April 29, 2025 • 25 mins
Dennis shares that when he started buying rentals, he was a barber charging $13 for haircuts.
On this episode, Dennis walks us through how he built his rental portfolio.
Dennis shares how he saved the down payment money to buy his first rental, and the mistakes he made purchasing that property.
Dennis also shares how the mistakes he made buying his first property helped him buy a better property for his next rental property.
We discuss the criteria he uses to purchase a rental property and the importance of using leverage to build wealth.
https://rentalincomepodcast.com/episode519
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)
On this episode, Dennis walks us through how he built his rental portfolio.
Dennis shares how he saved the down payment money to buy his first rental, and the mistakes he made purchasing that property.
Dennis also shares how the mistakes he made buying his first property helped him buy a better property for his next rental property.
We discuss the criteria he uses to purchase a rental property and the importance of using leverage to build wealth.
https://rentalincomepodcast.com/episode519
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 Landlord.
Speaker 2 (00:04):
This is the Rental Income Podcast, And now, damnly.
Speaker 1 (00:09):
Tell me what you were doing before you started buying rentals.
Speaker 2 (00:13):
So I was a small business owner. I had a
barbershop and real I was charging. This was like, I
don't know, over twenty plus years ago, charging thirteen dollars
a haircut. And I had a vision for my life
and the vision was real estate. So I just went
out and started buying single family homes and took it
from there.
Speaker 1 (00:33):
Dennis obviously was not making a ton of money when
he started buying rentals. He didn't have a lot of money,
but he was still able to reach financial independence from
his rental properties. And on the show today, we're going
to figure out how he did it. We'll walk step
by step and see how he built his portfolio and
how he got to where he is today. Joining us
(00:54):
on the podcast from Boca Raton, Florida is Dennis Balloons.
We'll take a quick break to thank our sponsor. We'll
come right back and we'll talk to Dennis. 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
(01:18):
and her specialty is helping investors finance rental properties. She
has a ton of loan programs and she can 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.
(01:40):
Investing in rental properties can be complicated, but it doesn't
have to be. My friends at Midsouth home Buyers sell
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, new electric, everything is
(02:03):
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. They have a one
(02:23):
year total maintenance warranty and a lifetime occupancy guarantee. Personally,
I just closed on my fifth property with mid South
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 midsouthhome Buyers dot com. Dennis, let's start
(02:45):
off talking about where you are today. What does your
portfolio look like?
Speaker 2 (02:51):
My portfolios single family and multifamily properties span over three
different states from New Jersey to Alabama to Florida, and
we focus on single family to multifamily up to about
six units and we rent them for long term appreciation
(03:12):
and income.
Speaker 1 (03:14):
How many properties do you have today?
Speaker 2 (03:17):
Right now? We're currently having our portfolio twenty five units.
Speaker 1 (03:21):
Wow, I mean that's incredible. So let's kind of figure
out how you did this. So you're a barber, you're
charging thirteen dollars for haircuts? How did you get started? Like,
how did you make that first move?
Speaker 2 (03:36):
So about twenty years ago? Our twenty five plus, I mean,
I'm dating myself now. It's kind of hard to think
how many years ago it was. But back in two
had a barbershop in New Jersey and I was a
young kid. I was like twenty three years old and
you know, just cutting hair and it was hard because
(03:59):
you know, it's long hours on your feet, and so
I wanted to find a better way for long term yeah,
business model. So I thought, you know, I had a choice.
I could either have done multi unit barbershops or I
could have done multi unit real estate at that time,
(04:21):
and I chose real estate. So from there we just
you know, I bought my first unit back then in
three it was a two family and then the rest
was history. I just you know, the first twenty thousand
dollars I saved in the business. I went out and
bought that property. I managed it myself. I was still
(04:41):
living home my parents, and I managed it, and you know,
we kicked out the tenants at that time and bumped
up the rents and just took it from there.
Speaker 1 (04:53):
How did you save that twenty thousand dollars? I mean
you're not making a ton of money, Like, what was that?
Was that really hard?
Speaker 2 (05:01):
It was hard. I mean I had to it was
an existing business. So I bought it from the original
owner at that time, and he's been there for forty years,
so you know, that was money I saved prior to
that because I started the business. You know, if I
want to go back further, I started when I was
like twelve years old, just sweeping the floors on Saturdays.
(05:22):
So it kind of like stuck with me through my
middle school years, and then high school was stuck with me,
and then I just wounded up skipping college and just
going straight into barbering and learning that skill, and then
after you know, you know, going through that and learning
the business. I opened my shop at twenty three years old,
(05:43):
so I was able to keep my expenses down really
low by living home and not having a lot of
expenses on me. You know, I didn't have a least car, right,
you know, I bought the car for cash and wasn't
paying rent, and just the first literally the first twenty
thousand dollars I ever seen my life. I just went
and bought a two family house. And luckily I had
(06:04):
the foresight and the vision to actually see and do that,
because not a lot of people would have that foresight, right,
I didn't really have any mentors at the time. I
was exposed to it from my father because he was
in the business collecting rent. So I guess that kind
of like rubbed off onto me.
Speaker 1 (06:23):
When you bought that first two in a deal. Did
you move into one of the units or were you
still living with your parents? No?
Speaker 2 (06:30):
I was living home and the goal was just to
get a two family house. So if I could tell
if there's any small business owners out there, if you're
just starting a small business or you are in a
small business. Doesn't have to be small business, it could
be you know, a W two earner, doesn't matter. Just
think of it as your career. I believe that the
first thing you got to do is just buy a property. Yeah,
(06:54):
and not for yourself, buy one as an investment. Did
you should be the goal?
Speaker 1 (07:00):
Did your parents think you were crazy? Like you're living
at home, you're buying a two unit. Did they get
your vision for what you were trying to do?
Speaker 2 (07:09):
Well? Like I said earlier, my dad was in the
business already, so they weren't. You know, my dad used
to throw me in the back seat and drive me
around and he would have to collect rent, and you know,
I'd sit in the back seat, I remember, and wait
for him to come back with the cash in his
pockets back in those days, because that's how they paid
the rent. Yeah, so it wasn't a surprise to him
(07:30):
because I was exposed to it, and that was kind
of like instilled in us, you know, in our family
to invest our money, whether it be real estate or
however you want to do it, just something that would
add value for the future.
Speaker 1 (07:43):
Now, I think where you were at right now in
your story is a place where a lot of people
get stuck. That you saved up, you bought that first property.
The property is going good, you're making some money, but
how did you get to your next property?
Speaker 2 (08:00):
Okay, so I got over the hurdle of that. But
before I want to go to the next property, I
just want to just clarify some things so that you know,
maybe you could learn from that first purchase. The first
purchase was very amateur because I my criteria was, Okay,
I had twenty thousand dollars and I can afford ten down,
(08:23):
So that's a two hundred thousand dollars property. That was
my only criteria. That shouldn't be your only criteria. Your
criteria should be what it would be like if you
were a renter. And seeing it from a renter's point
of view, because I only looked at it from uh,
you know, the landlord's point of view. Okay, numbers work great.
Mind me a two hundred thousand dollar house, I got
(08:45):
twenty grand. Good, that works regardless of the neighborhood. You know,
I didn't look at you know, parking situation. I didn't
look at you know, the size of the bedrooms. I
didn't look at closet space. I mean I saw them,
but I didn't really see it from the tenants perspective. Right, So,
(09:07):
as I look back, it was probably my worst purchase ever,
but it was my best learning experience I could ever
have in my career because that told me everything that
I knew after that.
Speaker 1 (09:20):
Right, So, with having not a good parking situation, not
a good setup inside the property, was it hard to
find tenants or to get tenants to stand it was?
Speaker 2 (09:31):
It was because you know, the bedrooms were small, there
was no closets, There was a share driveway. It was
a one way street, and it snowed in New Jersey,
so if it snowed, I mean there was no parking.
So the people my tenants, I had a great list
of tenants that wanted it but just didn't take it
because of those simple things. And that really taught me
(09:55):
how to look at investment properties and look at it
from a and it's perspective and also from a landlord's perspective.
You got to look at both sides. You know.
Speaker 1 (10:05):
That's really the great thing with rental properties is you
made some mistakes, but it sounds like things kind of
worked out with that property.
Speaker 2 (10:15):
Yeah. So, I mean it was timing as well, because
it was three oh four and the market was ramping
up at that time, you know, into the you know
when we had the five eight height there, right, money
was easy and you know, people were just buying stuff.
So fortunately I was in the right time in the
(10:36):
property like doubled at the time. So I sold it
and learned how to do a ten thirty one exchange
into more properties. But you asked me a question I
didn't really answer, how did I go to the next property? Right?
So my distinction was luckily, fortunately I had the concept
(10:58):
of knowing that the proper you live in, like your home,
is not an investment. It could be a savings account
because you are paying down equity on a mortgage, and yes,
you are saving money. But it's not and it's not
an investment. I mean, it is an investment, but it's
not like a cash flow typestyle to you.
Speaker 1 (11:18):
Right, it's not going to make you money the same
way a rental is.
Speaker 2 (11:22):
Right. So I looked at that first purchase, I looked
as as an investment. The next purchase was for me
to have my own home. So the next purchase was
another two family in a different town in Clifton, New Jersey.
And that was a two family and that's where I
lived in the first floor and I rented out the
(11:43):
second floor. And that's also known as house hacking. So
that's how I was able to get my next property.
Speaker 1 (11:51):
Okay, did you have a small down payment for that
one since it was your primary residence.
Speaker 2 (11:56):
Yeah, it was another twenty thousand dollars purchase and at time,
at that time, it was a two hundred thousand dollars property,
and the situation was better. It was a two way road.
You know, we had a garage. It was separated from
the actual house, you know, separate entrances and separate utilities
for the two units. So it worked out great, awesome.
Speaker 1 (12:17):
Okay, so now you've got the unit you're living in
you're renting out three units. You're at this point, are
you starting to build some cash flow?
Speaker 2 (12:28):
Yeah? So cash flow wasn't that great because at least
in my house, I was just paying taxes, and in
New Jersey we have high taxes, so at that time,
it was just covering my taxes and maybe some utilities.
But I wasn't seeing any really cash flow in my
own home. But the other property, I was seeing a
(12:48):
little bit of cash flow, but I just felt like
I was always making repairs and stuff. So if you're
just starting out and buying rentals, I wouldn't go into
it thinking that you're going to make a crazy amount
of cash flow. Just look at it as a long
term investment and uh, just stay steady, stay strong, and
just pay down your pay down equity. You know, don't
(13:12):
don't take like interest only mortgages. You know, you want
to take principal and interest, so you are paying principle.
Speaker 1 (13:19):
At this point, I think you're at a point where
you're you're maybe not seeing a lot of positive reinforcement.
You're you've got these properties, they're not making a ton
of money, but you're moving forward. Well, was it hard
to just stay focused and to not give up, or
(13:39):
did you just see the bigger picture that if you
just stick with it, it's going to work out.
Speaker 2 (13:44):
That's a good question I had. I had a long
term vision with the properties. So, like I said, I
wasn't in it for the cash flow upfront, although it
is it is nice to you know, stock a little
cash from your rentals, but in the beginning you're definitely
gonna want to take the dive cash flow and make
a savings account and just hold it for any emergencies
(14:04):
that arise, because things are going to happen, you know,
new roofs. You know, in New Jersey, we have heating
units and we have cooling. You know, it's not you know,
so heating units are expensive. Cooling units are expensive. So
those things break, and you know, you got to make
sure you have a cushion for that. And you know,
as a small business owner, even as you know, even
(14:27):
as a you know, an employee or W two earner,
having having properties in your portfolio, I mean, is a
really good tax advantage as well. So you don't want
to just look at it, Oh how much money am
I going to make every month? You should also think
about the great tax advantages that we we get with it,
(14:48):
you know, especially as a small business owner.
Speaker 1 (14:50):
So you've got those first two properties, tell me about
your third property.
Speaker 2 (14:55):
All right, So this is a this is where the
breaking point occurred. So I'm in the so the house
I'm living in, I'm not touching that. That's my home.
I'm not thinking about flipping or anything or going crazy
with that. The other property is what I needed to
do to leverage my way to the next property. So
I read a book years ago from Barnes and Nobles
(15:17):
called How to Make a Million Dollars in Real Estate.
So from the book, I only remembered one thing. I
was like nineteen years old when I read this thing.
He taught a principle of leverage. You know, if you
have one hundred thousand dollars and you go buy one
hundred thousand dollars property, you're worth one hundred thousand right now.
(15:37):
If you take that original one hundred thousand dollars you have,
and you bought ten properties, and you put ten thousand
down on each, so that's ten percent on each property
times ten, that's a million dollars worth of real estate
you're controlling with one hundred thousand dollars. So that resonated
(15:57):
with me. I was like, wow, that's pretty cool. So
that's stuck in my head. So when when the market
was ramping up in five and oh eight, I saw
that the home doubled, and I took advantage of that situation. Uh,
just for the fact that you know, I couldn't rent
it good and it wasn't very desirable, and hey, if
(16:20):
I can get double of this price, this is great,
and let me go do it. And I did, Hey,
you sold my property. I wind up selling it. Yeah,
and the person bought it. I remember they took out
one hundred percent loan. It was no money down it.
They were giving out loans for a hundred percent. And
it winded up taking her like six months to close.
(16:43):
And I remember going to the closing and my lawyer,
we closed with lawyers in New Jersey. He was like,
this is probably the worst closing he's had in thirty years.
I'm like, damn, because this is my first closing I
ever had in my life, right, and so to have
that experience on my first one was very interesting. But anyway,
(17:05):
we winded up closing. So I learned the principle called
ten thirty one exchange where you could take that's another
awesome tax advantage we have where we could take the
profit of one property and ten thirty one exchange into
another one and a light kind property and a certain
amount of time period. So then I took that leverage
(17:25):
thing that I told you about earlier, and I went
out and I seek other states that had more desirable
Alabama was one of them, more desirable renters like jobs.
I was looking for jobs. I did a research. I
(17:45):
was like, what state in our countries? Seeing the highest
job growth in Alabama? North Alabama came up to me.
I was like, all right, that's interesting. And I looked
I was researching, and the homes were going for like
sixty fifty dollars. I'm like, wow, we could put five
thousand down on those kind of properties and collect at
the time, I don't know, seven point fifty eight hundred
(18:09):
dollars a month. I was like, all right, that could work.
You know, they're all brick homes, three bedrooms, some have garages,
they have a backyard, you know, two way streets, they don't.
It doesn't snow there, so there's good offstreet parking. So
wind up going there and just buying as many properties
as I can with the money I earned with the
ten thirty one exchange. And that's how I broke through.
Speaker 1 (18:32):
Smart, really smart. So you took that appreciation and use
that for your down payments to buy a bunch of properties.
Speaker 2 (18:41):
Yeah, So that first purchase taught me how to everything,
how to analyze a property from the tennis perspective, how
to do it from the landlord's perspective, see the gross
income minus your expenses, what is our net? And then
learning how to transfer your your your profits tax free
(19:03):
into other properties. That's that's huge, and you know that's
how we did on that first That first purchase was huge.
You know, when I started, I was in that market
cycle of you know, five o eight. If you were
in the market, you know what I'm talking about. And
then so tho those really matter. You got to know
what market cycle you're in and how to work that
(19:26):
cycle while you're in it. And you know, the longer,
the longer you do it, these cycles stick out to you.
Like I'll give you another example. You know, the COVID time,
So I had around I don't know, twenty years experience.
You know, I've seen the highs of eight and I've
seen the crash of eight and then you had nine, ten, eleven, twelve.
(19:49):
It was just absolutely dead and there was no liquidity
in the market. There was no appreciation. I could barely
bump my rents up. It was just a dead market.
So when you have a liquidity event like COVID, you're like,
oh great, this is awesome, you know, so you start
shifting things again. And that's when my portfolio probably came
(20:12):
full circle during that time, because you know, I was
able to bump rents up, and you know, all of
a sudden, you know, you know, rentals became more desirable,
people were moving more so, so you know, you can
capitalize on events like that with the experience you gained
through the years.
Speaker 1 (20:33):
Now recently, I know you've sold some of your properties.
Why are you Why did you sell?
Speaker 2 (20:41):
Because some properties shot up like really high. Yeah, and
and I knew that we weren't going to see that
price again, so I sold some off and I paid
off about ten properties with the sale of like I
don't know four or five, Well, sold five to pay
off ten.
Speaker 1 (21:00):
That's interesting. So then so now you've got ten properties
without a loan. I'm sure the cash flow is pretty incredible.
Off those ten properties.
Speaker 2 (21:09):
Yeah. So yeah, it's been great because for the longest time,
like I've been uh, you know, I pumped so much
money into them, you know, by fixing them. And then
you know now that now that I could now I'm
seeing the light at the end of the tunnel, right,
so now I could take the cash flow now reinvest
(21:31):
it back into properties, fix them up, make them desirable,
and the tenants are happy. They're staying there longer now
because I'm putting money back into it. They're not deteriorating.
And it's just a great, great thing. And this is
something that I could pass on to you know, kids
or legacy. You know, it's legacy. So I'm happy that
(21:52):
I did that.
Speaker 1 (21:54):
What's interesting is that you've really kind of move to
the whole life cycle as an investor, where when you
were starting out you used a lot of leverage, use
that leverage to build a lot of wealth, and then
you were able to tap into that equity and pay
(22:16):
off these properties. And now you're building wealth without having
that that risk of the leverage.
Speaker 2 (22:24):
Yeah. I just want to let you know though, in
the beginning, you got to have some sort of financial backing.
If you're going to start leveraging yourself. You can't be
leveraging yourself and live off the income and make that
your primary source.
Speaker 1 (22:39):
Right.
Speaker 2 (22:40):
That's why I always said, like, if you're a small
business owner or a W two earner and you're you know,
somewhat of a high income earner, you could survive those times,
you know, Like I had to survive the nine to eight, nine, ten, eleven,
twelve years because you know, the market crashed, right, and
luck I wasn't speculating. I was buying for long term
(23:03):
appreciation and income. So because of that, I was able
to survive the downturn right and any other downturns we
had in the market because the rents still kept on
coming in right, right, And during that crash, the rents
were coming in fine, but if there was repairs, I
(23:24):
was coming out of pocket because there was not a
lot of income there.
Speaker 1 (23:28):
Yeah. I think that's a really good lesson. I mean,
when you think about it, you've invested in when the
market was high, you've invested when the market was low,
and you just kept going, like it almost doesn't matter
what the market's doing as long as you just kind
of stay through it. That the market's always going to
(23:50):
get better.
Speaker 2 (23:51):
Yeah, that's why I like real estate because it's a
hard asset. Like if this was stocks, if I leverage
myself and stopped, I would have been out of it
in probably a year because it's so easy to sell.
But for real estate, it's harder to sell, you know,
because you're not going to get the price you may
not want or you know you're going to have. It's
(24:14):
just harder. So that's why I like real estate. Kept me,
kept me in check.
Speaker 1 (24:19):
Dennis, thank you so much for sharing your story. That
was really inspiring. If you want to hear more from Dennis,
he has a really unique YouTube channel where he interviews
people as he's cutting their hair. If you want to
check that out, I've got a link to his YouTube channel.
You can find it at Rental incomepodcast dot com slash
(24:39):
episode five nineteen. I'd like to thank jay Lee Ridge
from Ridge Lending Group for sponsoring today's episode. If you're
looking to buy a rental property, whether you're just getting
started or you want to add to your portfolio, reach
out to jay Lee. She's a nationwide lender. She has
a ton of different loan programs and she can find
something to work for you in your situation. You can
(25:03):
track her down at ridgelendinggroup dot com NMLS four two
zero five six. Thank you so much for checking out
the podcast today. I'll be back with the new episode
next Tuesday. My name is Dan Lane and this has
been the Rental Income Podcast
Inspiring interviews with Today is Top Landlord.
Speaker 2 (00:04):
This is the Rental Income Podcast, And now, damnly.
Speaker 1 (00:09):
Tell me what you were doing before you started buying rentals.
Speaker 2 (00:13):
So I was a small business owner. I had a
barbershop and real I was charging. This was like, I
don't know, over twenty plus years ago, charging thirteen dollars
a haircut. And I had a vision for my life
and the vision was real estate. So I just went
out and started buying single family homes and took it
from there.
Speaker 1 (00:33):
Dennis obviously was not making a ton of money when
he started buying rentals. He didn't have a lot of money,
but he was still able to reach financial independence from
his rental properties. And on the show today, we're going
to figure out how he did it. We'll walk step
by step and see how he built his portfolio and
how he got to where he is today. Joining us
(00:54):
on the podcast from Boca Raton, Florida is Dennis Balloons.
We'll take a quick break to thank our sponsor. We'll
come right back and we'll talk to Dennis. 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
(01:18):
and her specialty is helping investors finance rental properties. She
has a ton of loan programs and she can 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.
(01:40):
Investing in rental properties can be complicated, but it doesn't
have to be. My friends at Midsouth home Buyers sell
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, new electric, everything is
(02:03):
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. They have a one
(02:23):
year total maintenance warranty and a lifetime occupancy guarantee. Personally,
I just closed on my fifth property with mid South
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 midsouthhome Buyers dot com. Dennis, let's start
(02:45):
off talking about where you are today. What does your
portfolio look like?
Speaker 2 (02:51):
My portfolios single family and multifamily properties span over three
different states from New Jersey to Alabama to Florida, and
we focus on single family to multifamily up to about
six units and we rent them for long term appreciation
(03:12):
and income.
Speaker 1 (03:14):
How many properties do you have today?
Speaker 2 (03:17):
Right now? We're currently having our portfolio twenty five units.
Speaker 1 (03:21):
Wow, I mean that's incredible. So let's kind of figure
out how you did this. So you're a barber, you're
charging thirteen dollars for haircuts? How did you get started? Like,
how did you make that first move?
Speaker 2 (03:36):
So about twenty years ago? Our twenty five plus, I mean,
I'm dating myself now. It's kind of hard to think
how many years ago it was. But back in two
had a barbershop in New Jersey and I was a
young kid. I was like twenty three years old and
you know, just cutting hair and it was hard because
(03:59):
you know, it's long hours on your feet, and so
I wanted to find a better way for long term yeah,
business model. So I thought, you know, I had a choice.
I could either have done multi unit barbershops or I
could have done multi unit real estate at that time,
(04:21):
and I chose real estate. So from there we just
you know, I bought my first unit back then in
three it was a two family and then the rest
was history. I just you know, the first twenty thousand
dollars I saved in the business. I went out and
bought that property. I managed it myself. I was still
(04:41):
living home my parents, and I managed it, and you know,
we kicked out the tenants at that time and bumped
up the rents and just took it from there.
Speaker 1 (04:53):
How did you save that twenty thousand dollars? I mean
you're not making a ton of money, Like, what was that?
Was that really hard?
Speaker 2 (05:01):
It was hard. I mean I had to it was
an existing business. So I bought it from the original
owner at that time, and he's been there for forty years,
so you know, that was money I saved prior to
that because I started the business. You know, if I
want to go back further, I started when I was
like twelve years old, just sweeping the floors on Saturdays.
(05:22):
So it kind of like stuck with me through my
middle school years, and then high school was stuck with me,
and then I just wounded up skipping college and just
going straight into barbering and learning that skill, and then
after you know, you know, going through that and learning
the business. I opened my shop at twenty three years old,
(05:43):
so I was able to keep my expenses down really
low by living home and not having a lot of
expenses on me. You know, I didn't have a least car, right,
you know, I bought the car for cash and wasn't
paying rent, and just the first literally the first twenty
thousand dollars I ever seen my life. I just went
and bought a two family house. And luckily I had
(06:04):
the foresight and the vision to actually see and do that,
because not a lot of people would have that foresight, right,
I didn't really have any mentors at the time. I
was exposed to it from my father because he was
in the business collecting rent. So I guess that kind
of like rubbed off onto me.
Speaker 1 (06:23):
When you bought that first two in a deal. Did
you move into one of the units or were you
still living with your parents? No?
Speaker 2 (06:30):
I was living home and the goal was just to
get a two family house. So if I could tell
if there's any small business owners out there, if you're
just starting a small business or you are in a
small business. Doesn't have to be small business, it could
be you know, a W two earner, doesn't matter. Just
think of it as your career. I believe that the
first thing you got to do is just buy a property. Yeah,
(06:54):
and not for yourself, buy one as an investment. Did
you should be the goal?
Speaker 1 (07:00):
Did your parents think you were crazy? Like you're living
at home, you're buying a two unit. Did they get
your vision for what you were trying to do?
Speaker 2 (07:09):
Well? Like I said earlier, my dad was in the
business already, so they weren't. You know, my dad used
to throw me in the back seat and drive me
around and he would have to collect rent, and you know,
I'd sit in the back seat, I remember, and wait
for him to come back with the cash in his
pockets back in those days, because that's how they paid
the rent. Yeah, so it wasn't a surprise to him
(07:30):
because I was exposed to it, and that was kind
of like instilled in us, you know, in our family
to invest our money, whether it be real estate or
however you want to do it, just something that would
add value for the future.
Speaker 1 (07:43):
Now, I think where you were at right now in
your story is a place where a lot of people
get stuck. That you saved up, you bought that first property.
The property is going good, you're making some money, but
how did you get to your next property?
Speaker 2 (08:00):
Okay, so I got over the hurdle of that. But
before I want to go to the next property, I
just want to just clarify some things so that you know,
maybe you could learn from that first purchase. The first
purchase was very amateur because I my criteria was, Okay,
I had twenty thousand dollars and I can afford ten down,
(08:23):
So that's a two hundred thousand dollars property. That was
my only criteria. That shouldn't be your only criteria. Your
criteria should be what it would be like if you
were a renter. And seeing it from a renter's point
of view, because I only looked at it from uh,
you know, the landlord's point of view. Okay, numbers work great.
Mind me a two hundred thousand dollar house, I got
(08:45):
twenty grand. Good, that works regardless of the neighborhood. You know,
I didn't look at you know, parking situation. I didn't
look at you know, the size of the bedrooms. I
didn't look at closet space. I mean I saw them,
but I didn't really see it from the tenants perspective. Right, So,
(09:07):
as I look back, it was probably my worst purchase ever,
but it was my best learning experience I could ever
have in my career because that told me everything that
I knew after that.
Speaker 1 (09:20):
Right, So, with having not a good parking situation, not
a good setup inside the property, was it hard to
find tenants or to get tenants to stand it was?
Speaker 2 (09:31):
It was because you know, the bedrooms were small, there
was no closets, There was a share driveway. It was
a one way street, and it snowed in New Jersey,
so if it snowed, I mean there was no parking.
So the people my tenants, I had a great list
of tenants that wanted it but just didn't take it
because of those simple things. And that really taught me
(09:55):
how to look at investment properties and look at it
from a and it's perspective and also from a landlord's perspective.
You got to look at both sides. You know.
Speaker 1 (10:05):
That's really the great thing with rental properties is you
made some mistakes, but it sounds like things kind of
worked out with that property.
Speaker 2 (10:15):
Yeah. So, I mean it was timing as well, because
it was three oh four and the market was ramping
up at that time, you know, into the you know
when we had the five eight height there, right, money
was easy and you know, people were just buying stuff.
So fortunately I was in the right time in the
(10:36):
property like doubled at the time. So I sold it
and learned how to do a ten thirty one exchange
into more properties. But you asked me a question I
didn't really answer, how did I go to the next property? Right?
So my distinction was luckily, fortunately I had the concept
(10:58):
of knowing that the proper you live in, like your home,
is not an investment. It could be a savings account
because you are paying down equity on a mortgage, and yes,
you are saving money. But it's not and it's not
an investment. I mean, it is an investment, but it's
not like a cash flow typestyle to you.
Speaker 1 (11:18):
Right, it's not going to make you money the same
way a rental is.
Speaker 2 (11:22):
Right. So I looked at that first purchase, I looked
as as an investment. The next purchase was for me
to have my own home. So the next purchase was
another two family in a different town in Clifton, New Jersey.
And that was a two family and that's where I
lived in the first floor and I rented out the
(11:43):
second floor. And that's also known as house hacking. So
that's how I was able to get my next property.
Speaker 1 (11:51):
Okay, did you have a small down payment for that
one since it was your primary residence.
Speaker 2 (11:56):
Yeah, it was another twenty thousand dollars purchase and at time,
at that time, it was a two hundred thousand dollars property,
and the situation was better. It was a two way road.
You know, we had a garage. It was separated from
the actual house, you know, separate entrances and separate utilities
for the two units. So it worked out great, awesome.
Speaker 1 (12:17):
Okay, so now you've got the unit you're living in
you're renting out three units. You're at this point, are
you starting to build some cash flow?
Speaker 2 (12:28):
Yeah? So cash flow wasn't that great because at least
in my house, I was just paying taxes, and in
New Jersey we have high taxes, so at that time,
it was just covering my taxes and maybe some utilities.
But I wasn't seeing any really cash flow in my
own home. But the other property, I was seeing a
(12:48):
little bit of cash flow, but I just felt like
I was always making repairs and stuff. So if you're
just starting out and buying rentals, I wouldn't go into
it thinking that you're going to make a crazy amount
of cash flow. Just look at it as a long
term investment and uh, just stay steady, stay strong, and
just pay down your pay down equity. You know, don't
(13:12):
don't take like interest only mortgages. You know, you want
to take principal and interest, so you are paying principle.
Speaker 1 (13:19):
At this point, I think you're at a point where
you're you're maybe not seeing a lot of positive reinforcement.
You're you've got these properties, they're not making a ton
of money, but you're moving forward. Well, was it hard
to just stay focused and to not give up, or
(13:39):
did you just see the bigger picture that if you
just stick with it, it's going to work out.
Speaker 2 (13:44):
That's a good question I had. I had a long
term vision with the properties. So, like I said, I
wasn't in it for the cash flow upfront, although it
is it is nice to you know, stock a little
cash from your rentals, but in the beginning you're definitely
gonna want to take the dive cash flow and make
a savings account and just hold it for any emergencies
(14:04):
that arise, because things are going to happen, you know,
new roofs. You know, in New Jersey, we have heating
units and we have cooling. You know, it's not you know,
so heating units are expensive. Cooling units are expensive. So
those things break, and you know, you got to make
sure you have a cushion for that. And you know,
as a small business owner, even as you know, even
(14:27):
as a you know, an employee or W two earner,
having having properties in your portfolio, I mean, is a
really good tax advantage as well. So you don't want
to just look at it, Oh how much money am
I going to make every month? You should also think
about the great tax advantages that we we get with it,
(14:48):
you know, especially as a small business owner.
Speaker 1 (14:50):
So you've got those first two properties, tell me about
your third property.
Speaker 2 (14:55):
All right, So this is a this is where the
breaking point occurred. So I'm in the so the house
I'm living in, I'm not touching that. That's my home.
I'm not thinking about flipping or anything or going crazy
with that. The other property is what I needed to
do to leverage my way to the next property. So
I read a book years ago from Barnes and Nobles
(15:17):
called How to Make a Million Dollars in Real Estate.
So from the book, I only remembered one thing. I
was like nineteen years old when I read this thing.
He taught a principle of leverage. You know, if you
have one hundred thousand dollars and you go buy one
hundred thousand dollars property, you're worth one hundred thousand right now.
(15:37):
If you take that original one hundred thousand dollars you have,
and you bought ten properties, and you put ten thousand
down on each, so that's ten percent on each property
times ten, that's a million dollars worth of real estate
you're controlling with one hundred thousand dollars. So that resonated
(15:57):
with me. I was like, wow, that's pretty cool. So
that's stuck in my head. So when when the market
was ramping up in five and oh eight, I saw
that the home doubled, and I took advantage of that situation. Uh,
just for the fact that you know, I couldn't rent
it good and it wasn't very desirable, and hey, if
(16:20):
I can get double of this price, this is great,
and let me go do it. And I did, Hey,
you sold my property. I wind up selling it. Yeah,
and the person bought it. I remember they took out
one hundred percent loan. It was no money down it.
They were giving out loans for a hundred percent. And
it winded up taking her like six months to close.
(16:43):
And I remember going to the closing and my lawyer,
we closed with lawyers in New Jersey. He was like,
this is probably the worst closing he's had in thirty years.
I'm like, damn, because this is my first closing I
ever had in my life, right, and so to have
that experience on my first one was very interesting. But anyway,
(17:05):
we winded up closing. So I learned the principle called
ten thirty one exchange where you could take that's another
awesome tax advantage we have where we could take the
profit of one property and ten thirty one exchange into
another one and a light kind property and a certain
amount of time period. So then I took that leverage
(17:25):
thing that I told you about earlier, and I went
out and I seek other states that had more desirable
Alabama was one of them, more desirable renters like jobs.
I was looking for jobs. I did a research. I
(17:45):
was like, what state in our countries? Seeing the highest
job growth in Alabama? North Alabama came up to me.
I was like, all right, that's interesting. And I looked
I was researching, and the homes were going for like
sixty fifty dollars. I'm like, wow, we could put five
thousand down on those kind of properties and collect at
the time, I don't know, seven point fifty eight hundred
(18:09):
dollars a month. I was like, all right, that could work.
You know, they're all brick homes, three bedrooms, some have garages,
they have a backyard, you know, two way streets, they don't.
It doesn't snow there, so there's good offstreet parking. So
wind up going there and just buying as many properties
as I can with the money I earned with the
ten thirty one exchange. And that's how I broke through.
Speaker 1 (18:32):
Smart, really smart. So you took that appreciation and use
that for your down payments to buy a bunch of properties.
Speaker 2 (18:41):
Yeah, So that first purchase taught me how to everything,
how to analyze a property from the tennis perspective, how
to do it from the landlord's perspective, see the gross
income minus your expenses, what is our net? And then
learning how to transfer your your your profits tax free
(19:03):
into other properties. That's that's huge, and you know that's
how we did on that first That first purchase was huge.
You know, when I started, I was in that market
cycle of you know, five o eight. If you were
in the market, you know what I'm talking about. And
then so tho those really matter. You got to know
what market cycle you're in and how to work that
(19:26):
cycle while you're in it. And you know, the longer,
the longer you do it, these cycles stick out to you.
Like I'll give you another example. You know, the COVID time,
So I had around I don't know, twenty years experience.
You know, I've seen the highs of eight and I've
seen the crash of eight and then you had nine, ten, eleven, twelve.
(19:49):
It was just absolutely dead and there was no liquidity
in the market. There was no appreciation. I could barely
bump my rents up. It was just a dead market.
So when you have a liquidity event like COVID, you're like,
oh great, this is awesome, you know, so you start
shifting things again. And that's when my portfolio probably came
(20:12):
full circle during that time, because you know, I was
able to bump rents up, and you know, all of
a sudden, you know, you know, rentals became more desirable,
people were moving more so, so you know, you can
capitalize on events like that with the experience you gained
through the years.
Speaker 1 (20:33):
Now recently, I know you've sold some of your properties.
Why are you Why did you sell?
Speaker 2 (20:41):
Because some properties shot up like really high. Yeah, and
and I knew that we weren't going to see that
price again, so I sold some off and I paid
off about ten properties with the sale of like I
don't know four or five, Well, sold five to pay
off ten.
Speaker 1 (21:00):
That's interesting. So then so now you've got ten properties
without a loan. I'm sure the cash flow is pretty incredible.
Off those ten properties.
Speaker 2 (21:09):
Yeah. So yeah, it's been great because for the longest time,
like I've been uh, you know, I pumped so much
money into them, you know, by fixing them. And then
you know now that now that I could now I'm
seeing the light at the end of the tunnel, right,
so now I could take the cash flow now reinvest
(21:31):
it back into properties, fix them up, make them desirable,
and the tenants are happy. They're staying there longer now
because I'm putting money back into it. They're not deteriorating.
And it's just a great, great thing. And this is
something that I could pass on to you know, kids
or legacy. You know, it's legacy. So I'm happy that
(21:52):
I did that.
Speaker 1 (21:54):
What's interesting is that you've really kind of move to
the whole life cycle as an investor, where when you
were starting out you used a lot of leverage, use
that leverage to build a lot of wealth, and then
you were able to tap into that equity and pay
(22:16):
off these properties. And now you're building wealth without having
that that risk of the leverage.
Speaker 2 (22:24):
Yeah. I just want to let you know though, in
the beginning, you got to have some sort of financial backing.
If you're going to start leveraging yourself. You can't be
leveraging yourself and live off the income and make that
your primary source.
Speaker 1 (22:39):
Right.
Speaker 2 (22:40):
That's why I always said, like, if you're a small
business owner or a W two earner and you're you know,
somewhat of a high income earner, you could survive those times,
you know, Like I had to survive the nine to eight, nine, ten, eleven,
twelve years because you know, the market crashed, right, and
luck I wasn't speculating. I was buying for long term
(23:03):
appreciation and income. So because of that, I was able
to survive the downturn right and any other downturns we
had in the market because the rents still kept on
coming in right, right, And during that crash, the rents
were coming in fine, but if there was repairs, I
(23:24):
was coming out of pocket because there was not a
lot of income there.
Speaker 1 (23:28):
Yeah. I think that's a really good lesson. I mean,
when you think about it, you've invested in when the
market was high, you've invested when the market was low,
and you just kept going, like it almost doesn't matter
what the market's doing as long as you just kind
of stay through it. That the market's always going to
(23:50):
get better.
Speaker 2 (23:51):
Yeah, that's why I like real estate because it's a
hard asset. Like if this was stocks, if I leverage
myself and stopped, I would have been out of it
in probably a year because it's so easy to sell.
But for real estate, it's harder to sell, you know,
because you're not going to get the price you may
not want or you know you're going to have. It's
(24:14):
just harder. So that's why I like real estate. Kept me,
kept me in check.
Speaker 1 (24:19):
Dennis, thank you so much for sharing your story. That
was really inspiring. If you want to hear more from Dennis,
he has a really unique YouTube channel where he interviews
people as he's cutting their hair. If you want to
check that out, I've got a link to his YouTube channel.
You can find it at Rental incomepodcast dot com slash
(24:39):
episode five nineteen. I'd like to thank jay Lee Ridge
from Ridge Lending Group for sponsoring today's episode. If you're
looking to buy a rental property, whether you're just getting
started or you want to add to your portfolio, reach
out to jay Lee. She's a nationwide lender. She has
a ton of different loan programs and she can find
something to work for you in your situation. You can
(25:03):
track her down at ridgelendinggroup dot com NMLS four two
zero five six. Thank you so much for checking out
the podcast today. I'll be back with the new episode
next Tuesday. My name is Dan Lane and this has
been the Rental Income Podcast
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