Turning a $25,000 Rental Property right into a $5,000/Month Rental Portfolio

Dave:
This investor purchased his first property for under 25 grand proper in his hometown. Now, his cashflow from actual property averages $5,000 each single month. He was in a position to accumulate 20 models in seven years, all whereas working a day job by maximizing his personal strengths, understanding his native space, and adapting as the actual property market has modified. If you wish to repeat his journey, preserve watching to learn how. Hey everybody. I’m Dave Meyer, head of Actual Property investing in BiggerPockets, and on this present we educate you how one can obtain monetary freedom by actual property. Our visitor on the present right this moment is Investor Dustin Cardenas from Western Illinois. Dustin didn’t begin in actual property with any kind of built-in benefits. He calls himself an everyman and has labored a sequence of very common jobs together with bug exterminator and automotive salesman. However Dustin additionally noticed a possibility proper in his yard, low priced properties that could possibly be value rather more if somebody simply took the time to repair them up and maximize their worth. So he thought, why not me? And acquired his first property for under 25 grand. That was seven years in the past, and right this moment Dustin has a money flowing portfolio that’s allowed him to chop again his hours at work and dream of a retirement that in any other case won’t be doable. Let’s convey on Dustin and listen to about this superb investor journey. Dustin, welcome to the BiggerPockets podcast. Thanks for being right here.

Dustin:
Thanks for having me. Large fan of the present.

Dave:
Oh, it’s nice to listen to. We love to listen to that. What was your background? How way back did you get into actual property and what had you been doing previous to that?

Dustin:
It’s humorous you requested that. I simply had to consider the age that I began investing in actual property and I truly wrote it down, so I used to be truly 35 years previous after I began investing in actual property and I’m presently 42 earlier than actual property. I had my W2, which I nonetheless have at this level. I’m a automotive salesman right here on the native dealership on the town, and I’ve been right here for 9 years. Beforehand to that, I used to be a pest management supervisor for about 4 years, and former to that I used to be a juvenile detention officer for nearly six years, and my spouse is presently a nurse practitioner right here at a hospital on the town.

Dave:
Good. Wow. You’ve achieved a little bit little bit of every thing. It sounds

Dustin:
Like a little bit little bit of every thing. Sure.

Dave:
Only a very various profession. Yeah. So why did you determine to get into actual property at 35?

Dustin:
There was a handful of traders round right here on the town and one man I went to high school with and he was sort of born into it, and I used to be at an area institution one evening and he advised me, he stated, you can do that. There’s room for everyone on this area. And he stated, Hey, I do know you bought an excellent job. I do know your spouse has an incredible job. You guys have good credit score. He stated, there’s greater than sufficient to get round, and what he stated to me caught with me and lit the fireplace proper there, and I nonetheless, I by no means forgot it. What he stated was, what I wish to do with my life? I wish to do no matter I wish to do at any time when I wish to do it, and I wish to receives a commission for it, and actual property does that for me. So proper then at that second, I simply began studying each kind of guide materials I might get my palms on and it was on and going from there.

Dave:
Oh, that’s tremendous cool. I really like that story and I really like the mentality of this man. You met your good friend or mentor, if you’ll. What was your intuition at that time? The place did you wish to go along with your investing profession and the way did you begin fascinated with doing all of your first deal?

Dustin:
However the first deal I hunted down, it was an incredible cope with my realtor and she or he’s nonetheless my realtor to today. I used to be promoting a car and I needed to take the car again to the actual property workplace. So I went in and had a dialog together with her and she or he was most likely eight years youthful than me, however she truly broke every thing right down to me and stated, you are able to do this. So simply to piggyback on the serving to one another.

Dave:
So

Dustin:
She stated, you are able to do this. And so we immediately began taking a look at homes then, and I had a number of completely different realtors sort of draw back from me as a result of I used to be searching for the smaller offers. I wasn’t searching for 100 thousand, $200,000 homes, something like that. I used to be within the vary of 20 to $40,000 homes. So the primary deal that we discovered it was they’d an inventory of $41,000 and it was a move-in prepared home on this space, proper place, proper time. The folks had moved to California and the home had already been redone, transfer in prepared. I ended up low balling them and I obtained the home for $25,000.

Dave:
Oh my God.

Dustin:
Wow. And I nonetheless personal that home to today, and that home proper now with fairness might be value 70,000 as a result of I purchased it in 2018, however that first deal was the one which sparked it, that I stated, okay, I can do that, and after that deal, then the snowball occurs and also you simply begin going from there.

Dave:
Wow. I imply, listening to these numbers in regards to the value of homes is loopy to only think about that you can purchase a home for 25 grand the place most individuals could be most likely fairly pleased to discover a home for 10 occasions that quantity in the event you might discover one thing for 2 50, however what’s your market like? Is it rural?

Dustin:
Our city is presently about 35,000 folks, so we’re in an ideal space. We’re proper in the midst of two increased quantity areas. 45 minutes north of us is, it’s known as the Quad Cities, and it’s most likely a few hundred, 120,045 minutes east to us is known as Peoria, Illinois, which can be a few hundred, 1500 20,000 folks. So we’re proper within the center, which is a superb space. I really like listening to the podcast on a regular basis too. You guys discuss in regards to the Midwest and it’s by far, I don’t wish to give all our secrets and techniques away, nevertheless it’s by far the highest spot to put money into the entire nation.

Dave:
That’s what I’m saying, man. I agree,

Dustin:
And that’s true, and I’ve the numbers to show it.

Dave:
Yeah, it sounds actually cool. While you purchase a home for $25,000, you stated it was transfer and prepared, what are you able to hire that for

Dustin:
Initially? I hire that home now for $700 a month, and that may be a two bed room home. It’s two and a half bed room, perhaps a little bit small workplace. There’s no closet. It additionally has two loos in it, so I hire that home for 700. Presently I used to be renting it for six 50, however with time it simply goes up and I’ve long-term renters there that they care for the house.

Dave:
That’s

Dustin:
Nice. They love the house, and never solely that, the lot is large, so it’s an incredible home.

Dave:
That’s unreal.

Dustin:
It’s utterly unreal. I figured you guys could be considerably shocked with these numbers that I let you know right here

Dave:
I’m. I imply, individuals are saying you possibly can’t get the 1% rule. You’ve gotten practically 3% rule proper now

Dustin:
On a number of properties, Dave.

Dave:
Wow, that’s superior. Properly, only for everybody who is aware of, there’s this factor known as the 1% rule that obtained actually well-liked perhaps like 10 years in the past, and principally the concept is that if you will discover a property the place your month-to-month hire is 1% of the acquisition value, you’re most likely going to have fairly robust money cashflow. And within the final couple of years it’s been more durable and more durable to seek out that, particularly outdoors of the Midwest, however you discover offers which are 0.7 0.8, which you can nonetheless cashflow, however a 1% is sort of a stable deal, however folks rightfully are saying it’s onerous to seek out these, however apparently Dustin’s discovering two and three% actual offers, which is fairly unimaginable. I might see why this has snowballed for you as a result of that’s an unimaginable first deal. Congratulations on figuring that out. As soon as you probably did that, have been you simply able to go for the following one instantly?

Dustin:
So 2018, that was August of 2018 is after I purchased the primary one, so I let that roll for a pair months. Then November got here again round and I discovered one other house, which I nonetheless personal to today, two bed room, two tub. As soon as once more, the identical situation, folks have been shifting out of it. I ended up getting that home for $30,000 and is shifting prepared. The identical tenant nonetheless lives there to today. Going onto the third one, I purchased a 3rd one, three homes in 2018. The third one was in November, identical actual situation. I ended up shopping for that home for $18,000 and that was additionally semi shifting prepared, however I needed to do only a few beauty stuff to it and I added Central Air to the house. However the situation behind that one and aged gentleman had moved to a nursing house. I used to be driving by in the future and his brother was mowing the yard and I simply stopped and talked to him.
He confirmed me the home instantly and he stated, Hey, we’re on the brink of listing it for 28,000. And I stated, okay. And I stated, nicely, would you guys take 18,000? He took my info and inside one week I had it rolling to buy that house. Oh my gosh. On the third deal, simply to sort of again up on that, on the third deal, the financer, the financial institution was stated, Hey, we normally like to attend a few 12 months or so earlier than we offer you any extra money. We wish to see the way it works. And I sort of simply was direct and ahead. I stated, Hey, I’ve this marketing strategy and it’s going to work. I stated, me and my spouse each have the funds to again this up, however I’m going to begin this enterprise and put it in an LLC, and both you guys are going to offer me the cash or I’m going to go down the road to a different financial institution they usually’re going to finance this instantly. As soon as I put the marketing strategy on the market, they accepted it. They knew that it was going to work as a result of I had every thing in play and from then on out, now I’ve a enterprise line of credit score by them. I don’t even need to undergo there. I don’t need to run credit score.

Dave:
Do you assume it is a technique or method that’s repeatable by the common investor? In the event you reside in a small city, do you assume that is simply one thing that anybody can do? I

Dustin:
Actually do, and I positively assume one hundred percent of it’s a demographic. I actually do imagine that anyone can do that, however I feel there’s only a concern round investing in actual property. Lots of people are pessimistic about it as a substitute of being optimistic about it. Me personally, I feel that you just’re doing your self a disfavor in the event you’re not investing in actual property. That’s simply my opinion, as a result of the financial institution wants folks like us. They want us to pay our rate of interest, they wish to give us cash to allow them to mortgage our cash out to completely different folks for various homes, automobiles, no matter it could be. However I positively imagine that it’s simply doable, particularly within the Midwest.

Dave:
Yeah, for positive. Yeah, I imply I feel within the Midwest it’s positively one thing that’s extra achievable, particularly from the affordability standpoint. However we discuss lots about markets on this present and in BiggerPockets basically, and there are some nice markets throughout the US all types. However I feel your story is simply reinforcing the concept that you actually could make nearly any sort of market work when you’ve got the precise method and the precise technique. And it feels like what you’re doing, Dustin is simply working with what this market rather well, who desires to reside there, who’s promoting properties, what the tenant base goes to be like, and also you’re utilizing that very successfully to your benefit. That’s superior. I really like that. Properly, it is a very cool story and I wish to hear extra about how your investing profession has progressed, however we do need to take a fast break. We’ll be proper again. Welcome again to the BiggerPockets podcast. I’m right here with investor Dustin Cardenas speaking about how he has scaled his portfolio very successfully with very reasonably priced properties. Inform me, Dustin, what occurred throughout COVID in your market? Most locations within the nation began going loopy value sensible. You have been beginning at a fairly low entry level. What has modified and what occurred in COVID?

Dustin:
I’m very glad that you just requested that query as a result of COVID, for me, 2020 was sort of a breakout 12 months. So even in my W2, the automotive business was nice. We offered a number of automobiles
And I purchased a number of homes. I truly purchased 5 models, one duplex, and the remaining have been single household properties in 2020. One among them was a duplex in a much less fascinating neighborhood, nevertheless it’s all about discovering these offers too. I hearken to Henry Washington lots. It’s all about discovering these offers. So I ended up discovering a duplex on the lower than stellar facet of city behind a liquor retailer. I do know it sounds cliche, nevertheless it’s truly true, and it truly was simply positioned on Fb market, and my sister messaged me and nicely, she tagged me within the publish, and so my spouse truly went and checked out it first and I obtained off of labor, and I keep in mind to today, I stroll upstairs and she or he’s sitting on the sofa simply obtrusive at me and she or he says, I need it. And it was a really good home. It would’ve seemed sort of like, it nonetheless seems like crap on the surface with previous shingles, nevertheless it was truly owned by a upkeep man upstairs and downstairs, do blacks separate utilities,

Dave:
Love that

Dustin:
Furnace, separate furnace, separate water heaters, locked down like a fortress. And I purchased that home for $24,000. Unreal. And I nonetheless personal that home to today, and I’ve long-term tenants there as nicely. In order that was a phenomenal house. So I had completely no downside in COVID.

Dave:
What are the situations of those properties? I’m making an attempt to only wrap my head round what a $7,500 or $10,000 property seems like. I imply, I paid extra to resurface my driveway than that property.

Dustin:
The $10,000 home I’ve, it was fairly good. It wasn’t dangerous. I rented it for roughly two or three years, a pair completely different tenants, after which the ground began sagging. So I ended up moving into there simply to make a fast restore. However after all once we obtained into it, I ended up rehabbing the entire home. So I rehabbed that entire home for about 11 grand. I wished to spend 5,000, nevertheless it’s such a small sq. footage,

Dave:
I simply don’t even perceive how does that occur? How do you do a brand new kitchen?

Dustin:
I did every thing in that home. It was such a,

Dave:
How do you do a kitchen for 11 grand?

Dustin:
The bedrooms have been high quality. It was two bedrooms on one facet of the home and a rest room within the center. On the opposite facet of the home is an open lounge that goes into your kitchen that’s separated by an island. So I tore it right down to the rafters, accomplished all model new wooden rafters, all of the wooden, every thing. After which I purchased stainless-steel home equipment, however I purchase a number of stuff secondhand. After which I’ve a plumbing and heating firm that went in there they usually redid the entire home for about $700 for plumbing. However you bought to consider the sq. footage is so minimal, there’s not an enormous space that they’re going

Dave:
That’s truthful.

Dustin:
However it was very price environment friendly.

Dave:
And in the event you have been to go and promote that property right this moment, how a lot do you assume you can get for it?

Dustin:
My realtors already supplied me about 30 for it. I feel if I put that home available on the market, I might most likely promote it. 35,000, 40,000 I feel I might get out of it.

Dave:
Okay. So you set 15 grand into this factor and you can most likely double that. And what wouldn’t it hire for?

Dustin:
I hire that home for $500 a month.

Dave:
All proper. Nonetheless an excellent deal. I wish to hear how your portfolio seems right this moment, what you’re shopping for, what your targets are, however we do need to take another fast break. We’ll be proper again. Welcome again to the BiggerPockets podcast. Me and Dustin are going over his unimaginable portfolio that he’s constructing. Truthfully, I didn’t even know that how this value level even exists anymore, nevertheless it looks as if Dustin, you’re making a profession out of this. So let’s quick ahead to now the place we sit in 2025. What does your portfolio appear to be right this moment?

Dustin:
Presently in 2025, I personal 20 models, 5 duplexes and the remaining are single household properties and one among my favourite properties that I purchased too. And I ventured out into a distinct area in actual property. I purchased a home in Peoria, Illinois, as soon as once more, a non-public deal by a good friend who was a realtor. The identical household owned this home for the reason that seventies, and their daughter lived there. They lived there, a central a part of city. I ended up shopping for a home for $30,000. They wished 45,000 for it. I ended up getting it for 30, they usually left every thing in there, transfer in prepared home. So I offered all the possessions in there, after which I simply principally gave the home a facelift. All new paint, after all, all beauty, nothing. I put a brand new water heater in it. However that present home, I attempted Airbnb for some time and Airbnb was not for me.
It was not for me simply because I used to be 45 minutes away, the excessive turnover fee, the cleansing. So I switched from that to Furnish Finder, which has been completely phenomenal there. I get long-term tenants and there’s two hospitals positioned there. In order that house I presently can hire for nearly $2,000 a month, and that’s completely every thing included, after all. However my energy, water insurance coverage, every thing like that could be very minuscule in comparison with the revenue margin that I make off of that house. And I’ll let you know, touring furnish finder is an incredible factor as a result of all nurses actually care about is cleanliness, a spot to sleep, wifi and air con, and a pleasant comfy mattress. And we offer all of that and I’m very happy to do it.

Dave:
Superior. So proper now you personal 20 models. Are you continue to self-managing all of them?

Dustin:
One man, me. So I self-manage each single one. I hearken to you guys each single week after I mow yards. So I mow about 10 to fifteen yards, and I’ll add that into the hire too, which I listened to your podcast for about hearken to your podcast for about 5 years. And I do know what function I fall into. I’m positively an lively landlord, so I prefer to preserve my eyes on the property. I’ve no downside mowing the yards. I truly educate myself whereas I’m mowing these yards. And I hear your podcast each single week, which is unquestionably attention-grabbing. I’ve discovered a lot off of it. However I utterly handle each single factor, all Google Sheets, and that every one got here with time as a result of after I first began, I’m writing stuff down on a bit of paper, I’m doing this, I’m doing that. Earlier than, I used to be truly paying some huge cash into taxes earlier than I discovered about tax write off and tax code and every thing like that. So I’ve every thing on Google Sheets, every thing backed up, and I completely adore it at this level, assume I wish to proceed to self-manage. However then I additionally hear you guys, as I advised my buddy right this moment, I stated, man, now I do know what they imply by you get a number of models and also you’re self managing it, and it does put on on you. It actually does.

Dave:
Yeah, it takes time and also you’re nonetheless working.

Dustin:
I work. So I used to be going to go away the auto business altogether after I purchased my perhaps 18th home. I simply stated, Hey, thanks for the chance. I labored for an exceptional place. I’ve solely labored at one dealership my entire complete profession. And I stated, I actually respect the chance, nevertheless it’s time for me to maneuver on. I simply can’t be right here 50, 60 hours per week. And so they gave me an incredible alternative. They stated, Hey, will you keep on part-time and we’d prefer to preserve you right here and you’ll journey. Do as you please, go as you please and work your buyer base. And even after I began investing, they have been nothing however supportive. They stated, oh, hey, he’s going to begin shopping for homes. You need to try this. I, so I couldn’t ask for a greater place to work, and I truthfully don’t plan on going wherever except they hearth me.

Dave:
That’s superior. I imply, it feels like one of the best of each worlds.

Dustin:
It truly is.

Dave:
I feel so many individuals deal with retiring, however imply when you’ve got a little bit bit of every, have some earnings coming in from the automotive dealership, extra money so that you can make investments, extra issues that you need to use to pay your way of life and hopefully scale your portfolio,

Dustin:
You’re completely right. You hit it proper on the button.

Dave:
Your portfolio degree right this moment, how a lot cashflow, in the event you don’t thoughts me asking, is it thrown?

Dustin:
Certain. I’ll break the numbers right down to you. Precisely.

Dave:
Yeah, let’s do it.

Dustin:
Properly, to start with, don’t reside past my means. So

Dave:
Good for you.

Dustin:
I’m very frugal, if that is sensible. However each single month I herald $13,700 in hire.

Dave:
Is that hire? Okay,

Dustin:
That’s what I herald hire. So the yearly gross is $164,000, $164,400. Now, the month-to-month mortgage I pay is $3,600. That’s what I pay for 20 models complete. Whole $3,600, 3000, kidding. 605 to be actual,

Dave:
Sure. Properly, I’ve some funds lower than that, however man, that’s wild to your complete portfolio.

Dustin:
Now, after all, that doesn’t embody, as we each know, it doesn’t embody my property taxes, and it doesn’t embody my insurance coverage. So with my insurance coverage and taxes, I pay $41,340 a 12 months only for insurance coverage and taxes.

Dave:
Okay, so that you’re nonetheless at what, 1 23 earlier than repairs and upkeep and emptiness and all

Dustin:
That? So complete yearly, web 1 21, 1 40, take house each month. All the pieces damaged down, every thing paid for, excluding upkeep, after all not if it’s when it’s going to occur, is $6,650 take house. After all of the payments are paid each single month.

Dave:
Wow, that’s superior. And do you could have a median of restore? That sort of expense

Dustin:
This 12 months has been the toughest to date. And I used to be talking with my buddy although, and I’m like, man, this has been my most costly 12 months. And he stated, nicely, that is additionally the 12 months that you’ve got essentially the most properties.

Dave:
Properly, that’s true too. Yeah.

Dustin:
As of this 12 months, I’m presently about 25,000 to $27,000 with upkeep charges this 12 months alone.

Dave:
So that you’re nonetheless making, I imply, web web, you’re nonetheless making 4 or 5 grand a month

Dustin:
Simply.

Dave:
That’s superior. That’s unimaginable. And is that sufficient to help your way of life?

Dustin:
Oh, 100%. As talked about, I don’t reside past my means. So the common door damaged down from Google Sheets, after all and every thing, and the common door, I make $332 and 50 cents is the common value on if I used to be to interrupt them down by 20. However so far as dwelling my way of life, I’m additionally a giant credit score man, so I do all of the, I journey without spending a dime. I don’t spend cash on resorts. I don’t spend cash on touring. Airplanes are free, rental automobiles are free, and I do all of that by enjoying the bank card recreation.

Dave:
Oh, I play the bank card recreation so onerous, man. I adore it. It’s one of the best. I’m so addicted.

Dustin:
I don’t keep in mind the final time I paid for a resort or flight or something like that.

Dave:
Truthfully, in the event you purchase rental properties, it’s such an excellent recreation to get into. In the event you can repay your, I’m not saying put issues in your bank card you can’t repay, however in the event you’re going to purchase stuff, purchase it on a bank card, particularly when you’ve got an LLC for each one among your properties, which is one thing that I personally do. You open a brand new enterprise card in each single title, they usually’re all the time providing you with these 100 thousand level bonuses or no matter. In the event you spend three grand within the first six months and it’s a rental property investor, normally you spend three grand within the first six months, and so that you’re simply, it’s like a thousand, 1500 bucks value of journey credit score in the event you’re simply going to purchase it anyway. It’s one of the best recreation.

Dustin:
Yeah, so why would you not? Yeah,

Dave:
Precisely. I really like

Dustin:
It. I used to be listening to your podcast the opposite day, and I used to be truly in the midst of doing what precisely what you and Henry stated. I used to be like, nicely, okay, I’m going to rehab this home, so I’m going to make use of this Amex card that’s going to offer me $20,000 curiosity free for a 12 months, so I’m going to go forward and I simply gave it to my contractor. I stated, right here, simply take this card. Purchase what you bought to purchase. You realize what I like? I’m all the time on a finances. I’m low cost. I do know that you just discover nice bargains. Right here’s this bank card. Let me know once you’re achieved.

Dave:
In the event you might try this, in the event you belief your contractor, I really like that. However simply so everybody is aware of that in the event you didn’t hearken to that episode, Henry and I have been saying that you are able to do this when you’ve got the cash to repay the bank card instantly. In the event you’re going to purchase it, you may as nicely put it on the bank card as a result of that’s an curiosity free mortgage. In the event you do it on a brand new bank card that has an curiosity free interval. Or you can simply do it to get the bank card factors, which might give you wherever between one to three% low cost or money again. Basically on this stuff. You bought to make use of bank cards responsibly. You possibly can’t let your bank card debt rack up. Having that curiosity sit, there generally is a large monetary entice. Don’t try this. What we have been simply saying is in the event you had 20 grand in your checking account and also you wanted to go spend 20 grand on a property, you may as nicely put it on the bank card, get the purpose, get some curiosity free interval, after which simply use the 20 grand to pay it off later.
I do know it won’t sound like lots, however in the event you do that over an extended sufficient time period, it actually does add as much as a number of bank card factors and cash saved over an extended time period.

Dustin:
How else I exploit make the most of bank cards too is I’ll pay the utilities for my homes, so I’ll embody it with the hire or they’ll pay me again. However nonetheless, I’ll pay $3,000 in utilities each month on a bank card after which instantly pay it off after accumulating hire.

Dave:
Yep, precisely. That makes a number of sense. Properly, Dustin, that is tremendous thrilling. Congratulations in your success. It’s unimaginable. Very cool. Distinctive portfolio. You’re constructing there. What’s subsequent for you? Do you could have any targets that you just’re pursuing proper now?

Dustin:
Presently in the midst of a flip proper now. I’m nearly achieved with it, and I’m hoping to make a considerable sum of money with this house simply to place it and reinvest into one other house. So far as the rental properties, I’m not actively trying, but when one thing comes alongside that I can’t go up, then I’ll purchase it. However 20 models proper now, I’m doing okay. It’s rolling. Nice tenants. I’m simply going to stay with that. However the subsequent step I wish to go into flipping, but in addition as we talked about earlier, I’m not against discovering one other furnish finder home as a result of I feel you get essentially the most bang to your buck off of the short-term leases. You actually do. It actually pays off if you are able to do it proper.

Dave:
Properly, Dustin, thanks a lot for becoming a member of us. Congratulations to you and your spouse and dealing actually onerous to have the ability to obtain such a formidable portfolio in nearly seven years. It’s actually cool story that you just obtained there. We actually respect you being right here.

Dustin:
I respect being right here and anybody on the market listening. It’s doable, particularly listening to podcasts like this. You bought to begin someplace. I began with one single household house, and I keep in mind folks doubted me, however after they doubt you, you’re the one which’s on the market doing the work. It’s not them. It’s doable, and particularly with an excellent group of help, it’s doable to get within the door of actual property.

Dave:
Superior. Properly, I really like that message and couldn’t agree extra. That’s completely doable. Simply work on getting your foot within the door and you will discover success similar to Dustin has. So thanks all a lot for listening to this episode of the BiggerPockets podcast. We respect you being right here, and we’ll see you subsequent time.