June 17, 2025 • 23 mins
Kevin Karagias shares why he isn’t worried about today’s cash flow. Instead, he’s playing the long game—buying properties he knows will pay off as rents rise, values appreciate, and tenants pay down his mortgages.
Kevin walks us through his portfolio and the key factors he looks for in a neighborhood. He also explains how he reinvests his cash flow to accelerate his growth, and why he believes time is the real secret to building wealth with rentals
.We also dig into a hot debate: 15-year vs. 30-year mortgages. Kevin breaks down the pros and cons of each and how he decided which Is the best option for him.
https://rentalincomepodcast.com/episode526
Thanks To Our Sponsors:
Ridge Lending Group - Making investment Mortgage process simple and stress-free.
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Kevin walks us through his portfolio and the key factors he looks for in a neighborhood. He also explains how he reinvests his cash flow to accelerate his growth, and why he believes time is the real secret to building wealth with rentals
.We also dig into a hot debate: 15-year vs. 30-year mortgages. Kevin breaks down the pros and cons of each and how he decided which Is the best option for him.
https://rentalincomepodcast.com/episode526
Thanks To Our Sponsors:
Ridge Lending Group - Making investment Mortgage process simple and stress-free.
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
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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.
Speaker 2 (00:08):
Damnly Kevin, You've got a real interesting way that you're
looking at your rental properties. Can you tell me kind
of how you're thinking towards the future?
Speaker 3 (00:17):
Yeah, Dan, Yeah, we are looking for you know, ten
to fifteen down, you know, years down the road, rents
to go higher. Tennant's paying down our mortgages and just
really put us in a good position down the road.
Speaker 2 (00:33):
Buying rental properties is a long term investment, and yeah,
cash flow is important. You need cash flow to stay
in the game. But Kevin has made a lot of
money by thinking long term and realizing that over time
the rents are going to go up. So if a
property doesn't cash flow that great today, over time, it'll
get better. He also knows that his properties are going
(00:54):
to appreciate, and he's made a lot of money by
thinking long term. With is investing. So on the show today,
we're going to try to figure out how he's thinking,
what he's buying, and see how everything has been working
out for him. Joining us on the show today from
Dallas is Kevin Karajas. We'll take a quick break to
thank our sponsors. We'll come right back and we'll talk
(01:16):
to Kevin. Investing in rental properties can be complicated, but
it doesn't have to be. My friends at mid South
home Buyers cell completely rehab turnkey properties in both Memphis
and Little Rock, and they've been doing it for twenty
three years. All their properties come totally rehab They put
on a new roof, new kitchen, new bath, new plumbing,
(01:37):
new electric, everything is brand new. They also have a
tenant that's moved in before you close, so you get
cash flow on day one. Mid South home Buyers also
continues to manage the property for you after closing. It
couldn't be easier. Everything is one hundred percent done for you.
All their properties also come with a couple of guarantees.
(01:59):
They have a one year total maintenance warranty and a
lifetime occupancy guarantee. Personally, I just closed on my fifth
property with Midsouth home Buyers and I couldn't be happier.
If you want to talk to a happy customer, reach
out to me. I'm happy to answer any questions, or
you can check them out at midsouthome buyers dot com.
(02:20):
It's a lot of 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 Ley 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
(02:42):
find something customized to 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 n MLS four two zero
five six. Kevin, let's start off talking about your portfolio.
What does your portfolio look like?
Speaker 3 (03:04):
So my portfolio right now is fifteen properties, sixteen doors.
We have eight properties located in northwest Indiana. We have
five properties around properties in DFW, and then we have
three properties in Oklahoma City.
Speaker 2 (03:22):
And are you self managing just the properties that are
near where you live or do you manage everything yourself?
Speaker 3 (03:31):
So we manage all of it. We started our first
property was in Dallas Fort Worth area, and we've kind
of followed the same process with you know, starting in
DFW and then going to our next two markets where
you know, we we built a relationship with a leasing
(03:53):
agent that would that we've built the relationships. They lease
all of our property in all three markets. Obviously, the
the the relationship times a little bit different based on
when we when we when we bought those properties, but
you know, the same.
Speaker 1 (04:12):
Methodology in each market is the same.
Speaker 3 (04:15):
We started off with a leasing agent and then from
there we would we would build our team to manage it.
We would you know, through however, we would find handyman, electricians,
h vac plumbers, everything that we would need to to
be able to help with any.
Speaker 1 (04:36):
Type of service issues. Right.
Speaker 3 (04:39):
And then we also have established relationships with contractors. We
have a go to contractor in each of the locations
and they are there when we have to go in
and you know, update the property and put you know
a little bit more work into it than a handyman
or you know, smaller just needs for the tenant.
Speaker 2 (05:02):
Okay, so if a tenant has a problem, they're calling you,
and then you call one of your contractors to go
out there and fix the problem. And your your local
listing agent is listing the property. When when when a
property turns over, Yes, yep, okay, sir, all right, So
I want to talk to you about kind of the
(05:25):
way that you're looking at properties. Got I think that
that this is kind of interesting that, you know, I
think a lot of investors are looking at just the
cash flow today and that that is kind of shortsighted
because rentals make money in a bunch of different ways.
So talk to me about future cash flow, like how
(05:49):
you're you're looking at that when you're evaluating a property.
Speaker 3 (05:52):
So we're we're looking down the road, right, We're looking
for appreciation, we're looking for cash flow early on in
the you know, my investing career. The second property that
I bought is something that we look back at all
the time when we when we are investing, when we
(06:14):
are buying things.
Speaker 1 (06:16):
So just kind of going back and kind of give
you example.
Speaker 3 (06:18):
In two thy thirteen, we bought a property in DFW
and just kind of give you round numbers. We bought
it for fifty thousand dollars, and we put twenty five
thousand dollars of renovation in the property. We kept that property,
we refinanced it. Just round numbers, let's say it was
(06:39):
about one hundred thousand dollars. So we built twenty thousand
and twenty five thousand dollars of equity in that property.
We did use a hard money loan to purchase, you know,
to purchase and do the renovations, and then we refinanced
it to a.
Speaker 1 (06:53):
Long term mortgage.
Speaker 3 (06:57):
That property right now, twelve years later, has has you know,
it's worth about almost three hundred thousand dollars.
Speaker 1 (07:07):
Wow. So so twelve yeah, so twelve.
Speaker 3 (07:10):
Years you know, and when we when we bought the
property and we started to rent it out, you know,
the rental, the rental, uh, you know, the monthly rental
for it was twelve hundred dollars. Now where we are
today that that property is about twenty one hundred dollars
(07:31):
a month.
Speaker 1 (07:32):
Wow.
Speaker 2 (07:32):
I mean so if you had looked at that and said,
your twelve hundred dollars isn't enough rent, I'm going to
pass on this deal, you would have left a ton
of money on the table.
Speaker 1 (07:44):
Yeah.
Speaker 3 (07:45):
And we we uh, you know, at the time of
buying the property, and once we refinanced it and got
a renter in there, you know, we were cash flowing
about three hundred dollars a month back in twenty thirteen.
Going forward to twenty twenty four, after just finishing up
you know, financial statements and things like that, that that
(08:06):
property still has the same mortgage on it. We've built
probably about twenty thousand dollars or so of equity by
the renter paying us and us paying the mortgage.
Speaker 1 (08:19):
You know, we're we're at we're at.
Speaker 3 (08:22):
About nine hundred dollars a month cash flow for that
property after paying all the expenses, plus the principal paydown
of the mortgage, again.
Speaker 1 (08:36):
Coming from from the renter. Right.
Speaker 3 (08:38):
So, so just kind of giving you high level of
twenty twenty four that property right there with the monthly
rental income, right and the principal paydowns about fifteen thousand dollars.
Speaker 2 (08:53):
Wow, fifteen thousand in the mortgage has been paid down
by your tenant.
Speaker 1 (08:59):
Yes, wow, Well, so.
Speaker 2 (09:01):
What changed with the neighborhood? Like did the neighborhood improve
it all? Like why did the rents go up so much?
And why did the value go up so much?
Speaker 3 (09:11):
So at this specific property, there's there's no more room
to build. There's you can't build anything. So it is
about ten miles from downtown Dallas. So it's a very
good commute, easy, easy commute, but just Dallas, Dallas in general.
(09:32):
You know that that appreciation. You know, a couple other
properties here in Dallas are very similar to that property.
Speaker 2 (09:44):
So the neighborhood like, did the neighborhood improve it all
or or is it just the location is a desirable location?
Speaker 3 (09:54):
Yeah, I would say that, you know it has it
proved a little bit, but you know, you still drive
down the straight It's it's an older, you know, part
of the city.
Speaker 2 (10:07):
Okay. Now, with the cash flow in the early days
twelve years ago, was the property making money back then
or were you at closer to a break even back then?
Speaker 1 (10:22):
Yeah?
Speaker 3 (10:22):
We were about three hundred dollars a month that for
that door.
Speaker 2 (10:27):
Okay, So then now the property is making way more money.
What are you doing with that extra cash flow?
Speaker 3 (10:35):
So that money just goes into the business, right and
and we use the funds in the business to purchase new.
Speaker 2 (10:44):
Property, okay, properties, So you're saving up and then when
you have a down payment, you're buying something else. Are
you still doing this strategy today? Are you still buying
properties today with the hopes that the rents are going
to go up and the property is going to appreciate.
Speaker 3 (11:02):
Yes, absolutely, we We actually have one going on right
now and in South Dallas close to another rental property
right across the street from a rental property that we
have and and we just actually finished one here in
Dallas about about a year ago. And you know, the
(11:26):
the numbers right now are not the greatest when it
comes to cash flow.
Speaker 1 (11:31):
It was you know, it was a renovation.
Speaker 3 (11:34):
We did get it down to the studs and you know,
all new finishes and just put that in our rental portfolio.
And that one's you know, probably about two hundred bucks
a door we're making off of that property. But we did,
we did, you know, just refinance that and we had
about fifty thousand dollars of equity through the renovation process
(12:00):
to to you know, the kind of refinance it from
a hard money loan into a d S c R loan.
But the cash flow, you know is close to a
little bit over a breaking even after you know, some
money in there for repairs.
Speaker 1 (12:16):
In the in the leasing costs.
Speaker 3 (12:19):
But you know, again we're looking ten fifteen years down
the road.
Speaker 1 (12:23):
You know.
Speaker 3 (12:23):
We we purchased that property and we you know, it
did slow down. We got it on the market at
the wrong time. You know, the the the the end
of the year to sell it, as as you know,
values in that area started to go down, and for us,
it was, hey, we weren't going to get rid of it.
Speaker 1 (12:45):
We're gonna keep it and.
Speaker 3 (12:47):
You know, re evaluate it through through the years and
and put in our portfolio. And that's very similar to
the majority of the rentals that we've had. As we've
we've always gone in and and and uh, you know, updated,
put put put some uh you know, some time some
time into it and and uh you know, use our
(13:09):
expertise and the renovation and the design to build the equity,
and and when we refinance it, we're or we have
equity in it, and and also trying to get as
much cash flow as we can.
Speaker 2 (13:22):
So I think an important thing to figure out is
that you're not buying properties that are losing you money.
They're making a little bit of money. You're buying properties
that have some built in equity, but you're really thinking
long term that in ten fifteen years this property is
going to make you a lot of money.
Speaker 1 (13:42):
Yeah.
Speaker 3 (13:43):
Absolutely, And why you know I started to invest, you know,
fifteen years ago, it was you know, being able to
to build, you know, build you know, properties for for
you know, passing that on for my kids to be
able to you know, build you know, build enough in
(14:05):
there for my kids to be able to take it over.
And you know, we we have been trying to purchase
more and more. You know, we used to buy quite
quite a few years. We used to renovate them and
and flip them. We kept we kept a couple and
and then uh, he kind of got busy with a family,
and yeah, kind of took took us away from from
(14:29):
focusing on on you know, our rental portfolio. But over
the last two years we've been really focusing you know
on on uh you know what what we're trying to
achieve in the future.
Speaker 2 (14:42):
Now with appreciation, with both front appreciation and price appreciation,
there's no guarantees that that that's gonna happen. I mean,
of course, over a long period of time, the price
of real estate is always going to go up. But
over say a five or ten in your period, it
might be flat. It might not go up. Is that
(15:04):
going to really bum you out if you buy properties
and they don't appreciate.
Speaker 3 (15:11):
No it. You know, we we again, we look at it.
We're looking at it for the long term. You know,
we we have some properties that really do well, and
then we have some properties that from a cash flow
perspective or just a you know, maybe maybe higher maintenance costs,
older you know, equipment, mechanical HVAC units, you know, things
(15:36):
like that. So we understand, you know, we do our
taxes every year. You know, there's certain properties that that
don't do the greatest, and then there's properties.
Speaker 1 (15:46):
That do you know, very very well.
Speaker 3 (15:49):
But you know, we're not looking to liquidate anything, you
know at this time.
Speaker 2 (15:55):
Now, tell me about how your thinking has evolved. I
know when you first got started, did you were using
fifteen year mortgages and at some point that shifted and
today you're using thirty year mortgages. Kind of walk me
through how you're thinking changed on that.
Speaker 3 (16:12):
Yeah, when I started, we were looking at at just overall,
like how do we get into a property over ten
fifteen years and make the most money on it? Right?
And when you're a fifteen year note compared to a
thirty note thirty year note, you know, the interest that
(16:33):
you pay is you know, less than half. So you know,
when I was starting off, you know, that was our
mindset was, I'm not really worried about cash flow. We're
focusing on appreciation right and paydown of the mortgage. And
that was really early on in my career on the
(16:53):
investing side. And then you know, as we developed and
we would purchase more properties, the mindset was, hey, we
we want to build more, you know, get more cash
flow coming in to be able to, you know, first
of all, make sure that we have you know, money
(17:15):
in our in our business to take care of loss
ran take care of renovations. If you got to buy
a new HVAC unit for five seven thousand dollars, that
we had that money in there. And those are things
that I learned early on, like, hey, you got to
(17:36):
have money in there to to take care of that.
Speaker 1 (17:39):
You know.
Speaker 3 (17:40):
Fast forward into you know where we are now and
even about five years ago, where the mindset change was
we want more, we want more properties. We're trying to
you know, pick up three to four to five a year.
So we want to be able to have the funds
to you know, eventually not have to use any type
(18:04):
of lending, but to be able to go in there
and use everything that we have in our in our
business to go buy the property, renovate the property, and
put it back on a rental market, you know, and
build the the the equity and you know through through
that process.
Speaker 2 (18:24):
So yeah, I mean it's it's it's tough. I mean
it's with a fifteen year mortgage, you're getting that property
paid down so much every month, I mean, so much
money is going towards principle, but you have a lot
less cash flow. And that's personally why I always do
thirty year mortgages. It just like having that extra extra
(18:48):
cash flow is really helpful with with those early properties.
Are they still on fifteen year mortgages? Like, have some
of those properties paid off or have you refined them?
Speaker 1 (19:01):
Yeah?
Speaker 3 (19:01):
So we have two of them that are still on
fifteen year notes, the first one. The first one will
be paid off in seven seven years, eight years from now.
Speaker 2 (19:13):
With the equity that you're creating and that you buy,
buying properties below market and fixing them up, and then
also with the market appreciation you've seen, have you tapped
into any of that equity to continue to fund down payments?
Speaker 1 (19:29):
So we have not.
Speaker 3 (19:31):
We have looked at that many many times on the
fifteen year notes and even some of the other properties
that have appreciated so much. But I think when when
the you know, the interest rates come down. That is
something that we you know, we are looking at, we're seeing,
(19:54):
you know, just globally, if that's what we want to do,
you know, for for you know, the short term here.
But that has been a thought of of mine for
the last couple of years, to be able to pull
out a couple one hundred thousand dollars and be able
to go use that for you know, for other rental properties.
Speaker 2 (20:15):
Yeah, because that's really kind of the magic that that
you're in this great spot here where you have all
this equity to be able to tap into that to
continue to grow. Is it really just kind of a
great way to grow without having to save up money.
Speaker 1 (20:30):
Yeah. And we've been thinking, you know, it's it's coming
down to.
Speaker 3 (20:33):
Hey, we're we're about to have some of these paid
off and you know, five seven years and you know
this the extra amount of cash flow, right do we
do we do we hold off or you know and
pay it off to where we we we have just
cash flow and we're looking at taxes down the road.
Speaker 1 (20:51):
You know.
Speaker 3 (20:52):
We meet with our CPA, you know, every every six
months or so, and before we make any any of
those decisions because it does effect we do. My wife
and I do have w two jobs, and we you know,
when we do those type of you know, financial decisions,
we do make sure from the tax perspective that you know,
(21:14):
we are not you know, exposing ourselves to pay more taxes.
Speaker 2 (21:19):
Personally, when I'm looking to buy a rental property, I'm
looking for positive cash flow today. I know that in
the background, the price of the property is going up.
I know that the tenant is paying down the mortgage.
I know I've got tax breaks, and I know that
in the future the value of the property is going
to be higher. But that positive cash flow today is
(21:43):
really the most important thing for me when I'm buying
a rental property. But I think Kevin has an interesting
strategy because the truth is, in every part of the country,
positive cash flow isn't really possible today. The are just
too high and the rents aren't high enough, and after
(22:04):
you pay the mortgage and all the expenses that there
just isn't money left. But if you think long term,
I don't see how you're gonna lose. I don't see
how in ten or fifteen years prices aren't higher, rents
aren't higher, and I think in the future you're gonna
have a lot more money as long as you buy
(22:24):
in a growing area and you buy a good property
that's desirable. I just don't see how you're going to lose.
So I think that Kevin has an interesting strategy. If
anybody wants to reach out to Kevin, I've got his
contact information on the website. You can find it at
Rental incomepodcast dot com slash episode five twenty six. If
(22:49):
Kevin inspired you and you're ready to buy your first
property or you want to add to your portfolio, reach
out to our sponsored Chailey Ridge. She's a nation wide
She has a ton of different loan programs and she
can find something that works for you in your situation.
If you want to find out more or you want
(23:10):
to talk to Chailey personally, you can track her down
at 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. That way you'll
be notified when new episodes come out. My name is
(23:30):
Dan Lane and this has been the Rental Income Podcast
Inspiring interviews with Today is Top Landlords, This is the
Rental Income Podcast and now.
Speaker 2 (00:08):
Damnly Kevin, You've got a real interesting way that you're
looking at your rental properties. Can you tell me kind
of how you're thinking towards the future?
Speaker 3 (00:17):
Yeah, Dan, Yeah, we are looking for you know, ten
to fifteen down, you know, years down the road, rents
to go higher. Tennant's paying down our mortgages and just
really put us in a good position down the road.
Speaker 2 (00:33):
Buying rental properties is a long term investment, and yeah,
cash flow is important. You need cash flow to stay
in the game. But Kevin has made a lot of
money by thinking long term and realizing that over time
the rents are going to go up. So if a
property doesn't cash flow that great today, over time, it'll
get better. He also knows that his properties are going
(00:54):
to appreciate, and he's made a lot of money by
thinking long term. With is investing. So on the show today,
we're going to try to figure out how he's thinking,
what he's buying, and see how everything has been working
out for him. Joining us on the show today from
Dallas is Kevin Karajas. We'll take a quick break to
thank our sponsors. We'll come right back and we'll talk
(01:16):
to Kevin. Investing in rental properties can be complicated, but
it doesn't have to be. My friends at mid South
home Buyers cell completely rehab turnkey properties in both Memphis
and Little Rock, and they've been doing it for twenty
three years. All their properties come totally rehab They put
on a new roof, new kitchen, new bath, new plumbing,
(01:37):
new electric, everything is brand new. They also have a
tenant that's moved in before you close, so you get
cash flow on day one. Mid South home Buyers also
continues to manage the property for you after closing. It
couldn't be easier. Everything is one hundred percent done for you.
All their properties also come with a couple of guarantees.
(01:59):
They have a one year total maintenance warranty and a
lifetime occupancy guarantee. Personally, I just closed on my fifth
property with Midsouth home Buyers and I couldn't be happier.
If you want to talk to a happy customer, reach
out to me. I'm happy to answer any questions, or
you can check them out at midsouthome buyers dot com.
(02:20):
It's a lot of 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 Ley 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
(02:42):
find something customized to 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 n MLS four two zero
five six. Kevin, let's start off talking about your portfolio.
What does your portfolio look like?
Speaker 3 (03:04):
So my portfolio right now is fifteen properties, sixteen doors.
We have eight properties located in northwest Indiana. We have
five properties around properties in DFW, and then we have
three properties in Oklahoma City.
Speaker 2 (03:22):
And are you self managing just the properties that are
near where you live or do you manage everything yourself?
Speaker 3 (03:31):
So we manage all of it. We started our first
property was in Dallas Fort Worth area, and we've kind
of followed the same process with you know, starting in
DFW and then going to our next two markets where
you know, we we built a relationship with a leasing
(03:53):
agent that would that we've built the relationships. They lease
all of our property in all three markets. Obviously, the
the the relationship times a little bit different based on
when we when we when we bought those properties, but
you know, the same.
Speaker 1 (04:12):
Methodology in each market is the same.
Speaker 3 (04:15):
We started off with a leasing agent and then from
there we would we would build our team to manage it.
We would you know, through however, we would find handyman, electricians,
h vac plumbers, everything that we would need to to
be able to help with any.
Speaker 1 (04:36):
Type of service issues. Right.
Speaker 3 (04:39):
And then we also have established relationships with contractors. We
have a go to contractor in each of the locations
and they are there when we have to go in
and you know, update the property and put you know
a little bit more work into it than a handyman
or you know, smaller just needs for the tenant.
Speaker 2 (05:02):
Okay, so if a tenant has a problem, they're calling you,
and then you call one of your contractors to go
out there and fix the problem. And your your local
listing agent is listing the property. When when when a
property turns over, Yes, yep, okay, sir, all right, So
I want to talk to you about kind of the
(05:25):
way that you're looking at properties. Got I think that
that this is kind of interesting that, you know, I
think a lot of investors are looking at just the
cash flow today and that that is kind of shortsighted
because rentals make money in a bunch of different ways.
So talk to me about future cash flow, like how
(05:49):
you're you're looking at that when you're evaluating a property.
Speaker 3 (05:52):
So we're we're looking down the road, right, We're looking
for appreciation, we're looking for cash flow early on in
the you know, my investing career. The second property that
I bought is something that we look back at all
the time when we when we are investing, when we
(06:14):
are buying things.
Speaker 1 (06:16):
So just kind of going back and kind of give
you example.
Speaker 3 (06:18):
In two thy thirteen, we bought a property in DFW
and just kind of give you round numbers. We bought
it for fifty thousand dollars, and we put twenty five
thousand dollars of renovation in the property. We kept that property,
we refinanced it. Just round numbers, let's say it was
(06:39):
about one hundred thousand dollars. So we built twenty thousand
and twenty five thousand dollars of equity in that property.
We did use a hard money loan to purchase, you know,
to purchase and do the renovations, and then we refinanced
it to a.
Speaker 1 (06:53):
Long term mortgage.
Speaker 3 (06:57):
That property right now, twelve years later, has has you know,
it's worth about almost three hundred thousand dollars.
Speaker 1 (07:07):
Wow. So so twelve yeah, so twelve.
Speaker 3 (07:10):
Years you know, and when we when we bought the
property and we started to rent it out, you know,
the rental, the rental, uh, you know, the monthly rental
for it was twelve hundred dollars. Now where we are
today that that property is about twenty one hundred dollars
(07:31):
a month.
Speaker 1 (07:32):
Wow.
Speaker 2 (07:32):
I mean so if you had looked at that and said,
your twelve hundred dollars isn't enough rent, I'm going to
pass on this deal, you would have left a ton
of money on the table.
Speaker 1 (07:44):
Yeah.
Speaker 3 (07:45):
And we we uh, you know, at the time of
buying the property, and once we refinanced it and got
a renter in there, you know, we were cash flowing
about three hundred dollars a month back in twenty thirteen.
Going forward to twenty twenty four, after just finishing up
you know, financial statements and things like that, that that
(08:06):
property still has the same mortgage on it. We've built
probably about twenty thousand dollars or so of equity by
the renter paying us and us paying the mortgage.
Speaker 1 (08:19):
You know, we're we're at we're at.
Speaker 3 (08:22):
About nine hundred dollars a month cash flow for that
property after paying all the expenses, plus the principal paydown
of the mortgage, again.
Speaker 1 (08:36):
Coming from from the renter. Right.
Speaker 3 (08:38):
So, so just kind of giving you high level of
twenty twenty four that property right there with the monthly
rental income, right and the principal paydowns about fifteen thousand dollars.
Speaker 2 (08:53):
Wow, fifteen thousand in the mortgage has been paid down
by your tenant.
Speaker 1 (08:59):
Yes, wow, Well, so.
Speaker 2 (09:01):
What changed with the neighborhood? Like did the neighborhood improve
it all? Like why did the rents go up so much?
And why did the value go up so much?
Speaker 3 (09:11):
So at this specific property, there's there's no more room
to build. There's you can't build anything. So it is
about ten miles from downtown Dallas. So it's a very
good commute, easy, easy commute, but just Dallas, Dallas in general.
(09:32):
You know that that appreciation. You know, a couple other
properties here in Dallas are very similar to that property.
Speaker 2 (09:44):
So the neighborhood like, did the neighborhood improve it all
or or is it just the location is a desirable location?
Speaker 3 (09:54):
Yeah, I would say that, you know it has it
proved a little bit, but you know, you still drive
down the straight It's it's an older, you know, part
of the city.
Speaker 2 (10:07):
Okay. Now, with the cash flow in the early days
twelve years ago, was the property making money back then
or were you at closer to a break even back then?
Speaker 1 (10:22):
Yeah?
Speaker 3 (10:22):
We were about three hundred dollars a month that for
that door.
Speaker 2 (10:27):
Okay, So then now the property is making way more money.
What are you doing with that extra cash flow?
Speaker 3 (10:35):
So that money just goes into the business, right and
and we use the funds in the business to purchase new.
Speaker 2 (10:44):
Property, okay, properties, So you're saving up and then when
you have a down payment, you're buying something else. Are
you still doing this strategy today? Are you still buying
properties today with the hopes that the rents are going
to go up and the property is going to appreciate.
Speaker 3 (11:02):
Yes, absolutely, we We actually have one going on right
now and in South Dallas close to another rental property
right across the street from a rental property that we
have and and we just actually finished one here in
Dallas about about a year ago. And you know, the
(11:26):
the numbers right now are not the greatest when it
comes to cash flow.
Speaker 1 (11:31):
It was you know, it was a renovation.
Speaker 3 (11:34):
We did get it down to the studs and you know,
all new finishes and just put that in our rental portfolio.
And that one's you know, probably about two hundred bucks
a door we're making off of that property. But we did,
we did, you know, just refinance that and we had
about fifty thousand dollars of equity through the renovation process
(12:00):
to to you know, the kind of refinance it from
a hard money loan into a d S c R loan.
But the cash flow, you know is close to a
little bit over a breaking even after you know, some
money in there for repairs.
Speaker 1 (12:16):
In the in the leasing costs.
Speaker 3 (12:19):
But you know, again we're looking ten fifteen years down
the road.
Speaker 1 (12:23):
You know.
Speaker 3 (12:23):
We we purchased that property and we you know, it
did slow down. We got it on the market at
the wrong time. You know, the the the the end
of the year to sell it, as as you know,
values in that area started to go down, and for us,
it was, hey, we weren't going to get rid of it.
Speaker 1 (12:45):
We're gonna keep it and.
Speaker 3 (12:47):
You know, re evaluate it through through the years and
and put in our portfolio. And that's very similar to
the majority of the rentals that we've had. As we've
we've always gone in and and and uh, you know, updated,
put put put some uh you know, some time some
time into it and and uh you know, use our
(13:09):
expertise and the renovation and the design to build the equity,
and and when we refinance it, we're or we have
equity in it, and and also trying to get as
much cash flow as we can.
Speaker 2 (13:22):
So I think an important thing to figure out is
that you're not buying properties that are losing you money.
They're making a little bit of money. You're buying properties
that have some built in equity, but you're really thinking
long term that in ten fifteen years this property is
going to make you a lot of money.
Speaker 1 (13:42):
Yeah.
Speaker 3 (13:43):
Absolutely, And why you know I started to invest, you know,
fifteen years ago, it was you know, being able to
to build, you know, build you know, properties for for
you know, passing that on for my kids to be
able to you know, build you know, build enough in
(14:05):
there for my kids to be able to take it over.
And you know, we we have been trying to purchase
more and more. You know, we used to buy quite
quite a few years. We used to renovate them and
and flip them. We kept we kept a couple and
and then uh, he kind of got busy with a family,
and yeah, kind of took took us away from from
(14:29):
focusing on on you know, our rental portfolio. But over
the last two years we've been really focusing you know
on on uh you know what what we're trying to
achieve in the future.
Speaker 2 (14:42):
Now with appreciation, with both front appreciation and price appreciation,
there's no guarantees that that that's gonna happen. I mean,
of course, over a long period of time, the price
of real estate is always going to go up. But
over say a five or ten in your period, it
might be flat. It might not go up. Is that
(15:04):
going to really bum you out if you buy properties
and they don't appreciate.
Speaker 3 (15:11):
No it. You know, we we again, we look at it.
We're looking at it for the long term. You know,
we we have some properties that really do well, and
then we have some properties that from a cash flow
perspective or just a you know, maybe maybe higher maintenance costs,
older you know, equipment, mechanical HVAC units, you know, things
(15:36):
like that. So we understand, you know, we do our
taxes every year. You know, there's certain properties that that
don't do the greatest, and then there's properties.
Speaker 1 (15:46):
That do you know, very very well.
Speaker 3 (15:49):
But you know, we're not looking to liquidate anything, you
know at this time.
Speaker 2 (15:55):
Now, tell me about how your thinking has evolved. I
know when you first got started, did you were using
fifteen year mortgages and at some point that shifted and
today you're using thirty year mortgages. Kind of walk me
through how you're thinking changed on that.
Speaker 3 (16:12):
Yeah, when I started, we were looking at at just overall,
like how do we get into a property over ten
fifteen years and make the most money on it? Right?
And when you're a fifteen year note compared to a
thirty note thirty year note, you know, the interest that
(16:33):
you pay is you know, less than half. So you know,
when I was starting off, you know, that was our
mindset was, I'm not really worried about cash flow. We're
focusing on appreciation right and paydown of the mortgage. And
that was really early on in my career on the
(16:53):
investing side. And then you know, as we developed and
we would purchase more properties, the mindset was, hey, we
we want to build more, you know, get more cash
flow coming in to be able to, you know, first
of all, make sure that we have you know, money
(17:15):
in our in our business to take care of loss
ran take care of renovations. If you got to buy
a new HVAC unit for five seven thousand dollars, that
we had that money in there. And those are things
that I learned early on, like, hey, you got to
(17:36):
have money in there to to take care of that.
Speaker 1 (17:39):
You know.
Speaker 3 (17:40):
Fast forward into you know where we are now and
even about five years ago, where the mindset change was
we want more, we want more properties. We're trying to
you know, pick up three to four to five a year.
So we want to be able to have the funds
to you know, eventually not have to use any type
(18:04):
of lending, but to be able to go in there
and use everything that we have in our in our
business to go buy the property, renovate the property, and
put it back on a rental market, you know, and
build the the the equity and you know through through
that process.
Speaker 2 (18:24):
So yeah, I mean it's it's it's tough. I mean
it's with a fifteen year mortgage, you're getting that property
paid down so much every month, I mean, so much
money is going towards principle, but you have a lot
less cash flow. And that's personally why I always do
thirty year mortgages. It just like having that extra extra
(18:48):
cash flow is really helpful with with those early properties.
Are they still on fifteen year mortgages? Like, have some
of those properties paid off or have you refined them?
Speaker 1 (19:01):
Yeah?
Speaker 3 (19:01):
So we have two of them that are still on
fifteen year notes, the first one. The first one will
be paid off in seven seven years, eight years from now.
Speaker 2 (19:13):
With the equity that you're creating and that you buy,
buying properties below market and fixing them up, and then
also with the market appreciation you've seen, have you tapped
into any of that equity to continue to fund down payments?
Speaker 1 (19:29):
So we have not.
Speaker 3 (19:31):
We have looked at that many many times on the
fifteen year notes and even some of the other properties
that have appreciated so much. But I think when when
the you know, the interest rates come down. That is
something that we you know, we are looking at, we're seeing,
(19:54):
you know, just globally, if that's what we want to do,
you know, for for you know, the short term here.
But that has been a thought of of mine for
the last couple of years, to be able to pull
out a couple one hundred thousand dollars and be able
to go use that for you know, for other rental properties.
Speaker 2 (20:15):
Yeah, because that's really kind of the magic that that
you're in this great spot here where you have all
this equity to be able to tap into that to
continue to grow. Is it really just kind of a
great way to grow without having to save up money.
Speaker 1 (20:30):
Yeah. And we've been thinking, you know, it's it's coming
down to.
Speaker 3 (20:33):
Hey, we're we're about to have some of these paid
off and you know, five seven years and you know
this the extra amount of cash flow, right do we
do we do we hold off or you know and
pay it off to where we we we have just
cash flow and we're looking at taxes down the road.
Speaker 1 (20:51):
You know.
Speaker 3 (20:52):
We meet with our CPA, you know, every every six
months or so, and before we make any any of
those decisions because it does effect we do. My wife
and I do have w two jobs, and we you know,
when we do those type of you know, financial decisions,
we do make sure from the tax perspective that you know,
(21:14):
we are not you know, exposing ourselves to pay more taxes.
Speaker 2 (21:19):
Personally, when I'm looking to buy a rental property, I'm
looking for positive cash flow today. I know that in
the background, the price of the property is going up.
I know that the tenant is paying down the mortgage.
I know I've got tax breaks, and I know that
in the future the value of the property is going
to be higher. But that positive cash flow today is
(21:43):
really the most important thing for me when I'm buying
a rental property. But I think Kevin has an interesting
strategy because the truth is, in every part of the country,
positive cash flow isn't really possible today. The are just
too high and the rents aren't high enough, and after
(22:04):
you pay the mortgage and all the expenses that there
just isn't money left. But if you think long term,
I don't see how you're gonna lose. I don't see
how in ten or fifteen years prices aren't higher, rents
aren't higher, and I think in the future you're gonna
have a lot more money as long as you buy
(22:24):
in a growing area and you buy a good property
that's desirable. I just don't see how you're going to lose.
So I think that Kevin has an interesting strategy. If
anybody wants to reach out to Kevin, I've got his
contact information on the website. You can find it at
Rental incomepodcast dot com slash episode five twenty six. If
(22:49):
Kevin inspired you and you're ready to buy your first
property or you want to add to your portfolio, reach
out to our sponsored Chailey Ridge. She's a nation wide
She has a ton of different loan programs and she
can find something that works for you in your situation.
If you want to find out more or you want
(23:10):
to talk to Chailey personally, you can track her down
at 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. That way you'll
be notified when new episodes come out. My name is
(23:30):
Dan Lane and this has been the Rental Income Podcast
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