11 Rentals in 4 Years with SMALL, Affordable Multifamily Properties

The housing market could do something it’s never done before—permanently reverse.Guess what folks? You can still buy real estate today and build an investment portfolio that cash flows monthly and build wealth long term. Yes, even with the current interest rates and home prices. Today we’re speaking with an investor who bought one single family home in 2021, then bought one more in 2022, and then he added a few more small multifamily properties over the last two years. It’s not a complicated strategy, but it can have a huge effect on your financial future. Today, he’s left his job to focus full-time on investing. What’s going on everybody? I’m Henry Washington and I’m guest hosting the BiggerPockets podcast Today in place of Dave Meyer. On this episode, we have an investor story for you with Jesse Walters. Jesse started investing in Columbia, Missouri in 2021 and has accumulated 11 doors in the last five years. If anyone thinks they can’t find cashflow in this market, Jesse is doing just that, even with some interest rates at 8% because he knows how to identify strong opportunities, he knows how to buy undervalued properties and how to grow within his means. It’s a tried and true playbook that almost anyone can follow. If you’re on the fence about whether real estate investing is right for you or about whether or not now is the time to grow your real estate business, this conversation might just convince you. Let’s go ahead and bring on Jesse. Jesse, man, thanks for being on the show today.Yeah, thanks for having me. I really appreciate this opportunity. OhMan. Amazing.For you to beHere, why don’t you give us a little background. Tell us where you were or what you were doing when you first got into real estate.I’m an entrepreneur at heart. I was actually a coffee roaster for about seven years. During that time, my wife, she became a licensed agent and that started growing in the background while I was doing this, and I just started getting the bug and in 2021 we found an opportunity. We just bought our first rental property. It was on MLS, we put 20% down. There was nothing crazy about it and the thing cash flowed.So you said you were a coffee roaster. I assume that means you owned the coffee business. You weren’t like the barista at Starbucks.We were a wholesaler, so we got a cafe, but it was like years later. So we owned the business. I sold coffee to cafes, restaurants, grocery stores, things like that. So I was on the backend.I’m sure buying an appreciating asset has got to feel more comfortable than buying coffee and hoping you can sell it to somebody.We ran through Covid through all that too, and coffee prices doubled during that time, but at the same time, the price on the shelf, it didn’t really go up much. So we were eating a lot of that cost and there was a lot of sleepless nights in that distance for sure.Yeah. Okay. Well that is definitely a great transition into real estate entrepreneurship. I don’t know that the sleepless nights get any less, but it sounds like real estate might be a little less stressed than coffee. So 2017, your wife Megan got her real estate license. I think oftentimes what happens is people either are working in the real estate industry or they’re exposed to the real estate industry and typically on a side that isn’t an investor getting the payouts. And so was that what made you realize, Hey, I want to be on that side of the closing table?Yeah, I started seeing her commission checks and what I was bringing in, I’m selling a $3 cup of coffee. I’m like, what am I doing with my life? I need to figure this out.So 2017, she was an agent, was it four years? 20, 21. You bought your first one?Yeah, 2021. So four years later we finally dove in,Bought your first deal on the MLS traditional 20% down financing, but you said it cash flowed, so that’s pretty positive. It must be a low interest rate at that timeframe.At that time, that was the glory days. I think we’re at a 3.6 30 year fixed loan. We’re just going to let that ride to the end for sure. But yeah, I think the mortgage tax insurance around eight 50 and we’re renting out right now for 1600 a month.Oh wow.Yeah.So how’d you move on from that deal? Because it’s tough to find deals like that. Just sitting on the market now.Actually the next two deals we found on the MLS too, so the first three investment properties, we bought all MLS. The second one, a single family home, like a three, two, it needed some work. We were able to get that one locked in. We put 15% down on a commercial loan and they covered all the renovation costs, everything like that. Still relatively low interest rate. We’re able to cashflow that one and then it really started to snowball after that in 2023, we bought our first fourplex. It needed work. We were able to use the equity we had in those first two properties. We put some money down in ’em and then they were also appreciating and we added value to that second one. So the bank, what they did was they used the equity from those other properties as collateral for a down payment.AndSo we were able to do $0 into that fourplex and it needed some work, but not a lot. We put maybe 25, 30 grand into it and between all four units, which was pretty minimal. That’s what really set the cashflow going and it just sustained the whole business after that.That’s when you’re really playing the game. I have several questions about that deal, but before we get to that, we’re going to take a quick break. Alright, we’re back with Jesse and we’re just getting into the meat and potatoes about how he started to scale his real estate business. It sounds like you said you bought a fourplex, this fourplex that you bought on the market or wasn’t an off market deal.It was on the MLS,On the MLS, but you said you were able to do something that, a strategy I like to use essentially it’s called cross collateralization. So you bought this duplex, but since you had owned a few other single family rental properties and those rental properties had appreciated, it sounds like the bank allowed you to pledge equity from other properties and use that as your down payment. Was this a local bank that you used or what kind of lender was this?Yeah, correct. It’s a small local bank here in my area. I didn’t even know about it. They offered it to me like, Hey, you should do this. And I’m like, what is that? And it actually took two different meetings. He explained the whole thing to me. I took notes, I went back home. I’m like, I still don’t understand this. And I went back to him again. I’m like, explain this one more time, how this works.I mean that’s the power of relationship banking. So relationship banking is typically going to be a bank, like a small local community bank. And the reason they are called relationship banks are because local community banks must lend to local community businesses in order to generate income. They’re not like bigger banks who originate loans and then sell those loans off. They originate loans and they keep ’em in their portfolio. And so what they’re really looking for are good investments to put their money into, and then they’re looking into good operators entrust with these loans. And so essentially when you build that relationship, what you’re doing is you’re showing them that, hey, I can buy good deals. I’m buying deals that are going to have equity in them and that makes the bank feel comfortable. Banks typically like real estate investors who are good operators and can buy good deals and typically they will go out of their way to figure out how to help you to continue to grow.
The same thing happened to me with one of my first deals. The bank basically was like, Hey man, I want to give you a line of credit on this property so you can keep bringing us deals like this for people that are listening. If you have a relationship with a local community bank already, if you’ve done some deals already, go talk to them about cross collateralization, go talk to them about if you’ve got existing properties, go talk to ’em about pledging equity in your properties to use as your down payment. This is something that a lot of banks do, but if you have a good relationship, sometimes these banks just bring you these ideas and really help you grow. That’s super cool to hear. So you bought this, you cross collateralization strategy, what’d you pay for it and what is it rent for?Yeah, so we bought it for 190,000. We paid full price asking on the MLS for it. We knew there was an opportunity there, and this is in a smaller town outside of where we do a lot of our investing. It’s actually my hometown, so I knew the market pretty well. So bought it for one 90, we put 2320 $4,000 in it between all four units. At the time, rents were very, very low and it was actually lower than I thought it was. Three of the four units went up for rent when we purchased it. So one was vacant when we bought it, and then when we took ownership, two voluntarily left and we only just had one of the original tenants left, so we had to turn all three of those very quickly. So the first unit we rented for $700 a month. Turns out that was way too low. We should not have done that.Is that tenant still there now?Actually, no. She ended up leaving, but yeah, my phone was ringing off the hook. I was like, okay, so the next one we put it at 800 a month and then it started leveling out a little more. But that all being said, so we left the original tenant place. We raised his rent a little bit, but we didn’t want to put him up to market. He’d been there a long time. We got rents up to about 2,400 a month and we had been 215,000 in it, two 20 in it. So we were over the 1% rule on the MLS buying this deal.Yeah, no, that’s great. That’s great.Kind of a bonus too, there was a vacant lot with it next to it and it was all part of the package. I got a vacant lot just sitting there free and clear too on the deal.Oh man, I love doing that. That’s another strategy I really enjoy is finding properties that have either lots big enough that you can split off a vacant lot, so legally go to the city and split it off and then you’ll get a vacant lot free and clear or specifically marketing to properties that have additional lots because typically when you buy the property at a discount, you essentially get the land for free, which you can use to develop later. I’ve done all scenarios. I’ve bought land with a free lot and then sold the free lot to cover my down payment on the property. I’ve also bought land with a lot, and then we’re looking at developing some of that land right now. So it really gives you options for later on down the road and it’s free land, right? Why wouldn’t you do that and have those options. So I also want to talk to you about, so you dabbled in this multifamily now. So did that become your main strategy going forward or are you still focused on singles?It definitely put a light bulb in my head for multifamily. I really look for ’em. I want to buy more of ’em, but it’s not my only strategy. I still do a lot of single families. We actually purchased a condo last year because the numbers worked and we did that too.You’re like me, man, I’m going to buy it. If it’s a good deal, I’ll figure it out after I buy it. Sometimes I’ll keep it, sometimes I’ll sell it. So one of the things that’s unique about you, Jesse, is your wife is an agent and a broker, and there’s a lot of new investors who always ask the question, should I get my license to get started in real estate? And I’m not going to throw that question at you, but I am going to say, do you feel like it’s been a benefit to you to have somebody around you that has a license or do you feel like it’s been a hindrance?I’m biased with it being my wife. I’m going to say she’s a really good agent, but she actually is. She is one of the top producers in our area, and I go to her when we flip a house or if we have a rental or anything like that, I’m going to her asking all these data points and what do you think we should do X, Y, z? Even on the design, Hey, what are you seeing in houses that are selling? What color should the walls be or what kind of floor she put in? She’s like, yeah, the X, Y, z, these homes with this flooring that sell better. And it has been a huge help and I can get a pretty good idea of what the value of a house will be after we do repairs, things like that. But she’s way more accurate at it than I am. And I think that goes for most agents.Probably the most important person on a real estate investor’s team is that investor friendly real estate agent. And luckily for you, you’re married to yours. I always tell people that if you’re getting your real estate license just because you want to be a real estate investor, that’s probably not the best first move because they don’t really teach you about real estate investing at agent school. That’s not really helpful for you. I think there are other things that you can do that are more beneficial, but having an agent, a good investor, friendly agent on your team is great. I would love for someone that was directly tied to my business to have their license. Luckily for me, I have a phenomenal agent and instead of since you married yours, I just moved into my investor friendly agent’s office, I rent a space in his office so that I can be that much closer to them. I like thatStrategyAlso, just the ability to have someone that can help you accurately comp because I mean the best way to comp a property is with MLS data. And so I mean that alone will save you a ton of money. So I don’t know that you need your license to be a real estate investor, but having somebody with a license close to you is absolutely a cheat code.If my wife was not licensed, I probably wouldn’t be either, but really the sole reason I have my license is to help her out with her listings, things like that. If I was just full-time investor, I probably wouldn’t have my license either.For those people who are considering getting their license, what are some of the benefits being licensed as an investor? So you specifically having your license, what benefit does it have for you and your investing business?One, I do have access to MLS data. That’s probably the biggest one, especially where we’re located. So we’re in Missouri and it’s a non-disclosure state, so sales price for homes and multifamily in the state are not public data. You can only get it through the MLS. So there is Zillow, things like that, but they’re not accurate. And so having that data is crucial to an investor. And then also the other big one is commissions. You can kind of leverage your commissions when you’re buying and selling properties too.Talk about how you do that.That fourplex we’re talking about when we went to put in an offer, this thing was on the market one day and there were other people getting ready to come in and place other offers. So what we did, we placed a full price offer on this thing and waived our commissions. So they got kind of an over asking offer without us having to overpay.In other words, they were able to actually pocket more money because they didn’t have to worry about agent commissions because the seller typically pays the commission, so you waive your commission. So instead of them selling for one 90 and then paying six or 3% in this case to an agent, they get to put that 3% in their pocket. Alright, we’re back with Jesse Walters out in Columbia, Missouri. Let’s talk about flipping houses. So Jesse, it looks like you had some experience buying rentals and figuring out how to get a little creative with the financing so that you’re not having to put 20% down every time. I know recently you have started flipping houses. Can you talk to us a little bit about what your flipping business looks like and how you got into that?I kind of flipped my first house on accident. Yeah, it was actually a condo here in town. We bought it for my grandmother-in-law to live in. At one point it was just going to work out there and then all of a sudden it didn’t work out. It turned out she needed to go to a nursing home and it was one of those things I was like, well, I could rent this thing out. I was like, but it’s not really going to cashflow that much. I wasn’t buying it for the cashflow so to say. I’m like, well, I can just turn this around and flip it. So that’s what we did. We could put a good chunk of change in our pocket. I was like, huh, maybe I should keep doing this yet. Tell us about the numbers on that. It was kind of an interesting story how we got it.
It was listed for 150,000, which was already under market value, no photos or anything. I went and looked at this thing, it was tenant occupied. I spoke to the tenants for half an hour, an older woman and her daughter was living there, things like that. And they kept asking me, if you buy this, whatcha going to do with it? Can we stay here? All these things. And I was very blunt and honest with, I was like, I mean, my intention is for my grandmother-in-law to live here. However, I’m not just going to kick you out. We’re going to come up with a plan to find you another place. I’m not going to make you homeless. Things like that. I will definitely help you in those ways. Well, it turned out those tenants were very in the ear of the owner. So the tenant was really driving this whole transaction. I guess I was the only one that came in there and told the tenants I would not kick ’em out. Everyone else said they would. I was the lowest offer on the table and they took my offer.I often tell people that real estate is not a real estate business. It’s a people business that transacts in real estate. The more we can find ways to take care of people, the more your business will thrive because there are people’s lives at the other end of our real estate transactions at the other ends of this wealth we’re trying to build A lot of investors, I don’t want to say most, but a lot of investors are very transaction focused. It’s all about the numbers. If the numbers work, it’s great. If the numbers don’t work, then it’s not great. And if I need to get rid of a tenant to make the numbers work, then I’m going to do that. I’ve often just found that being of service people is the best way for me to A, grow my business, but B, sleep at night. If I lose a deal because I wouldn’t have been able to take care of the people, then I’m fine with that. I’ll go find another deal where I can help somebody. So I appreciate you taking that approach because I think that’s what people need to learn how to do. They need to learn how to take care of people first. The money makes itself,It took a little longer in this process, but we really didn’t lose any money of it or any sleep, but we found these people actually a better place to live in the future and it just worked out for everybody.So you bought it for one 30, you put how much intoIt? We put 18,000 into it. It was a pretty easy cosmetic. That’s a great deal. Yeah. Yeah. Paint carpet, some light fixtures, a couple new appliances, and that was really it.And you sold itFor We sold it for 1 75. Nice. After commissions closing costs. It was a little over $21,000 profit.Nice. Yep. And so now you definitely got the bug. I know I did after I did my first flip.Definitely. Yeah. Yeah. It was another light bulb moment for me in my investing career. I was like, we need to do more of these. Yeah.Okay. So how did you expand that part of your business and what does it look like today?I rely pretty heavily on my outreach is mailers, but I’ve also bought from wholesalers. I bought a house from my, it was a referral for my junk removal guy, so my contractors send me houses now too. So it’s kind of all around and I still look on the MLS all the time. We bought one on the MLS last year, and then actually another agent sent me a couple of duplexes last year too before it hit the MLS.What kind of volume are you doing in your flipping business?Last year I closed out five flips, and this year I already have five. I’ve closed one and I’ve got four under construction right now. And then they’re all in different phases, but yeah, I assume we’ll probably be 10 to 15 by end of this year. We keep doing what we’re doing. Yeah.Okay. That’s amazing. And so you said Columbia, Missouri is where you live and invest. Is that the only market you invest inFor the most part, yeah. So Columbia and then my hometown is Booneville, Missouri. Small 8,000 population.I was going to say, it sounds like you made that up, to be honestWith you. Yeah, it kind of is. The thing boom Bill is known for is to have a casino. It’s probably one of the smallest towns in the nation that has a full blown casino in this thing.
But it really helps the economy there. And it’s a commuter town for Columbia, which was a University of Missouri is a lot of hospitals. It really economy driven town with a lot of jobs, a lot of people moving in and out of here, things like that. So Booneville has naturally kind of grown with Columbia as Columbia keeps growing. As Columbia gets more expensive, Booneville becomes more and more attractive to renters for sure. And we’ve definitely learned that in our experience. So I have more luck within the rental market in BBO than I do Columbia now. It’s a lot easier to get into it. It’s easy to find renters, good runners too. And yeah, they’re appreciative and want to be there.Yeah, man, I would encourage everyone who is investing in a specific town, especially if that town is a larger town, to look for a smaller town within 30 minutes to two hours away that share some of the same market dynamics and have a good strong economy. In Jesse’s case, this is fueled by a casino typically. There’s always a small town in and around your larger town that has similar market dynamics where it may be easier for you to find and cheaper for you to find a deal, but still get that consistent cashflow. Alright, before we get out of here, Jesse, it sounds like each year you’ve kind of improved and progressed as a real estate investor and become more mature. What are you doing now or in 2025 that’s different than what you’ve done in the past?A big change we’re making this year in our investments. So that fourplex we mentioned, we actually sold it. So yeah, going back we bought it for one 90, we put 2025 in it, I think, and we sold it for three 11.Oh wow.Two weeks ago. But anyway, all those proceeds were 10 30 wanting it into a vacant lot a block over. We are going to build a brand new triplex on that.Do you mind sharing the numbers for this new construction?Yeah, so this triplex we’re estimating to cost around $400,000 to build. And with it being in the smaller town, the land that we’re buying is hardly anything. I think we paid $17,000 for this lot. So there really isn’t much going into, it’s really just the build itself is what we’re investing in. Based on my experience with rentals there, there’s a huge need for it. And especially three bedrooms, there’s a lot of twos and ones. In these smaller markets, there are no three. So we’re building all three bedroom units and it’ll have off street parking, it has laundry, things that these smaller townses don’t have, especially where we are. It’s a lot of older homes, a hundred plus years, and there isn’t laundry hookups or anything like that. So it’s kind of become known that you just don’t get laundry in this area. Well, we’re going to have that, so we’re going to offer something else. And I think our rents, I’m projecting to be between 13 and 1500 a month per unit.Wow.So I’m building at the 1% rule just about.Yep. So it sounds like on the low end you’re at 3,900 a month in rents. On the high end you are at 42, 40 $300 a month in rent. You bought the land for 17, you’re building for four. So you’re all in at four 17 and you’re hitting the 1% rule on new construction. And we all know the 1% rule is a great rule of thumb, but I think the cool part about it is you’re at the 1% rule in new construction. A lot of your expenses with rental properties are maintenance and capital expenses, but when you do new construction, your maintenance and your capital expenses are typically going to be far lower because the property is so brand new. So you kind of put that off for five to 10 years, which allows you to actually make more cashflow. So I think that that’s great.
And I also love that you didn’t just say, I’m going to go build something. You said, I’m going to go build something, but I’m going to build something that’s going to have demand. And that’s why we always tell people, real estate is such a local game. You have to understand your local market and your understanding of your local market told you that there’s a shortage of three bedrooms and that there’s a shortage of rental properties with laundry. And so essentially by building something that doesn’t exist, you get all the demand for that product because there isn’t that product anywhere, which essentially is going to allow you to probably get the top rents in the market because you have a brand new product and you have amenities that don’t exist in your market. So it sounds like if you want to invest in Columbia, Missouri, or Booneville, you need to build three bedrooms or you need to go buy laundromats,Give me a couple years headstart. But yeah, you guys can come.That’s okay. Go find all the laundromat owners in the area, let’s start marketing to them. And I’ll go on a laundrymat business with you down there.I love it. Let’s do it.Alright, Jesse, thank you so much for sharing your journey in real estate investing with us here. Do you have any last minute advice for somebody who’s brand new and looking to get started?If I could say one thing that really propelled me forward in the success of all this, get in with a group of like-minded people. It gave me so much more confidence. My problems are not unique. Everyone’s dealing with the same stuff. And if you can hear other people talk about it, either you guys can drink a beer together and just talk about it or the other person will have a solution for you. One of the two. Absolutely. It has helped me tremendously.100% man, who you choose to be around, we’ll show you what’s possible. I’ve always said that and it’s hugely important. So change your circle, change your circumstances, man. Thank you again, Jesse, for joining us. We appreciated having, hopefully you all learned a whole lot. And if you think the BiggerPockets audience could learn from your own investing journey, you can apply to share your story on the show just like Jesse did. At biggerpockets.com/guest, I am Henry Washington and we’ll be back with another episode of the BiggerPockets podcast in just a few days. Thanks for listening.