rent. And I don’t have any partners. I only partner with the bank. So generally I use the same lender for the investment properties and I go to a credit union for my primary residence.

David:
What’s the cause of why the rents are going to jump by that much? It’s like a 40% increase.

Darius:
Number one, my rent is actually, because most of my tenants still been staying in my properties for a long time, so I’m very conservative on the rent increases. And the rent is still going up, values are still going up over here. Like I said, we have GM, Chrysler, and I have Amazon that just arrived here. We also have United Shore. They’re very big as well over here. So that just happened in the last couple of years.

David:
But are rents increasing by 40%, or are you having new properties coming into the portfolio that are also going to be bringing rent?

Darius:
Oh, I see. So the current rent is, between the five properties, a total of $66,000, but those additional three properties are going to bring in another $36,000. Sorry about that.

David:
That makes sense. So you’re adding a lot more cashflow because of these remodels that you have going on.

Darius:
Yes.

David:
Pretty sweet to be coming on as we may be heading into an economic recession, you’re going to be making more money.

Darius:
And just to bring more clarity, those additional properties that I purchased, those have no debt on them.

Rob:
Whoa.

Darius:
I went to auction, I bought them pretty close to zero.

Rob:
Wow, that’s crazy. So at this moment, on the $66,000 per year, what’s the actual cashflow? Like the net profit to you?

Darius:
Yeah, I would say about 60%.

Rob:
Wow. And then will you get even more profit once those other three are live, because you own those outright?

Darius:
Yes, yes. But my plan is to refinance everything and put debt on them, number one, because it protects you. And number two, my original plan was to buy a spread of homes really quick, and then refinance all the homes once I get my cash flow up. That way my DTI is a lot lower when I go to the bank.

Rob:
So now that you’re pretty seasoned in all of this, are you still DIYing any components of your rehabs?

Darius:
Yeah, so what I try to explain to people, we look at just the houses, but I also own the refrigerators, I own the process as well. I own about $20,000 in power tools. So what I’m trying to do is build my own internal team. So right now I have one person working part-time. My plan is to make them full-time eventually in the future, just for the repairs and as my own internal property manager, to take some of the load off of myself.

David:
So you’re thinking about creating a property management slash rehab internal team to work on your properties?

Darius:
Yes.

David:
And are they going to be salaried people

Darius:
Right now? Hourly.

David:
Okay. And then they’ll just work when you have work, and then when you don’t have work, they can do something else?

Darius:
Exactly.

David:
So have you thought about extending this into a business once you’ve got these people that are working under you, that maybe you have other investors in the area that need a crew, and you just charge the difference? Or keep the difference between what you charge that person, what you pay the people?

Darius:
Exactly. And that’s where I actually got my employee from. I actually was able to refer to someone else for help.

David:
I love that. I think that’s the future, going into this new market, that’s how everyone should be thinking. It’s in Pillars of Wealth, I talk about how we have to be thinking about investing as a way to make money, but also offense. What are you actively doing in the business world, or in your job, or in a commission space, whatever it is to make more money? And you’ve got a great synergy.
You’re going to save money by having people that do the work on your own remodels, because you don’t have to pay a contractor who’s going to keep a profit. And then in addition to that, you’re going to make money by actually making that profit yourself, by having these people work on other people’s jobs, because you’re willing to build this expertise and do the work. Which, I will add, you probably have the confidence to do that because you had to step into that nightmare project in the beginning, and learn how to do it. So while that looked like a reason to quit, you turn that into a possible business that you can use to make money, and scale your portfolio even more.

Darius:
Exactly.

David:
Good job on that.

Darius:
Thank you.

David:
Yeah. What’s the total equity across the portfolio?

Darius:
So it’s $350,000 in debt, of real estate debt, and $1,100,000 is probably what the portfolio is worth.

David:
Not bad at all, man.

Rob:
That’s not bad. That’s amazing.

David:
Yeah. Do you feel proud about that? What are your thoughts? Are you trying to grow it?

Darius:
I wasn’t looking at it like that from the beginning. Like I said, I was buying $2,500 and $10,000 houses. That was not my motive originally. Like I said, when Amazon came here, that’s when things got interesting, because Pontiac was more so of a lower class city as far as the home values, the income per household, and stuff. So back in 2014, rents were probably around between $550 to $700. Now for, like I said, a two bedroom rent’s like $1,400 a month. I’m thinking that the rent is going to get to $1,800 per house for a regular three bed, one bathroom house.

David:
So in order to get to the position you’re at three quarters of million dollars of equity, massive cashflow in this portfolio. A couple of things you did really well that I just want to highlight. One, you jumped in and you took action, and when it went wrong, most people would be completely wiped out if they had found out that they bought a house that doesn’t have electrical or plumbing. You found a resource, which was the neighbor, and you jumped in and you did a lot of the work yourself, which built up a lot of skills that are now helping you at this point. You kept going. You said, “Hey, I’m going to buy another one.” And you were always finding stuff below market value that you added value to. That’s a very good principle. Just to take in mind that you were always paying less than what you could have by going to an auction, and then you were adding value to it by doing the work.
And you got in there and did the stuff. You didn’t just get frustrated that you couldn’t find a contractor, or the person that you hired didn’t do it on time. You went in there and did a lot of the stuff yourself. Then you used the BRRRR Method to scale once you had a good thing going with every single one of these properties, you’re adding equity, adding equity, snowballing, snowballing, snowballing. Now that you’ve got a really good thing going, you’re expanding. That’s the last thing that I just want to highlight. You’re looking at getting your own crew so you can buy more properties, and building a business. And then as a little bonus thing here, you picked the right location, whether it was on purpose or whether it just worked out.
Now you intentionally know, you say, “Where are the jobs going? And I want to go there, and I want to own that.” Because you’re looking at this as a property manager would, how can I get rents and how can I get a steady stream of employees? Which was buying into a market that at the time was incredibly distressed and everybody was saying to stay away from, you went against that, and you were able to build a pretty impressive snowball. So well done, my man. That’s an inspiring story. Rob, anything you want to add?

Rob:
Yeah, I mean, you’ve come a long way, man. A janitor making $10 an hour to having somewhere in the neighborhood of $750,000 in equity, plus some pretty generous cashflow here. What has this been able to afford you and your family? I know that you mentioned taking $50,000 worth of vacations, but what else has this done for you?

Darius:
So it is given me a peace of mind. And then one of the things that I’m proud of is, it helped my wife a lot. She’s been able to be a stay at home mom and assist with the real estate. She’s also a realtor as well. She’s the one who sells me some of the properties as well, and gives me some tips there. But I’m able to spend the passive money without pulling out that scrap sheet of paper every month, and seeing if I have enough money to pay my bills. It just takes a lot of pressure off me.

David:
Well, thanks for sharing your story with us today. We don’t hear about these too often. This is a great one. I am sure a ton of people are going to be reaching out to say, “I want to do what you just did.” Where’s the best place for people to go if they want to find out more about you?

Darius:
You can simply Google, Re with D. That’s Real Estate with Darius. I have my own website as well, so rewithd.com, I have coaching on there. You can also go to my Facebook, that’s RE with D, and you can also reach me on Instagram at Darius_oneofone. And that’s all spelled out, no numbers.

David:
O-N-E O-F O-N-E. Darius, O-N-E-O-F-O-N-E. All right, thanks Darius. Rob, how about you? Where can people find out more about you?

Rob:
Fine me on YouTube at Robuilt R-O-B-U-I-L-T, and on Instagram at Robuilt as well. I post content many, many times a week, and I teach you guys all this stuff and more. So go follow me there. What about you?

David:
Much like Carmen San Diego, Rob is traveling all over the place, so if you do want to find him, you’re going to have to do it on social media, not in real life. He’s recording this from a hotel room right now at a conference. Busy man, traveling all over the place.

Rob:
Hey, but I made my bed though, if you can tell, because I got in trouble on the Barbara Corkin interview by all the YouTubers. All the YouTube comments, they’re like, “Bro, make your bed.” And I’m like, listen, it’s just not the first thing I do every morning.

David:
You can find me at davidgreen24.com, or you could go online on any social media platform and find me at DavidGreen24. So please go give me a follow and reach out. Darius, thank you for being here, man. Awesome story. Love hearing this, and I just can’t help but state that you have an incredible portfolio and you’re a powerlifter, not a Fitbit Walker. I know causation isn’t necessarily creates correlation, but in this case, I really think it does. So Rob, just think about how rich you could be if you did more than just walking. Any last words for you, Darius?

Darius:
No, no. I think you covered everything. I really appreciate you for having me. I remember being on BiggerPockets back in 2015. I didn’t think I would’ve own as many houses as I own today, and having BiggerPockets is really helpful.

Rob:
Awesome.

David:
That’s it. Well, thank you for sharing your story. And if you’re listening to this, remember you too could have a result just like Darius is. It’s just about finding the right pieces, putting them all together and staying focused on the goal. All right, Darius, we’re going to let you get out of here. This is David Green for Rob. Where in the world is Carmen San Diego? Abba Solo signing off.

Hosted by Brian Sullivan, “Last Call” is a fast-paced, entertaining business show that explores the intersection of money, culture and policy. Tune in Monday through Friday at 7 p.m. ET on CNBC.

As with the natural cycle of all things, businesses are born and when the time comes, they die.

Safestyle UK, is the latest large company to enter administration in the UK.

After trading for almost 31 years, the company collapsed last Friday due to factors including poor consumer confidence. Interpath’s Advisory’s managing director Rick Harrison said “After seeing strong sales during the Covid lockdown periods, many companies are seeing trading being impacted by the cost-of-living crisis and soaring costs.”

Whilst around 70 of the company’s 750 workers are being kept on in the short term to complete closing down duties, more than 600 employees have found themselves without a job.

What Can Businesses Do To Avoid Redundancies?

When faced with financial problems, there are a number of steps to take before resorting to sudden redundancies.

Flexible Working

To save on office space and utilities costs, consider allowing employees to work flexible hours or fully remote. Continue to foster a team atmosphere through in-person and virtual team building activities, and frequent good communication practices.

Cross Training

To boost operational efficiency, and reduce the need for new hires, you could train existing employees to perform multiple tasks. Make sure your requests are reasonable or it won’t end up being an efficient solution.

Feedback And Appraisals

Identifying areas for improvement and promoting a culture of learning can be easily done by regularly assessing employee performance, and giving them constructive feedback.

Government Support

Search for and consider using government programs, loans or grants that exist to support small businesses through financial difficulties.

Raise Finance Privately

Applying for loans, grants, lines of credit or starting a crowdfunding campaign could successfully reduce the need for redundancies.

Shift Focus

Within your business, there are likely some offers that are more profitable than others. Placing more focus on selling these is a way to trim the fat and make more profit.

Improve Your Offer, Customer Experience And Advertising

Take a deep look to analyze existing strategies and update or put in place new ones. The offer, customer experience and advertising are areas of your business that have huge potential to change the balance sheet for the better.

Save Where Possible

Review your budgets. Are there areas where reducing costs won’t sacrifice quality or productivity? If so, make the required cuts.

Sometimes there is no other choice. However, if redundancies are necessary, let workers know well in advance, organize severance pay and support them in finding new employment. In the case of Safestyle UK, this didn’t happen which has added to the discontent from their now redundant workforce.

Lee Parkinson, GMB Union organizer, said, “More than 600 workers have been cruelly cut off from work, weeks before Christmas, with no guarantee that they will even get last week’s paycheck.”

Ashley:
This is Real Estate Rookie, episode 335. My name is Ashley Kehr and I am here with my co-host, Tony J. Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, twice a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Today, we’ve got someone who’s like a born, bred, raised in the bask of all things BiggerPockets. We got Tim Yu on the podcast and he’s been a faithful listener for quite some time. He said he listened to the podcast every day for almost two years, but really use everything he learned in the podcast to really kickstart his investing journey. The guy closed on 10 deals in a year. A little less than a year actually. And you’ll get to hear exactly how he made that happen.

Ashley:
Yeah, I love how we go through every single deal. So listen to him talk about all the ways he was able to finance these deals. Not one was funded the same exact way, so he is going to break down each deal he did and how he was able to get financing for them or get a very creative… One deal, he only paid $2,000 out of pocket and didn’t have to go and get a bank loan. So he explains how he was able to do that.

Tony:
He even got paid to buy a property. He went to the closing table and got a check back. So you’ll get to hear how he made that happen. But overall, Tim is just, I think, a shining example of what happens when you’re a big part of the BiggerPockets community. He was active on the Real Estate Rookie Facebook group and the YouTube channel on the actual podcast itself and the forums. And it’s like when you do those kinds of things, good things typically happen.
So if you’re part of the rookie community and you haven’t yet, we would love if you could leave us an honest rating and review. We’re at 1,595 ratings as of this recording. So hopefully by the time it airs, we’re at like 1,700. We should be there at least. But take a few minutes, let someone know what you think about the show because honestly, the more reviews we get, the more folks we’re able to reach. And hopefully that leads to more stories like Tim’s. So take a few minutes, leave that review for us.

Ashley:
And if you have a story like Tim’s or you just completed your first deal, we would love to hear about it. Please apply to be a guest on our podcast by going to biggerpockets.com/guests. And I will tell you that if you don’t think that your story is good enough, it probably is good enough and we’d love to have you on. I’ll also tell you a little secret that when our producers go through the application, they love, love extra detail. So really take your time and give us all of the nitty-gritty about how you got into real estate investing and we would love to have you on if you would take the time to share it with the rookie community and inspire others. Welcome to the show. Thank you so much for coming on with us today. Can you tell us a little bit about yourself?

Tim:
Yeah. Hey, I appreciate you guys bringing me on the show. I’m Tim. I’m 30 years old. I’m actually a full-time Army officer stationed at Fort Knox and I live in Louisville, Kentucky. I started investing back in November 2022, and I kind of dabbled in a lot of different things throughout the last year. At first, I wanted to do long-term rentals through BRRRRs, and then I ended up having a love and passion for fix and flips. And then I went into the creative space and that’s where I’m right now.

Ashley:
Awesome. So before we go any further, just give us an overall picture of what your portfolio looks like today.

Tim:
Yes. So I have two duplexes. I have three single families in Louisville, Kentucky. I have two partnerships in Oklahoma. They are two single families as well. And then we also have a fix and flip partnership in Atlanta, Georgia. I’m currently working on a fix and flip right now in Louisville, Kentucky, which we just started renovations and then we’re closing on a property in a couple of weeks, which is a seller finance deal.

Ashley:
So you had said 2022, so this was all within a year.

Tim:
Yeah. So November will be my one-year anniversary.

Ashley:
Wow, awesome.

Tim:
… of real estate investing.

Tony:
That is amazing.

Ashley:
Yeah. It’s very cool.

Tim:
So it’s been so fun.

Tony:
I just want to ask something because… Let me ask this question first. Before you got that first deal in November 2020, how much time would you say you spent educating yourself, getting yourself mentally to a point where you were like, “Okay, I’m ready.”

Tim:
So there was a lot of things that I did. I was always an investor of some sort. I had that mindset with stocks. So I did the 401(k), I did the Roth IRA type thing. My brother-in-law is actually a big investor with stocks and stuff, so he would teach me, “Hey, if you make $50 mowing a lawn, put half of that away in a 401(k) and then you can keep that half to spend it.” He told me that when I was 11 years old. As soon as I started working a full-time job, I always decided to put money away into my investment accounts, which we’ll go into that probably later of how I used it to invest in real estate.
But prior to that, I live in Louisville, Kentucky. So if anyone is in the military, especially the army, you know that all the duty stations are terrible locations. I was single at the time, so I wanted to live in a city, so I had to commute to work every day. So I drove 50 minutes each way every day for two years and I got started on real estate by listening to you guys. So I listened to the Rookie Podcast every single day for almost two hours a day for a year and a half. And I’m sitting-

Ashley:
So you’re sick of us by now.

Tim:
I still listen to you guys. It’s absolutely incredible because I sat in my car one day and I realized I was listening to you guys for a year and a half and I never did anything about it. I always wanted to say, “Hey, I wanted to buy a house now, but maybe I’ll just do it later.” I ran into a real estate agent by chance when I was trying to get out of my rental lease. So I was asking the lady, “Hey, when do I need to tell you I’m moving out?” And she’s like, “Why are you moving?” “Well, I want to go buy a house.” A real estate agent literally walked around the corner and was like, “Hey, I’m an agent. Do you want to work with me?”

Tony:
No way.

Tim:
And I still work with her to this day. She’s incredible. And I was like, “Let’s do it. Let’s go get a property.”

Tony:
That’s a lesson learned for all of our agents that are listening to the podcast. Just lurk around corners and just wait until you hear someone say that, “I want to sell my house.” But Tim, so you have this year and a half journey of educating yourself, which is what I’ve found is the typical time range for people that really take action is somewhere between a year to two… Six months, a year and a half is a good timeframe typically, but you close on that first deal and then you just go on a rampage where you’ve got 10, 11 deals done in a year. I know we’ll get into the specifics, but just at a high level, was it your intention going into it to move this quickly from the beginning? Did the motivation or the momentum just build after one deal? What was it that allows you to move so quickly?

Tim:
This was definitely not the plan. I wanted to do one property every couple of years because I am a veteran, so I wanted to use my VA loan. So I wanted to do house hacks. That was the big strategy that I wanted to start off with, which, “Let’s house hack a deal or let’s renovate a property in BRRRR and just slowly grow from there.” I think they call it the real estate bug. I bought one house and I was like, “Oh my gosh, this is so fun.” I think the most fun I have now is going to the closing table. So I think it’s just been a rush. It’s been so much fun and the people you meet in real estate world is incredible. So I think it just snowballed from there.

Ashley:
So let’s talk about being able to fund all these deals in a year. Where is all of this funding coming from? Let’s start out with the first deal and then maybe walk through how you were able to fund the other ones.

Tim:
Okay. So the first deal originally was going to be a BRRRR. So it was around Thanksgiving time. I was walking in the park with my girlfriend at the time who is now my fiance.

Tony:
Congratulations.

Tim:
Thank you, man. I appreciate it. And she was actually yelling at me saying, “Hey, get off your phone. We’re outside. Enjoy the weather.” I’m creeping on Zillow the whole time. It was on the MLS and a house was $100,000 and it actually dropped to $50,000 overnight. So we went to go see it. There was definitely something wrong, but there was a squatter in the property that the seller had to get rid of and he was out of state. So I offered $40,000 cash to purchase the property. They accepted the contract the next day and I realized I didn’t have that money in my checking account.
So I asked my agent, “Hey, what do I do?” She’s like, “Look at hard money loans.” I had no idea what they were, so I went on YouTube and became a YouTube warrior and was just watching videos on hard money loans. I ended up linking up with a hard moneylender at one of my local real estate meetups and he was like, “Hey, if this is your first deal, I’ll fund you.” Because I actually had some issues getting some hard moneylenders to approve me just because of my lack of experience and they weren’t exactly confident on the property, but he actually took a chance, so he loaned me 90% of the deal and I had to find the rest to close.
So I begged my parents, I was like, “Hey, loan me some money. This is going to work out.” And they actually said no. So they’re very old school. We don’t have a financial background. They had all their money in a checking account and for the last 20 years, so they didn’t really feel comfortable with this type of investment. So what I did was, I was like, “Well, if you don’t lend me the money, I’m going to sell my 401(k) off and I’m going to fund this deal myself.”
That’s what I decided. It’s like we talked about earlier, my whole foundation was stocks and invest for 30, 40 years and retire off that money. I’m sitting in my room contemplating, liquidating the account.

Ashley:
Pushing that button.

Tim:
Oh my gosh. They had to call me and say, “Are you sure you want to do this?” I literally was like, “I need another day to think about it.” But at the end of the day, I think I took a chance and took a gamble. And I think a lot of investors and entrepreneurs have to take that leap one day. I said, “I think I’m going to make more money doing this than sitting in my retirement account.” And that’s pretty much how I decided to press the button and sell it all.

Ashley:
So first I just have to acknowledge this, you threatened your parents to give you the money or you’re going to liquidate your 401(k). Did they say, “Go ahead, I don’t care, that’s on you”?

Tim:
They basically told me like, “Hey, you’re an adult. If you really believe in this, you doing that shows that you’re serious.”

Ashley:
Yeah.

Tim:
Don’t support me.

Ashley:
Which I think is a wonderful response. Yeah.

Tim:
They support me in what I do.

Ashley:
Exactly.

Tim:
Do they agree on everything? A hundred percent, no.

Ashley:
It’s the support that is important that they weren’t saying, “Don’t do it at all. You’re making a super stupid decision.” It’s that, “If you’re really passionate about this, you want to do that, then make that investment.”

Tony:
Sorry, before we move on, I just want to ask one question because you mentioned this, Tim, about the hard moneylender, and you said that because you didn’t have any experience that a lot of hard moneylenders weren’t necessarily excited to work with you, which is true. A lot of hard moneylenders tend to favor working with folks that have a bit more experience. But you said you found this hard moneylender at a real estate meetup. Were you just going around shaking hands saying, “Hey, someone give me some money.” Or how did you broach that conversation? And if I’m a new investor in a similar situation, what should I be doing to find that hard moneylender?

Tim:
So I watched a video a long time ago on YouTube. It was one of the big investors out there and he said, “Hey, if you go to a meetup, don’t just go to a meetup to just network.” He said, “Have an intention and have a plan.” So I went to that meetup looking for a lender of some sort. I wasn’t sure if it was going to be a private person where it was a friend and one to just lend on the deal or if it was going to be an entity, like a hard moneylender or something like that.
So I asked everybody, “Hey, do you know any lenders? Do you know any hard moneylenders?” And that’s how I got connected with a couple of them. Throughout the week, I called every single one of them and they were like, “We have a minimum amount of money that we want to loan out.” And my deal was under that threshold. So a lot of those hard moneylenders wanted at least a hundred thousand dollars loaned out and I was asking for 70.
So they were like, “Well, it doesn’t meet my requirement and also, you don’t have a lot of experience, so we don’t really want to lend on this.” And luckily this one guy said, “Hey, I’ve been in your shoes before and as long as you can show that you have some sort of money in the back.” So I leveraged the 401(k). I said, “I have this money in a piggy bank and I’m willing to let it all go if this deal goes south.” And he was like, “Let’s do it. Let’s close.”

Ashley:
So with that first one, was it more just the experience part or was there something actually with the deal they didn’t feel good with?

Tim:
A lot of it was the experience and the amount of money I’m asking to borrow. So because it was under a hundred thousand, they’re like, “It’s not worth it for us to take the chance.” And also they asked me how many properties have we done? I was like, “This is my first, zero.” And it wasn’t in the best neighborhood either.

Ashley:
Okay. That’s what I was wondering, just because sometimes the hard moneylender will actually do their own analysis of the deal and curious as to if they said, “We don’t like the numbers on this property at all.”

Tim:
Actually, the guy who agreed to do the deal actually sent out his own appraiser and then it ended up appraising for 118. So we were all in on the deal for 70, and it appraised for 118, so then he was like a hundred percent good to go on it after that.

Ashley:
Okay. So let’s just go into how you funded some of the other properties real quick, and then maybe we can go into one of those deals and work through the exact numbers on it. But I think what a lot of people want to know, “Which I want to know is how were you able to get these 10 properties within the year?” So what were some of the ways that you scraped up money? So your first deal liquidated your 401(k), and then you had your money guy, but what are some of the other ways you’ve had to fund the deals?

Tim:
So after we purchased the first property and we were renovating it, or I had the real estate bug, so I was looking for another deal. Since I liquidated the 401(k), I had about $30,000 left just sitting in the pot. So we found a duplex on the MLS that needed a little bit of work. So I went full traditional. I did the 20% down on that property and I did the light renovations myself, and then that’s just a long-term rental. And then as we moved forward, I was out of money, so I used pretty much all my money on that down payment.
So then I started looking to use my VA loan. So the next property was the duplex. That’s the house I’m in now. We got the 0% down with the VA loan. And then we also had sellers concessions where the seller actually paid for the down payment. So I actually got paid a couple hundred dollars to close on that. So I live in one unit, and then the other unit in the duplex is actually a midterm rental for nurses because Louisville has a crazy nursing market out here.
There’s like five or six hospitals around here. Now, I’m completely out of options. I have no money, no VA loan. And I was like, “Let me try wholesaling.”

Ashley:
Real quick, Tim, before you go forward, for anyone that doesn’t know what a VA loan is, let’s just break that down as to no down payment. So you didn’t need any money for that. Did you qualify to have no closing costs or did you have to pay closing costs on it?

Tim:
Yeah. So you have to pay closing costs with the VA loan, but you can negotiate what the seller to have sellers concessions, which you can use that money to either buy points down on the loan or you can go towards the closing cost, which is what I did. And the really great benefit about the VA loan compared to the FHA is you don’t pay the PMI, so you don’t pay the mortgage insurance, which saves you a lot of cashflow. So that’s what the VA loan is awesome. And also you can use it for any residential property. So one to four plexes, you can use the VA loan on it. So it’s a great tool to house hack.

Ashley:
That was a great explanation. I think there is one circumstance where you can avoid paying closing costs, and I think that’s if you have a certain eligibility of disability.

Tim:
Yep. So if you have-

Ashley:
Yeah, I don’t Remember what the limit is though.

Tim:
So that’s a crazy program. Obviously, I’m still in, so I don’t have that disability. But yeah, if you have the disability on you, you also… The more you use your VA loan, so the first time you use it, you don’t have to pay this crazy fee, but that fee is waived every time once you have your disability. So it gets even better for you.

Ashley:
We also did an episode recently number 329 where we did a really deep dive into doing VA loans if anyone wants to learn more about that.

Tony:
Just one quick comment too, Tim, you mentioned that you got paid to close on that duplex. Can you just explain what that means for people because you glossed over that, but I mean, it’s a cool concept.

Tim:
So in Kentucky there’s a certain maximum percentage of sellers concessions. So I think I got about nine to $10,000 of sellers concessions and my closing costs were almost about that range. So since I moved all that money to my closing costs, I actually was in the net positive. So when you show up to the closing table, it’s crazy that they cut a check to you. I was really surprised, but it was enough sellers concessions to pay off everything, which is great.

Tony:
So tell us what happens from there, man. So you get to get this duplex. Move us to how you funded the rest of these ones after the VA loan is gone.

Tim:
I didn’t have any more money, so I was kind of like, “Man, I still want to buy stuff. I still got a crazy addiction to trying to buy houses.” So I started trying to wholesale and that really didn’t go well. I tried working for somebody and that’s how I started with the partnership stuff. I wanted to work for somebody and gain some knowledge and mentorship by serving as a cold caller. I realized that I really didn’t want to do that. So I started seeing creative finance options, the seller finance. The subject-to deals and all that stuff. And then I started getting really into that and that’s what kind of landed me on my next deal in Louisville was a single family.
It was a subject to deal and that’s when I took over the person’s mortgage payments. She was actually a full-time nurse and didn’t want to manage her property anymore, and it was zoned for Airbnb. So when we talked to her, she wanted to listen on the market, but it had no equity in the deal. So if she sold a house, she would actually have to lose money to do so. What we tried to do was… I actually pitched arbitrage. I didn’t know how to do that. She didn’t want to do that. She wanted to sell it outright.

Ashley:
Explain what arbitrage is real quick.

Tim:
So it’s when someone leases a property from somebody and furnishes it and lists on Airbnb and the person who furnished it manages the property and you don’t own the property at all. So the seller or the person who owns the house still owns it, they’re just leasing it out to you and you’re doing all the legwork on it. So that’s how you can generate that short-term rental revenue without actually owning the property. And I hope that was a good enough explanation.

Ashley:
Yeah, that was great.

Tim:
But yes, she didn’t want to do that. She wanted to sell it outright. So I literally talked to her on the phone for two, three hours about subject-to and if it was legal or not. We actually convinced her to do it and then I ended up buying it subject-to, and then I actually turned that into a midterm as well.

Tony:
All right. So let’s break down what subject-to is for folks that aren’t familiar with that phrase as well, Tim.

Tim:
Okay. Purchasing a home subject-to is when you take over an existing mortgage. So her mortgage was 3.96% interest rate, and I think at the time when I was shopping around, interest rates were around 6%. So I got a really good mortgage rate. So the PITI was super low. And I guess the way I explained this is if you’re buying a bag of groceries at a grocery store and you have the bag of groceries and you swipe your credit card, who owns the groceries? You do. You’re holding the bag of groceries. If you give it to your aunt down the road and you give her the bag of groceries, who owns the bag of groceries? Your aunt.
How do you prove who owns the groceries? It’s the receipt to the grocery bag. So we treat the receipt of the groceries as the deeded to the property. So they give us the receipt or the deeded to the property, and then we just take over their credit card payments or their mortgage payments and you’re now the owner of the house.

Ashley:
That’s a really cool explanation. Yeah, go to analogy.

Tim:
Thanks.

Tony:
Yeah. That’s like better [inaudible 00:22:10]

Tim:
I mean, we heard that story from Pace, so it’s burned in my brain. But I think that’s a great story to explain sub-to. So I paid her $2,000 on top, so we took over the property, we took over the mortgage and we gave her $2,000 on top and the incentive was she was going to lose $7,000 in the deal. So instead of losing seven, she gained 2000. Now she doesn’t have to worry about the mortgage and we took over the property.

Ashley:
So let me ask you this. This is something I’ve always wondered, especially when Pace talks about sub-to and I see a lot of agents who specifically go towards vacation rentals, short-term rentals saying buy houses at sub-to. Are a lot of these people selling? So if they have that really great interest rate, they probably bought it within the last three years and it seems like some of them are selling because it’s not profitable for them. Why would somebody else want to come in… So they’ll have the same expenses from them and take over those payments and then renting it out.
What is the thing that I’m missing in this gap? Is it poor management? Is they’re not taking advantage of pricing? What am I missing in that scenario is if someone’s not making money on this house, they want to sell it, why would I come in, take over their payments in?

Tim:
I think people try to get into the short-term rental business and especially if they’re out of market. So if they’re out of state, I think it’s to our advantage as creative finance investors because they think it’s going to be super profitable until they realize they got to deal with the constant turnover managing the cleaners. And then also if they’re out of state, they probably have a property manager and they’re paying a lot of money to manage these short-term rentals.
For us or for me in this market, if I take over someone’s mortgage and I keep all the PITI the same, I’m probably going to save a lot of money on managing the property myself in the market. And also, you save that 15, 20% and I think that’s huge. And then also since I’m boots on ground, I can go see the property and make sure that the cleaners are doing their job and doing all that other small stuff that actually gets people dinged up on their reviews or it just eats into their cashflow. But I think from my experience, I think it’s because of that, they have all the expenses.

Ashley:
You have that advantage that self-managing or saving that management fee, and then also you’re able to have a better product because you’re the boots on the ground overseeing it and you have that quality control I guess.

Tim:
Yeah. And I don’t do any short-term. That short-term rental, that probably would’ve done well as a short term. I just turned into a midterm because I have the midterm in the other unit right here. So I have some experience with that. I think I like the slower turnover because I do at least three month contracts with my midterm nurses versus, “Oh, there’s a weekends there and I can manage it myself with that.” But if it’s a short-term rental, I probably would’ve to hire somebody because I’d have to keep going and turning over the property and stuff.

Ashley:
Yeah. I’ve always wondered about that because it seems like it’s becoming very common that people are doing sub-to to vacation rentals. Tony, what are your thoughts on that? Have you guys bought anything sub-to?

Tony:
Yeah. We haven’t purchased anything sub-to, but in terms of why would I buy a property, I think a lot of what Tim said is true. It’s like, I guess first taking a step back, there’s probably a couple of different motivations as to why someone would want to sell their short-term rental. It could be because they have a property manager in place and that property manager just isn’t performing well and they don’t have the time desirability to manage it themselves. They’re like, “Hey, I could make more by selling this than continuing to pay this property manager 25 or 30%.”
The other motivations that they have been managing it themselves, but maybe they’re burned out. Maybe they underestimated how much work goes into managing a short-term rental. They haven’t really set up the tools and systems and automations and software to do it the right way. So they’re like, I just don’t want to do this anymore. And in both of those situations, like Tim said, I think there’s an opportunity for you to come in as a new host and improve the performance of the property.
Let’s say that first motivation where maybe they had a property manager that was charging them 25%. If I come in and I’m it myself, I’m immediately adding 25% to the bottom line, even if everything else stays the same. And that could be a big difference in profitability. I might have to pay my VAs a few bucks an hour, but it’s significantly cheaper than 25%. Or maybe they weren’t doing things like using dynamic pricing tools. Maybe they have really old listing photos.
Maybe they hadn’t changed the linen since the ’80s. Who knows what it is? But you come in, do a little bit of a refresh, and I do think there’s an opportunity there for folks.

Ashley:
Okay. So, Tim, sub-to, what’s your next financing you did? We’ve got the VA loan, sub-to, liquidating a 401(k).

Tim:
Yeah. So now we go into the partnerships in Oklahoma and Atlanta. So I actually met these partners through a mentorship that I joined down the road and I met those partners through there. For the partnership stuff, it’s a really scary game too because you’re not only marrying the deal, you’re also marrying that partner.
So the ones in Oklahoma, I actually met somebody out there that does GC work himself, so he does all the renovations and manages those type of projects. And those two deals were actually sub-to deals as well. I funded the deals by raising capital. So I brought the money to the table and to the deals, and then he managed the project and found the tenant buyers. So how we got rid of those deals as long-term rentals were we actually lease optioned those two houses out to end buyers. And that’s how we fund the deals.

Ashley:
Can you explain what that process is doing a lease option?

Tim:
So explain the lease option process?

Ashley:
Yeah.

Tim:
So a lease option process, I guess the easiest way for me to explain it is that you rent it out to somebody with the option to purchase the home later. So I guess the slang term is rent to own or something like that, but it’s a two -part deal where you lease the property to somebody and they rent it and then they have the option to buy it from now to however long you set the terms.
So for those two properties, we set a five-year term. So it’s a fixed purchase price for that amount of time for that buyer to qualify for a loan and then purchase it outright with a lender.

Tony:
And Tim, you’ve got so many tools in your tool belt here, man. So I guess what’s been your process for like… I guess let me frame the question this way. There’s a lot of people who read on certain topics or YouTube university, podcasts, whatever it is. But like you said, it took you 18 months to kind of feel confident to do that first deal and you went from that deal to the duplex, which was somewhat similar, but then you really took off into the creative finance space.
Was it that you were surrounding yourself with the right kind of people? Because you mentioned going to the meetups. You mentioned that the mentorship program, you mentioned all these other things you’ve been meeting people. Was it your network that gave you that confidence to try out these different strategies or was it something else?

Tim:
A hundred percent. So I know a lot of people talk about Robert Kiyosaki’s book, Rich Dad, Poor Dad. And it gets them started in investing and it’s an amazing book, but the book that I really love that I live by all the time is Who Not How by Dan Sullivan. That book really changed my mindset with business owning and entrepreneurship because it really talks about instead of you spending hours, months and years learning a strategy like lease option to finding the person in your community or in your mentorship program that has been doing those type of deals. And to find those people to help you, the who’s in your world to help you catapult your career or catapult your journey and the way that you get those people to help you is try to figure out what value you provide.
Because I know there’s a lot of people that say, “Hey, go network with people, go network.” It’s absolutely true, but I feel like a lot of people just ask people for help and they don’t really know how to ask for help. So for me, I like talking to people. I like building relationships and I think that’s where I figured out like, “Hey, that’s how I’m going to bring value to the team. Let me go talk to investors and bring some money to deals because I don’t have the money myself and I’m not generating the leads myself.”
So to find someone that has a lot of leads but doesn’t have the funding to get those deals done, that’s when I kind of figured, “Hey, this is where I’m going to sandwich myself in between these deals.”

Ashley:
So do you think a big part of this, if somebody is just starting out, is finding that money partner, finding how to finance a deal first by making those connections? Or is it finding the deal first, then going out and searching for those connections?

Tim:
I think if you find a really good deal, and you guys may have different experiences, but if you find a really good deal and the numbers make sense and it’s going to make money for you or a partner, I think the money will come once you find the deal. Because even me as a normal guy looking at properties and stuff, if the deal makes absolutely sense and I can fund it somehow or bring the money, we’re both going to win.
So I think a lot of people are afraid. I was too. I was like, “I don’t have the money to do all this stuff.” But once I started realizing once you bring a good deal to the table, the money is going to come from somewhere if you reach out to enough people.

Tony:
Yeah. Tim, I’m so glad you said that because I couldn’t agree with you more. I think finding a good deal makes everything else exponentially easier. And I heard this story over the weekend. It was this marketing guy, but he was talking about how sales is easier when you’re better at marketing and he gave the example of two different cars that you were trying to sell for $400,000 and he said, say imagine the first car is like an old beat up VW bus with blown out tires and the air conditioner doesn’t work and hasn’t been touched since 1970 and you’re trying to sell that for $40,000.
And then the second car is Rolls-Royce which retails for $300,000 and you’re trying to sell that for 40,000. You could be the world’s worst salesperson and still sell the Rolls-Royce for $40,000 because it’s an amazing deal. And you would have to be a hell of a salesman to get someone to buy the VW bus for you.
A lot of that comes down to raising capital as well. It’s like if I’ve got a really, really good deal, it doesn’t matter how big my network is because someone is going to find that deal. I could go into a random Facebook group and say, “I’ve got a really good deal and you’re going to have people breaking down your door.” So for a lot of our rookies that are listening, I think if the capital is a constraint for you, then try and focus your energies on how do I find a really good deal and then let everything else flow from there.

Tim:
Absolutely.

Tony:
All right. We’ve been talking a little bit of funding. Did we get through all the deals yet? I think you’ve got a couple more left in there. We haven’t touched on them all. Let’s quick rapid fire the last few deals and how you funded those.

Tim:
Okay. So the fix and flip in Atlanta, I actually… It’s kind of crazy. The Atlanta flip, I used a credit card, so I used a business credit card that had a promotion on it. It was like 0% interest. So I funded that deal on Atlanta. We sell it and we listed this month.

Tony:
Wait. Hold on for a second. Did you use that to purchase the property or to fund the rehab?

Tim:
To fund the rehab.

Ashley:
Okay. I was going to say how [inaudible 00:34:29] with a credit card.

Tony:
I’ve never seen anyone buy a property with a credit card.

Ashley:
I’ve seen people do a cash advance and pull out the cash off the credit card.

Tim:
So I used the credit card. I paid the 2% whatever to transfer the money into the checking account, and then I wired it to the Atlanta title company and then he’s renovating the property and then we’re going to list it actually in a couple weeks.

Tony:
Wow. Was that a business credit card or a personal card?

Tim:
Business one.

Tony:
Gotcha. Which one was that?

Tim:
It was a Wells Fargo card. So it had 0% interest for I think nine months. So it’s coming due soon. We’ve got to sell this house.

Ashley:
Well, I used a Wells Fargo one too for a funder rehab. We actually did it for all the materials.

Tim:
Oh, nice.

Ashley:
So we didn’t do a cash advance or anything, but we did it for all the materials. And they had a promotion too that if for the, I don’t know, first nine months, if you made your minimum payment every month that they would extend it to 12 months. I think-

Tim:
That’s nice.

Ashley:
… we paid it off already, but it did extend in case we have another project that comes up we need it for.

Tim:
Yeah. I mean they’re a really good tool. They’re so underrated.

Ashley:
Definitely. I mean, you could fund a pretty good rehab doing your materials and then you just have to worry about coming up with the cash to pay your contractor unless your contractor takes credit card. I just actually did a dumpster removal where they cleaned out a property and took the dumpster and everything like that and they emailed me the bill and they’re like, “All right. Pay by credit card.” I’m like, “Yep, racking up those credit card points.”

Tim:
Excellent. Awesome. And then the next deal, the one that I’m renovating now is a hard money loan. It’s just a normal fix and flip. We did a cash offer and then used the private moneylender to cover the rest of the costs and holding costs. We just started reno this week. And then the house that we close on in a couple weeks, it’s a seller finance deal, so we’re going to do light reno. Little down payment and we’re going to use a private moneylender on that deal as well.

Ashley:
Okay, awesome. So a wide variety of different ways to finance properties. I do want to go back to. Okay, so you’ve been able to purchase all these properties with this different funding, but now I’m curious about the rehab portion of it. Did you have any kind of construction experience at all?

Tim:
No, absolutely not. I looked for general contractors on the Facebook pages and networking events and that led to my first deals struggles because of my lack of experience and lack of network and having those systems in place. So are we going to talk about that more in depth? That kind of led into my first deal with the contractors and the lack of experience. I think the contractor knew that that was my first project and I lacked experience. I picked the cheapest one because I figured let me use the cheapest contractor to make the most spread on the deal, and it ended up costing me a lot more money because we had to hire a new contractor later on to fix a lot of the stuff that he originally did.
Also, since he knew that I was really inexperienced, we didn’t do a contract and it was the last third of the project and he actually asked me to pay him in advance because he had to pay his workers. I said, “Yeah, you’ve done a really great job for me the last month or two. Yeah, absolutely, I’m going to pay you.”
So I gave him the last third and then he literally stopped showing up to work. I know a lot of people have issues with their first GC and all that stuff, and it’s definitely true. He disappeared on me, so I had to paint the house myself and put all the light fixtures up myself to get this listed. And the project took really long because I had to do it myself towards the end. I remember I was supposed to BRRRR this house and I ended up listing it on the MLS to just get rid of it because I was just bleeding, holding costs and all this stuff.
As soon as that house was listed, there was a drug bust right across the street. So it was a lot of madness. I wanted to just stop real estate investing after that and it ended up selling. So we made a little bit of money off it. So I think that’s why I felt okay, but it was probably the most expensive learning experience that I’ve had. And I think that’s what’s helped me with the further projects because now I actually GC my own projects here in Louisville where I hire my own contractors, floors, windows and all that.
I think my military background helped me with that because I like managing stuff like that. So it’s a lot of fun to me. And I feel like I can sleep better at night.

Tony:
Tim, I guess the logical next question is you must’ve picked up that drug bust house on a pretty good deal. Right?

Tim:
I try to buy it. I try to buy it. I couldn’t get ahold the seller, but I tried.

Tony:
I wonder why.

Tim:
I really tried. It was all boarded up and stuff too, so I was like, “Oh, let me try to find the seller.” But no, I couldn’t get ahold of them.

Ashley:
I was at a real estate meetup once and this wholesaler came up to me and-

Tony:
A drug bust happened?

Ashley:
No. The wholesaler came up to me and I think he was a newer wholesaler. I didn’t know him. And he’s like, “Oh, people told me I should talk to you that you invest in this area.” It was one of the rural towns that’s actually close to where I went to high school and he is like, “Here, I have this house here. Here’s the address and stuff.” He was like, “Okay. I’ll look at it. I’ll email you.” And so I pull it up, I’m like, “Why does that house look familiar?”
I searched the address, just Googled the address and it was a meth lab, the people that owned it. And I remember my mom calling me and telling me that there was this meth lab, this drug bust going on in this house or whatever and this was probably like five, eight years ago maybe. So I said to the wholesaler, I said, “Well, has there been any remediation done?” And he’s like, “What are you talking about?” I’m like, “This house is a meth lab and it’s a [inaudible 00:40:32] the cops busted up.”
He had no idea or whatever. And it was just, you literally Google the address and information like that came up. So just you’re trying to wholesale houses or you’re buying houses. Just take the time to put the address of the property in and google it and see if there’s any news articles on that property. But actually I see that finally somebody ended up buying it and they’re slowly doing stuff to it.
Okay. Well, any last words of advice for somebody that’s doing a rehab or project managing? So you said your military background has definitely helped you with that. What are some of the things that you have implemented that make you a strong project manager?

Tim:
So I like to set deadlines now. I think organizing the project in thirds or quarters and having that contract laid out, I think that’s really important is to not do those handshake deals with your contractors and to have that contract that’s organizing, “Hey, I’ll pay you in thirds or I’ll pay you in halves after you finish this set list of items.” It’s actually really nice too because if you’re using a hard moneylender, a lot of those hard moneylenders will pay you for your renovations after they go see it. They inspect it or you take pictures of it.
So actually it helps us too out when you break down those payments in those organized manners because once they finish that project, then you can call the hard moneylender. They’ll inspect those items and then they’ll cut you the check and you can pay your contractors. And with that contract, it really keeps your workers in check as well. And also, I like to add a little bonus too. So if I have a 45-day project, I’m like, “Hey, if you finish it in 40 days or 38 days,” whatever it is, I like to give them a little money on top so they have a little bit of incentive. But also not too fast. So they rushed the deal and the project kind of gets messed up.

Tony:
Well. Tim, it seems like you’ve learned a lot since that first deal and sometimes things going south can be the best teacher and you tend to learn a lot when things go wrong, sometimes even more than when things just go perfectly great. So I’m glad to hear that you’re able to take some of those lessons. The next question I have for you though is about how you’re actually structuring these different partnerships and obviously Ash and I wrote the book on partnerships for BiggerPockets. Head over to biggerpockets.com/partnerships. But Tim would love to hear just your experience on how you’ve structured these different partnerships across the different deals.

Tim:
I actually had a partnership with somebody that didn’t work out, so it is not always sunshine or rainbows. But a lot of it is you find what you’re missing in your tool bag. So for me was the lead generation and finding someone in those areas out of the market or out of your local real estate market to help you. So for me, obviously, I’m not boots on ground. I don’t know how to generate those leads in those random cities like Oklahoma or Atlanta. I met some of these guys through the mentorship. And you always have to do your homework on your partners because once you work together, you’re stuck together until a good or bad outcome happens.
A lot of it is to see, instead of just analyzing the deal, you got to analyze your partner. So you got to see what their credibility is, how many deals they’ve done. So I usually try to find them on social media first to see if they’re actually posting content on Instagram, Facebook, or YouTube and to see what type of projects they’ve had. Also since I’ve met those guys in a mentorship, I actually asked a couple of guys and girls in my mentorship if they worked with them.A lot of other students had some really positive reviews about these guys, and so I felt like I can trust them.

Tony:
Got it. I love that you’re doing a little bit of homework on people beforehand. I think you mentioned this earlier, but sometimes getting… I mean, not sometimes, every time in a lot of ways getting into a real estate partnership is like a marriage. So you really want to make sure that you’re “getting into bed with”. But Tim, love your story so far, brother. I want to leverage all the experience you’ve gained this past year and let you answer a question from someone in the rookie audience.
So we’re going to head over to our rookie request line. So for all of our rookies that are listening, if you’d like to potentially get your question answered on the show, head over to biggerpockets.com/reply and we just might use your question for the show. So today’s question comes from someone by the name of Ja Mac and Ja’s question is, “In your opinion, what are the top three things that increase rental value? I’m gathering ideas for a home that we bought and planned to rent out.” So Tim, in your opinion, how would you answer this question for Ja?

Tim:
To increase rental? Are they talking about the rental income, how much you can charge?

Tony:
I guess let’s look at both, right? Both rental value and the after repair value.

Tim:
For the after repair value, you can always… If you have some extra space, maybe add another bedroom or a lot of the projects that I do is we have huge closets in the master bedroom and it doesn’t have a bathroom. So we usually add a bathroom in there because it adds a ton of value. Renovating a kitchen. I think one of the projects I did actually in my midterm, the kitchen looked like it was a picture from the 1950s. Has it been renovated? It had the weird turn knob ovens.
So we modernized that, ripped out all the cabinets and gave it a facelift, stainless steel appliances on and all that. But anything that you can add some value to your property will definitely boost your ARV. And obviously if you make things nicer, you can definitely raise the rents of those properties. If you are trying to make it even more profitable, if it’s in a really nice neighborhood or a good market for a midterm or short term, you can always add value like that by changing the amount of income you’re getting. So there’s the couple of tips that I can think of right now to boost the value and also to boost your rental income.

Tony:
Yeah. I love that answer, Tim. I think a big part for me is looking at your comps as well. So what other properties have sold in that area and what information can you get from those properties that have sold? We recently had Serena Norris on episode 330 and she came in and just gave a masterful breakdown of managing rehabs. So part of that conversation was how heavily she relies on comps to come up with her scope of work. So Ja, if you’re thinking about rehabbing a property, I’d say look at some of those other properties in your area, understand what they’re offering to folks and see what you can do to match.
All right. Let’s go to our next segment here, which is the Rookie Exam. Tim, these are going to be the three most important questions you’ll ever be asked in your life and you’re doing it in front of the rookie audience. Are you ready for the exam?

Tim:
I’m ready.

Tony:
All right, man. So question number one. What is one actionable thing that a rookie should do after listening to your episode?

Tim:
If you’re trying to get started in real estate, and I think you should find a real estate investor focused agent, it’s no cost out of your pocket to use a real estate agent. I think if you find an investor friendly agent that’s focused on investments and own their own projects, they can help you comp, like what Tony was talking about earlier, comp properties, find out what the values are and tell you what a deal is or what not a deal is. Also, when you buy a house on the MLS with an agent, you’re not paying the commission. So it’s free of charge for you and I think it’s a good way to get started and also build your network as well.

Ashley:
Yeah. I think that’s great advice. And BiggerPockets has the agent finder tool too. If you go to biggerpockets.com/agentfinder, you can see the selection of investor friendly agents to really help you out. Okay. Next question is, what is one tool software app or system in your business that you use?

Tim:
So I actually use your guys’ program for my property management. I use RentRedi. Because since I’m a pro member, I get it for free and I’ve been using it for the last year and it’s super easy. This is not an ad, but it’s super awesome. I mean it made my life a lot easier because I was super worried about being a property manager and it’s super nice to get your requests for repairs on there. Also, it literally goes directly to your bank account. A lot of your tenants will really like it too. They don’t have to cut a check to you, they can just wire the money to you. So that’s my number one software that I use.

Ashley:
And they don’t have to call you to put in the maintenance request. They can just put it in through the app.

Tim:
Put it in, super easy. But for real estate stuff, I use REIPro. My REIPro, so I use that as my system to pull up addresses, to pull up information about the properties. Now, that costs a little bit of money, but if you are trying to wholesale or trying to find some good deals off the market, that’s a system that I use.

Tony:
That’s interesting. I’ve never actually heard of REIPro before. Have you heard of that one, Ash?

Tim:
So it’s kind of PropStream.

Tony:
Interesting. There’s so many other options that are popping up. And Velo is one that has a relationship with BiggerPockets. Privy is one that I just recently found that actually seems pretty, pretty cool. Lots of options out there. But last question for you here, Tim. Where do you plan on being five years from now. If you keep the same pace, you’re going to be at like a thousand doors in five years, but what’s your personal goal where to see yourself being in five years?

Tim:
For me personally, in the next couple of years since I’ve been shifting towards the fix and flips and shorter stuff, I’m really trying to supplement my W2 income so I can comfortably leave work and start focusing on the business full-time. I started off with the long-term rentals, trying to generate a hundred, $200 a cashflow a month. But that would take me a long time to eventually feel comfortable to leave my W2. So I think in five years from now is to focus on real estate full time and start building long-term wealth with long-term rentals and still using the flip income to survive.
But I think in the long run is I would like to start getting into multi-families larger than the normal residential stuff. I think it’s a great opportunity out there. There’s a lot of cool things to get into and it’s something new, something that I’m not familiar with. So I really like learning, so I think that’s what I want to get into down the road.

Tony:
Awesome, brother. We’re excited to see you make that a reality, Tim.

Tim:
I hope so.

Tony:
So before we wrap things up, I want to give a shout-out to you. This week’s rookie rockstar, this week’s rockstar is Marielle Lily Walter. And Marielle says, “It’s almost unbelievable how much life can change in just one year when you decide to get out of analysis, paralysis, fear and doubt, and go for something greater. One year ago I decided to plunge headfirst into real estate and go hard towards my goals of financial freedom. At that time, I had done just a few real estate deals. Now, I’m about to celebrate my one-year anniversary of taking the real estate plunge and decided to look back over the year.”
So she says in just one year, she’s done 12 real estate deals, including seven flips, two apartment building investments, three rental properties, and four new deals under contract. And she finishes off by saying, “Your dreams are on the other side of your fear.” So Marielle, congratulations giving you a run for your money, Tim, with 12 deals in one year. But super excited to see that success happening too, man.

Ashley:
Tony, when I first read that before you said it out loud, I thought it said, “Your dreams are on the other side of your feet.” And it was because there was like a little smear on my computer screen. I was like, “Huh, I never heard that one before. You got to move your feet to take action to reach your dreams.”

Tony:
Move your feet to make it happen.

Ashley:
Well, Tim, thank you so much for joining us on the show today. Can you let everyone know where they can reach out to you and find out more information about you?

Tony:
Yeah, thanks for having me on the show. It’s been so much fun. You can find me on Instagram. It’s @itstimyu. So we keep it super simple with my name and you can find me on there. And thanks so much guys.

Ashley:
Thank you so much for listening to this week’s Rookie Podcast. I’m Ashley @wealthfromrentals, and he’s Tony @tonyjrobinson. And we will be back on Saturday with a rookie reply.

Speaker 4:
(singing)