August 26, 2025 • 23 mins
Most real estate investors assume buying existing rentals is the fastest path to cash flow. But what if you could build them cheaper, and end up with a property that performs better long-term? That’s exactly what Tyler Casey discovered.
On this episode, Tyler breaks down the strategy that’s allowing him to out-build the market. He shares why the right floor plan can be a game-changer, how repeating the same blueprint cuts costs and saves time, and the small design details that dramatically reduce maintenance headaches down the road.
We dive into the financing he’s using, walk through the actual numbers on one of his recent builds, and compare new construction to rehabs, and why building can actually be the easier, smarter move.
Tyler also takes us back to his beginnings, buying his first rentals at just 18, and shows how his approach has evolved into something far more scalable.
Along the way, we unpack the hidden advantages of building vs. buying: tax benefits, lower operating costs, higher rent potential, better tenant quality, and even cheaper insurance.
https://rentalincomepodcast.com/episode536
Thanks To Our Sponsors:
Ridge Lending Group - Get A Free 30-Minute Strategy Session With Caeli Ridge.
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Rental Accounting Software Made Easy. Free 30 Day Trial
On this episode, Tyler breaks down the strategy that’s allowing him to out-build the market. He shares why the right floor plan can be a game-changer, how repeating the same blueprint cuts costs and saves time, and the small design details that dramatically reduce maintenance headaches down the road.
We dive into the financing he’s using, walk through the actual numbers on one of his recent builds, and compare new construction to rehabs, and why building can actually be the easier, smarter move.
Tyler also takes us back to his beginnings, buying his first rentals at just 18, and shows how his approach has evolved into something far more scalable.
Along the way, we unpack the hidden advantages of building vs. buying: tax benefits, lower operating costs, higher rent potential, better tenant quality, and even cheaper insurance.
https://rentalincomepodcast.com/episode536
Thanks To Our Sponsors:
Ridge Lending Group - Get A Free 30-Minute Strategy Session With Caeli Ridge.
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Rental Accounting Software Made Easy. Free 30 Day Trial
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Inspiring interviews with Today is Top Landlords, This is the
Rental Income Podcast and now Damnly Tyler.
Speaker 2 (00:10):
I wanted to bring you on the podcast today because
you're doing something pretty interesting. You're building new properties to
rent out. What are some of the advantages to building
a new property versus buying a property and fixing it up.
Speaker 1 (00:24):
Well, there's quite a few, you know.
Speaker 2 (00:28):
You.
Speaker 3 (00:29):
First of all, things like cost segregation for taxes are
more obvious because you have like line item by line item,
you know, costs of construction. You also have a pretty
good spread typically between the cost of construction and what
they're worth. You know, as complete you have lower ongoing
(00:53):
operating expenses at least for the first five to ten years,
because all your major systems are brand new. That means
lower CAPEX budgets, lower repair budgets for a period of time.
Insurance costs are typically less as well, and then you
get typically higher rents and higher tenant quality, so less delinquency,
(01:13):
less vacancy credit loss. I've found it to be very,
very beneficial.
Speaker 2 (01:20):
On the podcast today, we're going to learn more about this.
We'll see what's involved in building a new property. We'll
take a look at the numbers and see how everything
has been working out for Tyler. Joining us on the
show today from Pittsburgh, Kansas is Tyler Casey. We'll take
a quick break to thank our sponsors. We'll come right
back and we'll talk to Tyler. It's a lot of
(01:41):
work to find a really good rental property, and when
you actually find that property, you want to make sure
you're working with a lender that can get that loan closed.
The lender that I recommend is jay Lee Ridge from
Ridge Lending Group. She's a nationwide lender and her specialty
is helping investors finance rental properties. She has a ton
of loan programs and she can find something customized to
(02:03):
you for your situation. If you want to find out
more or you're ready to get started today, just go
to Ridge Lendinggroup dot com. That's our Idge Lendinggroup dot
com and MLS four two zero five six. Are you
thinking about investing in rental properties but maybe you don't
know where to start. My friends at Midsouth Home Buyers
(02:25):
make it simple. For over twenty three years, they've been
selling fully renovated, turnkey rental properties in Memphis and Little Rock.
We're talking new roofs, plumbing, electric, kitchens, bathrooms. Everything is
brand new and done right. And here's the best part.
Every property comes with a well qualified tenant in place
(02:46):
before you close. That means you get cash flow from
day one. Plus Midsouth continues to professionally manage the property
for you after the sale, and they back it up
with two powerful guarantees. You get a one year total
maintenance warranty and a lifetime occupancy guarantee. Personally, I bought
(03:07):
five properties from them and I couldn't be happier. If
you want to talk to someone that's been through the process,
feel free to reach out to me. I'm happy to
answer any questions, or if you're ready to get started,
just go to midsouthhome Buyers dot com. That's midsouthhome Buyers
dot com. We'll get into the new construction in a bit,
but let's talk about you for a second, Tyler, How
(03:30):
did you first get the idea to buy rentals?
Speaker 3 (03:33):
So, my grandfather, who was an engineer by trade in Tulsa, Oklahoma,
he had a stock portfolio as part of his retirement,
and he was in his early fifties in two thousand
when the dot com bubble burst and he lost a
(03:55):
lot of money, which he probably should have held it
for a couple years he would have been fine. But
what he did was he sold it and he put
all that money into rental properties. And I used to
go down in the summers in high school and I
would help him on his rental properties, some as a
(04:15):
as a part time job, doing like maintenance, fixing toilets,
you know, putting new trim down, repairing or replacing flooring,
things like that.
Speaker 2 (04:27):
And then how did you then get started with your
rental properties.
Speaker 3 (04:33):
Well, when I was eighteen years old, I was a
freshman and freshman in college, and I had made some
I had had some money saved up from working a
little bit for my grandpa, working a little bit for
my dad at the country club, working a little bit
for a local contractor there in Pittsburgh, Kansas. And when
I say a little bit of money, I had a
couple thousand dollars saved up. But I had also purchased
(04:56):
and financed a car and a couple other things. I
had pretty good credit, and I just again from learning
it from my grandpa, I went and bought a house
which was a three bed, one and a half bath
house right by Pittsburgh State University campus, and I lived
in one of the rooms and I rented the other
(05:18):
two rooms out to my friends.
Speaker 2 (05:19):
So smart and to be eighteen to be thinking that way,
I mean, that is really really good. So you bought
the property, rented out some rooms, and then did you
buy more properties while you were in school?
Speaker 3 (05:34):
Yeah, So by the time I graduated, I owned eight
homes and I had fixed up and sold a couple
others in that time period as well, and then.
Speaker 1 (05:49):
I also.
Speaker 3 (05:51):
Was managing about forty rental properties for people by the
time I was a senior in college.
Speaker 2 (05:56):
So incredible. And trying to get the financing. I mean,
I can understand getting one property, but was it hard
to get financing to get all the properties that you bought?
Speaker 3 (06:10):
It was actually really easy because most of them at
the time, you know, this was two thousand and eight
to two thousand and ten, twelve, you know, in that range,
and the banks had tons of other real estate owned
or OREO inventory back then. And when they've basically they
(06:34):
start out I guess as ario, which is just real
estate owned in the bank, wing go and then after
they've held them for a period of time, they go
into other real estate owned category they haven't sold them,
and once they go into that category, a lot of
these lenders can get really, really flexible on what they
do with financing. So I had a lender who was
(06:56):
actually giving me ninety five percent of the purchase price
and rehab costs, you know, for their OREO properties at
the time. So that's mostly what I was buying was
foreclosures from local banks.
Speaker 2 (07:15):
Did your parents think you were crazy?
Speaker 1 (07:19):
My dad definitely thought I was crazy.
Speaker 3 (07:21):
Yeah, you know, he was just very much like conservative
thought I should you know, which I did go to
school and I did graduate, but he thought I should
go to school, graduate, get a good job, you know,
the stability factor. Yeah, and my mom was more like,
you know, if this is what you want to do,
(07:43):
go for it. So it was kind of a little
bit of a mixed bag.
Speaker 2 (07:47):
That's awesome. So you bought those properties, and then when
you graduated, did you start buying even more properties?
Speaker 1 (07:57):
Yeah?
Speaker 3 (07:58):
So I got my I got my real estate license
right as I was graduating, which in Kansas you don't
you don't actually have to have a real estate license
to manage property. But I thought a lot of my
clients were looking for stuff to buy, because I already
had a few property management clients by that time, like
I said, and I thought, well, this was just another
(08:19):
way for me to make money in real estate. So
I got my real estate license. You know, I was
buying a ton. I actually owned forty eight before I
was twenty four.
Speaker 2 (08:30):
Wow. And how many properties do you have today?
Speaker 1 (08:35):
My wife and I own about one hundred and seventy
five units.
Speaker 2 (08:38):
Wow. And how many years has it been since you've
been out of college?
Speaker 3 (08:43):
I graduated college in twenty ten, Okay, But I did
have a partnership as part of those original fifty or
so doors, and we had an in house construction company
at that time. And then by that time, I also
had a real estate broker business, and I had partners
in a lot of that, and I had a partnership
(09:05):
dissolution in twenty fifteen twenty sixteen, kind of overlapping the years,
and I had to sell all but five of that
original portfolio I had built to get cash to basically
pay everybody off and get one hundred percent of my
company back.
Speaker 2 (09:22):
Wow. I mean, it's really really impressive what you've done.
I mean, it really just goes to show that anybody
can can buy rental properties and that's really really great.
So when did you get into building properties versus buying them?
Speaker 3 (09:41):
Well, like I said, we had we had a general
contracting business from twenty eleven to It was another thing
where we just struggled with contractors for ourselves and for
our property management business. And I actually went out and
recruited a buddy of mine from college who was a
superintendent for one of the top hundred commercial contractors in
the world at the time, and said, come back and
(10:04):
partner up with me, and let's, you know, let's.
Speaker 1 (10:08):
Build our own real.
Speaker 3 (10:09):
Estate investments and rehab our own real estate investments basically,
And so.
Speaker 1 (10:15):
He did that.
Speaker 3 (10:16):
And at the time to kind of make make the
money all work, we were just doing any kind of
general contracting work we could do. Like we did everything
from government bidding spec work like building the Parks and
Recreation building and for Parsons Parsons Kansas Department of Parks
and rec and remodeling the Joplin Mall into the job
in high school after the Joblin Tornado, and building low
(10:40):
income housing projects for cities. So like City of Baxter Springs,
Kansas had us build a thirty two unit project for them.
So we got really well versed in just really just
general contracting period of whatever it was. We even built
some custom homes for some friends and some other you know,
some other things stuff we weren't even necessarily trying to
(11:02):
get into, you know, and we started really it wasn't
until after the partnership dissolved then I reformed an in
house construction operation in twenty twenty that we started doing
the build to rent.
Speaker 2 (11:17):
Okay, so about five years. And so what works best
if you're doing a new build. Is it better to
get a duplex or a single family or a triplex?
What are you building?
Speaker 3 (11:31):
So definitely from a cost and return on investment standpoint,
I like duplex as the best. Obviously building single family
homes there's still a spread and value in them. It's
just the cost per square foots a little higher on
building a single family home, and the rent is not
(11:51):
really that much higher than it is on a per
unit basis for building a duplex. And if you build
something over a duplex, most cities require you to put
in fire suppression systems, which can cost tens of thousands
of dollars. So for me, I would rather buy either
a single lot or multiple you know, multiple lots that
(12:13):
are one parcel and split them up into lots and
just build individual duplexes.
Speaker 2 (12:18):
Right, Okay, And then do you have like one blueprint
that you just keep using over and over again or
do you come up with a different blueprint every time
you build a new property.
Speaker 1 (12:31):
Uh?
Speaker 3 (12:31):
So we have like three different standard duplex plans that
we build. We have a couple others that we on
a cage like we have we have acquired through a
one time build that we also plan to build more
of now. So we have like five kind of plans
in house that we can you know, our cells continue
(12:53):
to build and also you know, build for our clients.
Speaker 2 (12:56):
And so that that just makes it easier that your
you're guys know what to do. You've got all everything
you need to do. That is that why you you
don't go with a new design every time?
Speaker 3 (13:10):
Yeah, and you kind of get a little bit more
efficient every time you build one. You kind of you
kind of learn something about like oh, well, we can
move the electrical service here and it reduces the cost
of the service entrance or you know, we can I
mean basically we've whittled down the cost for a duplex
on all these and continue to be able to do
(13:31):
so a little bit because of just efficiencies, right, and
also when we know exactly how much of quantities of
materials we need we can order. You know, if we
have eight lots out ahead of us, you know, we
can order materials for eight duplexes at a time and
then get the cost of those materials down as well.
Speaker 2 (13:49):
That makes sense. I mean, just like anything, the more
you do it, the better you're going to get at it.
So have you found that there is a certain floor
plan or a bedroom bathroom combination that works best and
gets you the biggest bang for your buck.
Speaker 3 (14:06):
Pretty much everything we're building is three bed, two bath
on the on the duplex front, so per unit, you know,
so you've got six bedrooms and four bathrooms in total.
A couple of the plans have one car garages. Several
of them just have like an attached storage shed off
the back as well, So a little bit of variation there,
(14:28):
but in general, three bed, two bath is what we've
been doing.
Speaker 2 (14:31):
Have you found anything that just helps you rent the
properties better that if you build it a certain way
or have a certain feature that it attracts tenants or
maybe even lowers your maintenance cost.
Speaker 3 (14:44):
Well, one thing we're doing is we're building a lot
of these on slabs, and we're doing finished concrete flooring
in a lot of them, which actually looks really cool
and it doesn't seem to deter renters and it saves
you from ever having to do new flooring in the
property right as well, So a reduction and expenses kind
(15:05):
of everything we're doing is geared towards reduction and ongoing
maintenance costs. You know, on the outside, we're doing like
all vinyl siding sometimes with a little bit of stone
veneer on the front, like you know, a wains coating
four foot high or so. And we're doing like all
metal metal and vinyl wrapped facious off a window trim
(15:27):
all that so nothing's exposed. We're doing all single one
piece tubshower inserts so that you know, nothing can really
break down on those all granted countertops throughout. So that
I mean, obviously that's an attractive thing for perspective tenants.
(15:48):
It adds to the value of the property, but it
also is the lowest maintenance option. Like if you put
for mica in, yeah, it might cost one thousand dollars
less on the front end, but you're gonna end up
with the you know, and you've all seen them, probably
every real estate vester's probably seen for Mike countertops where
the edges are peeling back, or there's burn marks on
(16:08):
them or chips out of them or whatever. They just
end up looking terrible pretty quick.
Speaker 2 (16:12):
So having a brand new property, is it just night
and day between buying a property that's already built that
maybe you can rehab, Like, is it worth all the
extra work?
Speaker 1 (16:27):
Well, it's a lot easier.
Speaker 3 (16:29):
Actually, the construction process a lot easier than a rehab,
especially a significant rehab. I mean, if you can buy
a house and put painting floors in it and rent
it out, that's one thing. But if you got to
do any kind of you know, you know, any kind
of you're going to have to do permitting and stuff
on anything much bigger than that anyway, on a rebodel,
(16:50):
and then you've got a bunch of walls that are
out of square, you got a bunch of old systems
you got to evaluate, and you don't know where everything's ran.
And it's a construction process on a rehabs actually a
nightmare compared to new construction sometimes can take just as
long and cost just as much as well, depending on
the situation. And then you don't still don't necessarily know
(17:13):
exactly what you have when you're done all the time,
or have everything brand new.
Speaker 2 (17:18):
That's true, and so your main as you mentioned at
the beginning, the maintenance is way low.
Speaker 3 (17:24):
Yes, well, you're not going to have to replace an
HVAC unit, or upgrade an electrical system or mess with
plumbing for a decade plus. Probably you know, roof's perfect,
brand new for a decade plus. I mean most you're
not gonna have to touch anything for a long time.
Speaker 2 (17:43):
Talk me through the financing. So how does it work? Like?
So when you I guess the first thing you're doing
is you're buying land. Do you have to pay cash
for the land or are you able to finance that?
Speaker 3 (17:56):
Yeah, so what I'm doing is I'm buying the land
with cash typically, which is you know, anywhere from five
to twenty thousand dollars depending on the location the city.
You know, we operate in five different cities, but and
there's a little bit of variation even within the cities.
(18:17):
But just to give you an example, I bought three
lots in Pittsburgh, Kansas, which is which is a small
town in southeast Kansas, but it has a seven thousand
person Division two university, so it's a big rental market
for twenty five thousand dollars, so just a little over
(18:38):
eight thousand dollars apiece. We've already got plans, you know,
our standard plans. We're going to build three duplexes right there,
already have permits with the city, already have the loan
in place, and we're getting ready to break around next week. Well,
the appraisal came in at two hundred and ninety five
five hundred dollars. Bank loaned me two hundred and forty
(19:02):
thousand dollars per duplex, so close to seven hundred and
fifty thousand dollars in total. My average cost to build
each duplex is about two hundred and thirty three thousand,
So I'm roughly like I may be out the holding
costs maybe a couple thousand dollars plus the holding costs
per duplex to acquire those three duplexes.
Speaker 2 (19:26):
So I so just make sure I understand. So you're
with the land cost of about eight thousand dollars and
then two hundred and thirty three thousand to build the property.
So you're all in at about two forty and that's
what the bank is loaning you. Yeah, wow, okay, and
then the property appraises for how much?
Speaker 3 (19:49):
Those particular ones appraised for two hundred and ninety five
five hundred dollars. Most of our standard plans, four of
the five that we've been building, have appraised between two
ninety and three twenty almost every time, depending on the location.
And then we've got a larger luxury duplex plan that
(20:11):
we built that appraises in the four twenty five to
four to fifty range, so similar price per square foot
to build, but just a little bit bigger, nicer property.
Speaker 2 (20:23):
Every time that you build a property, it sounds like
you're making about fifty thousand dollars.
Speaker 3 (20:31):
Yeah, I mean, it's not cash in my pocket that
it's equity my balance sheet, right, So yeah.
Speaker 2 (20:38):
That's great. Okay. So you're all in a two forty
and then what would that do plex rent for?
Speaker 1 (20:45):
Average?
Speaker 3 (20:46):
About twenty five hundred a month or twelve hundred and
fifty per unit in our markets, Again, the range could
be anywhere from about eleven to fifty a month per
side to you know, fourteen hundred a month per side,
depending on the location, but average is about twelve to
fifty per unit.
Speaker 2 (21:03):
You know, that is really awesome. I mean you're right
at the one percent role there, so you're getting good rents,
you've got equity, and you've got a brand new property
at the end of the day.
Speaker 3 (21:14):
Yeah, I mean, they all they all cash flow really
well for me. I mean, it's not like you make
a ton when you put that much debt on them,
but I mean I can tell you that my average
net on these which obviously you have like a six
month build window where you're covering carrying costs and you're
not getting paid.
Speaker 1 (21:32):
So that's the one thing.
Speaker 3 (21:36):
But once you do start getting you know, getting rental income,
once they're kind of stabilized. I've been averaging about nineteen
hundred a month net out of our property management system.
So that's after paying you know, all the repairs and
maintenance management. Taxes, insurance that's another thing. Taxes insurance are
(21:57):
cheaper on new builds and also just an areas are
cheap in general, and the payments are about fifteen to
sixteen hundred a month, so like maybe a couple hundred
dollars a month in positive cash flow average.
Speaker 2 (22:11):
Now, I know you've built a lot of houses for
your clients, but how many have you built for yourself?
Speaker 1 (22:20):
Forty?
Speaker 2 (22:21):
If you want to connect with Tyler and maybe see
if he can build a property for you, I've got
his contact information on the website. You can find it
at Rental incomepodcast dot com slash episode five thirty six.
I'd like to thank chay Lee Ridge from ridgelind and
Group for sponsoring today's episode. If you're looking to buy
(22:41):
a rental property, whether you're just getting started or you
want to add to your portfolio, definitely reach out to
cha Lee. She has a ton of different loan programs
and she can find something that I'll work for you.
And right now she's offering a free thirty minute consultation
to help you get a game plan together to your
rental portfolio. If you want to take advantage of that,
(23:03):
just go to Ridgelendinggroup dot com NMLS four two zero
five six. Thank you so much for checking out the
podcast today. Make sure you hit the follow button. I
put out a new episode every single Tuesday, and if
you're following the show, you'll get notified when the next
episode comes out. My name is Dan Lane and this
(23:26):
has been the Rental Income podcast.
Inspiring interviews with Today is Top Landlords, This is the
Rental Income Podcast and now Damnly Tyler.
Speaker 2 (00:10):
I wanted to bring you on the podcast today because
you're doing something pretty interesting. You're building new properties to
rent out. What are some of the advantages to building
a new property versus buying a property and fixing it up.
Speaker 1 (00:24):
Well, there's quite a few, you know.
Speaker 2 (00:28):
You.
Speaker 3 (00:29):
First of all, things like cost segregation for taxes are
more obvious because you have like line item by line item,
you know, costs of construction. You also have a pretty
good spread typically between the cost of construction and what
they're worth. You know, as complete you have lower ongoing
(00:53):
operating expenses at least for the first five to ten years,
because all your major systems are brand new. That means
lower CAPEX budgets, lower repair budgets for a period of time.
Insurance costs are typically less as well, and then you
get typically higher rents and higher tenant quality, so less delinquency,
(01:13):
less vacancy credit loss. I've found it to be very,
very beneficial.
Speaker 2 (01:20):
On the podcast today, we're going to learn more about this.
We'll see what's involved in building a new property. We'll
take a look at the numbers and see how everything
has been working out for Tyler. Joining us on the
show today from Pittsburgh, Kansas is Tyler Casey. We'll take
a quick break to thank our sponsors. We'll come right
back and we'll talk to Tyler. It's a lot of
(01:41):
work to find a really good rental property, and when
you actually find that property, you want to make sure
you're working with a lender that can get that loan closed.
The lender that I recommend is jay Lee Ridge from
Ridge Lending Group. She's a nationwide lender and her specialty
is helping investors finance rental properties. She has a ton
of loan programs and she can find something customized to
(02:03):
you for your situation. If you want to find out
more or you're ready to get started today, just go
to Ridge Lendinggroup dot com. That's our Idge Lendinggroup dot
com and MLS four two zero five six. Are you
thinking about investing in rental properties but maybe you don't
know where to start. My friends at Midsouth Home Buyers
(02:25):
make it simple. For over twenty three years, they've been
selling fully renovated, turnkey rental properties in Memphis and Little Rock.
We're talking new roofs, plumbing, electric, kitchens, bathrooms. Everything is
brand new and done right. And here's the best part.
Every property comes with a well qualified tenant in place
(02:46):
before you close. That means you get cash flow from
day one. Plus Midsouth continues to professionally manage the property
for you after the sale, and they back it up
with two powerful guarantees. You get a one year total
maintenance warranty and a lifetime occupancy guarantee. Personally, I bought
(03:07):
five properties from them and I couldn't be happier. If
you want to talk to someone that's been through the process,
feel free to reach out to me. I'm happy to
answer any questions, or if you're ready to get started,
just go to midsouthhome Buyers dot com. That's midsouthhome Buyers
dot com. We'll get into the new construction in a bit,
but let's talk about you for a second, Tyler, How
(03:30):
did you first get the idea to buy rentals?
Speaker 3 (03:33):
So, my grandfather, who was an engineer by trade in Tulsa, Oklahoma,
he had a stock portfolio as part of his retirement,
and he was in his early fifties in two thousand
when the dot com bubble burst and he lost a
(03:55):
lot of money, which he probably should have held it
for a couple years he would have been fine. But
what he did was he sold it and he put
all that money into rental properties. And I used to
go down in the summers in high school and I
would help him on his rental properties, some as a
(04:15):
as a part time job, doing like maintenance, fixing toilets,
you know, putting new trim down, repairing or replacing flooring,
things like that.
Speaker 2 (04:27):
And then how did you then get started with your
rental properties.
Speaker 3 (04:33):
Well, when I was eighteen years old, I was a
freshman and freshman in college, and I had made some
I had had some money saved up from working a
little bit for my grandpa, working a little bit for
my dad at the country club, working a little bit
for a local contractor there in Pittsburgh, Kansas. And when
I say a little bit of money, I had a
couple thousand dollars saved up. But I had also purchased
(04:56):
and financed a car and a couple other things. I
had pretty good credit, and I just again from learning
it from my grandpa, I went and bought a house
which was a three bed, one and a half bath
house right by Pittsburgh State University campus, and I lived
in one of the rooms and I rented the other
(05:18):
two rooms out to my friends.
Speaker 2 (05:19):
So smart and to be eighteen to be thinking that way,
I mean, that is really really good. So you bought
the property, rented out some rooms, and then did you
buy more properties while you were in school?
Speaker 3 (05:34):
Yeah, So by the time I graduated, I owned eight
homes and I had fixed up and sold a couple
others in that time period as well, and then.
Speaker 1 (05:49):
I also.
Speaker 3 (05:51):
Was managing about forty rental properties for people by the
time I was a senior in college.
Speaker 2 (05:56):
So incredible. And trying to get the financing. I mean,
I can understand getting one property, but was it hard
to get financing to get all the properties that you bought?
Speaker 3 (06:10):
It was actually really easy because most of them at
the time, you know, this was two thousand and eight
to two thousand and ten, twelve, you know, in that range,
and the banks had tons of other real estate owned
or OREO inventory back then. And when they've basically they
(06:34):
start out I guess as ario, which is just real
estate owned in the bank, wing go and then after
they've held them for a period of time, they go
into other real estate owned category they haven't sold them,
and once they go into that category, a lot of
these lenders can get really, really flexible on what they
do with financing. So I had a lender who was
(06:56):
actually giving me ninety five percent of the purchase price
and rehab costs, you know, for their OREO properties at
the time. So that's mostly what I was buying was
foreclosures from local banks.
Speaker 2 (07:15):
Did your parents think you were crazy?
Speaker 1 (07:19):
My dad definitely thought I was crazy.
Speaker 3 (07:21):
Yeah, you know, he was just very much like conservative
thought I should you know, which I did go to
school and I did graduate, but he thought I should
go to school, graduate, get a good job, you know,
the stability factor. Yeah, and my mom was more like,
you know, if this is what you want to do,
(07:43):
go for it. So it was kind of a little
bit of a mixed bag.
Speaker 2 (07:47):
That's awesome. So you bought those properties, and then when
you graduated, did you start buying even more properties?
Speaker 1 (07:57):
Yeah?
Speaker 3 (07:58):
So I got my I got my real estate license
right as I was graduating, which in Kansas you don't
you don't actually have to have a real estate license
to manage property. But I thought a lot of my
clients were looking for stuff to buy, because I already
had a few property management clients by that time, like
I said, and I thought, well, this was just another
(08:19):
way for me to make money in real estate. So
I got my real estate license. You know, I was
buying a ton. I actually owned forty eight before I
was twenty four.
Speaker 2 (08:30):
Wow. And how many properties do you have today?
Speaker 1 (08:35):
My wife and I own about one hundred and seventy
five units.
Speaker 2 (08:38):
Wow. And how many years has it been since you've
been out of college?
Speaker 3 (08:43):
I graduated college in twenty ten, Okay, But I did
have a partnership as part of those original fifty or
so doors, and we had an in house construction company
at that time. And then by that time, I also
had a real estate broker business, and I had partners
in a lot of that, and I had a partnership
(09:05):
dissolution in twenty fifteen twenty sixteen, kind of overlapping the years,
and I had to sell all but five of that
original portfolio I had built to get cash to basically
pay everybody off and get one hundred percent of my
company back.
Speaker 2 (09:22):
Wow. I mean, it's really really impressive what you've done.
I mean, it really just goes to show that anybody
can can buy rental properties and that's really really great.
So when did you get into building properties versus buying them?
Speaker 3 (09:41):
Well, like I said, we had we had a general
contracting business from twenty eleven to It was another thing
where we just struggled with contractors for ourselves and for
our property management business. And I actually went out and
recruited a buddy of mine from college who was a
superintendent for one of the top hundred commercial contractors in
the world at the time, and said, come back and
(10:04):
partner up with me, and let's, you know, let's.
Speaker 1 (10:08):
Build our own real.
Speaker 3 (10:09):
Estate investments and rehab our own real estate investments basically,
And so.
Speaker 1 (10:15):
He did that.
Speaker 3 (10:16):
And at the time to kind of make make the
money all work, we were just doing any kind of
general contracting work we could do. Like we did everything
from government bidding spec work like building the Parks and
Recreation building and for Parsons Parsons Kansas Department of Parks
and rec and remodeling the Joplin Mall into the job
in high school after the Joblin Tornado, and building low
(10:40):
income housing projects for cities. So like City of Baxter Springs,
Kansas had us build a thirty two unit project for them.
So we got really well versed in just really just
general contracting period of whatever it was. We even built
some custom homes for some friends and some other you know,
some other things stuff we weren't even necessarily trying to
(11:02):
get into, you know, and we started really it wasn't
until after the partnership dissolved then I reformed an in
house construction operation in twenty twenty that we started doing
the build to rent.
Speaker 2 (11:17):
Okay, so about five years. And so what works best
if you're doing a new build. Is it better to
get a duplex or a single family or a triplex?
What are you building?
Speaker 3 (11:31):
So definitely from a cost and return on investment standpoint,
I like duplex as the best. Obviously building single family
homes there's still a spread and value in them. It's
just the cost per square foots a little higher on
building a single family home, and the rent is not
(11:51):
really that much higher than it is on a per
unit basis for building a duplex. And if you build
something over a duplex, most cities require you to put
in fire suppression systems, which can cost tens of thousands
of dollars. So for me, I would rather buy either
a single lot or multiple you know, multiple lots that
(12:13):
are one parcel and split them up into lots and
just build individual duplexes.
Speaker 2 (12:18):
Right, Okay, And then do you have like one blueprint
that you just keep using over and over again or
do you come up with a different blueprint every time
you build a new property.
Speaker 1 (12:31):
Uh?
Speaker 3 (12:31):
So we have like three different standard duplex plans that
we build. We have a couple others that we on
a cage like we have we have acquired through a
one time build that we also plan to build more
of now. So we have like five kind of plans
in house that we can you know, our cells continue
(12:53):
to build and also you know, build for our clients.
Speaker 2 (12:56):
And so that that just makes it easier that your
you're guys know what to do. You've got all everything
you need to do. That is that why you you
don't go with a new design every time?
Speaker 3 (13:10):
Yeah, and you kind of get a little bit more
efficient every time you build one. You kind of you
kind of learn something about like oh, well, we can
move the electrical service here and it reduces the cost
of the service entrance or you know, we can I
mean basically we've whittled down the cost for a duplex
on all these and continue to be able to do
(13:31):
so a little bit because of just efficiencies, right, and
also when we know exactly how much of quantities of
materials we need we can order. You know, if we
have eight lots out ahead of us, you know, we
can order materials for eight duplexes at a time and
then get the cost of those materials down as well.
Speaker 2 (13:49):
That makes sense. I mean, just like anything, the more
you do it, the better you're going to get at it.
So have you found that there is a certain floor
plan or a bedroom bathroom combination that works best and
gets you the biggest bang for your buck.
Speaker 3 (14:06):
Pretty much everything we're building is three bed, two bath
on the on the duplex front, so per unit, you know,
so you've got six bedrooms and four bathrooms in total.
A couple of the plans have one car garages. Several
of them just have like an attached storage shed off
the back as well, So a little bit of variation there,
(14:28):
but in general, three bed, two bath is what we've
been doing.
Speaker 2 (14:31):
Have you found anything that just helps you rent the
properties better that if you build it a certain way
or have a certain feature that it attracts tenants or
maybe even lowers your maintenance cost.
Speaker 3 (14:44):
Well, one thing we're doing is we're building a lot
of these on slabs, and we're doing finished concrete flooring
in a lot of them, which actually looks really cool
and it doesn't seem to deter renters and it saves
you from ever having to do new flooring in the
property right as well, So a reduction and expenses kind
(15:05):
of everything we're doing is geared towards reduction and ongoing
maintenance costs. You know, on the outside, we're doing like
all vinyl siding sometimes with a little bit of stone
veneer on the front, like you know, a wains coating
four foot high or so. And we're doing like all
metal metal and vinyl wrapped facious off a window trim
(15:27):
all that so nothing's exposed. We're doing all single one
piece tubshower inserts so that you know, nothing can really
break down on those all granted countertops throughout. So that
I mean, obviously that's an attractive thing for perspective tenants.
(15:48):
It adds to the value of the property, but it
also is the lowest maintenance option. Like if you put
for mica in, yeah, it might cost one thousand dollars
less on the front end, but you're gonna end up
with the you know, and you've all seen them, probably
every real estate vester's probably seen for Mike countertops where
the edges are peeling back, or there's burn marks on
(16:08):
them or chips out of them or whatever. They just
end up looking terrible pretty quick.
Speaker 2 (16:12):
So having a brand new property, is it just night
and day between buying a property that's already built that
maybe you can rehab, Like, is it worth all the
extra work?
Speaker 1 (16:27):
Well, it's a lot easier.
Speaker 3 (16:29):
Actually, the construction process a lot easier than a rehab,
especially a significant rehab. I mean, if you can buy
a house and put painting floors in it and rent
it out, that's one thing. But if you got to
do any kind of you know, you know, any kind
of you're going to have to do permitting and stuff
on anything much bigger than that anyway, on a rebodel,
(16:50):
and then you've got a bunch of walls that are
out of square, you got a bunch of old systems
you got to evaluate, and you don't know where everything's ran.
And it's a construction process on a rehabs actually a
nightmare compared to new construction sometimes can take just as
long and cost just as much as well, depending on
the situation. And then you don't still don't necessarily know
(17:13):
exactly what you have when you're done all the time,
or have everything brand new.
Speaker 2 (17:18):
That's true, and so your main as you mentioned at
the beginning, the maintenance is way low.
Speaker 3 (17:24):
Yes, well, you're not going to have to replace an
HVAC unit, or upgrade an electrical system or mess with
plumbing for a decade plus. Probably you know, roof's perfect,
brand new for a decade plus. I mean most you're
not gonna have to touch anything for a long time.
Speaker 2 (17:43):
Talk me through the financing. So how does it work? Like?
So when you I guess the first thing you're doing
is you're buying land. Do you have to pay cash
for the land or are you able to finance that?
Speaker 3 (17:56):
Yeah, so what I'm doing is I'm buying the land
with cash typically, which is you know, anywhere from five
to twenty thousand dollars depending on the location the city.
You know, we operate in five different cities, but and
there's a little bit of variation even within the cities.
(18:17):
But just to give you an example, I bought three
lots in Pittsburgh, Kansas, which is which is a small
town in southeast Kansas, but it has a seven thousand
person Division two university, so it's a big rental market
for twenty five thousand dollars, so just a little over
(18:38):
eight thousand dollars apiece. We've already got plans, you know,
our standard plans. We're going to build three duplexes right there,
already have permits with the city, already have the loan
in place, and we're getting ready to break around next week. Well,
the appraisal came in at two hundred and ninety five
five hundred dollars. Bank loaned me two hundred and forty
(19:02):
thousand dollars per duplex, so close to seven hundred and
fifty thousand dollars in total. My average cost to build
each duplex is about two hundred and thirty three thousand,
So I'm roughly like I may be out the holding
costs maybe a couple thousand dollars plus the holding costs
per duplex to acquire those three duplexes.
Speaker 2 (19:26):
So I so just make sure I understand. So you're
with the land cost of about eight thousand dollars and
then two hundred and thirty three thousand to build the property.
So you're all in at about two forty and that's
what the bank is loaning you. Yeah, wow, okay, and
then the property appraises for how much?
Speaker 3 (19:49):
Those particular ones appraised for two hundred and ninety five
five hundred dollars. Most of our standard plans, four of
the five that we've been building, have appraised between two
ninety and three twenty almost every time, depending on the location.
And then we've got a larger luxury duplex plan that
(20:11):
we built that appraises in the four twenty five to
four to fifty range, so similar price per square foot
to build, but just a little bit bigger, nicer property.
Speaker 2 (20:23):
Every time that you build a property, it sounds like
you're making about fifty thousand dollars.
Speaker 3 (20:31):
Yeah, I mean, it's not cash in my pocket that
it's equity my balance sheet, right, So yeah.
Speaker 2 (20:38):
That's great. Okay. So you're all in a two forty
and then what would that do plex rent for?
Speaker 1 (20:45):
Average?
Speaker 3 (20:46):
About twenty five hundred a month or twelve hundred and
fifty per unit in our markets, Again, the range could
be anywhere from about eleven to fifty a month per
side to you know, fourteen hundred a month per side,
depending on the location, but average is about twelve to
fifty per unit.
Speaker 2 (21:03):
You know, that is really awesome. I mean you're right
at the one percent role there, so you're getting good rents,
you've got equity, and you've got a brand new property
at the end of the day.
Speaker 3 (21:14):
Yeah, I mean, they all they all cash flow really
well for me. I mean, it's not like you make
a ton when you put that much debt on them,
but I mean I can tell you that my average
net on these which obviously you have like a six
month build window where you're covering carrying costs and you're
not getting paid.
Speaker 1 (21:32):
So that's the one thing.
Speaker 3 (21:36):
But once you do start getting you know, getting rental income,
once they're kind of stabilized. I've been averaging about nineteen
hundred a month net out of our property management system.
So that's after paying you know, all the repairs and
maintenance management. Taxes, insurance that's another thing. Taxes insurance are
(21:57):
cheaper on new builds and also just an areas are
cheap in general, and the payments are about fifteen to
sixteen hundred a month, so like maybe a couple hundred
dollars a month in positive cash flow average.
Speaker 2 (22:11):
Now, I know you've built a lot of houses for
your clients, but how many have you built for yourself?
Speaker 1 (22:20):
Forty?
Speaker 2 (22:21):
If you want to connect with Tyler and maybe see
if he can build a property for you, I've got
his contact information on the website. You can find it
at Rental incomepodcast dot com slash episode five thirty six.
I'd like to thank chay Lee Ridge from ridgelind and
Group for sponsoring today's episode. If you're looking to buy
(22:41):
a rental property, whether you're just getting started or you
want to add to your portfolio, definitely reach out to
cha Lee. She has a ton of different loan programs
and she can find something that I'll work for you.
And right now she's offering a free thirty minute consultation
to help you get a game plan together to your
rental portfolio. If you want to take advantage of that,
(23:03):
just go to Ridgelendinggroup dot com NMLS four two zero
five six. Thank you so much for checking out the
podcast today. Make sure you hit the follow button. I
put out a new episode every single Tuesday, and if
you're following the show, you'll get notified when the next
episode comes out. My name is Dan Lane and this
(23:26):
has been the Rental Income podcast.
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