BP Podcast 197: Starting with $10k and Buying 52 Units in 3 Years with Chris Heeren

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Get ready to be inspired, amazed, and blown away with today’s BiggerPockets episode! Today on the show we’re sitting down with Chris Heeren, a real estate investor from Wisconsin who’s absolutely crushing it with his rental property investing. In just the past three years, Chris has built a massive portfolio of houses and small multifamily properties — and he did it with just over $10,000 to start AND while working full-time. Packed with tips, stories, and incredible advice, this show will completely revolutionize the way you run your real estate business forever and prove — once and for all — that anyone can succeed no matter their situation. Listen up!

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In This Episode We Cover:

  • Who exactly Chris is
  • How be obtained 52 units in 3 years
  • The story behind his first duplex
  • Tips for using the BRRRR strategy
  • How he found ways to fund his deals
  • The process he used to create teams to help his investing
  • Quick tips for being persistent
  • How to counter-offer
  • How he finds and offers on deals via the MLS
  • Advice for buying properties while working a full-time job
  • His average purchase price
  • How he uses direct mail marketing
  • How to find great property managers
  • Chris’s $8,000 mistake
  • What the next 6 months look like for him
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “There’s always a way. You just have to be determined, be motivated, and not give up.” (Tweet This!)
  • “I’d rather have half of the deals out there than none of the deals because I didn’t start.” (Tweet This!)
  • “If you don’t learn from your mistakes, you’ll never grow in the future.” (Tweet This!)

Connect with Chris

Show Preview

About Author

Thanks for checking out the BiggerPockets Real Estate Investing & Wealth Building Podcast. Hosts Joshua Dorkin & Brandon Turner strive to bring top-notch educational content and interviews to our listeners -- without the non-stop pitch prevalent around the industry. With over 80,000 listeners per show, the BiggerPockets Podcast has become the biggest real estate podcast in the world. But don’t take our word for it. We’re the top-rated and reviewed real estate show on iTunes — check it out, read the reviews on iTunes, and get busy listening and learning!

181 Comments

  1. Gardi A.

    Awesome podcast. I can relate to chris as im starting out the same exact way. Chris just inspired me to push forward even more now. Just listened to this PD on my way to my Full time job similar to how Chris does it

  2. fred Lopez

    Thank you for the GREAT tips Chris! I will be trying your red font letters and envelopes idea to see if that helps my response rate. Thanks again and a HUGE thanks to Josh and Brandon for an always informative show with great guest.

  3. Richard Francois

    Great Podcast Interview and It relates to me. Me and my brother own two properties worth 250K and We have some cash set aside as well. We Currently do not have a mortgage on either property. We are thinking of taking a home equity line of credit on both properties to acquire more. We spoke to PNC Bank and they gave us an insight but would you think a credit union would be better.

    • Chris Heeren

      I’ve found that Credit Unions have slightly better interest rates than Local Banks, however it’s really up to what you are ultimately trying to do with the loan. Determine what your game plan is and then find a bank that is willing to work with you and your plan. The factor that determined which bank I used was the ability to refinance at 80% of the Appraisal even if the house was purchased a month or 2 earlier. In your scenario, it sounds like you have already owned the properties for awhile and most banks would probably be willing to do an 80% Refi (you may not even want to pull out that much equity) In that case I would look closer into what terms they are offering and the amount of closing costs you’ll end up paying. You best bet is to talk to at least 3 banks or credit unions and choose the one with the best terms.

  4. Jon Sanborn

    BRRRR strategy at its finest! Great tips Chris, I’ll be sure to use your letter idea as I am also an agent and if the deal isn’t stellar for my portfolio I can also list it as well.

    Also, I recently picked up disk golf and think it’s pretty cool!

    • Chris Heeren

      Thanks Jon! Since we haven’t actually put the Real Estate Agent idea to practice it’s only theory right now, though I’m hoping we can help turn my wife from a newbie into one of the top selling agents at the brokerage in a very short time! Also it’s “Disc Golf” 😉

  5. joe facciolo

    I truly love the concept of the bir theory. but my question how are they refinancing all of these property’s. every time I want a mortgage or to refinance a property they want my pay stubs and debt to income . I have down payments no problem 90% of my issue is getting financing . my credit is great and I can understand using your properties as income but the banks want to see then rented for a few years consistent before they use that money as income? any suggestions to what I’m doing wrong here

    • Chris Heeren

      Good Question, this is where I had to talk to many banks before I would find one that was able to refinance the property without looking at a 2 year history – this is very similar to banks wanted to use the purchase price rather than the appraisal within the first 2 years of purchase. I would recommend talking to small local community banks or credit unions, they are more apt to financing these properties. Also, our debt coverage ratios are on average a 2.2 vs the typical 1.2 that they are looking for. In this sense, every property we purchase we look that much stronger in the eyes of the bank to lend to on a future purchase.

  6. Matthew Hipp

    Chris,
    This was simply awesome. One of the best podcasts yet, imo. Are you putting all of your properties into one llc or are you getting an llc for each property? Also, are you buying the property in your name and then transferring the property into an llc or do the banks youre using lend directly to your llc? Thanks again for such a great show.
    Matt

    • Chris Heeren

      Thanks Matt, I greatly appreciate it!! I currently have 3 LLC’s – one from 2014, 2015 and 2016. They each have between 15 – 20 units in them. I plan to create a 4th LLC for 2017 but honestly not exactly sure of the structure I will use after that (I’m currently looking into this). I buy all my properties directly into an LLC and get a typical 5/1 ARM amortized loan over 20 years at a 4.5%-4.9% interest rate.

      • Matthew Whelan

        Chris, I have consumed probably 50 podcasts from BP. Yours was by far the best and the most closely aligned to my investment strategy. The questions I have are around financing. When you first got started, would the credit uinions loan on smaller deal sizes. We are struggling to find investors that are interested in $40-$50 deal sizes, even thought the returns are great for us, they aren’t so much for the banks. Now I haven’t tried the small local credit unions yet, and that is my next stop. Just curious how you have found money for smaller deals. We are looking at $20k homes in Cleveland that have 35%- 40% cap rates.

        • Chris Heeren

          I haven’t had a problem on loan sizes from any Credit Union I’ve used. I did put a $18,000 refi on a 3 bedroom house that only appraised at $23,000 after rehab . . . kinda crazy but this was through a local bank and said that they would prefer we keep the refinance prices a little higher or at least roll 2 or 3 together going forward – they still did the refi for us. This was also in a rougher neighborhood which we won’t buy in again.

  7. Ishviyan d.

    Excellent podcast Chris. It was very inspirational and your go-getter attitude is just awesome. Congratulations on your success. I’m curious how easy/hard it was for you to find a real estate agent who understood investing and was able to source the right types of properties for you based on your criteria. Or did you find a regular agent and “teach” him/her about the criteria you sought? Thanks

    • Chris Heeren

      I’ve went through 5 Real Estate Agents in 2014-2015. In 2016 nearly all my deals have been off market without a Realtor, though I have been using the one that was most open to working with Investors on my most recent deals and also to list my latest several houses on the MLS to sell. Thanks again for the great feedback!

    • Chris Heeren

      Thanks Jessie – I’d prefer to not give out the most recent banks I’m using as I’m still working on building a solid relationship with them. I do currently have loans at 2 local community banks and 2 credit unions who typically only issue loans around the County I’m buying in. I suggest working with some local banks around your area and start building the rapport early on!

    • Chris Heeren

      Good Question Steve! I don’t actually calculate the DSCR directly myself, however in my Property Calculator I do factor in the following items:
      1 month vacancy
      Principle & Interest on Mortgage
      Property Taxes
      Insurance
      Property Management
      Gas & Electric if tenant doesn’t pay
      Water & Sewer if tenant doesn’t pay
      Regular Maintenance Visits, Permits, Lawn/Snow Removal, Turnover Cleaning, Lease Signings
      CAP EX (For this I break down an entire schedule of items, prorate their costs and then calculate what I need to set aside for each month, If you only go off of using a percentage, it won’t be enough when you buy properties on the cheaper end of the spectrum)

      After your question I decided I’m going to have to build a DSCR into my calculator to see what my values come out to. The ones I mentioned in the show were directly from what my bank provided which I believe are a little less conservative (and also the only ones that matter when getting a loan). I do know they were using Property Tax, Insurance, Property Management, Vacancy and Maintenance, just not sure on the exact percentages. I tend to be over conservative on a lot of my numbers as I plan to hold these long term – and a lot of things can go wrong over the long term.

  8. Andrew Buchanan

    This is an amazing Podcast! This is exactly the path I want to go on, and never thought it might be possible to do it in a 3-5 year time span on my available cash. This, combined with the BRRR strategy webinar, I feel extremely motivated. Now just to find my niche and target market!

    • Chris Heeren

      I’d recommend breaking each step down into spans of weeks . . . and no longer than that. For Example, determine a target market by next week, then the following week determine your mailing list (or MLS properties) the following week take action and send out mailers or make offers on the MLS. In less than a month from now you could be working with sellers and making offers on properties. If that makes you nervous it should, that means you are getting out of your comfort level and taking action. Most people just think about doing it and never get to the point of taking action. If you are looking at doing a 3-5 time-span, then you need to take action immediately, not next Monday or the following month.

  9. Hassan Muhammad

    This podcast is def in the top 5 best BP podcast, easy!
    So many tips, tactics, strategy, mind-set, lessons, ect. to learn from in this episode!

    Thanks Chris!
    Im looking forward to the NEXT time you are on the show, since you told Brandon off the air that you had more tips to share!

    ~Happy Investing
    ~~Hassan

  10. alexander ramos on

    Great podcast,tips and tricks. I like Josh, heard golf as well lol. Cool stuff though. So my original plan is to get an FHA loan to start out on a duplex/tri. Prices seem at peak, therefore considering BRRR strategy. Do you recommend finding offmarket or can one go about BRRR with FHA from MLS. If that makes sense

    • Chris Heeren

      I’ve never used an FHA loan before as all my rentals are in an LLC and require business mortgages. Though there may not need to be a reason to use the BRRRR with FHA as you can get loans with very little down payment. The typical business loan is 20% down which is why I take the REFI strategy and hopefully avoid that large chunk of cash sunk into equity – with FHA you’ve already removed nearly all that additional equity in the property.

      Also, since FHA loans are cookie cutter loans, I would imagine they have a stipulation that would require amounts to be based off of the purchase price – but rather than have someone online that has never used an FHA loan before tell you that you can’t do it, it sounds like a great opportunity to go out there and learn exactly what is required from the bank on these types of loans.

  11. Excellent episode! I was wondering Chris, since you and your wife both work, you haven’t bothered to take tax benefits due to persons who meet real estate professional status, have you? Are you planning to wait until you retire, to start reaping these additional tax benefits?

    • Chris Heeren

      Correct, neither me or my wife meet the Real Estate Professional status as we both work 2000+ hours a year at a day job. However, I’m not fully sure what tax advantages we could be utilizing by going that route. Due to our high rent values to low purchase price amounts we show a large positive gain at the end of the year, even after all expenses and depreciation have been taken. This is definitely I topic I’ll be discussing with my CPA in about a month though. I’m still trying to look into all the advantages and disadvantages that go along with claiming this status.

    • Chris Heeren

      It depends on the amount of work done to the property. It’s probably right around 10 weeks on average from the time we buy the property until the time we have the loan put into place. The banks we are using include the current rents of the property in our income which means every property we buy increases our ability to buy more. I just closed on a $30K refinance this morning. We bought the 2bd/1ba Duplex for $23K and have put about $4K into it. The current rents are $575/unit which leaves a pretty high cashflow on the books compared to our $175/mo mortgage.

  12. Nick Zias

    Chris,

    Regarding properties in class C neighborhoods, what are some of the biggest factors to look out for? My biggest concerns are repair costs, vacancy and lack of appreciation. How do you factor these into your potential properties? Also, how much do you weigh appreciation of a property in class c areas when buying a property?

    Thank you.

    • Chris Heeren

      Thanks for reposting this question Nick! I was hoping to actually discuss this on the Podcast and got sidetracked!

      I am currently purchasing properties in Class C neighborhoods for several reasons (Note – this game plan will most-likely change in the next 1-3 years). My immediate goal is to free up more of my time by supplementing my day job income with passive cashflow. To do this, long term appreciation won’t help me, so I’m focused on building short term monthly cashflow with high rent to value ratios, the trade-off being low to no appreciation. Once I can leave my day job, my main focus will be long term wealth building which I plan to do with Apartment Complex’s and buying houses in great area’s with high appreciating values.

      Secondly, we are approaching or have already hit the top of the latest market cycle. Properties in higher appreciating markets typically kick out little to no cashflow but are solid investments as you receive principle pay-down, appreciation and tax benefits. However, if you buy at the top of the market and now watch your house price plummet along with not having the cashflow to carry extended vacancies, tenant turnover and end up underwater on the mortgage; this is a receipt for disaster in a falling economy. Area’s that have appreciated the fastest have the farthest to fall back to sustainable prices. While area’s that haven’t sky rocketed over the last 8 years but have the ability to continue to kick out a steady cashflow, even at increased vacancy rates or reduced rents, will still put money in your pocket every month.

      My plan is to continue to buy in these Class C area’s strictly for cashflow, assume 0% appreciation and whether through the next major downturn in the market. After the next economic recession (whether that starts next month or 5 years from now) I plan to switch gears and buy up properties in high appreciating markets that have just lost 30%-50% of their values, whether they have a positive cashflow or are just breaking even. If you are leveraged at a 20:1 ratio (5% down payment) and the house goes up 10% a year, your actual investment has just increased by 200%. Keeping in mind that this can also go the other way and if the prices drop 10% you have just lost twice what you have invested. This is the reason I can’t see risking this approach at our current place in the market cycle.

      Also be careful when people say “Market”, Real Estate is made up of many small local markets, there is always a place appreciating and some place depreciating. However, if in general the majority of the markets are decreasing, it makes it that much harder to find and stay in a market that will continue to appreciate. I’d like to error on the safe side and pick those markets when the majority of the markets are set to appreciate for a while!

    • Chris Heeren

      To more directly answer your question – The biggest factors to look out for is crime, screening of tenants, building materials of the property (asbestos, knob & Tub Wiring, old foundations) and ensuring you have factored in the correct Cap Ex. I use a minimum of 1 month vacancy even though I’ve had <5% in the majority of my properties, yearly lease fee's, rental permit fee's, property management, insurance mortgage, utilities, gas/water, maintenance which I figure 8%, yard care, garbage collection, and finally I have a Cap Ex schedule. One mistake I see people make on cheaper houses is using a percentage for Cap Ex rather than a dollar amount. Since the properties typically rent for less than B or A class properties, your percentage will be much smaller – even though the cost to replace the roof, water heater, carpet remains the same. To get around this I created an entire schedule of things that will need to be replaced, gave them a replacement cost and then a life expectancy. Then I calculated how much I should be setting aside each month to cover the cost to replace all of these times over the entire life of the property.

      • Nick Zias

        Thank you for the response Chris,

        I cant remember if you discussed this in the podcast but I also had a question on what you typically put down on a house since you are buying through an LLC. Is it at least 20% and you then fix it up and do a cash out refi?

        • Chris Heeren

          Well I put 100% down as I’m paying all cash and then refinance the money back out. Some of the properties I opt to use a bank up front and then yes, it’s 20% down – I don’t plan to refinance those within the next several years though.

  13. Glenn McCrorey

    Chris, just a quick note to congratulate you on a great podcast. I’ve taken a slower approach but our stories are very similar. Took me 10 years to retire…. but similar (podcast 110). You are no doubt an inspiration to new investors!

    • Chris Heeren

      Thanks Glenn – I did listen to your Podcast! The most important part is that you made it! I wish I would have started 10 years earlier but there is always something you could have done better. I’m just thankful I stumbled across this process in the first place.

  14. Derek Platts

    Great show Chris! Very inspirational! I own a few multis I have picked up off the MLS and I am starting to dabble with direct mail. I just recently got 2 phone calls from about 15 yellow letters I sent out, but I was caught off guard that I actually got responses! Any suggestions/tips for how to go from that first phone call received to closing a deal? I guess I didn’t think much about my next steps!

    • Chris Heeren

      Sounds like you are doing it right – learn as you go. It’s like trying to drive to the grocery store . . . you don’t sit in your driveway and wait until every light turns green, you gotta get out there and start taking those steps, then when you get to a red light you look into the next step in order to move forward. I would start taking the calls until you get one or 2 that sound promising and set up that first sight visit. Even if they don’t seem like great deals, it’s a great experience walking through a property and negotiating with the seller. I always bring a signed offer with me on every visit with the intention we’ll get it signed before I leave.

  15. Dmitriy Fomichenko

    Honestly, there’s a ton of advice for anyone starting with real estate investing. Your persistence in getting the financing was amazing. Further, collaborating with someone on the mailing list is another excellent tip to start with.

    Thanks for sharing!

  16. Chris D.

    Hi Chris. I loved your interview…..very inspirational. You mentioned you listen to 25 podcasts..Can you mention some of your favorites? Specifically, if there are any that relate to marketing for properties, property management or areas to target, I’d appreciate it.

  17. Brad Shepherd

    That was awesome stuff, Chris. Thanks for sharing your story. Definitely one of the BP podcasts I’ve enjoyed the most, and the guest I felt most like I could identify with since we seem to be in similar life positions. Other than my wife just stopped working to stay home with our new baby. So I’ve gotta get hoppin’ to replace her income!

    Just a quick question on how you approach the banks from the beginning of a dialogue with them. I’ve walked into a couple banks and talked to loan managers, but at some I couldn’t talk with the decision maker or was asked to come back later with an appointment. Have you found it’s better to just walk in and show up? Or call? Or set an appointment and go in? And is it a loan officer you are talking with at the branch?

    Alright, thanks again, and congrats on the success. Clearly a result of your hard and smart work.

    • Chris Heeren

      I’ll call the banks on the phone. I first ask if they do cash out refinances, if they say yes. Then I ask, so if I own a property free and clear, you will be able to get an appraisal and then loan 80% of the appraisal?, If they say yes again, then I ask is there a time from I would have needed to own the house in order to qualify for the 80% of appraisal. If they say they don’t really know or have a timeline then I’ll schedule to go in and meet with their Commercial Loan officer to discuss further details. If they answer no to any of the questions I just move on to the next.

  18. James Masotti

    Awesome show Chris! I work full-time and will be closing on my 3rd property this week. A lot of the tips and strategies you refer to in the podcasts are strategies I’ve been looking into as well. We seem to have a lot in common. I’m working 60+ hours a week, have a 85 mile round trip commute each day, invest another 40 miles the opposite direction from my commute, my area is a C area and I have a pretty solid contractor, realtor, and property manager right now (at least as far as I can tell after only 2 completed deals). Your story is inspiring to know what I hope to accomplish is possible with the right sacrifices.

    I’d love to know which podcasts you recommend for your commute as well. I burn through BP podcasts too fast and occasionally listen to some others but have taken to Audible…but the price of that many audiobooks will start to rack up very quickly.

    Again awesome story and I definitely look forward to following more of what you do!

  19. Nirmal Khanderia

    Hi Chris, what an amazing and inspiring podcast! Hats off to your “make it happen” attitude, and your approach of finding solutions in every situation. You have such a great perspective of the business.

    I have shared your podcast with my friends already.

    I will listen to it frequently to keep myself motivated.

    I wish you were in Austin, and I can meet with you and rub off your motivation.

    Nirmal Khandeia

  20. Brant Jones

    Amazing podcast, Chris! Thank you for sharing your story and insight on how you achieved great success. I too was on the one house a year track but you have inspired me to re-evaluate my strategy, start asking myself “How can I..?”, and look for more creative ways to accelerate my portfolio building!

    • Chris Heeren

      Yes – Educate yourself. The first thing you need to do is start researching how you want to invest that money. The last thing you want to do is ask others how to invest the money for you – it’s the quickest way to end up with $0.

  21. Shelly Scruggs

    Chris….this was by far one of the most inspiring podcasts I’ve experienced. I was at the one bank turn down state and was crushed because of debt to ratio reason. With your tip of searching around for bank after bank and small community banks or credit unions have given me hope and the tip about resubmitting offer after offers on the same property was also refreshing. Question, if the realtor you are working with doesn’t do what you ask because of their “experience”, should you find another or just believe what they tell you. Also, is there a specialty to getting access to the MLS? Again, I loved this podcasts and will always refer back to it when I need tips and inspiration! Thank you!!!!!

    • Chris Heeren

      Thanks for the feedback Shelly! When working with banks you will need to have a high cash flowing property or at least a minimum 1.2-1.3 debt coverage ratio, otherwise you will soon be limited to the amount of properties you can purchase based on your income. My average portfolio is sitting at just over the 3% rule so every time we make a new purchase, we are actually that much stronger in the eyes of the bank. Your second question about the Realtor – I would hope you could answer that one yourself. Lastly, the 2 ways of gaining access to the MLS are finding a realtor to send you links or go ahead and get your own real estate license.

  22. Yer Ly

    Hello Wisconsin! Fellow cheesehead here. Your podcast is so inspiring. Thank you for sharing. I’m putting together a list of banks to contact as soon as I’m done posting this. BTW, if you need help with anything REI, I’m looking to learn from someone who’s more experienced than I am. Shoot me a message.

  23. Robbie A.

    Phenomenal interview! You mentioned getting a lot of success from direct mail after the MLS dried up. What’s your criteria and who are you mailing to? I’ve sent out a few mailers from my driving for dollars list with some success (no deals) and am looking to purchase a list for a south-eastern suburb around my area. Congratulations on your continued success!

    • Chris Heeren

      Thanks Robbie, I appreciate it! We typically send to absentee owners and home owners who’ve lived on the property for at least 15 years. Since we try to hit as many people as we can in a small area, I don’t really limit ourselves any more than that.

  24. Steve W.

    Hi Chris, thanks for sharing your experiences. Personally I found the biggest lessons to be in persistence, working hard, and real-life sacrifices. After a long commute, a long day at work, and to continue at it from 8pm-12am is indeed inspirational.

    My question actually comes from reading your comment on OCTOBER 21, 2016 10:16 AM which stated “The current rents are $575/unit which leaves a pretty high cashflow on the books compared to our $175/mo mortgage.” Do the properties in your area typically offer such high rent-to-value ratio? If so, using your example with rent of the duplex being 6.6x of the mortgage, why are people renting? Seems like if a person could afford $575/mo rent, they could afford a $175/mo mortgage. I am having difficulty understanding why there is such a high ratio in your case. Thanks Chris, take care.

    • Chris Heeren

      I guess that is the Million Dollar question. That first single family I bought using the BRRRR strategy rents out for $1000/mo and I purchased it for $27,500, we put a $35,000 mortgage on it and the payments are $225/mo. Most of my portfolio consists of properties like this and it’s amazing that someone who makes $3,000 per month doesn’t purchase their own property. Now keep in mind a lot of my tenants have 600 credit scores and most likely would not qualify for a loan. Others may not want the hassle of owning their own house. I’m not here to figure that question out, I just provide renters with a clean, safe place to live. Also, I work to find these deals, the typical house price in these areas are $60K+ though again, with FHA 30 yr loans, the down payment and mortgage payment wouldn’t be much higher than mine.

  25. Adam Austreng

    Hey Chris, I just joined BP and starting to learn about real estate investing. I listened to your podcast this morning on my way to work, and it was great! Very inspiring and lots of great information, thank you! I live in Milwaukee, so maybe we’ll run into each other sometime. Thanks again!

  26. Hey Chris, what is your logic and reasoning behind of getting the 5/1 ARM amortized loan instead of other type of loans (like traditional 15 or 30 years loan)? Is the plan to pay it off by 5th years or not too long after (or before)? Thanks in advance.

        • Chris Heeren

          Yes I have, I see no reason why I would want to even consider doing this in my scenario. This is obviously different for everyone. I would never want to put my personal assets at risk. Not to mention, the only benefit I see from buying it in your own name is to get a lower interest rate – however, to get that you would be getting a conventional loan which means I wouldn’t be able to do my cash out refinance strategy and thus ruin my entire game plan of purchasing properties.

        • David Grabiner

          I understand the risk aspect. But I’m not sure why you think it would be impossible to do the cash out refinance strategy? I know it can be done but normally they require it to be at least 6 months after purchase before they will do a new appraisal. The big benefit I see is that you get a 30 yr fixed loan at a lower rate. Thus reducing monthly payments and increasing cash flow but more importantly you reduce your risk. Because a 5/arm increases your risk that your rate might go up significantly or you might not be able to renew it without bringing cash to closing if property values crash. Obviously your strategy is working great for you and I think it is awesome, I’m just interested as to why you are completely against conventional. Why not do both, they both have risk they are just a different types of risk?

        • Chris Heeren

          In my opinion you are only increase your risk as you are now putting all your personal possessions at risk with a chance at a lawsuit – to others who are starting out out and don’t have anything at risk to lose, it may be a different story. Also, if you are able to find a convention loan that is willing to do the refinance within your timelines, AND you don’t have other personal assets at risk. It seems like that may be the best strategy for that person. Again, keep in mind if you start growing and accumulating wealth, you’ll need to take a second look at your asset protection strategy.

  27. David Pascual

    Hey Chris loved this podcast but some questions.

    I am new to REI, I dont have a job and I havent built enough credit to be eligable for a loan (im assuming im not), but I have a decent amount of money saved up. If I trying to use the BRRR strategy would this still work if I have my parents co sign the loan if i find one? also when you say appraisal do you mean that that is how much you estimate the property be worth after you fix up the property?

    • Chris Heeren

      Hey David, these are questions you would need to ask the lenders you plan on working with. Since I’m not the one lending you the money, I wouldn’t be able to answer them. Also, when I say appraisal, this is the value that an appraiser puts on the house in it’s current state. Sometimes I have them appraised before I purchase the property, other times I have it appraised after we have finished the rehab.

  28. Lisa Filiatrault

    Chris! Loved, loved, loved the podcast! So much helpful information! As a new realtor, I would like to know how you are writing in the walk-thru contingency in your offer. Specifically the verbiage, and then how well that is received on your offers?I would think sellers wouldn’t want to tie up the property for 2-3 days waiting for your walk thru up-front. Or, are you just using the inspection contingency and doing those in the 2-3 days vs a standard 5-7 day? Thanks so much for sharing your story and all of your tips! Best of luck to you and your wife as you continue to grow your legacy 😉

    • Chris Heeren

      I use different wordings when I submit an offer, it’s basically stating: “This offer is contingent upon the Buyer’s walk-through and approval within (5) business days.” I normally don’t put any other contingencies in the contract so I haven’t had any problems with a 5 day period to allow me to walk through and inspect the property. Most offers have a 20 day inspection contingency or a 30 day finance contingency so they would gladly take my 5 day offer over these others.

  29. George Gao

    Hi Chris,

    Thanks for share your experience on the podcast!!
    Quick question, do you hire a bookkeeper to keep track all the mortgage payments/insurance/others or do you still handle them yourself. If so, at what point did you decide to transition to outsourcing those activities?

    • Chris Heeren

      I still do it all myself and I would say 50 is the number where I’m starting to honestly look into it. Since I’m growing so quickly I like to ensure I understand where every dollar is going and keep on top of of budgets.

  30. Evan Thomas

    Hey Chris, this was my favorite podcast out of every podcast so far. You were absolutely inspirational and I would love Josh & Brandon to do another show with you (and hopefully you would break the record for longest show ever). Thank you so much for sharing your story, and I wish you the best of luck with your REI goals.

    • Chris Heeren

      Ha, thanks Evan! I love talking about real estate and could probably talk for a few hours if they didn’t have to cut to the “Famous 4”. I mentioned that if they are doing Podcasts for another year or 2 down the road I’d love to come back and discuss how I was able to quit my job and buy my first 100 unit building! 😉

  31. Dean C.

    I found this episode very inspiring how Chris was able to achieve so much in a compressed time by optimizing your time to the best you could while having a young family, a day job and that long commute to get it. I too have a long commute (from the same general area as you…just over the border in Illinois) with the day j-o-b but I guess I’m all out of excuses now! This one gave me hope and reinvigorated me to get refocused and recommit to my own goals! I’ll be listening to this episode time and again. Thanks for the inspiration Chris and BP!

  32. Ivan A.

    Chris, you killed it, thanks.

    One question I have is…Theoretically, what is the magic number for a single man to do real estate full-time with solid experience already? (In landlording and flipping)

    To be a bit more specific on how it can be drawn out, it’d be one lump sum to create cash flow with.

    • Chris Heeren

      Hey Ivan – Not exactly sure what this magic number you are looking for is, also since I’m not single I may not be the right person to ask. Are you looking for amount of cashflow to live off of? That’s really going to be dependent upon your budget and living expenses.

      • Ivan A.

        I mean a lump sum from a cash out refi…No serious cash flow, just going with the guns on the expertise and using focus to produce a living off of it through more flips.

        By the way, it’s about 2 years worth of my usual income. 4 years if I’m extremely frugal.

        • Chris Heeren

          Sounds like a good chance to jump into it, find out and let us know what that number is. I haven’t done it before and am not the right person to ask. I typically find that getting in there and doing it yourself is usually the best way to determine the answers. There are plenty of things I have done that I didn’t have the answers to before I went out and did them, definitely glad I didn’t wait until I had all the answers as I probably still wouldn’t have started yet.

  33. Ryan Plesz

    Hi Chris,

    This was my first Podcast I listened to and now you’ve got me hooked! One question…how do you keep track of all the info you learn on the podcasts you listen to? I’m doing the 2hr commute a day too but find it hard to keep track of all the tips I get in the podcasts. Would be nice to have an app that quickly takes voice notes with minimal effort so my eyes are not off the road. Ok….I guess maybe 2 questions, this one is related to the 1st….how do you keep track of all the good info you learn outside of the podcast so you can have quick reference.? I”m using excel right now. Thanks and this was a very inspirational Podcast for sure! Good luck and best wishes!

    • Chris Heeren

      Hey Ryan – it’s pretty simply actually, I have a hard time retaining knowledge the way it is so I learn through repetition. I listen to a lot of podcasts each week and there is a lot of overlap between them. So basically I’m hearing this stuff everyday and pretty soon it becomes second nature. Then when you do hear a great tip you haven’t heard before it’s much easier to remember. Keep in mind there is a endless supply of information out there and you’ll never be able to learn it all, that’s where stepping up and taking action helps get the ball rolling.

  34. Ryan Plesz

    Hi Chris,

    That sounds like a lot easier way than what I was doing…plus I probably would never go back to look at my notes anyway or I’ll get in a accident taking the note. Thanks for the quick reply…and you had to put that “A….” word in there didn’t you…..but your right.

    Take care

    Ryan

  35. Brian Stieler

    Hey Chris. I’ll quickly repeat what everyone else is saying. By far my favorite podcast! Perfect mix of action items and motivational info. You’re also working the same strategy that I’m trying to put together so that helps. Thank you!

    Question: I’m ready to start sending yellow letters and making MLS offers at 30% below market value. My “fear” is financing. I’ve talked to big banks about refinancing, and I’ll move to credit unions as you suggested, but where is the initial cash coming from to purchase and rehab? I assume I’ll need ~$50k, so where did you get that? I’ve been hearing private loans with family and friends, but wanted to get your opinion.

    • Chris Heeren

      Well that is the question you should be asking yourself – the same one I had to ask myself. Where will YOU get that initial capital? I owned my own house and was able to get a small HELOC, I also have great credit and was able to get small unsecured lines of credit as well as free cash advance credit cards. I also had a little bit of cash saved up after after I started doing more deals, I was able to gather some from family members, I then was able to get chunks of cash from other investors at the REIA. It all depends on your scenario and where you believe you can get the cash from.

      • Chris Heeren

        My biggest recommendation is to ensure you have the 20% down payment before you start. You don’t always hit a home run with a 100% financed property and you need to be able to whether a 20% on that purchase. This is the reason I wasn’t able to take on all 25 units on the deal I mentioned in the Podcast. Hindsight shows that I could have all 25 with no money out of my pocket, but if things didn’t work out I only have enough capital to whether a down payment on 18 of them.

        • Brian Stieler

          Thank you for the response Chris. I went back and listened to your podcast again this morning. The notes I took said you received an unsecured line of credit for 15k at 5%, a credit card from the bank with cash advances at 8%, and a 50k 401k loan. This sounds like an area where I’ll need to dedicate more of my energy and hustle. I also like your thinking on having the 20% down payment available. That makes smart sense to me. Again, thanks for your time.

  36. David Grabiner

    Hi Chris,

    I have been listing to podcasts for about a year now and yours is really my favorite so far. Your advice was so spot on I kept pausing it to write things down. This podcast, without a doubt, will help me become a better investor.

  37. Mike German

    Best. Podcast. Ever (IMO)! Lots of great tips- as others have stated, I’ve listened to it a couple times over! I’m a newbie in OH-IO, looking to do my first deal; excellent credit, decent bucket of cash (although not enough to 100% finance) and other cash reserves plus HELOC. More comfortable taking my own lumps first before going down the private money route.
    For your first few deals, how did you finance the deal? Did you also go through multiple local credit unions/local banks to find bank partners on the original financing, not just the cash out-refinance?

    • Chris Heeren

      Hey Mike, I took out typical 5/1 ARM loans amortized over 20 years with a 20% down payment at a 4.5% interest rate on my first 2 properties. When the appraisals came back quite a bit higher than what I bought them for I was then able to go back to a second bank and do a cash out refinance for roughly the same terms, just 80% of the appraisal rather than 80% of the purchase price.

        • Chris Heeren

          No, I typically pay all cash which would be 100% down, then go back and refinance them at 80% of appraisal – this is essentially the same as 0% down if done right. I do a fixed rate for 5 years which then turns into a variable interest rate. I do this because…..well it’s the only option banks will give me on investment properties. If you find a bank that will do fixed 30 year loans in an LLC, sign me up! I’m not saying it can’t be done, I just haven’t found one yet, at least one that will do a cash out refi at 80% with no seasoning.

  38. clay Sellers

    Chris – Finished the Podcast for a second time today after my wife was so pumped up from listening to it. You have some GREAT advice and it’s very inspirational to hear what you’ve done for yourself in the last couple of years.

    I’m in a similar situation work wise 50+ hrs. p/week 50 mile RT commute. I listen to Podcasts and Audible going to and from work.

    Any advice for a newbie, living in Socal? Don’t think this market out here is a good one to get started in, especially will little $$. I would like to try the BRRRR strategy in a more affordable market. Do you have any experience in a virtual market?

    • Chris Heeren

      You’ll have to do your research on markets and figure out which strategy works best for you. There is no one right or wrong way of investing. The biggest advice I can give is to simply buy a property. In my opinion it’s better to get that deal and learn from it than to just sit on the sidelines saying you’ll invest “someday”. You’ll learn a ton from that one deal which will make you better on the next.

  39. JT Johansen

    Chris,

    Many thanks for a fantastic podcast! I also really appreciate all your detailed responses to the comments here. Even more valuable!

    I have two questions:

    1) How do you go about finding areas where it is possible to buy houses for $ 35k with $ 850 rent? I am in California where it is impossible to find deals like that

    2) Once you have found your target area, what are your tips for securing under market value deals?

    Thanks again, your passion is very inspiring!

    • Chris Heeren

      There are countless cities in the Midwest that have these purchase to rent ratios, if you live in Cali you’ll either need to use a different strategy for the majority of the markets down there or look into creating an out of state team. The absolute best way to get under market deals is by using direct mailing. There are plenty of other methods but seems like the most consistent has been to send letters to home owners.

  40. Jonathan Safa

    Chris,

    Honestly one of the most inspirational things I have listened to in the past few years.
    I’ve probably listened to your episode of the podcast maybe 7+ times? Can’t get enough. I’ve been painting my family’s house, and put it on repeat… Next time I listen, I’ll have my notes out.

    I hope you don’t mind me trying to copy your strategy in every single possible way.
    Heck, I might even want to pick up disc golf after this one!!

    An absolute huge thanks for the tips, tricks, and encouraging words flooded throughout this episode.
    I owe you big time.

    Jonathan

    • Chris Heeren

      Hah – well thanks for the compliment Jon and congrats on hitting the highest number of times listening to a single podcast!! It’s great to hear how people get inspired from what I have accomplished. Also I can’t say I recommend taking up disc golf and real estate together, I seem to have found a direct correlation with the less rounds I play, the more units I buy (go figure).

    • Chris Heeren

      We are able to use and report the income from the properties I’ve previously bought and rented out. Therefore, each property we buy actually makes us look stronger in the eye’s of the bank. We’ve not gotten to a point where they will lend solely on our rental income and we don’t need to use my salary or my wife’s salary to qualify for a loan. Typically banks need at least a 1.2 (20%) Debt Coverage Ratio in order to make a deal work, most of ours are deals are 2.0-3.0 coverage (200%-300%)

  41. Laura H.

    So much great information here! I love that you provided real numbers (I’m a nerd – I love math) and explained how you got started with MLS properties. Really gives me the confidence to keep moving forward!

    EXCELLENT job, Chris!

  42. Ishviyan d.

    Hi Chris, 3rd time listening to your show and I just love it. Few questions. 1) If you are talking about debt coverage ratios, I assume you are using commercial loans to finance the properties? 2) And does this mean you need to finance several properties at once in order to meet a specific loan minimum (I’m assuming the bank wouldn’t finance a small loan using a commercial loan)? 3) Lastly, you mentioned the bank does not rely solely on your rental income but considers your DSCR as well when financing your properties.. Im trying to get an idea of rental income requirements when the bank considers financing for these kinds of loans. Does the bank look at rental income the same way it would look at, say, W2 income? Or is rental income looked at differently? Thank you!

    • Chris Heeren

      1) My debt coverage ratios are around 2.0 – 2.2 Which is the cashflow after expenses divided by the mortgage payment. Banks typically look for a 1.2 which is 20% more than the mortgage payment. I’m at just over 100% on my portfolio all together.
      2)I haven’t had any issues with financing small loans, the smallest I’ve done was $18,000 which the bank said they weren’t happy about doing but still did it. Basically anything under $30K going forward I’m going to try and lump 2 together, just to save on closing costs.
      3) This is a question you need to sit down and ask the banks you plan on using. It may be slightly different on who you talk to. I’m personally not going to be financing your loans, so I suggest you talk to the people who are.

    • Chris Heeren

      Nice, I will definitely check that out. I haven’t been happy with mine but haven’t taken the time to try anything else yet. There are quite a few things I could improve upon in my business once I can dedicate my full time to real estate.

  43. Jaron Sherwood

    Chris, what a great episode. I’m very interested in doing the mailers the way you have done it. How are you getting your addresses to send to? Are you using a website like listsource.com or NOD lists? Are there other better routes to get these addresses and owners? Thank you

  44. Rob cee

    Chris, first of all thanks for sharing on the podcast. So great you give back to help others. What is the cash-on-cash return you get on your average house when you buy it cash? Let’s just say you did not refi the property. Just curious what the cash-on-cash return would be on these small houses with someone buying cash (NET cash flow divided by total cost to buy it + total initial fix costs).

    And since C neighs, have you had a lot of issues with tenants? Many evictions?

    • Chris Heeren

      I would say around 20% for cash on cash, I’ve bought a couple that were over 30% but that depends on how you calculate your cashflow, I’ve very conservative in my numbers. If using just the generic 50% rule my cash on cash is between 20%-30%. For example a Triplex I purchased in September get’s $1,550 in rent (1550x.5=775×12=9,300/yr) We purchased it for $35,000 with it fully occupied. 9,300/35,000 = 26.5% COC. I just bought a house on Wednesday for $13,000. The rehab will be about $6,000 and will list for rent at $775. That comes to 24.5%. Vacancy is about 5%-6% here and the only evictions I’ve had to do are from inherited tenants that came with the property that we purchased.

        • Chris Heeren

          Well, when factoring in bank leverage, principle pay-down, appreciation and the advantages from tax depreciation, the numbers get almost too good to be true.

      • Rob cee

        So theoretically someone could come into a midwestern type market and learn to buy like you do and take $500k cash and turn it into a $100k a year income stream? And that is on the low end of your cash-on-cash return scale of 20%. $1 million would create $200k/year.

        • Chris Heeren

          If you buy right it’s possible. Keep in mind nearly all my time is spent on acquisitions, so it’s not as simple as get money, plop it down into properties and then make a 25% COC return. I invest within 30 minutes of where I live which gives me a huge advantage to finding great deals. Also, using leverage you can achieve some amazing returns in these areas. I’ve invested about $70K of my own money in the last 3 years, and have turned it into about $120K+/year cashflow.

        • Rob cee

          That is amazing that you created $120k a year in net rental income in just a few years with only $70k cash. Yes I am aware you investing locally and put a big amount of time, energy and effort find the deals you find.

  45. Marcos Luis Mogollon

    Hi Chris,
    This is BY FAR my favorite episode. I am now where you started and it’s a great guide for newbies like me

    I have a question:
    You mention that you used to make an offer for 70% of the market value on MLS listings.
    But, what happens when you get calls from direct mails? do you make an offer for 70% of the market price as well? or do you let them make an offer first? How’s your negotiation process?

    • Chris Heeren

      Direct Mail really depends on the situation. What is there scenario and how soon do they need to sell? Are they going to lose their house in a week and we are their only option? Or are they simply going to list the house on the market if they don’t sell to us. Depending on the urgency you can offer much steeper discounts. There is no right or wrong answer, I suggest sending mail out, start receiving phone calls and learn where people fall as far as what is the right price to offer. You’ll always have to adjust your strategy as you go and nobody can tell you every detail to be prepared for before you even start.

  46. Gisela Casabella

    Hi Chris.
    I feel very identified with you because i never take a no as an answer. Allways pushing to find a way. I have some specific questions in regards to funding and would like to email you, or perhaps a phone call might work if you can?
    I would really appreciatte it.
    Thank you
    Gisela

    • Chris Heeren

      You can always send me your questions in a private message here on BiggerPockets. I’ve been ensuring that I answer everyone who reaches out. If they are more broad questions, you can ask them on this forum so others can learn from them as well.

  47. Gisela Casabella

    Hi Chris. You have mentioned that your credit looks strong because of the rental income, so the debt to income ratio doesnt have a negative impact. This would be on the personal credit, right?
    Would it be better to build business credit instead of using personal credit? Just to be safer and not personally liable?
    Do you have any recommendation in regards to building business credit on my EIN number versus on my social sec number?
    Thank you for your outstanding generosity in helping others with such complete information in all your postcasts.
    Gisela

    • Chris Heeren

      My credit doesn’t have anything to do with rental properties, it’s strong because we have always paid our bills and don’t have maxed out credit cards. In fact, I work with my banks to ensure none of our rental mortgages even show up on my credit report. The loans I do take out are in my LLC names using their EIN, though I still am personally guaranteeing the mortgages. I will be looking more into Non Recourse loans next year and if it’s even possible to get a larger blanket loan on all my SFH’s. I typically only hear about them being used on Apartment Complexes.

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