November 18, 2025 • 21 mins
Preston Garcia spent two full years studying, researching, and preparing before he ever bought his first rental property.
On this episode, Preston opens up about how that first deal has actually worked out. We dig into how he found the property, the creative seller financing he worked out, how much cash he had to bring to the table, and how he raised additional capital by bringing in a partner.
Preston also shares the realities of managing a Section 8 rental. It hasn’t been easy, he’s struggled to collect the tenant’s portion of the rent, dealt with unexpected maintenance issues including a roach problem.
We also talk about what Preston plans to do differently on his next rental and his best advice for new investors getting ready to buy their first property.
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)
Rental Accounting Software Made Easy. Free 30 Day Trial.
On this episode, Preston opens up about how that first deal has actually worked out. We dig into how he found the property, the creative seller financing he worked out, how much cash he had to bring to the table, and how he raised additional capital by bringing in a partner.
Preston also shares the realities of managing a Section 8 rental. It hasn’t been easy, he’s struggled to collect the tenant’s portion of the rent, dealt with unexpected maintenance issues including a roach problem.
We also talk about what Preston plans to do differently on his next rental and his best advice for new investors getting ready to buy their first property.
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)
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 now damnly.
Speaker 2 (00:09):
Before I bought my very first rental property, I thought
about it for a long time. Preston, how long did
it take you from the time that you first got
the idea till you actually bought a property?
Speaker 1 (00:22):
It took me about two years, two.
Speaker 2 (00:25):
Years of doing research and trying to learn everything you
could correct.
Speaker 1 (00:29):
Yes, I'm doing the research for about two years or so,
and then found a good deal and finally pulled the trigger.
Speaker 2 (00:34):
So did anything change financially or change with you personally
or was it just that after two years you felt
like you knew enough to actually move forward.
Speaker 1 (00:45):
A combination of both. I just found a seller finance
opportunity on market so allowed me to put a little
amount of money down so it didn't break the bank.
Speaker 2 (00:56):
The property that Preston ended up buying was a duplex,
and on the podcast today, we're going to talk about
how he found it. We'll talk about his financing, We'll
go over all of his numbers and see if there's
anything that he would do differently after going through this.
Joining us on the podcast today from Rochester, New York,
is Preston Garcia. We'll take a quick break to bank
(01:19):
our sponsors. We'll come right back and we'll talk to Preston.
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 Lee Ridge from Ridge Lending Group. She's a
nationwide lender and her specialty is helping investors finance rental properties.
(01:42):
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.
Are you thinking about investing in rental properties, but maybe
(02:04):
you don't know where to start. My friends at Mid
South home Buyers make it simple. For over twenty three years,
they've been selling fully renovated, turnkey rental properties in Memphis
and Little Rock. We're talking new roofs, plumbing, electric kitchens, bathrooms.
Everything is brand new and done right. And here's the
(02:25):
best part. Every property comes with a well qualified tenant
in place before you close. That means you get cash
flow from day one. Plus mid South 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,
(02:50):
I've bought five properties from them and I couldn't be happier.
If you want to talk to someone that's been through
the process, feel free to reach out to me. I'm
happy to answer any questions. Or if you're ready to
get started, just go to midsouthhome Buyers dot com. That's
midsouthhome Buyers dot com. All right, let's start off talking
about the property you bought. Can you tell me about
(03:12):
the property?
Speaker 1 (03:13):
Yeah, it's a duplex in the city over here in
rush To, New York. Got it for eighty thousand, and
like I said, I was seller finance, so we only
had to put a low percentage down compared to getting
a you know, a new investment loan, which would be
twenty to twenty five percent. Instead of doing that, we
only had to put it. I believe it was ten
(03:33):
percent down.
Speaker 2 (03:35):
And what made you want to buy a duplex versus
a single family or something bigger.
Speaker 1 (03:41):
Usually well, in this case, the numbers just worked out.
It was double the cash flow compared to doing a
single family, and like I said, it was pretty cheap.
So yeah, it just seemed like a good deal overall.
Speaker 2 (03:53):
And how did you find the property?
Speaker 1 (03:57):
This was on market? I'm also agent over here, and
I was just looking at what's available, reach out to
some agents, see if the seller would be open to
seller financing, And luckily this guy was all right.
Speaker 2 (04:09):
So that this was listed on market, it was it
was available for anyone to buy. You just happened to
be the one to buy it.
Speaker 1 (04:17):
Correct, Yes, Now.
Speaker 2 (04:19):
Did it say in the listing that the seller was
open to seller financing or was that something you worked out?
Speaker 1 (04:27):
I don't believe it wasn't a listing. I just reached
out and asked, and he talked to the seller, and
I think he just didn't want to deal with the
tenants anymore and decided to be open to sellar financing.
Speaker 2 (04:40):
So was there any trick to be able to talk
him into it? Or was it just as simple as asking?
Speaker 1 (04:47):
I was literally just asking. Wow, I did say in
the listing that the owner was motivated, but I didn't
say anything about seller financing shot and it worked.
Speaker 2 (04:57):
Now you mentioned that it's you two years of doing
research and and I guess learning the market and figuring
everything out, Like, can you like walk us through what
you learned and what it was that that made you
feel like you knew enough?
Speaker 1 (05:17):
Well? Yeah, I mean I was pretty confident from after
a month or two. The biggest hurdle for me personally
was just to have the amount of you know, capital
needed to put twenty or twenty five percent down. So
it took me just a while to find someone that
(05:37):
would be okay with this other finance to put five
or ten percent down. And usually on these cheaper properties,
a lot of the lenders have a minimum loan amount,
so that's also a barrier as well. So I was
ready for a while, it just took me a while
to find it.
Speaker 2 (05:55):
So, like, were there certain numbers that you were trying
to hit? Uh?
Speaker 1 (06:00):
Yeah, I mean the bare minimum was they call the
one percent rule, so the rent would be at least
one percent of the purchase price. So in this case,
I believe it was just about double that. So two percent.
Speaker 2 (06:12):
Rule, all right, So it was eighty thousand dollars that
you bought the property for, correct, okay, And so then
how is the rent split up between the two units?
Speaker 1 (06:25):
Well, at the time, one was paying seven to fifty
the other one was paying six point eighty. And the
main reason why it took is because they were one
hundred percent covered by the government assistant So at the
time it was the assistance program was covering their whole thing,
so we'd have to worry about mispayment.
Speaker 2 (06:43):
Awesome, okay. So Section eight was paying the entire rent
and they don't have any amount that they're having to pay.
Speaker 1 (06:50):
Correct. Why at the time, Now the situation has changed
a little bit, so it's a little bit more tricky now.
But yes, at the time, we didn't have to worry
about it.
Speaker 2 (06:59):
How how did change?
Speaker 1 (07:03):
Well, we increase the rent and on and for one side,
one of the tenants, they're only covered a little bit
less now, so instead of getting the whole six eighty,
now they're getting covered less than that. And we increase
the rent. So now every month I think that's a
roughly three hundred out of pocket or something like that. Okay,
(07:27):
So and now they're falling behind a little bit. I'm
so trying to get them caught up.
Speaker 2 (07:32):
Oh wow, Okay, so the tenant is falling behind on
the portion they have to pay, but you're still getting
to Section eight money. So what are you doing with that? Like,
are you, like, do you think that might lead to
an eviction at some point? Or are you trying to
work with them.
Speaker 1 (07:49):
I'm trying to work with them. I'm trying to give
them one last chance because ever since we raise the rent,
they haven't fully caught up. Besides I think the very
first month, but I know they were trying to go
through some programs that will help cover that portion, to
help cover the back pay and future rent. So I'm
giving them probably one or two more months max. And
(08:11):
hopefully the situation will be solved by then.
Speaker 2 (08:13):
Wow. I mean you always I think with Section eight
you don't have to worry about payment problems. But yeah,
I guess that's not true that you you can have
payment problems. It's not not one hundred percent easy.
Speaker 1 (08:26):
Yeah.
Speaker 2 (08:27):
So what's the neighborhood like, I mean.
Speaker 1 (08:31):
That, I guess the average neighborhood in the city. I mean, overall,
there's gonna be worse sections of the city than this
there's gonna be better sections, but I mean overall, I
guess it's I don't know. I'd say C C minus area.
Speaker 2 (08:46):
And so you don't. I mean, so you're renting out
both sides. So this was never a house sack, or
that was never the plan for it to be a
house sack. You always looked at this as pure rental.
Speaker 1 (08:59):
Correct. Yeah, No, I live in a house in Suburbs
about fifteen minutes away. So no, I was not planning
on living here. Okay, although that would be a great
option for a lot of people that are trying to
get into investment companies, especially if they if they're single
or don't have any kid, to be perfect for that.
Speaker 2 (09:16):
Sure. All right, so let's talk about the financing. So
it was seller financing. Now, so you did you have
to get any bank financing at all for any of
it or did the seller finance the whole thing?
Speaker 1 (09:32):
So this is actually considered a hybrid. So there's a
mortgage that's still in place, so we're taking over those payments,
we're paying that to the lender, and then there's some
equity between the purchase price and what was owed, so
we pay the seller a little bit of that every
month until we end up refinancing.
Speaker 2 (09:52):
Okay, and then how much cash did you have to come.
Speaker 1 (09:56):
Up with for the transaction? It was ten percent eight
thousand plus whatever the closing costs were.
Speaker 2 (10:03):
Okay, all right, eight thousand in closing costs and all right,
so how much are both mortgage payments between the the
amount that you pay the seller and then taking over their.
Speaker 1 (10:16):
Mortgage between the two it's I think it was like
seven fifteen. I think something like that.
Speaker 2 (10:24):
Seven fifteen, and all right, so the rents have gone out,
but what are the rents today?
Speaker 1 (10:31):
They're still pretty low, but one's nine hundred and the
other one's eight point fifty. And the only reason why
we put one lower than the others because we're hairing
the tenants do the lawn.
Speaker 2 (10:41):
Whoa, okay, how has that been working out?
Speaker 1 (10:45):
So far? So good for the most part. I mean
sometimes they're a little bit of a pain. If the
other side, the other tenant has a little bit of
of their stuff in the yard, the other tenant won't
mow it. So okay, it's a little bit of a
little bit of a hassleble overall, it's it's not bad.
(11:06):
It's been working out okay, all right.
Speaker 2 (11:08):
So the total rents for both sides are seventeen fifty
and you said the mortgage payment is seven fifteen.
Speaker 1 (11:17):
Yeah somewhere around there, okay.
Speaker 2 (11:20):
And that includes taxes and insurance. Yes, okay, all right,
So you've got ten thirty five left over. Do you
have a property manager or are you managing it yourself?
Speaker 1 (11:32):
I'm managing it myself, okay. I had a capital partner
that was able to do most of the down payment
and closing costs, so we split everything fifty to fifty
profit wise every month. But no, I'm doing all the managing.
Speaker 2 (11:46):
So walk me through that. So you didn't you didn't
come up with the down payment? You had a partner
that helped you with that.
Speaker 1 (11:55):
Yeah, I only had to put the one thousand earns money. Wow,
he covered the rest.
Speaker 2 (12:00):
And is it like a loan or are you paying
him back or is he a partner in the property.
Speaker 1 (12:07):
Yeah, he's a partner of the property, Joe. Whenever we sell,
the total difference of what he put in the whole property,
and I did, he will get that difference at close
and then will fifty to fifty the rest after that.
Speaker 2 (12:21):
Okay, So you you only came up with one thousand
dollars and then you're doing the management of the property. Correct, yes, okay,
all right, So after you pay the mortgage, you have
a little bit over one thousand dollars a month left over.
What do you what do you how do you guys?
What do you do with that money?
Speaker 1 (12:43):
Well, we're a little bit behind since we raised the rent,
so it should be that much. But right, okay, it's
really it's really not right now. But we're just holding
on to it. We don't having a specific you know,
bank account or anything, or just holding on to it
and then uh, whenever a repair is needed, we'll just
pay for it. But we don't have we don't have
(13:06):
a separate like account or anything for that.
Speaker 2 (13:09):
Okay, So so the money, so you don't take any
of the cash flow. You're just building it up so
that when an expense comes up, you've got the money
for it.
Speaker 1 (13:19):
I'm sorry, maybe maybe I misspoke. So the cash flow
that comes in, it just goes to our personal bank accounts.
We're not we don't have like a reserve.
Speaker 2 (13:27):
Okay, Well why why not have a reserve?
Speaker 1 (13:31):
Like?
Speaker 2 (13:31):
Is there is there reasoning for that? Like, because like
you're gonna have expenses or things coming up.
Speaker 1 (13:40):
That's just what my partner wanted to do. I know
a lot of people probably do put it in a reserve,
but if if something pops up, we'll just take it
out of our personal accounts and put it in our
spreadsheet that we have so we know, we we go
to you know, sell how much we each put it? Right?
Speaker 2 (13:58):
Okay, okay, all right. So the tenants are both Section eight.
Have you had any problems or any trouble dealing with
Section eight or has it been pretty easy?
Speaker 1 (14:10):
It's been fairly easy to deal with them because we
haven't had to like personally talk to them. But I
mean there's been a hassle sometimes with with their or
with the tenants, like their case cases that are going
on because one time they missed a month of payments.
We're still waiting for that to come back from February.
Speaker 2 (14:29):
Or second eight didn't pay you.
Speaker 1 (14:32):
Yeah, I don't know how they missed them. Okay, we're
still still waiting for that check. Wow.
Speaker 2 (14:37):
So have you had any surprises or anything come up
that you weren't planning on or didn't think was going
to happen.
Speaker 1 (14:48):
As far as repairs? I mean not really into what
we're getting into and bought the property because I walked it,
but I wasn't expecting to have so many hiccups with
Section eight. Yeah, especially when its supposed to be guaranteed
and then raise it right a little bit and they're
not covering that. So yeah, it's a learning curve. Yeah.
Speaker 2 (15:12):
Yeah. And then you know with the money, you know,
it's like, you know, it's like you just think you're
gonna get that money every month, Like is that like
disappointing at all on any level that you're not clearing
one thousand dollars a month on the property.
Speaker 1 (15:30):
Yeah, of course it is. But I mean at the
end of the day, there's not too much we can
do about it. So we're just hoping one of these days,
one of these months, so'll, you know, I'll catch up.
But at the same time, we're used to it, so
at this point it is what it is now.
Speaker 2 (15:44):
When you were looking at deals and you were analyzing numbers,
like did you have a spreadsheet you were using or
were you just thinking, Okay, if we can hit the
two percent role, this is probably gonna work out.
Speaker 1 (15:57):
I didn't really have to because I already knew what
the the pit. I was from the cellar, and I
knew what I was getting in rent. So the numbers
are pretty easy to calculate based on those.
Speaker 2 (16:08):
Had these tenants been there for a long time?
Speaker 1 (16:12):
Yeah, I want to say one's been there I don't know,
eight years. The other one's been there like twelve years
or something.
Speaker 2 (16:19):
Wow. So with them being there that long, like what's
the condition? Like, do you think that you might have
a lot of money or an expensive turnover when they
actually move out?
Speaker 1 (16:33):
Yeah? For sure, at least at least the one side
doesn't have to be full and redone in there.
Speaker 2 (16:36):
Wow.
Speaker 1 (16:37):
So we're trying to get a grant to help cover that.
But even with the grants of some stipulations like you
can't sell I think for like I don't know, five
or ten years or something. So there's we're trying to
figure out what the best rategy is to renovate it.
Speaker 2 (16:53):
And this is like a landlord grant from the city. Yeah, okay,
so how does does that work? Like that this is
just money that the city is giving to landlords to
improve the property.
Speaker 1 (17:07):
Correct. Yeah, I don't know exactly where the funding comes
from for it, but that's that's pretty much all I
know about it.
Speaker 2 (17:14):
Sure, Now what about when the tenants do move out,
is there more opportunity to improve the property and maybe
get higher rent in the future.
Speaker 1 (17:25):
Yeah, for sure. It's just a matter of you know,
what we want to do with these tenants, because one
is a little bit behind because they're they're not covering
their portion. The other ones more of a I want
to say, not that clean or what's the word, not
very clean. So so at one point it caused roaches
(17:50):
on both sides, so you got that settled for the
most part. So I mean, I probably could get rid
of them to innovated and increase the rents, but just
not sure if it's worth it, because we're probably gonna
have to put I don't know, fifteen to twenty k
probably in the side.
Speaker 2 (18:11):
Yeah, you might be better off just putting that off
for as long as you can. Now, what about getting
rid of the roaches? Was that difficult?
Speaker 1 (18:20):
Yes, because that the tenant is still not super clean.
So they got rid of most of them, but not fully.
I mean, you can only do so much. You can
put all the baits and do all the sprays or
whatever they put in there, but if they don't stay clean,
then they're gonna come back right now.
Speaker 2 (18:39):
Is there any any advice that you would give it
if anyone is listening right now thinking about maybe buying
their first friendsal property, you know, as someone that's been
doing this now for two years, is there any advice
that you would give them?
Speaker 1 (18:57):
Yeah, don't just jump on the property due to the number.
I mean, the numbers are great, but this is clearly
or this clearly shows that it's not always guaranteed. Yeah,
so I don't just jump on anything that that makes sense.
Number wise, try to do a little bit more research,
Try to see what kind of repairs are going to
be needed, see how the tenants are living. Yeah, so
(19:21):
just take take those into account before just buying a property.
Speaker 2 (19:25):
Now, do you so it's been two years, Like, do
you see yourself buying more duplexes down the road?
Speaker 1 (19:32):
Yeah, I definitely will. I'm trying to look at some
right now, but just haven't pulled the trigger any right now.
Speaker 2 (19:38):
Do you think he would buy in a better neighborhood
like going forward.
Speaker 1 (19:45):
Probably a little bit better neighborhood than this, But it's
just hard because sometimes when you when you get in
a better neighborhood, I mean the price might be double,
the cash flow will be you know, break even, maybe
make a couple hundred bucks if fare so, so it's
very hard. I'm very picky. So that's why i'm right now.
I'm only looking for seller finance opportunities. Yea.
Speaker 2 (20:06):
Now, with the with the problem that you've had with
Section eight that it hasn't been one hundred percent easy,
would you do section eight again or would you rather
have a cash paying tenant?
Speaker 1 (20:23):
I mean I would do either. I mean, if a
Section eight's already in there, that's cool, I'll take that
because I mean most of it will be guaranteed. I'd
have to check with that specific tenant or that agent
to see how much is being covered by the assistance
and how much is they have to pay out of pocket.
But I mean if the section as covering the whole thing,
(20:43):
then yeah, I'll definitely do it.
Speaker 2 (20:45):
Preston, thank you for being so open and honest with us.
I think this was a great look into what it's
like to buy your very first friendtal property. If anybody
wants to reach out to Preston, I've got his contact
information on the website. You can find it at rentalincomepodcast
dot com. Slash episode five forty eight. If you're looking
(21:07):
to finance a rental property, whether you're just getting started
or you want to add to your portfolio, reach out
to our sponsor, Chailey Ridge. She's a nationwide lender. She
has a ton of different loan programs and she can
find something that'll work for you. If you want to
track her down, just go to ridgelendinggroup dot com NMLS
(21:28):
four two zero five six. Thank you so much for
checking out the podcast today. Make sure you hit that
follow button. I put out a new interview every single Tuesday,
and if you're following the podcast, you'll get notified when
the next 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 now damnly.
Speaker 2 (00:09):
Before I bought my very first rental property, I thought
about it for a long time. Preston, how long did
it take you from the time that you first got
the idea till you actually bought a property?
Speaker 1 (00:22):
It took me about two years, two.
Speaker 2 (00:25):
Years of doing research and trying to learn everything you
could correct.
Speaker 1 (00:29):
Yes, I'm doing the research for about two years or so,
and then found a good deal and finally pulled the trigger.
Speaker 2 (00:34):
So did anything change financially or change with you personally
or was it just that after two years you felt
like you knew enough to actually move forward.
Speaker 1 (00:45):
A combination of both. I just found a seller finance
opportunity on market so allowed me to put a little
amount of money down so it didn't break the bank.
Speaker 2 (00:56):
The property that Preston ended up buying was a duplex,
and on the podcast today, we're going to talk about
how he found it. We'll talk about his financing, We'll
go over all of his numbers and see if there's
anything that he would do differently after going through this.
Joining us on the podcast today from Rochester, New York,
is Preston Garcia. We'll take a quick break to bank
(01:19):
our sponsors. We'll come right back and we'll talk to Preston.
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 Lee Ridge from Ridge Lending Group. She's a
nationwide lender and her specialty is helping investors finance rental properties.
(01:42):
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.
Are you thinking about investing in rental properties, but maybe
(02:04):
you don't know where to start. My friends at Mid
South home Buyers make it simple. For over twenty three years,
they've been selling fully renovated, turnkey rental properties in Memphis
and Little Rock. We're talking new roofs, plumbing, electric kitchens, bathrooms.
Everything is brand new and done right. And here's the
(02:25):
best part. Every property comes with a well qualified tenant
in place before you close. That means you get cash
flow from day one. Plus mid South 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,
(02:50):
I've bought five properties from them and I couldn't be happier.
If you want to talk to someone that's been through
the process, feel free to reach out to me. I'm
happy to answer any questions. Or if you're ready to
get started, just go to midsouthhome Buyers dot com. That's
midsouthhome Buyers dot com. All right, let's start off talking
about the property you bought. Can you tell me about
(03:12):
the property?
Speaker 1 (03:13):
Yeah, it's a duplex in the city over here in
rush To, New York. Got it for eighty thousand, and
like I said, I was seller finance, so we only
had to put a low percentage down compared to getting
a you know, a new investment loan, which would be
twenty to twenty five percent. Instead of doing that, we
only had to put it. I believe it was ten
(03:33):
percent down.
Speaker 2 (03:35):
And what made you want to buy a duplex versus
a single family or something bigger.
Speaker 1 (03:41):
Usually well, in this case, the numbers just worked out.
It was double the cash flow compared to doing a
single family, and like I said, it was pretty cheap.
So yeah, it just seemed like a good deal overall.
Speaker 2 (03:53):
And how did you find the property?
Speaker 1 (03:57):
This was on market? I'm also agent over here, and
I was just looking at what's available, reach out to
some agents, see if the seller would be open to
seller financing, And luckily this guy was all right.
Speaker 2 (04:09):
So that this was listed on market, it was it
was available for anyone to buy. You just happened to
be the one to buy it.
Speaker 1 (04:17):
Correct, Yes, Now.
Speaker 2 (04:19):
Did it say in the listing that the seller was
open to seller financing or was that something you worked out?
Speaker 1 (04:27):
I don't believe it wasn't a listing. I just reached
out and asked, and he talked to the seller, and
I think he just didn't want to deal with the
tenants anymore and decided to be open to sellar financing.
Speaker 2 (04:40):
So was there any trick to be able to talk
him into it? Or was it just as simple as asking?
Speaker 1 (04:47):
I was literally just asking. Wow, I did say in
the listing that the owner was motivated, but I didn't
say anything about seller financing shot and it worked.
Speaker 2 (04:57):
Now you mentioned that it's you two years of doing
research and and I guess learning the market and figuring
everything out, Like, can you like walk us through what
you learned and what it was that that made you
feel like you knew enough?
Speaker 1 (05:17):
Well? Yeah, I mean I was pretty confident from after
a month or two. The biggest hurdle for me personally
was just to have the amount of you know, capital
needed to put twenty or twenty five percent down. So
it took me just a while to find someone that
(05:37):
would be okay with this other finance to put five
or ten percent down. And usually on these cheaper properties,
a lot of the lenders have a minimum loan amount,
so that's also a barrier as well. So I was
ready for a while, it just took me a while
to find it.
Speaker 2 (05:55):
So, like, were there certain numbers that you were trying
to hit? Uh?
Speaker 1 (06:00):
Yeah, I mean the bare minimum was they call the
one percent rule, so the rent would be at least
one percent of the purchase price. So in this case,
I believe it was just about double that. So two percent.
Speaker 2 (06:12):
Rule, all right, So it was eighty thousand dollars that
you bought the property for, correct, okay, And so then
how is the rent split up between the two units?
Speaker 1 (06:25):
Well, at the time, one was paying seven to fifty
the other one was paying six point eighty. And the
main reason why it took is because they were one
hundred percent covered by the government assistant So at the
time it was the assistance program was covering their whole thing,
so we'd have to worry about mispayment.
Speaker 2 (06:43):
Awesome, okay. So Section eight was paying the entire rent
and they don't have any amount that they're having to pay.
Speaker 1 (06:50):
Correct. Why at the time, Now the situation has changed
a little bit, so it's a little bit more tricky now.
But yes, at the time, we didn't have to worry
about it.
Speaker 2 (06:59):
How how did change?
Speaker 1 (07:03):
Well, we increase the rent and on and for one side,
one of the tenants, they're only covered a little bit
less now, so instead of getting the whole six eighty,
now they're getting covered less than that. And we increase
the rent. So now every month I think that's a
roughly three hundred out of pocket or something like that. Okay,
(07:27):
So and now they're falling behind a little bit. I'm
so trying to get them caught up.
Speaker 2 (07:32):
Oh wow, Okay, so the tenant is falling behind on
the portion they have to pay, but you're still getting
to Section eight money. So what are you doing with that? Like,
are you, like, do you think that might lead to
an eviction at some point? Or are you trying to
work with them.
Speaker 1 (07:49):
I'm trying to work with them. I'm trying to give
them one last chance because ever since we raise the rent,
they haven't fully caught up. Besides I think the very
first month, but I know they were trying to go
through some programs that will help cover that portion, to
help cover the back pay and future rent. So I'm
giving them probably one or two more months max. And
(08:11):
hopefully the situation will be solved by then.
Speaker 2 (08:13):
Wow. I mean you always I think with Section eight
you don't have to worry about payment problems. But yeah,
I guess that's not true that you you can have
payment problems. It's not not one hundred percent easy.
Speaker 1 (08:26):
Yeah.
Speaker 2 (08:27):
So what's the neighborhood like, I mean.
Speaker 1 (08:31):
That, I guess the average neighborhood in the city. I mean, overall,
there's gonna be worse sections of the city than this
there's gonna be better sections, but I mean overall, I
guess it's I don't know. I'd say C C minus area.
Speaker 2 (08:46):
And so you don't. I mean, so you're renting out
both sides. So this was never a house sack, or
that was never the plan for it to be a
house sack. You always looked at this as pure rental.
Speaker 1 (08:59):
Correct. Yeah, No, I live in a house in Suburbs
about fifteen minutes away. So no, I was not planning
on living here. Okay, although that would be a great
option for a lot of people that are trying to
get into investment companies, especially if they if they're single
or don't have any kid, to be perfect for that.
Speaker 2 (09:16):
Sure. All right, so let's talk about the financing. So
it was seller financing. Now, so you did you have
to get any bank financing at all for any of
it or did the seller finance the whole thing?
Speaker 1 (09:32):
So this is actually considered a hybrid. So there's a
mortgage that's still in place, so we're taking over those payments,
we're paying that to the lender, and then there's some
equity between the purchase price and what was owed, so
we pay the seller a little bit of that every
month until we end up refinancing.
Speaker 2 (09:52):
Okay, and then how much cash did you have to come.
Speaker 1 (09:56):
Up with for the transaction? It was ten percent eight
thousand plus whatever the closing costs were.
Speaker 2 (10:03):
Okay, all right, eight thousand in closing costs and all right,
so how much are both mortgage payments between the the
amount that you pay the seller and then taking over their.
Speaker 1 (10:16):
Mortgage between the two it's I think it was like
seven fifteen. I think something like that.
Speaker 2 (10:24):
Seven fifteen, and all right, so the rents have gone out,
but what are the rents today?
Speaker 1 (10:31):
They're still pretty low, but one's nine hundred and the
other one's eight point fifty. And the only reason why
we put one lower than the others because we're hairing
the tenants do the lawn.
Speaker 2 (10:41):
Whoa, okay, how has that been working out?
Speaker 1 (10:45):
So far? So good for the most part. I mean
sometimes they're a little bit of a pain. If the
other side, the other tenant has a little bit of
of their stuff in the yard, the other tenant won't
mow it. So okay, it's a little bit of a
little bit of a hassleble overall, it's it's not bad.
(11:06):
It's been working out okay, all right.
Speaker 2 (11:08):
So the total rents for both sides are seventeen fifty
and you said the mortgage payment is seven fifteen.
Speaker 1 (11:17):
Yeah somewhere around there, okay.
Speaker 2 (11:20):
And that includes taxes and insurance. Yes, okay, all right,
So you've got ten thirty five left over. Do you
have a property manager or are you managing it yourself?
Speaker 1 (11:32):
I'm managing it myself, okay. I had a capital partner
that was able to do most of the down payment
and closing costs, so we split everything fifty to fifty
profit wise every month. But no, I'm doing all the managing.
Speaker 2 (11:46):
So walk me through that. So you didn't you didn't
come up with the down payment? You had a partner
that helped you with that.
Speaker 1 (11:55):
Yeah, I only had to put the one thousand earns money. Wow,
he covered the rest.
Speaker 2 (12:00):
And is it like a loan or are you paying
him back or is he a partner in the property.
Speaker 1 (12:07):
Yeah, he's a partner of the property, Joe. Whenever we sell,
the total difference of what he put in the whole property,
and I did, he will get that difference at close
and then will fifty to fifty the rest after that.
Speaker 2 (12:21):
Okay, So you you only came up with one thousand
dollars and then you're doing the management of the property. Correct, yes, okay,
all right, So after you pay the mortgage, you have
a little bit over one thousand dollars a month left over.
What do you what do you how do you guys?
What do you do with that money?
Speaker 1 (12:43):
Well, we're a little bit behind since we raised the rent,
so it should be that much. But right, okay, it's
really it's really not right now. But we're just holding
on to it. We don't having a specific you know,
bank account or anything, or just holding on to it
and then uh, whenever a repair is needed, we'll just
pay for it. But we don't have we don't have
(13:06):
a separate like account or anything for that.
Speaker 2 (13:09):
Okay, So so the money, so you don't take any
of the cash flow. You're just building it up so
that when an expense comes up, you've got the money
for it.
Speaker 1 (13:19):
I'm sorry, maybe maybe I misspoke. So the cash flow
that comes in, it just goes to our personal bank accounts.
We're not we don't have like a reserve.
Speaker 2 (13:27):
Okay, Well why why not have a reserve?
Speaker 1 (13:31):
Like?
Speaker 2 (13:31):
Is there is there reasoning for that? Like, because like
you're gonna have expenses or things coming up.
Speaker 1 (13:40):
That's just what my partner wanted to do. I know
a lot of people probably do put it in a reserve,
but if if something pops up, we'll just take it
out of our personal accounts and put it in our
spreadsheet that we have so we know, we we go
to you know, sell how much we each put it? Right?
Speaker 2 (13:58):
Okay, okay, all right. So the tenants are both Section eight.
Have you had any problems or any trouble dealing with
Section eight or has it been pretty easy?
Speaker 1 (14:10):
It's been fairly easy to deal with them because we
haven't had to like personally talk to them. But I
mean there's been a hassle sometimes with with their or
with the tenants, like their case cases that are going
on because one time they missed a month of payments.
We're still waiting for that to come back from February.
Speaker 2 (14:29):
Or second eight didn't pay you.
Speaker 1 (14:32):
Yeah, I don't know how they missed them. Okay, we're
still still waiting for that check. Wow.
Speaker 2 (14:37):
So have you had any surprises or anything come up
that you weren't planning on or didn't think was going
to happen.
Speaker 1 (14:48):
As far as repairs? I mean not really into what
we're getting into and bought the property because I walked it,
but I wasn't expecting to have so many hiccups with
Section eight. Yeah, especially when its supposed to be guaranteed
and then raise it right a little bit and they're
not covering that. So yeah, it's a learning curve. Yeah.
Speaker 2 (15:12):
Yeah. And then you know with the money, you know,
it's like, you know, it's like you just think you're
gonna get that money every month, Like is that like
disappointing at all on any level that you're not clearing
one thousand dollars a month on the property.
Speaker 1 (15:30):
Yeah, of course it is. But I mean at the
end of the day, there's not too much we can
do about it. So we're just hoping one of these days,
one of these months, so'll, you know, I'll catch up.
But at the same time, we're used to it, so
at this point it is what it is now.
Speaker 2 (15:44):
When you were looking at deals and you were analyzing numbers,
like did you have a spreadsheet you were using or
were you just thinking, Okay, if we can hit the
two percent role, this is probably gonna work out.
Speaker 1 (15:57):
I didn't really have to because I already knew what
the the pit. I was from the cellar, and I
knew what I was getting in rent. So the numbers
are pretty easy to calculate based on those.
Speaker 2 (16:08):
Had these tenants been there for a long time?
Speaker 1 (16:12):
Yeah, I want to say one's been there I don't know,
eight years. The other one's been there like twelve years
or something.
Speaker 2 (16:19):
Wow. So with them being there that long, like what's
the condition? Like, do you think that you might have
a lot of money or an expensive turnover when they
actually move out?
Speaker 1 (16:33):
Yeah? For sure, at least at least the one side
doesn't have to be full and redone in there.
Speaker 2 (16:36):
Wow.
Speaker 1 (16:37):
So we're trying to get a grant to help cover that.
But even with the grants of some stipulations like you
can't sell I think for like I don't know, five
or ten years or something. So there's we're trying to
figure out what the best rategy is to renovate it.
Speaker 2 (16:53):
And this is like a landlord grant from the city. Yeah, okay,
so how does does that work? Like that this is
just money that the city is giving to landlords to
improve the property.
Speaker 1 (17:07):
Correct. Yeah, I don't know exactly where the funding comes
from for it, but that's that's pretty much all I
know about it.
Speaker 2 (17:14):
Sure, Now what about when the tenants do move out,
is there more opportunity to improve the property and maybe
get higher rent in the future.
Speaker 1 (17:25):
Yeah, for sure. It's just a matter of you know,
what we want to do with these tenants, because one
is a little bit behind because they're they're not covering
their portion. The other ones more of a I want
to say, not that clean or what's the word, not
very clean. So so at one point it caused roaches
(17:50):
on both sides, so you got that settled for the
most part. So I mean, I probably could get rid
of them to innovated and increase the rents, but just
not sure if it's worth it, because we're probably gonna
have to put I don't know, fifteen to twenty k
probably in the side.
Speaker 2 (18:11):
Yeah, you might be better off just putting that off
for as long as you can. Now, what about getting
rid of the roaches? Was that difficult?
Speaker 1 (18:20):
Yes, because that the tenant is still not super clean.
So they got rid of most of them, but not fully.
I mean, you can only do so much. You can
put all the baits and do all the sprays or
whatever they put in there, but if they don't stay clean,
then they're gonna come back right now.
Speaker 2 (18:39):
Is there any any advice that you would give it
if anyone is listening right now thinking about maybe buying
their first friendsal property, you know, as someone that's been
doing this now for two years, is there any advice
that you would give them?
Speaker 1 (18:57):
Yeah, don't just jump on the property due to the number.
I mean, the numbers are great, but this is clearly
or this clearly shows that it's not always guaranteed. Yeah,
so I don't just jump on anything that that makes sense.
Number wise, try to do a little bit more research,
Try to see what kind of repairs are going to
be needed, see how the tenants are living. Yeah, so
(19:21):
just take take those into account before just buying a property.
Speaker 2 (19:25):
Now, do you so it's been two years, Like, do
you see yourself buying more duplexes down the road?
Speaker 1 (19:32):
Yeah, I definitely will. I'm trying to look at some
right now, but just haven't pulled the trigger any right now.
Speaker 2 (19:38):
Do you think he would buy in a better neighborhood
like going forward.
Speaker 1 (19:45):
Probably a little bit better neighborhood than this, But it's
just hard because sometimes when you when you get in
a better neighborhood, I mean the price might be double,
the cash flow will be you know, break even, maybe
make a couple hundred bucks if fare so, so it's
very hard. I'm very picky. So that's why i'm right now.
I'm only looking for seller finance opportunities. Yea.
Speaker 2 (20:06):
Now, with the with the problem that you've had with
Section eight that it hasn't been one hundred percent easy,
would you do section eight again or would you rather
have a cash paying tenant?
Speaker 1 (20:23):
I mean I would do either. I mean, if a
Section eight's already in there, that's cool, I'll take that
because I mean most of it will be guaranteed. I'd
have to check with that specific tenant or that agent
to see how much is being covered by the assistance
and how much is they have to pay out of pocket.
But I mean if the section as covering the whole thing,
(20:43):
then yeah, I'll definitely do it.
Speaker 2 (20:45):
Preston, thank you for being so open and honest with us.
I think this was a great look into what it's
like to buy your very first friendtal property. If anybody
wants to reach out to Preston, I've got his contact
information on the website. You can find it at rentalincomepodcast
dot com. Slash episode five forty eight. If you're looking
(21:07):
to finance a rental property, whether you're just getting started
or you want to add to your portfolio, reach out
to our sponsor, Chailey Ridge. She's a nationwide lender. She
has a ton of different loan programs and she can
find something that'll work for you. If you want to
track her down, just go to ridgelendinggroup dot com NMLS
(21:28):
four two zero five six. Thank you so much for
checking out the podcast today. Make sure you hit that
follow button. I put out a new interview every single Tuesday,
and if you're following the podcast, you'll get notified when
the next episode comes out. My name is Dan Lane
and this has been the Rental Income podcast
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