31 units in 30 months at age 24, $70k Annual Cashflow

115 Replies

@Joel Florek  

You are as true inspiration to all of us new guys who need motivation to stop being a coward and pull the trigger. I live in Cleveland and cant seem to find similar deals that you find.

It seems you found your first deal after college pretty quickly. How long would you say it takes to find a good deal? Also most of the things you say sound amazing but dont make sense to me. How could you possibly put only 6% down?

Anyways I love reading your stories.

Maybe I need to read more into things?

Wow, maybe I need to move to the midwest those are quite attractive numbers compared to Portland Oregon. Cap rates are pushed down to the low 5% here and GRM on duplex and Fourplexes are in nosebleed territory of 15 to 18 range so very difficult to buy the amount cashflow your are getting per dollar. One of my properties is a 8 unit which would sell in $1.6 range, think can you find me 4 or 5 deals like you just closed if I sell that one? ;-). Good luck with your future acquisitions.

@Jackson I. If a realtor comes to me and shows me a deal I havent heard about yet then I would be happy to have them represent me. They did the work and brought something to my attention. However, I havent yet found a realtor who has been able to bring me a deal that I havent already seen on the market through searches on Realtor.com or Loopnet. When I find a property I reach out the agent who is representing the seller(listing agent) so I can have as close to direct access to the seller as possible. In the case of my 16 unit there were no realtors involved. In my other 3 deals I worked directly with the listing agents. 

@Rob Ross Generally speaking there are plenty of opportunities in the 8% range, and a few that go higher. But generally for the class B and class C properties you can expect cap rates of 7% to 9% in the mid west. In the fast growing and large cities cap rates still get like you see on the west and east coast. But for $1.6m there are 3 or 4 deals right now on the market that will buy you 30 to 60 units and not require anything more then regular maintenance and upkeep. You just have to be comfortable knowing that you shouldnt expect to see strong price appreciation unless you force through the NOI.

@Mitchell Litam There are plenty of good deals available in Cleveland. I have actually envied some of the numbers i see there but dont know enough about that market and am not ready to start investing in that direction yet. Remember that leverage makes the cash on cash returns outsized. You must use leverage with caution but with the right deal it can provide you a fantastic tool. Regardless keep looking and running the numbers. I have probably ran the numbers on 200 to 300 deals over the past 3 years and have only done 4 deals. 

@Trevor Rutherford For this 8 unit deal the 6% down payment money I used was actually from a line of credit I had on my 3 unit I purchased earlier this summer. 

@Joal would you be willing to share your lender that was willing to do the 6 down 1st and 2nd lean deal?

@Anibal Martinez the decision to sell a property is always tough, but it comes down to a few important questions

1: Are you making the returns you need for it to make sense to keep the property?

2: Could all the funds be better utilized in another deal based on the numbers you are seeing in your market?

3: Does the property fit with your current investing goals? 

If you are going to keep buying small multi family properties and the property cashflows well I would argue to keep it. But I would seriously consider leveraging up with a line of credit and use that money as a down payment to purchase additional properties. Talk to banks and see what options you have. I bought a 3 unit where the numbers were amazing for the price I paid. Has its issues but overall a great cash flowing beast. Does it fit with my longterm goals? No. But it fits with the current portfolio I hold in that town and doesn't take much extra work for the returns I get. I was able to stretch my funds and buy it in cash. I then put a line of credit against the property for a rate of 5.25%. The rate will change over time, so maybe not the best choice for some but its not a large some of money to adjust so I am ok with it as long as I get stellar returns from the properties that I purchase with it. In the future when I start trading up to larger properties (50 to 100+ properties) I will likely sell off my current portfolio to condense my holdings to fewer parcels so that way my time is better utilized. 

Originally posted by @Trevor Rutherford :

@Joal would you be willing to share your lender that was willing to do the 6 down 1st and 2nd lean deal?

I worked with Old National Bank. I believe they only focus on work in Indiana. They were willing to lend up to 80% LTV and wanted to see a debt coverage ratio of 1.27 on all loans used to purchase the property.

thanks for the inspiration, I am 21y/o myself and plan on moving into the multi-family space sometime between my mid twenties using traditional financing - but now you have definitely opened up my mind about using creative financing - thanks so much & congrats! 🤙

Joel, thanks for taking the time to write about all your investments. As you can see, it's a great inspiration to many, many people. I invest only in Valparaiso, IN so far, with only SFR, but I am motivated to start with something larger 4-8 units would be good. I've got the money, but just haven't had good luck with tenants. Even though I can rehab the units fine,...I am too much of a pushover with bad tenants. How do you screen your tenants , and how far away from your personal home would you be willing to look for a property?

@Jessie Silva @Andre Crabb Thanks for reaching out! 

@Jessie Silva First you need to find good deals. Then creative financing will super charge the deal. Dont buy a bad deal because creative financing makes it a decent or good deal. 

Originally posted by @Carolyn Trepper :

Joel, thanks for taking the time to write about all your investments. As you can see, it's a great inspiration to many, many people. I invest only in Valparaiso, IN so far, with only SFR, but I am motivated to start with something larger 4-8 units would be good. I've got the money, but just haven't had good luck with tenants. Even though I can rehab the units fine,...I am too much of a pushover with bad tenants. How do you screen your tenants , and how far away from your personal home would you be willing to look for a property?

 Thanks for reaching out. Bad tenants suck.... The first thing I like to do is have good units and price them as such. Usually higher priced units eliminate a lot of the issues. But you will always have headaches. Ever have a headache with a boss or tough customer? 

I always start out with a process of responding back by phone or email and getting a quick conversation to let them know my process. It goes as follows. 

1. usually I let all leads go to voicemail. This forces them to leave a professional message. The crazy ones usually call again and again often leaving no or crazy messages. This is a great way to screen out the odd balls. 

2. I have the applicant go to website and fill out online application form for pre-qualification

3. Once pre qualified I follow up with a phone call or email to get a date set up for a showing. At this point I know their income is sufficient, they have indicated they dont have a criminal issue, bankruptcies, and evictions. 

4. Show up on time and see if they like the unit. Do they get crazy with requests for changes or are they happy as is? Helps to give additional verification. 

5. If they like the unit and want to move forward I send them an application through MySmartMove to get a background and credit check. They pay! Assuming this comes back favorable(did they tell the truth and not have any major issues) then we are good. 

6. Send them a lease and have them get it back to me in a timely manor and send the first full months rent with move in fee. 

So far this has produced great results for me. I will get burned at some point but it has been good so far. I dont get crazy with verifying past landlords or calling employers. I just dont have the patience to do that. At some point in the future when I get a virtual assistant to take over this process I will include the employer verification in this process. 

Currently I own 23 doors in Northern Michigan which is 376 miles from where I live. I still handle all the leasing aspects myself. I do have a live in manager that can do showings for me and takes maintenance calls, salts sidewalks, and mows the lawns. 

2. I have the applicant go to website and fill out online application form for pre-qualification
 

Please what website do you use for applications and pre-qualification? 

Hey Joel, great to hear of some success in the area! I'm in the Northwest Indiana market and things are tight around here. Houses are getting some fierce competition and a lot of people are paying all cash (and a little too much imo). I had a question for you. When starting off you said you got a $25k loan from your parents for 8% interest. Did you get them to agree to this because you had a corporate job and you had a deal lined up? Was that deal a multifamily too? Also, did you have any other loans (ie student loans, primary residence mortgage, etc) when you took on the $25k? 

I'm at the beginning of my investment career, fresh out of college and pretty heavy in debt at 7% interest. I'm really just trying to figure out how to structure my deals with little money and little room for error. Ideally I'm looking to get into flipping so I can build capital first but like I said the deals are few and far between in our area. 

Thanks for sharing your story @Joel Florek . One question I'm curious about - what was your rationale for paying cash on the 3 Unit and then pulling a LOC vs. putting 20% down and going with a traditional mortgage (w/ potentially a better rate)? Did you feel a cash offer and a short closing timeframe outweighed the cost of a slightly higher interest rate on the LOC? Or were you planning to own the property under a LLC and this was the easier route? Thanks again for the story.........definitely motivating!

Joel, thanks for the prompt and thorough reply.   I'm really amazed at your helpful dedication!   Could you please help me out with finding an "online application form" for pre-qualification that I might use?   Do you use a service that does multiple credit checks for you so to bring down the price to like $15/each, or just run them each separately for more?   Thanks , again.

@Jackson I. I have my own website that I built through Wix. I have tried Weebly, Squarespace and Wix. Wix is by far my favorite. 

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@Eddie C. Good question. I new based on the sellers situation that if I offered cash, close in 10 days, that it would be an enticing offer. The property was listed for $69k and I offered $56k on opening day. They accepted the offer even to the surprise of the listing agent. 

For a commercial loan the rates are the exact same. I also want to be able to move money in and out as much as possible. I dont want cash sitting in my bank account earning nothing. I want to put my cash into my line so its earning 5.25%(equivalent rate of return by paying off loan and not having to pay interest debt) and then pull it back out when I need it for a future deal. Basically I can use it as a big low interest credit card. 

All my properties are bought via LLC so I use the commercial loan team. Honestly have never touched the traditional mortgage side of the bank.

Originally posted by @Ryan Johnston :

Hey Joel, great to hear of some success in the area! I'm in the Northwest Indiana market and things are tight around here. Houses are getting some fierce competition and a lot of people are paying all cash (and a little too much imo). I had a question for you. When starting off you said you got a $25k loan from your parents for 8% interest. Did you get them to agree to this because you had a corporate job and you had a deal lined up? Was that deal a multifamily too? Also, did you have any other loans (ie student loans, primary residence mortgage, etc) when you took on the $25k? 

I'm at the beginning of my investment career, fresh out of college and pretty heavy in debt at 7% interest. I'm really just trying to figure out how to structure my deals with little money and little room for error. Ideally I'm looking to get into flipping so I can build capital first but like I said the deals are few and far between in our area. 

 I did have a good job, but more importantly my parents knew I had the skills to make the deal happen. Real estate has been my passion for a long time and they wanted to see me succeed. I used a commercial loan on that first property which was a 4 unit. I did have a corporate job with good earnings which is why the bank was willing to lend to me. 

Out of college I primarily had student debt of around $22k at 4% interest(all the government loans). So that payment is only $212 a month. 

Flipping is very hard.... I caution people as using that as your strategy. Yes it can work, but it is risky and very hard. I actually worked for a house flipper over the last year and I am pretty sure I made more then him as his laborer after 5 flips. If you dont have the tools and skills to DIY and get yourself out of a tough spot then you can be SOL if the deal goes south. I personally recommend people look into an FHA on a small multi to get started. Its the easiest way to buy up to 4 doors for only 3.5% down.

Thanks for posting the wonderful summary of this deal - it is really helpful! I also have found your comment replies on such a wide variety of topics here just as helpful. Congratulations and thanks for the inspiration!

This is really great stuff!!
Very inspiring for some of us who are just making the first steps on this journey......Well done and thanks for sharing.

Did you use one lender for all of your loans? Also would you consider wrapping all of your properties  into one loan? 

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