September 9, 2025 • 25 mins
When Joe first started investing, he thought what he wanted most was time freedom. But over time, he realized what he really wanted was flexibility, and his rental income has given him just that.
.In the past year alone, Joe has added four new properties to his portfolio. On this episode, he shares how he found those deals, how he financed them, and the creative ways he’s used a HELOC to fund purchases.
We also talk about how he’s applying velocity banking to pay down debt faster.
Joe discusses the challenges of rising insurance premiums and property taxes and how he’s adjusted his strategy to stay profitable.
We also dig into the numbers on his four most recent purchases.
https://rentalincomepodcast.com/episode538
Thanks To Our Sponsors:
Ridge Lending Group - Get A Free 30-Minute Strategy Session With Caeli Ridge.
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Rental Accounting Software Made Easy. Free 30 Day Trial
.In the past year alone, Joe has added four new properties to his portfolio. On this episode, he shares how he found those deals, how he financed them, and the creative ways he’s used a HELOC to fund purchases.
We also talk about how he’s applying velocity banking to pay down debt faster.
Joe discusses the challenges of rising insurance premiums and property taxes and how he’s adjusted his strategy to stay profitable.
We also dig into the numbers on his four most recent purchases.
https://rentalincomepodcast.com/episode538
Thanks To Our Sponsors:
Ridge Lending Group - Get A Free 30-Minute Strategy Session With Caeli Ridge.
MidSouth HomeBuyers – Turnkey Rentals In Memphis & Little Rock. Instant Cash Flow On Day One. (Priced between $100,000 to low $200's)
Rental Accounting Software Made Easy. Free 30 Day Trial
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
The inspiring interviews with today is Top Landlords, This is
the Rental Income Podcast and no damnly, Joe, you used
to tell people that you were buying rental properties for freedom,
but today you've kind of changed the way that you
were thinking about that. Can you explain what you mean?
Speaker 2 (00:20):
And I did. I use freedom for a long time
and now I've switched over to using flexibility. And because
like I have a lot of responsibilities. I have responsibilities
to my tenants, to my clients, and so I don't
say I'm free, but man, I can be flexible in
my time, and I you know, I can do a
lot of stuff. I went on a ten plus day
(00:41):
trip with a few days notice to Florida and I
kept everything running smoothly from out there. I did work
a little bit, but it was a great family time.
And so that's the type of flexibility slash freedom that
real estate can give you.
Speaker 1 (00:55):
Joe was with us on the podcast about a year ago,
and on the show today, we're going to follow up
with Joe see how he's been doing with growing his
rental portfolio in the last year. Joe has bought four properties.
On the show today, we're going to figure out how
he found them, how he financed them. When we talked
to Joe last he was using his hee lock to
(01:15):
buy properties. We'll see if that's still working today and
we'll talk more about how Joe is getting time flexibility
from investing in rental properties. Joining us on the show
today from Kansas City is Joe Blackshear. We'll take a
quick break to thank our sponsors, will come right back
and we'll talk to Joe. It's a lot of work
to find a really good rental property, and when you
(01:37):
actually find that property, you want to make sure you're
working with a lender that can get that loan closed.
The lender that I recommend is jay Lee Ridge from
Ridge Lending Group. She's a nationwide lender and her specialty
is helping investors finance rental properties. She has a ton
of loan programs and she can find something customized to
you for your situation. If you want to find out
(02:00):
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. Are you
thinking about investing in rental properties, but maybe you don't
know where to start? My friends at Midsouth home Buyers
make it simple. For over twenty three years, they've been
(02:23):
selling fully renovated, turnkey rental properties in Memphis and Little Rock.
We're talking new roofs, plumbing, electric, kitchens, bathrooms. Everything is
brand new and done right. And here's the best part.
Every property comes with a well qualified tenant in place
before you close. That means you get cash flow from
(02:44):
day one. Plus, Midsouth continues to professionally manage the property
for you after the sale, and they back it up
with two powerful guarantees. You get a one year total
maintenance warranty and a lifetime occupancy guarantee. Personally, I've bought
five properties from them and I couldn't be happier. If
(03:04):
you want to talk to someone that's been through the process,
feel free to reach out to me. I'm happy to
answer any questions or if you're ready to get started,
just go to midsouthhome Buyers dot com. That's midsouthhome Buyers
dot com.
Speaker 2 (03:18):
Joe.
Speaker 1 (03:18):
For anyone that maybe didn't hear your first interview on
the podcast, can you remind us what does your portfolio
look like?
Speaker 2 (03:28):
Well, it's you know, we're probably up to just over
thirty doors. You know, we're probably I don't know how
detailed you want me to get, but you know we're
around forty forty forty five percent leveraged just single family homes,
you know, probably four or five duplexes all in in
(03:48):
and around the surrounding areas of Kansas City, Missouri. And
we started eight years ago, and really we've got some
great loans on quite a few of them. So they're
they're cash flowing pretty well. We're pretty happy with it.
Speaker 1 (04:03):
And what kind of neighborhoods do you buy in?
Speaker 2 (04:07):
We have gone kind of where the deals have let
us led us to. I would say, as we have progressed,
we've gotten into nicer homes, little a little little higher
you know, price point of homes just makes it a
little easier to rent, a little easier for ownership what
I call less brain damage, you know, like staying out
(04:28):
of the urban core where crime could be a consideration.
So but so yeah, we have moved out of some
of those areas. And but really just the Kansas City,
I would say suburbs.
Speaker 1 (04:40):
B.
Speaker 2 (04:41):
You know, I hear people grade grade areas like B
B plus blue collar neighborhoods and above.
Speaker 1 (04:48):
So what made you decide to go on a buying spree?
Mean adding four properties in a short period of time.
I mean that that's a lot of work. Like what
made you want to do that?
Speaker 2 (05:00):
My wife might just say I'm crazy. I don't know,
but uh, I think. I think I just wasn't happy
with with with our cash flow, to be totally honest,
I wanted to get it back up to the levels
it was at when I retired with twenty five doors.
And a big part of that was, you know, I
think every landlord, if you will, or you know, housing
(05:21):
provider are feeling the crunch on their cash flow based
on you know, not only just the cost of things,
but the in my area specifically, and I'm sure others,
property taxes have gone rampant with the increases, and then
also the cost of insurance, and so those have really
ate into the profit margins. And so you got to
(05:43):
own more doors obviously to make the same amount of money.
Speaker 1 (05:46):
Interesting, Okay, so because things are more expensive, you just
have to buy more properties to be at the same level.
Speaker 2 (05:54):
Yeah, unless you're you're in a lucky situation and you're
able to you know, keep your rents kind of in
pace with those increase of cost and and and you know,
so it's it's probably a happy medium of doing both.
Speaker 1 (06:06):
So deals are hard to come by right now. There's
just not a lot on the market. How did you
find your properties?
Speaker 2 (06:14):
So, you know, I I am a real estate agent,
so I have kind of an insight as far as
working the MLS. So and I and in my overall portfolio,
I do have quite a few from the MLS. So
there are you know, there are diamonds out there that
you can find, you can mine, so to speak. And
I use a I use a real specific key word
(06:35):
search that I have set up. But but really though,
having great relationships with wholesalers has has been huge. I'm
looking at the four that I purchased specifically, one was
off the MLS. It was, you know, closed before the
end of the year. You know, this lady had didn't
want to have two mortgages or at least was moving
(06:56):
into a home, so you know, we were able to
get that home at a good price. But the other
ones I mentioned relationships, I'm looking here and two of
them were from the same wholesaler, and then another one
is just from a from a wholesaler who you know,
I've been friends with both these guys for a real
long time. We start to do more and more business.
Speaker 1 (07:14):
So with doing four rehabs, were they back to back,
like were you constantly working on a property?
Speaker 2 (07:22):
No? No, because I think they started around October and
probably finished around February. So some of them did overlap,
are a different phases of different stages, and in you know,
some cases, I had a different crew work on one
and the same guys work on the other three. So yeah,
I mean, I'm not such a big operator that I
(07:45):
that I do a whole lot of things all at
the same time, like that multiple properties at the same time,
but they just all worked really well where one's finishing,
ones coming online, and I got to a point where
I had, you know, multiple people that I was keeping busy,
so you know, I made a point to go out
and find these deals so I could keep them going.
And it gave me the confidence knowing that I had
(08:06):
them to help me with these properties get them ready.
So I'm I'm I'm very grateful at the at the
whole process that I that we went through over the
winter with these these gentlemen that came on board with us.
Speaker 1 (08:20):
So talk to me about the financing. I know when
we talked to you last time, you would use your
heelock to buy a lot of properties. Is that still
what you were doing with these properties?
Speaker 2 (08:32):
Yeah? So looking at these, I think I used my
own lines of credit that we had, you know, for
either paid off properties, we put lines of credit on them,
So I use those for probably at least half of them, probably,
and then a couple others I used just private, private
hard money lending for you know, short term loans to
(08:53):
to do the rehab and to and to buy the
property and then and then you know, eventually pay the
pay those individuals off once we put long term financing
on the rehab properties. But yeah, definitely the lines of
credit or what propelled the growth at this timeframe.
Speaker 1 (09:12):
That's a really smart use of equity. So you have
rental properties that you've paid off, but then you have
lines of credit on them so that you can access
that equity to do burs or to buy more properties.
Speaker 2 (09:28):
Yeah, exactly. And you know, this may be an introduction
of a new strategy for your listeners, but something I
would encourage everybody to take a look at when they're
trying to do things like this. Or payoff debt or
you know, taking on debt to eventually you know, it's
an asset, but is a strategy that we've used for
(09:49):
years called velocity banking, and so it's just kind of
a debt weapon, so to speak, or an asset accumulation
net worth growth kind of a strategy where you use
lines of credit to attack your debt or to make
purchases and then and then you put all of your
cash flow against that line of credit to bring down
(10:14):
the average daily balance. So you're paying the least amount
of interest because all of your cash flow sits against
that line of credit, and then you can turn around
and use it if you need it to pay bills
throughout the month. And so that's how we've been able
to use the line of credit while we were working
W two's too, both my wife and my wife and I,
(10:36):
you know, we each at one time had wt's. I
left my job in twenty twenty two. But we used
our lines of credit to kind of grow our portfolio
slow and steady, and you know, nothing spectacular. She's a teacher,
I was a retailer, and we just kind of did
it slow and steady, putting twenty five percent down on
(10:57):
different properties, you know, some of them we did create
a but and then over time you have this larger
cash flow to pay those lines of credit down and
then just keep keep circulating that money.
Speaker 1 (11:08):
I love it. Yeah, that's so so exciting what you
guys have done. So all right, now with the properties
once they were all fixed up, did you get individual
mortgages on all four properties or did you get a
blanket mortgage for everything?
Speaker 2 (11:26):
So we got a blanket mortgage like a portfolio loan
on those four properties, and then I had three other
rentals that were due in the same year or some
of them. In some cases, you know, in a couple
of months that were you know, they were like a
three year note if you will, like a balloon payment.
(11:47):
I had balloon payments coming up on three of our
properties with smaller banks. So I ended up just doing
a seven seven property portfolio loan all in one and
rolled them all into into one, so there's one payment.
Speaker 1 (12:01):
What's the advantage to having one mortgage for all the
properties versus having seven individual mortgages.
Speaker 2 (12:11):
Well, it definitely helps you stay like organized. And in
this case, the finance company lender, they required us to
create a new LLC and hold them all under that
one LLC and create a new bank account. So the
advantage there is asset protection for one both for the
bank and for ourselves, meaning like these seven properties, we
(12:34):
were now not in a overall portfolio with all of
our other properties. So that is an advantage in itself,
just not getting too many homes inside of one LLC.
So I guess the other advantages, you know, like it's
one application, one kind of underwriting process, went out with
(12:56):
the appraisal and did all of them in the matter
of a half a day. So it's just there's just
synergies and doing them all together, and you know, so
I'd say that's the biggest thing. You probably get some
savings on different fees, you know, because you're doing so
many at once that sort of thing, So there are
(13:18):
some some savings up front too.
Speaker 1 (13:21):
I think, now, what would happen if you wanted to
sell one of the properties. You know, maybe for whatever reason,
a property isn't working out, or maybe it appreciates a
lot and you just want to capture some of that equity.
Could you sell off one of the properties and still
keep the mortgage.
Speaker 2 (13:39):
Yeah, So those are definitely things that you want to
look into the terms of your loan, and so for
mind specifically, most of these types of loans, because there's
a lot of costs up front for the lender. They
obviously make their money through the interest payments. There there's
a pre payment penalty, so you got to look at
those terms, those details closely. In my case, I could
(14:02):
have paid a higher interest rate and not had a
pre payment penalty attached to these properties. But for what
we got, it's a step down. Meaning a real popular
one is five four three two one. So you sell
it in the first year, it's a five percent pre
payment penalty, and then each subsequent year four three two one.
So just really pay attention to the terms of your
(14:24):
loan and ask those questions what's best for you. For me,
I'm a long term buy and hold. I just rehabbed
all these properties. I'm not you know, I don't foresee
me selling any of them. But what in most cases
in a portfolio loan like this, if you did sell
one off, they would kind of grow rate the value
that was inside of that loan, and then just recalculate
(14:47):
the payment and recalculate the overall loan you'd pay back
a portion of the underlying debt that's in the portfolio,
and then probably you know, so, yeah, that's kind of
the thing. And because of that that's seven well that
seven percent interest, you know, we definitely wouldn't sell them
in the first year because that could mean you know,
(15:08):
over ten thousand dollars on a two hundred thousand dollars property.
Speaker 1 (15:12):
Now, let's get into to some numbers here, right. I
want to see how much how much revenue you're you're
creating here? So for the four properties that you did
the Burson how much rent are you bringing in every month?
Now off those properties?
Speaker 2 (15:30):
Okay? So off of those four properties, it's sixty five
hundred okay.
Speaker 1 (15:35):
And then all seven properties in the loan, how much
how much revenue is that.
Speaker 2 (15:42):
Ten thousand, four hundred and thirty okay?
Speaker 1 (15:46):
And then after you pay the mortgage? How much how
much is left over after the mortgage payment.
Speaker 2 (15:52):
After mortgage tax and insurance it's twenty three hundred okay?
Speaker 1 (15:56):
And then how does it seem like does it.
Speaker 2 (15:58):
Seem like a lot? But you know, in this case,
we we h with the financing out that we did,
we did take a max cash out, so we virtually
don't have, like, you know, really a lot of money
into these properties at this.
Speaker 1 (16:11):
Point, which is great because you got all your money
back to pay down your line to credits and now
you can do it again if you want, which is uh,
which is really good. So I mean, I think the
key here is that you bought these properties. Is it
no money out of pocket or did you put a
little money into the properties.
Speaker 2 (16:31):
Yeah, So we refinanced all seven properties and got a
loan for one million, thirty four thousand. The appraisal on
all seven properties that we got done was was one
point four million, so we have a lot of equity
right there. Yeah, and so we were able to you know,
and we were all in all in at nine hundred thousand,
(16:56):
so you know, I walked away with about two hundred
and sixty thou which paid back any credit card we
had materials on it, It paid off all of our
lines of credit. And so yeah, going forward, if we
wanted to just focus on those four properties, which I
think is for the exercise, the way to go, we
(17:17):
have two hundred and seventy seven thousand dollars in equity
just on those four properties we bought since October to
February the earlier this year, in twenty twenty five.
Speaker 1 (17:27):
So you've you've created by doing these four burd properties,
you've created two hundred and seventy seven thousand dollars in equity. Yeah, correct, correct,
that's awesome. And you're in a market or in an
area where the prices are appreciating, right, So these properties
will if everything continues to go well with the real
(17:48):
estate market, these properties should continue to appreciate past that.
Speaker 2 (17:54):
Yeah, I mean these are in some good areas, ones
in well least Summit, Raytown, Liberty, Independence, all suburbs of
Kansas City. I think, Yeah, anywhere between four to seven
percent per year is is achievable in appreciation?
Speaker 1 (18:09):
Incredible? All right, So let's go back to the monthly
cash flow. So you said you have twenty three hundred
dollars a month after you pay the mortgage, which includes
taxes and insurance. What about like budgeting for repairs and vacancy.
How do you do that?
Speaker 2 (18:27):
So I kind of use, first of all, that's not
my forte the whole budgeting thing as it pertains to that,
but I kind of use, like, just know that about
twenty percent of our overall revenue should should be accounted
to handle the repairs capital. You know, maybe taxes on
aren't captured inside of alone. So I just kind of
(18:50):
count on twenty percent of all revenue not being available
to spend, meaning you know, to be in that it's
just going to be used for the throughout the month
each month for repairs and other things.
Speaker 1 (19:05):
And you're looking at that in your whole portfolio, not
necessarily just for these properties. That that that twenty percent number,
that's for all your rental income, for all your rentals. Yes, yeah, awesome.
And you also self manage and it seems like you
you run a pretty pretty mean and lean operation, so
(19:29):
you're maybe able to do this maybe a little bit
cheaper than someone else.
Speaker 2 (19:34):
Right, Yeah, I do self manage, and yeah probably obviously
I don't have like eight, you know, seven to eight
to ten percent to a property management company, so that
that does help overall. Just looking at our overall portfolio,
and you know, I probably have to update this, but
it's it's up near fifty thousand dollars a month in
(19:54):
rental income and you know, somewhere around thirty three thousand
and monthly mortgage payments. And you know, one thing, you
got to keep and keep keep in mind is not
like at the end of the year when we pay
property taxes, not every property tax that we pay is
captured inside of a S croad, inside of a loan.
So that's that can be a that can a lot
(20:17):
of times I say a lot to my friends or
amongst landlords specifically, not just every friend, but you know,
like landlords are some of the richest people you'll meet,
you know, or you know, like the whole idea is
while you're building your portfolio is you're gonna you're gonna
live poor but retire rich. That's kind of the long play.
The long game is like you're just maintaining these properties
(20:40):
and keeping them up and having you know, you know,
having your tenants help pay them down, having the appreciation
appreciation drive them up. So it's you know, I didn't
get into this necessarily for the cash flow. It's nice
and it did help me leave my Corporate America job.
But but definitely you gotta be kindful that it takes
(21:02):
quite a few to really replace an income, quite a
few rentals to replace an income.
Speaker 1 (21:08):
So are you glad you left your job or is
it ever? Is it ever a little tight? Like would
it would it be easier if you still had your
W two job.
Speaker 2 (21:23):
So definitely why you're in a growth phase, I would
I would recommend you keep a W two job because
lenders will love you, especially like the lenders that will
give you the best terms on loans. Now you know
the debt service coverage ratio loan where it's specifically tied
(21:43):
to the the potential of a property. They don't always
take into consideration entirely the individual. It's more of the
deal and the and the property. So you know there
are those things. But those loans have higher fees, higher
interest rates. So definitely, I I would say, like keep
your W two. If you're starting out, get max out
(22:04):
the amount of loans you can get in your personal name,
because those are going to be the best loans and
for that a W two is the way to go.
But for me personally, I don't. Although I didn't leave
my work entirely how I wanted to, I definitely have
found like freedom in my day, and freedom in that
I would not trade for anything. A lot of a
(22:27):
lot of late nights and working weekends and extra work
put in to be able today to have I don't
call it free financial freedom or but I call it
flexibility for sure. I mean, like just for example, yesterday
I went to my son's where his college, and we
you know, just just with a day's notice, you know,
(22:47):
and we put in we built a wall so that
we could add a fifth bedroom down where the basement was,
you know. And like you know, earlier last week, I
had a chance to go to Wednesday one o'clock Royals
baseball game that you know, the tickets were offered to
me two days advance, and something somebody could ask me
to do something next week at two o'clock on a Tuesday.
(23:08):
I know I'm free because I know my schedule and
I don't. I don't, I don't have an answer to it.
Like I'm not tied to a nine to five and
and that is like, like it's just awesome. I you know,
I try to play pickleball for my health. I try
to play pickleball at least two hours either in the
morning or in the evenings. I think, Dan, we had
to schedule around my pickleball schedule. We did, that's what
(23:30):
you know so and now. And don't get me wrong,
I'm also an active real estate agent and I work
very hard there. But just just definitely like anyone that
was interested in getting involved or growing a portfolio and
in real estate specifically, just I would like one hundred
percent support them and and and say it's a great
decision because of the life changing kind of things along
(23:54):
with the freedom. And you'd ask me if I missed
my W two. I missed the people for sure. I
don't miss the required structure in time. I had to
be there.
Speaker 1 (24:06):
So yeah, it's all about the freedom. I mean, I
think that's really the secret to life is having that freedom.
And it sounds like you're doing things right.
Speaker 2 (24:16):
Yeah, that was a really long explanation to say exactly
what she just said.
Speaker 1 (24:20):
It's all about the Yep, it's all about the freedom. Well,
if anybody is investing in Kansas City or you want
to reach out to Joe, I've got his contact information
on the website, you can find it at Rental incomepodcast
dot com slash episode five thirty eight. I'd like to
thank jay Lee Ridge from Ridge Lending Group for sponsoring
(24:40):
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 Chailey right now. She's
offering a free thirty minute strategy session. If you want
to take advantage of that, just go to Ridge Lendinggroup
dot com NMLS four two zero five six. Thank you
(25:02):
so much for checking out the podcast today. Make sure
you hit that follow button. That way, you'll be notified
every Tuesday when a new episode comes out. My name
is Dan Lane and this has been the Rental Income
podcast
The inspiring interviews with today is Top Landlords, This is
the Rental Income Podcast and no damnly, Joe, you used
to tell people that you were buying rental properties for freedom,
but today you've kind of changed the way that you
were thinking about that. Can you explain what you mean?
Speaker 2 (00:20):
And I did. I use freedom for a long time
and now I've switched over to using flexibility. And because
like I have a lot of responsibilities. I have responsibilities
to my tenants, to my clients, and so I don't
say I'm free, but man, I can be flexible in
my time, and I you know, I can do a
lot of stuff. I went on a ten plus day
(00:41):
trip with a few days notice to Florida and I
kept everything running smoothly from out there. I did work
a little bit, but it was a great family time.
And so that's the type of flexibility slash freedom that
real estate can give you.
Speaker 1 (00:55):
Joe was with us on the podcast about a year ago,
and on the show today, we're going to follow up
with Joe see how he's been doing with growing his
rental portfolio in the last year. Joe has bought four properties.
On the show today, we're going to figure out how
he found them, how he financed them. When we talked
to Joe last he was using his hee lock to
(01:15):
buy properties. We'll see if that's still working today and
we'll talk more about how Joe is getting time flexibility
from investing in rental properties. Joining us on the show
today from Kansas City is Joe Blackshear. We'll take a
quick break to thank our sponsors, will come right back
and we'll talk to Joe. It's a lot of work
to find a really good rental property, and when you
(01:37):
actually find that property, you want to make sure you're
working with a lender that can get that loan closed.
The lender that I recommend is jay Lee Ridge from
Ridge Lending Group. She's a nationwide lender and her specialty
is helping investors finance rental properties. She has a ton
of loan programs and she can find something customized to
you for your situation. If you want to find out
(02:00):
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. Are you
thinking about investing in rental properties, but maybe you don't
know where to start? My friends at Midsouth home Buyers
make it simple. For over twenty three years, they've been
(02:23):
selling fully renovated, turnkey rental properties in Memphis and Little Rock.
We're talking new roofs, plumbing, electric, kitchens, bathrooms. Everything is
brand new and done right. And here's the best part.
Every property comes with a well qualified tenant in place
before you close. That means you get cash flow from
(02:44):
day one. Plus, Midsouth continues to professionally manage the property
for you after the sale, and they back it up
with two powerful guarantees. You get a one year total
maintenance warranty and a lifetime occupancy guarantee. Personally, I've bought
five properties from them and I couldn't be happier. If
(03:04):
you want to talk to someone that's been through the process,
feel free to reach out to me. I'm happy to
answer any questions or if you're ready to get started,
just go to midsouthhome Buyers dot com. That's midsouthhome Buyers
dot com.
Speaker 2 (03:18):
Joe.
Speaker 1 (03:18):
For anyone that maybe didn't hear your first interview on
the podcast, can you remind us what does your portfolio
look like?
Speaker 2 (03:28):
Well, it's you know, we're probably up to just over
thirty doors. You know, we're probably I don't know how
detailed you want me to get, but you know we're
around forty forty forty five percent leveraged just single family homes,
you know, probably four or five duplexes all in in
(03:48):
and around the surrounding areas of Kansas City, Missouri. And
we started eight years ago, and really we've got some
great loans on quite a few of them. So they're
they're cash flowing pretty well. We're pretty happy with it.
Speaker 1 (04:03):
And what kind of neighborhoods do you buy in?
Speaker 2 (04:07):
We have gone kind of where the deals have let
us led us to. I would say, as we have progressed,
we've gotten into nicer homes, little a little little higher
you know, price point of homes just makes it a
little easier to rent, a little easier for ownership what
I call less brain damage, you know, like staying out
(04:28):
of the urban core where crime could be a consideration.
So but so yeah, we have moved out of some
of those areas. And but really just the Kansas City,
I would say suburbs.
Speaker 1 (04:40):
B.
Speaker 2 (04:41):
You know, I hear people grade grade areas like B
B plus blue collar neighborhoods and above.
Speaker 1 (04:48):
So what made you decide to go on a buying spree?
Mean adding four properties in a short period of time.
I mean that that's a lot of work. Like what
made you want to do that?
Speaker 2 (05:00):
My wife might just say I'm crazy. I don't know,
but uh, I think. I think I just wasn't happy
with with with our cash flow, to be totally honest,
I wanted to get it back up to the levels
it was at when I retired with twenty five doors.
And a big part of that was, you know, I
think every landlord, if you will, or you know, housing
(05:21):
provider are feeling the crunch on their cash flow based
on you know, not only just the cost of things,
but the in my area specifically, and I'm sure others,
property taxes have gone rampant with the increases, and then
also the cost of insurance, and so those have really
ate into the profit margins. And so you got to
(05:43):
own more doors obviously to make the same amount of money.
Speaker 1 (05:46):
Interesting, Okay, so because things are more expensive, you just
have to buy more properties to be at the same level.
Speaker 2 (05:54):
Yeah, unless you're you're in a lucky situation and you're
able to you know, keep your rents kind of in
pace with those increase of cost and and and you know,
so it's it's probably a happy medium of doing both.
Speaker 1 (06:06):
So deals are hard to come by right now. There's
just not a lot on the market. How did you
find your properties?
Speaker 2 (06:14):
So, you know, I I am a real estate agent,
so I have kind of an insight as far as
working the MLS. So and I and in my overall portfolio,
I do have quite a few from the MLS. So
there are you know, there are diamonds out there that
you can find, you can mine, so to speak. And
I use a I use a real specific key word
(06:35):
search that I have set up. But but really though,
having great relationships with wholesalers has has been huge. I'm
looking at the four that I purchased specifically, one was
off the MLS. It was, you know, closed before the
end of the year. You know, this lady had didn't
want to have two mortgages or at least was moving
(06:56):
into a home, so you know, we were able to
get that home at a good price. But the other
ones I mentioned relationships, I'm looking here and two of
them were from the same wholesaler, and then another one
is just from a from a wholesaler who you know,
I've been friends with both these guys for a real
long time. We start to do more and more business.
Speaker 1 (07:14):
So with doing four rehabs, were they back to back,
like were you constantly working on a property?
Speaker 2 (07:22):
No? No, because I think they started around October and
probably finished around February. So some of them did overlap,
are a different phases of different stages, and in you know,
some cases, I had a different crew work on one
and the same guys work on the other three. So yeah,
I mean, I'm not such a big operator that I
(07:45):
that I do a whole lot of things all at
the same time, like that multiple properties at the same time,
but they just all worked really well where one's finishing,
ones coming online, and I got to a point where
I had, you know, multiple people that I was keeping busy,
so you know, I made a point to go out
and find these deals so I could keep them going.
And it gave me the confidence knowing that I had
(08:06):
them to help me with these properties get them ready.
So I'm I'm I'm very grateful at the at the
whole process that I that we went through over the
winter with these these gentlemen that came on board with us.
Speaker 1 (08:20):
So talk to me about the financing. I know when
we talked to you last time, you would use your
heelock to buy a lot of properties. Is that still
what you were doing with these properties?
Speaker 2 (08:32):
Yeah? So looking at these, I think I used my
own lines of credit that we had, you know, for
either paid off properties, we put lines of credit on them,
So I use those for probably at least half of them, probably,
and then a couple others I used just private, private
hard money lending for you know, short term loans to
(08:53):
to do the rehab and to and to buy the
property and then and then you know, eventually pay the
pay those individuals off once we put long term financing
on the rehab properties. But yeah, definitely the lines of
credit or what propelled the growth at this timeframe.
Speaker 1 (09:12):
That's a really smart use of equity. So you have
rental properties that you've paid off, but then you have
lines of credit on them so that you can access
that equity to do burs or to buy more properties.
Speaker 2 (09:28):
Yeah, exactly. And you know, this may be an introduction
of a new strategy for your listeners, but something I
would encourage everybody to take a look at when they're
trying to do things like this. Or payoff debt or
you know, taking on debt to eventually you know, it's
an asset, but is a strategy that we've used for
(09:49):
years called velocity banking, and so it's just kind of
a debt weapon, so to speak, or an asset accumulation
net worth growth kind of a strategy where you use
lines of credit to attack your debt or to make
purchases and then and then you put all of your
cash flow against that line of credit to bring down
(10:14):
the average daily balance. So you're paying the least amount
of interest because all of your cash flow sits against
that line of credit, and then you can turn around
and use it if you need it to pay bills
throughout the month. And so that's how we've been able
to use the line of credit while we were working
W two's too, both my wife and my wife and I,
(10:36):
you know, we each at one time had wt's. I
left my job in twenty twenty two. But we used
our lines of credit to kind of grow our portfolio
slow and steady, and you know, nothing spectacular. She's a teacher,
I was a retailer, and we just kind of did
it slow and steady, putting twenty five percent down on
(10:57):
different properties, you know, some of them we did create
a but and then over time you have this larger
cash flow to pay those lines of credit down and
then just keep keep circulating that money.
Speaker 1 (11:08):
I love it. Yeah, that's so so exciting what you
guys have done. So all right, now with the properties
once they were all fixed up, did you get individual
mortgages on all four properties or did you get a
blanket mortgage for everything?
Speaker 2 (11:26):
So we got a blanket mortgage like a portfolio loan
on those four properties, and then I had three other
rentals that were due in the same year or some
of them. In some cases, you know, in a couple
of months that were you know, they were like a
three year note if you will, like a balloon payment.
(11:47):
I had balloon payments coming up on three of our
properties with smaller banks. So I ended up just doing
a seven seven property portfolio loan all in one and
rolled them all into into one, so there's one payment.
Speaker 1 (12:01):
What's the advantage to having one mortgage for all the
properties versus having seven individual mortgages.
Speaker 2 (12:11):
Well, it definitely helps you stay like organized. And in
this case, the finance company lender, they required us to
create a new LLC and hold them all under that
one LLC and create a new bank account. So the
advantage there is asset protection for one both for the
bank and for ourselves, meaning like these seven properties, we
(12:34):
were now not in a overall portfolio with all of
our other properties. So that is an advantage in itself,
just not getting too many homes inside of one LLC.
So I guess the other advantages, you know, like it's
one application, one kind of underwriting process, went out with
(12:56):
the appraisal and did all of them in the matter
of a half a day. So it's just there's just
synergies and doing them all together, and you know, so
I'd say that's the biggest thing. You probably get some
savings on different fees, you know, because you're doing so
many at once that sort of thing, So there are
(13:18):
some some savings up front too.
Speaker 1 (13:21):
I think, now, what would happen if you wanted to
sell one of the properties. You know, maybe for whatever reason,
a property isn't working out, or maybe it appreciates a
lot and you just want to capture some of that equity.
Could you sell off one of the properties and still
keep the mortgage.
Speaker 2 (13:39):
Yeah, So those are definitely things that you want to
look into the terms of your loan, and so for
mind specifically, most of these types of loans, because there's
a lot of costs up front for the lender. They
obviously make their money through the interest payments. There there's
a pre payment penalty, so you got to look at
those terms, those details closely. In my case, I could
(14:02):
have paid a higher interest rate and not had a
pre payment penalty attached to these properties. But for what
we got, it's a step down. Meaning a real popular
one is five four three two one. So you sell
it in the first year, it's a five percent pre
payment penalty, and then each subsequent year four three two one.
So just really pay attention to the terms of your
(14:24):
loan and ask those questions what's best for you. For me,
I'm a long term buy and hold. I just rehabbed
all these properties. I'm not you know, I don't foresee
me selling any of them. But what in most cases
in a portfolio loan like this, if you did sell
one off, they would kind of grow rate the value
that was inside of that loan, and then just recalculate
(14:47):
the payment and recalculate the overall loan you'd pay back
a portion of the underlying debt that's in the portfolio,
and then probably you know, so, yeah, that's kind of
the thing. And because of that that's seven well that
seven percent interest, you know, we definitely wouldn't sell them
in the first year because that could mean you know,
(15:08):
over ten thousand dollars on a two hundred thousand dollars property.
Speaker 1 (15:12):
Now, let's get into to some numbers here, right. I
want to see how much how much revenue you're you're
creating here? So for the four properties that you did
the Burson how much rent are you bringing in every month?
Now off those properties?
Speaker 2 (15:30):
Okay? So off of those four properties, it's sixty five
hundred okay.
Speaker 1 (15:35):
And then all seven properties in the loan, how much
how much revenue is that.
Speaker 2 (15:42):
Ten thousand, four hundred and thirty okay?
Speaker 1 (15:46):
And then after you pay the mortgage? How much how
much is left over after the mortgage payment.
Speaker 2 (15:52):
After mortgage tax and insurance it's twenty three hundred okay?
Speaker 1 (15:56):
And then how does it seem like does it.
Speaker 2 (15:58):
Seem like a lot? But you know, in this case,
we we h with the financing out that we did,
we did take a max cash out, so we virtually
don't have, like, you know, really a lot of money
into these properties at this.
Speaker 1 (16:11):
Point, which is great because you got all your money
back to pay down your line to credits and now
you can do it again if you want, which is uh,
which is really good. So I mean, I think the
key here is that you bought these properties. Is it
no money out of pocket or did you put a
little money into the properties.
Speaker 2 (16:31):
Yeah, So we refinanced all seven properties and got a
loan for one million, thirty four thousand. The appraisal on
all seven properties that we got done was was one
point four million, so we have a lot of equity
right there. Yeah, and so we were able to you know,
and we were all in all in at nine hundred thousand,
(16:56):
so you know, I walked away with about two hundred
and sixty thou which paid back any credit card we
had materials on it, It paid off all of our
lines of credit. And so yeah, going forward, if we
wanted to just focus on those four properties, which I
think is for the exercise, the way to go, we
(17:17):
have two hundred and seventy seven thousand dollars in equity
just on those four properties we bought since October to
February the earlier this year, in twenty twenty five.
Speaker 1 (17:27):
So you've you've created by doing these four burd properties,
you've created two hundred and seventy seven thousand dollars in equity. Yeah, correct, correct,
that's awesome. And you're in a market or in an
area where the prices are appreciating, right, So these properties
will if everything continues to go well with the real
(17:48):
estate market, these properties should continue to appreciate past that.
Speaker 2 (17:54):
Yeah, I mean these are in some good areas, ones
in well least Summit, Raytown, Liberty, Independence, all suburbs of
Kansas City. I think, Yeah, anywhere between four to seven
percent per year is is achievable in appreciation?
Speaker 1 (18:09):
Incredible? All right, So let's go back to the monthly
cash flow. So you said you have twenty three hundred
dollars a month after you pay the mortgage, which includes
taxes and insurance. What about like budgeting for repairs and vacancy.
How do you do that?
Speaker 2 (18:27):
So I kind of use, first of all, that's not
my forte the whole budgeting thing as it pertains to that,
but I kind of use, like, just know that about
twenty percent of our overall revenue should should be accounted
to handle the repairs capital. You know, maybe taxes on
aren't captured inside of alone. So I just kind of
(18:50):
count on twenty percent of all revenue not being available
to spend, meaning you know, to be in that it's
just going to be used for the throughout the month
each month for repairs and other things.
Speaker 1 (19:05):
And you're looking at that in your whole portfolio, not
necessarily just for these properties. That that that twenty percent number,
that's for all your rental income, for all your rentals. Yes, yeah, awesome.
And you also self manage and it seems like you
you run a pretty pretty mean and lean operation, so
(19:29):
you're maybe able to do this maybe a little bit
cheaper than someone else.
Speaker 2 (19:34):
Right, Yeah, I do self manage, and yeah probably obviously
I don't have like eight, you know, seven to eight
to ten percent to a property management company, so that
that does help overall. Just looking at our overall portfolio,
and you know, I probably have to update this, but
it's it's up near fifty thousand dollars a month in
(19:54):
rental income and you know, somewhere around thirty three thousand
and monthly mortgage payments. And you know, one thing, you
got to keep and keep keep in mind is not
like at the end of the year when we pay
property taxes, not every property tax that we pay is
captured inside of a S croad, inside of a loan.
So that's that can be a that can a lot
(20:17):
of times I say a lot to my friends or
amongst landlords specifically, not just every friend, but you know,
like landlords are some of the richest people you'll meet,
you know, or you know, like the whole idea is
while you're building your portfolio is you're gonna you're gonna
live poor but retire rich. That's kind of the long play.
The long game is like you're just maintaining these properties
(20:40):
and keeping them up and having you know, you know,
having your tenants help pay them down, having the appreciation
appreciation drive them up. So it's you know, I didn't
get into this necessarily for the cash flow. It's nice
and it did help me leave my Corporate America job.
But but definitely you gotta be kindful that it takes
(21:02):
quite a few to really replace an income, quite a
few rentals to replace an income.
Speaker 1 (21:08):
So are you glad you left your job or is
it ever? Is it ever a little tight? Like would
it would it be easier if you still had your
W two job.
Speaker 2 (21:23):
So definitely why you're in a growth phase, I would
I would recommend you keep a W two job because
lenders will love you, especially like the lenders that will
give you the best terms on loans. Now you know
the debt service coverage ratio loan where it's specifically tied
(21:43):
to the the potential of a property. They don't always
take into consideration entirely the individual. It's more of the
deal and the and the property. So you know there
are those things. But those loans have higher fees, higher
interest rates. So definitely, I I would say, like keep
your W two. If you're starting out, get max out
(22:04):
the amount of loans you can get in your personal name,
because those are going to be the best loans and
for that a W two is the way to go.
But for me personally, I don't. Although I didn't leave
my work entirely how I wanted to, I definitely have
found like freedom in my day, and freedom in that
I would not trade for anything. A lot of a
(22:27):
lot of late nights and working weekends and extra work
put in to be able today to have I don't
call it free financial freedom or but I call it
flexibility for sure. I mean, like just for example, yesterday
I went to my son's where his college, and we
you know, just just with a day's notice, you know,
(22:47):
and we put in we built a wall so that
we could add a fifth bedroom down where the basement was,
you know. And like you know, earlier last week, I
had a chance to go to Wednesday one o'clock Royals
baseball game that you know, the tickets were offered to
me two days advance, and something somebody could ask me
to do something next week at two o'clock on a Tuesday.
(23:08):
I know I'm free because I know my schedule and
I don't. I don't, I don't have an answer to it.
Like I'm not tied to a nine to five and
and that is like, like it's just awesome. I you know,
I try to play pickleball for my health. I try
to play pickleball at least two hours either in the
morning or in the evenings. I think, Dan, we had
to schedule around my pickleball schedule. We did, that's what
(23:30):
you know so and now. And don't get me wrong,
I'm also an active real estate agent and I work
very hard there. But just just definitely like anyone that
was interested in getting involved or growing a portfolio and
in real estate specifically, just I would like one hundred
percent support them and and and say it's a great
decision because of the life changing kind of things along
(23:54):
with the freedom. And you'd ask me if I missed
my W two. I missed the people for sure. I
don't miss the required structure in time. I had to
be there.
Speaker 1 (24:06):
So yeah, it's all about the freedom. I mean, I
think that's really the secret to life is having that freedom.
And it sounds like you're doing things right.
Speaker 2 (24:16):
Yeah, that was a really long explanation to say exactly
what she just said.
Speaker 1 (24:20):
It's all about the Yep, it's all about the freedom. Well,
if anybody is investing in Kansas City or you want
to reach out to Joe, I've got his contact information
on the website, you can find it at Rental incomepodcast
dot com slash episode five thirty eight. I'd like to
thank jay Lee Ridge from Ridge Lending Group for sponsoring
(24:40):
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 Chailey right now. She's
offering a free thirty minute strategy session. If you want
to take advantage of that, just go to Ridge Lendinggroup
dot com NMLS four two zero five six. Thank you
(25:02):
so much for checking out the podcast today. Make sure
you hit that follow button. That way, you'll be notified
every Tuesday when a new episode comes out. My name
is Dan Lane and this has been the Rental Income
podcast
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