You’ve asked yourself this before, and we all have. It’s the age-old question: Is a stack of cash today better than a steady but smaller stream of income? 

Investors have struggled with this concept forever, and the BiggerPockets forums show evidence of that. Daily, investors post, wondering if cashing in their equity is the best play or if they should play the long game.

There truly isn’t a wrong answer, though I’ll admit, I am quite biased, especially after years of conversations with chronic flippers who are filled with regret about not having kept some of their projects. 

A Look at BRRRR vs. Flipping

BRRRR and flips are really two sides of the same coin—the real estate investing coin. Of course, much of this is market- and property-specific, but the main differences are that with flips, you might spend a little more on higher-end finishes than you would a BRRRR. 

Either way, you are forcing equity in your property and addressing deferred maintenance and upgrades in the hopes of profiting at some point. If you plan to flip and are in a B neighborhood, maybe you spring for the stone counters and tile accent wall in the bathroom. If you are going to rent in a B neighborhood, maybe those upgrades are unnecessary. Besides, if you rent the property for 10 years, you can always add those upgrades later if and when you decide to sell. 

Yes, sure, the BRRRR, if done properly, will allow you a trickle of funds indefinitely, whereas a flip is once and done. However, at the end of the day, they’re both strategies for quick(er) cash and (hopefully) leverage. You are forcing equity and hoping to leverage that profit. 

How to Decide

So, how do you decide to sell or keep the property? Here are some factors to consider.

The cash flow

First, my rule of thumb is that an ideal BRRRR will have you all in at 75% or less of after-repair value (ARV). If you can create at least 25% equity, you should be able to refinance the property and get close to 100% of your money back out. 

It doesn’t always mean that you should sell if you have less, but you will likely leave some of your own cash in the deal. I’ve done that many times before and been perfectly happy with the results—but I planned on this as a possibility going in. Some people won’t keep a property if they have to leave any cash in it. That’s not a dealbreaker for me, and unless you have unique circumstances, it shouldn’t be the only criteria you consider either. 

If you can BRRRR a property and it will more than pay for itself every month, that’s a good start to deciding if you should keep it. The monthly cash flow that you are willing to accept is totally up to you, but my market is an aggressively appreciating market, and I’m happy to ride that wave if someone else is footing the bill, even if I’m not making much every month. 

If you are in a C area, you’ll need decent cash flow to weather the inevitable storms that come from holding those properties. If you are seeing regular, reasonable appreciation and rent increases, it should be less important that you fully cash out or that the property performs like a dream right away. That property will become more efficient over time and can eventually become your cash cow. 

If you are in a market that traditionally sees lower appreciation, say the Midwest or parts of the South, selling might be a better option. This is because the velocity of the equity you have could be put to better use in another project (this is the leverage piece I mentioned). 

If rents average only 2% increases every year, and appreciation is historically similar, or barely keeping up with inflation, you can and should take that cash and do much better in many other ways than keeping it in a property and renting it out. Just keep in mind that you need to budget for the taxes you’ll pay on that income. 

I find it fascinating, and it really speaks to how dynamic real estate investing can be, that there are so many people doing one thing—and doing it really well. However, they have very limited knowledge of other types of investing within real estate, as well as the pros and cons of each. 

I’m talking about chronic flippers. I’ve lost count of the number of professional and truly talented flippers who have never kept a single property as a rental. 

The taxes

In addition, I know many people who have been writing checks to the IRS for hundreds of thousands of dollars every year because of how much they’ve “killed it” flipping houses. Fast-forward a few years, and they learn about tax strategy and cost segregation, and suddenly, CoC return when holding a rental doesn’t seem anywhere as important as the tax benefits of those paper losses. 

Flipping is extremely active income—both literally and figuratively. If you aren’t buying, renovating, and selling properties, you aren’t making money. You are constantly active, and it can be stressful to let up on the gas. The IRS sees it exactly the same way—as an earned income/wage—and you’ll be taxed as such. 

It might seem like I am saying that flipping houses isn’t a good idea, which is absolutely not true. If done correctly, there’s not really a much better way to build immediate capital, especially as you are starting out. Also, there are many properties that make for fantastic flips that would be terrible rentals. 

There’s absolutely a time and place for flipping houses. Our team works with lots of flippers, both bringing them deals and buying them as turnkey rentals once they are done. 

That being said, I think it’s fair to say that everyone reading this article is on BP because they are looking for FIRE and passive income. Flipping houses is, and can be, a stepping stone on that path, but it’s not the destination. 

One of the biggest challenges for newbies is wrapping their heads around the tax benefits of buy-and-hold investing. It can truly be life-changing, and it’s nearly impossible to see or understand until you experience it. If you are strictly flipping homes, you’ll never see those tax benefits and are actually creating a higher tax liability for yourself. 

Don’t get me wrong—paying a bunch of taxes because you made a boatload of money is definitely not a bad thing. But isn’t paying little to no taxes and making a bunch of money objectively better? 

By considering a BRRRR on flips where it might make sense, you are giving a gift of a tiny bit of freedom to your future self. Do that repeatedly, and those tiny future gifts can change your family tree forever. 

The Bottom Line

Flipping is truly a great way to build capital and start your real estate journey. However, I would encourage you to change the way you look at BRRRR and analysis if you are looking for long-term wealth and FIRE. That BRRRR might not look like a great deal today, but five or 10 years from now, you are very unlikely to regret keeping and depreciating that asset. You can always sell a property in the future if it doesn’t work out, but once you sell it, it’s gone forever. 

It might seem counterintuitive, but in real estate, you get wealthy by not selling. Be patient, give it some time, and enjoy the passive fruits of your labor in the not-so-distant future. 

The Real Estate Podcast

Want to build long-term wealth through real estate investing? In this podcast, you’ll get a breakdown of strategies that work for different niches and experience levels. Tune into the #1 real estate investing podcast every Tuesday, Thursday, and Sunday.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

David:
This is the BiggerPockets Podcast show, 839. What’s going on everyone? It’s David Green, your host of the BiggerPockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet every week, bringing you the stories, how toss and the answers that you need in order to make smart real estate decisions now in this current market. And boy, do we have a show for you. Rob, what are some of the things that people should keep an eye out for in today’s show to help them on their investing journey?

Rob:
Darius is a very relatable, very inspiring fellow. He comes from humble beginnings, and I think a lot of people will just be a little relieved to know that he was able to achieve so much by taking baby steps and scaling accordingly. He doesn’t have a crazy story where he had trust fund parents, or he didn’t raise money. I mean, he was funding all this while he was working an hourly job. So I think for everyone at home, just to understand it is a marathon, not a race. And so, for Darius, he took steps.

David:
100%. Not only did he take steps, but he actually did the work. Darius was able to do this in a market that most people would’ve said, “Don’t invest in,” at a time when everybody was saying don’t invest. Basically, he had a lot of resistance and people going against him, which is the same thing that happens when you lift a weight, and it builds strength. This will all make sense later as you get into today’s show. But before we bring in the amazing Darius to share his story, today’s quick tip is simple. Go ask a question on one of the BiggerPockets forums. This was a game changer for Darius. He talks about how it really helped him in his own journey and stay tuned for some clever ways that he optimized his forum questions. Rob, anything you want to add?

Rob:
I guess I will say, quick tip number two, make sure you always bring a sewer camera to an inspection, because one day you might walk into your bathroom and find ramen noodles in your bathtub.

David:
All right, let’s bring in Darius. Darius Keller, welcome to the BiggerPockets podcast. Very glad to have you here today. Darius has been investing for nine years, owns eight rental properties, mostly single families, lives and invests in Michigan near an Amazon center, has used the BRRRR Method to snowball his gross. Currently makes $66,000 a year in gross rents and is on track to make over $100,000 in gross rents in 2024. And as a fun fact, Darius is an elite powerlifter that also played college basketball. Darius, welcome to the show.

Darius:
Thank you. Thank you for having me today.

David:
All right, before we get into your backstory, can you paint a scene for us about what you discovered when you bought your first property?

Darius:
Yeah, so when I bought my first property, it was back in 2014, and the thing I discovered was, there was no copper in the house. Assuming that there was a sink and stuff, and there was switches, and the walls were up, you would assume that there’s electrical in the house. But when I went to the basement, there was no furnace, no hot water tank, no electrical panel. What do I do at that point?

David:
Wait, wait, wait. So they had light switches on the walls, but no electricity running to them?

Darius:
Yeah, and homepath.com is much different than today. Back then, it was an auction setting type of purchase that I did.

David:
What was going through your mind when you saw that?

Darius:
At first, I didn’t realize how expensive it was, so that was actually a good thing. I didn’t put myself into shock, but I was questioning myself, like how am I going to get this done? So what I did is, I just kept a good mindset and reached out to people. So I had my wife’s dad, who was real handy, not real handy with the mechanicals, but he knew people who knew how to put work in with mechanicals.

Rob:
Wow, that’s awesome, man. I cannot wait to hear how you resolve that and how you built your portfolio to over $1,000,000 today. It’s pretty crazy, man. But before we get there, and before we get this beautiful resolution, can you paint a scene for us about what your life looked like before you found real estate? What was your job? What was your living situation? Give us a little bit of a taste here.

Darius:
Yeah, so right before 2014, before I made my first purchase, I had to move in with family. I went from paying rent, into moving in with my wife’s dad. It was a two bedroom house, six other people in the house. You can imagine that it didn’t have a basement or nothing. So it was just one floor, two bedrooms. And during that time, I hit rock bottom financially. So I ended up totaling my car right in front of the house, and I was still a janitor at the time, so I was only making $10 an hour. I even keep my pay stubs still, just as a reminder of what it looked like before I started. That’s essentially what it looked like, and I was still getting my master’s degree at the time, so I can relate to a lot of the people that are out here watching today.

Rob:
Yeah. Well, what did it feel like? I mean, I know you said you were making $10 an hour. Was that at all a comfortable living at that time? Was it super, super tight, were you able to save money?

Darius:
I was able to save a little bit of money. I was doing little side jobs here and there, and while I was living with other people, everybody was sharing the bills, so that kind of helped me as well. So I ended up saving almost $10,000, and that’s when I went into my first home, and I purchased that at a $9,100. So it was just a single family, three bed, one bath colonial, and that was the one off of homepath.com.

David:
Did it have electricity or water?

Darius:
Yeah, so just to paint the picture of what it looked like, it had the sink, the walls were up. Like I said, there were switches in the walls. The exterior was pretty new, everything but the siding. So you had a new roof, new gutters, that kind of thing. I thought it was a move in type of situation. I bought it off the auction, I won. That’s it. Hooray, that kind of thing. But it wasn’t.

David:
Do you think the builder just decided it’s not worth putting money into it, or was it intentionally supposed to be a scam? How do you think this happened?

Darius:
I think it was listed for sale, and then somebody came in during the sale and-

David:
Stole everything.

Darius:
… stripped it out. Yeah.

David:
Okay, that makes more sense. It sounded at first somebody built a house and put light switches, but never actually ran electrical to it, because they intended just to make it look like something. But you think somebody came in and they stole the pipes, and the electrical, and everything while it was sitting there?

Darius:
Yeah, during that time, Pontiac was much different. There was a lot of vandalism in that time. It was going downhill. It wasn’t getting better during that time.

David:
This was during around the time of all the auto companies leaving or getting shut down, is that right?

Darius:
We were hit by the recession hard, so we had a lot of blight, boarded up homes, there were schools that were boarded up. It was more of that kind of situation. GM Chrysler were still here, but things got significantly better when Amazon showed up, which was in 2019 roughly.

David:
Well, I’m glad you made it through that. That’d be enough to make most people say, “I want nothing to do with real estate.” You’re clearly somebody who had been through some difficult times before, so you’re able to handle adversity like this. But I am curious, what got you willing to jump into an asset class that you didn’t know a ton about? What was going through your mind that made you want to do this?

Darius:
Well, I had a nothing to lose mindset. So getting a master’s degree, you are going to run up the debt. So I had $100,000 worth of debt at the time. So I was just trying to survive, that was literally my goal. I just needed a house to cut the cost. So I figured, if I owned my house, didn’t have to pay the mortgage every month, didn’t have to pay any rent, that was enough cushion for me to be financially stable. So I had no intentions of investing or anything like that. I was just trying to buy a home that I could live in. And that kind of pushes me into the second home, because that’s when I started to think, man, these homes are cheap. So like I told you, the first home was $9,100. The second home I bought for $2,500, which is two streets away. So what I did is, I moved my wife’s family into that home.

David:
You’re the first person I’ve talked to that actually bought real estate at that time. I remember hearing about the stories that houses were $2,000, $1,500, that basically the state just wanted someone to pay property taxes on these things. A lot of them had been foreclosed on by the state, and because they didn’t pay state property taxes, and they would give them away almost if someone’s willing to pay. What was the prevailing wisdom at the time? Were people telling you that this is a great idea to buy these houses, or were people thinking, why would you ever want to buy any of those things?

Darius:
So I had family members say, “Why don’t you just get a mortgage and pay the mortgage every month?” And actually, I couldn’t get a mortgage, it was very tough to get financing during that time.

David:
Well, yeah, you can’t get financing on anything that’s that cheap. Banks aren’t going to finance a $9,000 house. You can’t get a mortgage that low, which is also probably a big factor in how you ended up buying a house that didn’t have electricity or water, because normally that would’ve come up during the appraisal. They would’ve realized that was the case. But when you’re paying cash for it and it’s your first home, I can see that that being something that slips beneath the cracks. You were living in a two bedroom property with six people, right?

Darius:
Yeah.

David:
Was that just a powerful motivating thing that you’re sitting there, sleeping in a room with other people, and cramped that you were just thinking, “I really want to get my own spot?”

Darius:
Well, no, you don’t think of it like that. You’re living and you’re saying, “Hey, you’re a man. You’re living with your wife’s dad.” It’s like a moral kind of thing. Just, you don’t want to do that.

David:
It doesn’t feel good.

Darius:
Right. But to go back to your question, there were a lot of people that just were shaking their heads, like, “You’re just wasting your money.” There was no value to the properties I was buying at the time.

Rob:
Yeah. And Darius, you mentioned that you were $100,000 in debt. Was that all student loan debt or was it other debt as well?

Darius:
No, it was only student loan debt at the time.

Rob:
And what were you studying? What was the reason for even going and getting your master’s?

Darius:
Yep. So I started off in graphic design, and then I moved to business administration, and it was simply because I needed a boost in income. I understood that $40,000, $50,000 just wasn’t enough. And I’m one of those guys, I take things to the extreme. So somebody told me that I needed a master’s degree, so that’s what I went and did. That was my instinct. That’s what I was taught at the time, to go get as much education as possible.

Rob:
Nice. Did you end up finishing that master’s degree, just out of curiosity?

Darius:
Yeah. Yep, yep. I finished the master’s degree. The graphic design helped me get into the engineering area, in the corporate world, and then what happened is I became a design engineer. So that’s what I’m doing now at a Fortune 500 company.

David:
Okay. So you bought this first deal at an auction in 2014. You paid $10,000 for the property and you had to go through a bidding war. You show up to see your prize and you realize it’s got no water, no electricity. Walk me through what you were feeling and thinking when you go to look at the house, you’re flipping on the switch, and nothing’s coming on. You kind of realize that you’ve been had.

Darius:
Like I said, I talk to a lot of people. I don’t shy around, so I go outside my door and there’s other young guys who are investing as well. And what I did is, I was friendly to him. I asked the guy if he needed any water, I had water bottles and stuff available. If he needed anything, just let me know. His home was in the same condition as mine. Like I told you, there was a lot of vandalism at the time, there was a lot of boarded up homes, a lot of investors out there.
So what happened was when I introduced myself to him and was kind to him, he offered to look at the property. And he happened to be an engineer as well, an electrical engineer. So he ended up assisting with the furnace, the hot water tank, because this was my primary residence at the time, I was able to go through the permanent process myself. They allow that here in Pontiac if it’s your primary residence. And that’s really where, that initiated my learning experience, making friends with the guy across the street. I pretty much learned everything. Once you learn the electrical, the plumbing was like, I learned the plumbing within a day. And then I was able to learn the gas within a few weeks after that, learned how to do that as well.
So I learned all the trades pretty quickly. And then, like I said, when I bought that second house, you pay what you get, you get. So I bought a $2,500 house at the time, and it looked like a $2,500 house. And once I did that house, I pretty much could remodel the entire house by myself at that point. I had all the skill. Do I want to? No, but like I said, I had the skill. That pushes me up into 2017. It takes time to fix up the houses. I had no money at the time, I still had no money. So in 2017, that’s when I started moving up the corporate ladder. I started making a little bit more money.
I ended up quitting my janitor job at the time, and then I financed. Well, I took a HELOC on my primary residence and I bought my third property, and I bought that third property from auction.com for $35,000. And that’s also in Pontiac as well. So I’m harvesting, I’m a farmer in Pontiac, essentially. That property now is probably worth about anywhere from $150,000 to $180,000. So you can imagine purchasing that for $35,000 and the homes being worth nothing, to what you’re seeing them now. Just to give you some stats in the house, it’s like a three bedroom, two bathroom colonial. And at that time, again, back in 2017, the websites were not as sophisticated as they are today. Today they’re a lot more competitive to purchase properties on. So when I tell people the prices on the websites, they’re in shock, because they’re only seeing what the Zillows, Redfins, and auction.coms look like today.

David:
So you’re doing this sweat equity, you’re doing some of this work yourself on the property. What did that do for your confidence as a real estate investor, as you learn new skills you didn’t have before, and you realized that you could solve some of these problems?

Darius:
So once I learned how to fix everything, that took a lot of pressure off me, because like I said, I went to auction.com and I bought that property blind. I couldn’t go inside the property. So here I am, I pulled $40,000 of equity out of my primary residence, and that’s what I use to purchase the third property. So if there’s no pressure on me for repairing the property, then I can put all the money up to assume the property.

David:
So from there you use the BRRRR Method so you could get more properties. So you’ve got some confidence, you also know where to go get these properties. You kind of know what you’re stepping into at this point, so you feel more comfortable going big. What was the pace that you started acquiring properties at and how were you funding them initially?

Darius:
So I would say the second property took me almost two years to redo. Like I said, I bought it for $2,500. The third and fourth property, things got a little bit faster, but I would say on average it would take me about eight months to repair a property, then put a tenant inside, and then take maybe another month to get the financing to pull the equity out the property.

Rob:
So the order of properties, the first one was $10,000. That’s the one that you bought, I guess, at the auction that didn’t have all the stuff in it. The second property was $2,500. The third properties, did you say it was like $35,000 or $60,000? Which one of those?

Darius:
Yep, so the second property, the $2,500 property, the third one was the $35,000 property.

Rob:
Got it. Okay, cool, cool, cool.

Darius:
So that’s when I learned all the financing. I was really stuck in how the financing goes when I got to that third property. But also, I hit a wall during that third property. It had a big plumbing issue. So when I got to the third property, that’s when I assumed my actual non-family member tenant as well. So I would consider myself a real investor at that point, where I started to deal with a lot of the problems that normal investors deal with. So the plumbing issue I had was, the pipe had the snake coiled up inside of it in the yard. So we had to pay $5,200 for them to dig and put a T in the yard from the pipe. So we would call it a clean out drain.
And within that same two month timeframe, I also had another pipe break in my primary residence. And when pipes break, everything stops. The kids in the house can’t use the restroom, I can’t use the restroom in my own house. So that’s when I was like, “Okay, from now on when I buy these properties, I really have to take a sewer camera to the auctions, into these showings with me, when I do inspections.” Because I was doing my own inspections as well, just to cut costs.

David:
So what’s the process like of using a sewer camera to actually scope the line?

Darius:
So I use Forbest, it’s a cheap $500 camera. You can actually get a used one. It’s disgusting to say, but you can. It comes with a battery. You pull the screen out. As long as you have a fly trap, you can easily fish the camera from inside all the way out to the street. And you can see the cracks, you can see roots. It comes with an LED light in the front of it. You can record it and send it to the seller, to bring the price down. I mean, essentially it’s extremely important to have one, because in some cities it could cost $7,000 to $10,000 just to get the permitting, just to cut out the street if you have to repair a pipe. So that’s where I was going at with that. If I’m going to lose in this game, it’s going to become from construction, not because tenants didn’t pay me rent, or I bought a bad deal.

David:
What we’re talking about here is also called the sewer lateral. This is where the sewer line that runs to your house from where it ties into the city, typically goes under the front yard and you’ll get tree roots that can climb into that, or you can get different things that cause a problem. So when your house is trying to flush the waste out too tight into the city plumbing system to have it taken away, it could get back up. It can start leaking into the front yard and then you can’t use the plumbing at all.

Rob:
Darius, I relate a little bit to this, because when I bought the house that I’m in right now, there was an issue with the sewer. We got it scoped and they said that they agreed to fix it, and we did not get it re-scoped afterwards, because we’re like, “Well, they fixed it, so we’re good.” Well, they lied about it, and so we’re settling in, it’s been a week, we’re into this house, we’re enjoying it. And then I walk into my bathroom and there’s ramen noodles inside my bathtub, along with a few other non-aesthetically pleasing things. And man, yeah, when you don’t have a working bathroom, shower, kitchen sink or anything, oh man, it is pure agony and chaos in the household with kids.

Darius:
And of course, if they can’t use the bathroom, tenants can’t, you know they’re not paying you rent. They’re going to be fighting that.

Rob:
Which I think is not unfair.

Darius:
Right.

Rob:
So at this point, you said you had sort of learned a lot of lessons from your first properties, and you had worked on the electrical and the plumbing with your neighbor. Did that knowledge transition to this third house and this problem? Were you pretty aware of how to do it yourself, or were you outsourcing sort of right from the get go?

Darius:
Yeah, so the plumbing issue, you have to outsource that, just don’t have the tools to do that. But after the third property, that’s pretty much when I hit the ground running at that point. That’s when things got real interesting. I had an appraisal issue as well with the third house, the Quicken Loans. During that time, again, you had some houses that were appraising high and some that are low, but it’s still very tough for an appraiser when half the neighborhood is just distressed. So I would say it is like the baby Detroit. If you’re from the outside, you’re right.

David:
That’s a great point there. So you’ve got a property that you bought at a low price because it’s distressed, and now you put money into it and you fixed it up, and then it’s cash flowing really well. If you were to build it from the ground up, it would be way more expensive than what you’ve actually put into it. So there should be some equity here, but the appraiser’s looking at a whole bunch of abandoned houses in this same neighborhood that are maybe worth $2,000 or $3,000, that does look at their valuation, because how do they know what to compare this to? If you’ve got the only house that’s fixed up, is that kind of what the problem was?

Darius:
Yeah, they came back and said the house was worth $55,000. I’m looking at them, like there’s no way. Absolutely no way. And so what I did is, I went and got a second appraisal, and it was worth that little $500. It was worth the money, because they said it was worth $85,000. So I was able to take the 75% loan to value. That got me around $63,000, and I bought a fourth property, which is a condo, which was pretty much what we would call a turnkey at that point. And I bought it at HOA.
I mean, I had that thing rented out within a few months. Literally. I had issues with the HOA and the ticketing, and I didn’t understand that they were giving the tenants nearly the same amount of power as the landlord. So the tenants could actually show up to the board meetings just like the landlord could and stuff. That rubbed me the wrong way. So what I did is, I sold the condo and I replaced it with a single family home. And I got the single family home from my actual wholesaler, and I got this right on time. It was like in 2019, the same month as Amazon came in, and I bought it for $42,900. Like I said, the wholesaler got it for $10,000, and it’s worth probably about $150,000. It sits next to a $200,000 house. It’s literally less than a quarter mile away from Amazon, less than that.

David:
Now, appraisals can be tricky, and part of what makes it even trickier is, real estate is worth what someone’s willing to pay for it. Which means that that doesn’t fit in as a value on a spreadsheet very well, and people don’t like that. They want to have a number attached to what something is worth in dollars, preferably. But with an appraisal, it’s so subjective, the appraiser gets to decide. I have a cabin in the Blue Ridge Georgia Mountains that I bought, and I basically built a second cabin on the property. The appraiser came in and gave me an additional $50,000 of value when I doubled the square footage of the property that was on that lot.
It doesn’t make any logical sense, but that’s just what the appraiser gets to say. I think that they look at what you bought it for, and they try to keep the new price as close to that as they can. So for everyone that hears this, it’s easy to get discouraged by that. It’s easy to think you did something wrong. Oh man, I never should have done this. I only got $50,000 of value. That’s not true. If I were to sell this thing to someone else, they would pay way more than just $50,000 more than what I paid for it, and I’ve doubled what the property will be able to generate in revenue. So there’s lots of different ways to value property, appraisals can be tricky. What do you think, Rob?

Rob:
Yeah, definitely. When I built my tiny house in Joshua Tree, it was really tough, because I was like the first tiny house, so I actually had to fight for three different appraisals. The first one, they’re like, “No, that’s way too high.”
The second one was insanely low, and I was like, “Listen, we’re tied here. We got to get a third appraisal.”
And they were like, “Okay, that’s fine.” So third appraisal came in right at the amount that allowed me to take 100% of my money out. I would’ve been fine leaving some in, because that’s just how the nature of the game with BRRRR is. Sometimes you might leave $10,000, $15,000, $20,000 in the deal, but man, yeah, appraisals, it’s not as objective as you’d think.

David:
But in areas where there’s a lot of comps, you can start to get an appraisal that’s somewhat predictable. That’s maybe a better thing than saying accurate, because who knows what the house is worth. It’s just worth what someone will pay for it. But when it becomes predictable, it could benefit you. So areas like Phoenix or Las Vegas, they have a lot of track housing. The appraiser’s like, “There’s a million 4 bedroom, two bathroom houses for me to pick from.” They get a very tight number that comes in, and then you can kind of plan your BRRRR or your flip based off of that. That’s one of the reasons that you just want to understand the area that you’re investing in. I’ve said you don’t have to invest in your backyard, but you got to understand the backyard you are investing in if you’re going to do long distance. So Darius, you’re in a specific area. How do you feel that just buying the majority of your portfolio in that location has been a benefit to you?

Darius:
Oh, I mean, you’re creating an infrastructure around you. I’m using the same contractors though, the populating tenants in the properties, it becomes like word of mouth. I have a good eye of the rent flow, so I know exactly how much the rent is for each property that I’m buying. At that point in 2019, that’s when I took off, because I don’t have to do as much of research as anymore. I don’t have to rely on Zillow, and Redfin, and stuff for the data. I’m getting the data live, because I’m actually in it.

David:
I know you had mentioned that you were working as a janitor when you bought that first house, which I love. Because I had a same blue collar approach, where I just worked blue collar jobs, saved my money, worked as hard as I could, put it into real estate, and started to climb my way out of that hole. At what point did you switch from being a janitor to taking that corporate position that you mentioned, and did real estate play a role in helping you make that jump?

Darius:
So in 2014, I was still only making like $14 an hour. I was a contractor at the time at Chrysler. When I made the bigger jump in income, it was probably in 2017, so that was right after I bought my third property, which makes sense because you need income to qualify for the loans. Real estate helped when I refinanced that third property, because now I had the equity plus I had the monthly net profit to use for repairs and purchases.

David:
I’ve noticed that, in my journey, I think Rob’s might be a little different, because my understanding is that Rob scaled his initial portfolio with partnerships. So that might not be the best example, but I’ll let you weigh in a second here, Rob.
I noticed that there is a relationship between the money that you make at your job or your business, and the real estate that you buy. And what I mean by that is, when you develop some kind of passive income, you can take risks in the job that are not as risky. If you go for another job and it doesn’t work out, or if you leave the security of a W2 to go to a 1099 opportunity or whatever, it’s easier to do when you got a little bit of cashflow coming in.
And the same is true for some of the risks that go with real estate. They’re easier to handle when you’ve got a steady paycheck coming in and you live beneath your means, right? There’s this kind of, both hands work together to make the wealth building journey a little bit easier. Did you notice a dynamic like that, Darius, in your world, where you’re working as a janitor, you’re getting some momentum getting real estate, then you’re doing some physical labor on the house, your confidence is going up because of what you’re learning, you buy another house, you’re learning stuff about the loan process, now that’s giving you confidence in the job again, or did you see these as completely different independent tracks?

Darius:
No, I saw them completely independent tracks. I didn’t look at it that way. I looked at my nine to five as something that gives me stability, and I still look at the real estate like, okay, if this thing turns out well, it could give me the financial freedom. The job is great, but when you turn on the Instagrams and the YouTubes, and you see people buying the cars and stuff, they’re using passive income. They’re not using the money that they’re working for, earned income. So I really pushed that. I just spent over $50,000 in a year on vacations, and there’s no way my nine to five would be able to support that. The passive income is what supported that. So I look at it separately, yeah.

David:
But you were getting loans by these properties, so having some kind of steady income helps you get the financing that you were able to use to build a passive, right?

Darius:
Yes.

David:
Okay. You also have a perspective here on live data. So when you’re at an auction and you’re bidding, you’re looking at live data versus someone on Zillow that’s looking at stale data. Can you go into your perspective on that?

Darius:
Yeah, yeah. So between 2021 and 2022, I bought five properties, okay? I went to Flint, I went to entire 40 miles out from Pontiac. Flint is not, it is very distressed. They had the water crisis, they had the recession, we had COVID out there. I mean, there’s a lot of things that hit Flint. They got different kind of problems out there. So I went to a high risk area to buy properties. I had a lot of people out there who were saying, “Oh, don’t buy in Flint because it’s a bad area.”
And what I did is, I actually went to the auction, stood in line, saw how many people were waiting for the properties, and I started telling people, “Hey, that data that’s on Zillow is not real. That’s not live data.” The live data is when you’re in the auction, you’re actually seeing it happen right in front of you. The live data is when I’m in the auction online, getting beat and putting blind offers at $60,000 for two bedroom houses in rough areas.

David:
So what’s the advice that you’d give to somebody who tends to make their decisions about where to buy, what to buy, what to pay off of data that they get from the internet, like sources like Zillow?

Darius:
I would say actually go and see the properties. People think they can sit behind the computer and do everything. You can’t fully inspect a property from behind the computer, you actually get up and go to the property. And sometimes it pays off too, because you may see something to use as a negotiating factor to bring the price down with you and the seller. So sometimes I’ve been able to take the price down by like $10,000 on a property because there’s some minor repairs that are needed that are not shown online.

David:
Are you still buying properties at auctions?

Darius:
Yes. Yes.

David:
Okay, what about that? If somebody isn’t sure about it, hasn’t done it before, can you just describe how that’s different than buying properties traditionally using a loan, and maybe who this is good for and who it’s not good for?

Darius:
Yeah, so there’s some auctions where you can use a loan. The auctions I go to, generally you cannot use a loan. You have to use used hard, hard cash. The auctions, for example in Flint, the good things about those is that you can actually go and see the property. Many times the online auctions don’t allow you to physically go and see the property. So there’s a disadvantage to those types of auctions.
The prices of the properties, they’re not evaluated, so they’re just pretty much, they get the properties and they put them up for sale for whatever they’re owed to the city, because they know the city owns the properties. Where if you’re going to Zillow, or if you’re going to MLS, the open market, you look at a property, at that point, the point you’re starting at, somebody has already evaluated the property, they evaluated the condition of the property, that kind of thing. So you’re likely to not get as good of a deal.

Rob:
I mean, buying four properties, or I guess four or five properties in a year, that’s pretty crazy, man. A lot of people work their whole lives to just get four to five properties in general. So the fact that you were able to scale at that level, that quickly into your career, I think it shows that you figured it out. But from my understanding, when you were trying to figure out how to scale, you took that question to the BP forums. How did that help you?

Darius:
Yeah, so really when I go to the BiggerPockets forums, I’m looking for reassurance, and I think that’s how other people can use the BiggerPockets forums. If you’re investing in real estate, you’re already a smart person, that says a lot about you. But if you’re looking to know if you’re doing things right or if you’re organizing your portfolio correctly, you can go to the forums to find credible people for help. My issue was, I didn’t know how to scale, and somebody told me what they did is they refinanced their four unit and bought a bunch of single family homes. I didn’t have a four unit, I only had single family homes. So what I did is, I did multiple refinances and then I bought a spread of single family homes in a smaller period of time, which is what I did in 2021 and 2022.

Rob:
And can you recap for us what your cashflow in your portfolio is looking like now, and what’s on the horizon?

Darius:
Yeah, so nine total properties, one I live in, three are currently being remodeled right now. They should be finished at the end of the year, and then five are actually occupied and rented. So those five bring in about $66,000 annually. And after those other three are remodeled, we’re looking at a total of $102,000 roughly a year from the rent. And I don’t have any partners. I only partner with the bank. So generally I use the same lender for the investment properties and I go to a credit union for my primary residence.

David:
What’s the cause of why the rents are going to jump by that much? It’s like a 40% increase.

Darius:
Number one, my rent is actually, because most of my tenants still been staying in my properties for a long time, so I’m very conservative on the rent increases. And the rent is still going up, values are still going up over here. Like I said, we have GM, Chrysler, and I have Amazon that just arrived here. We also have United Shore. They’re very big as well over here. So that just happened in the last couple of years.

David:
But are rents increasing by 40%, or are you having new properties coming into the portfolio that are also going to be bringing rent?

Darius:
Oh, I see. So the current rent is, between the five properties, a total of $66,000, but those additional three properties are going to bring in another $36,000. Sorry about that.

David:
That makes sense. So you’re adding a lot more cashflow because of these remodels that you have going on.

Darius:
Yes.

David:
Pretty sweet to be coming on as we may be heading into an economic recession, you’re going to be making more money.

Darius:
And just to bring more clarity, those additional properties that I purchased, those have no debt on them.

Rob:
Whoa.

Darius:
I went to auction, I bought them pretty close to zero.

Rob:
Wow, that’s crazy. So at this moment, on the $66,000 per year, what’s the actual cashflow? Like the net profit to you?

Darius:
Yeah, I would say about 60%.

Rob:
Wow. And then will you get even more profit once those other three are live, because you own those outright?

Darius:
Yes, yes. But my plan is to refinance everything and put debt on them, number one, because it protects you. And number two, my original plan was to buy a spread of homes really quick, and then refinance all the homes once I get my cash flow up. That way my DTI is a lot lower when I go to the bank.

Rob:
So now that you’re pretty seasoned in all of this, are you still DIYing any components of your rehabs?

Darius:
Yeah, so what I try to explain to people, we look at just the houses, but I also own the refrigerators, I own the process as well. I own about $20,000 in power tools. So what I’m trying to do is build my own internal team. So right now I have one person working part-time. My plan is to make them full-time eventually in the future, just for the repairs and as my own internal property manager, to take some of the load off of myself.

David:
So you’re thinking about creating a property management slash rehab internal team to work on your properties?

Darius:
Yes.

David:
And are they going to be salaried people

Darius:
Right now? Hourly.

David:
Okay. And then they’ll just work when you have work, and then when you don’t have work, they can do something else?

Darius:
Exactly.

David:
So have you thought about extending this into a business once you’ve got these people that are working under you, that maybe you have other investors in the area that need a crew, and you just charge the difference? Or keep the difference between what you charge that person, what you pay the people?

Darius:
Exactly. And that’s where I actually got my employee from. I actually was able to refer to someone else for help.

David:
I love that. I think that’s the future, going into this new market, that’s how everyone should be thinking. It’s in Pillars of Wealth, I talk about how we have to be thinking about investing as a way to make money, but also offense. What are you actively doing in the business world, or in your job, or in a commission space, whatever it is to make more money? And you’ve got a great synergy.
You’re going to save money by having people that do the work on your own remodels, because you don’t have to pay a contractor who’s going to keep a profit. And then in addition to that, you’re going to make money by actually making that profit yourself, by having these people work on other people’s jobs, because you’re willing to build this expertise and do the work. Which, I will add, you probably have the confidence to do that because you had to step into that nightmare project in the beginning, and learn how to do it. So while that looked like a reason to quit, you turn that into a possible business that you can use to make money, and scale your portfolio even more.

Darius:
Exactly.

David:
Good job on that.

Darius:
Thank you.

David:
Yeah. What’s the total equity across the portfolio?

Darius:
So it’s $350,000 in debt, of real estate debt, and $1,100,000 is probably what the portfolio is worth.

David:
Not bad at all, man.

Rob:
That’s not bad. That’s amazing.

David:
Yeah. Do you feel proud about that? What are your thoughts? Are you trying to grow it?

Darius:
I wasn’t looking at it like that from the beginning. Like I said, I was buying $2,500 and $10,000 houses. That was not my motive originally. Like I said, when Amazon came here, that’s when things got interesting, because Pontiac was more so of a lower class city as far as the home values, the income per household, and stuff. So back in 2014, rents were probably around between $550 to $700. Now for, like I said, a two bedroom rent’s like $1,400 a month. I’m thinking that the rent is going to get to $1,800 per house for a regular three bed, one bathroom house.

David:
So in order to get to the position you’re at three quarters of million dollars of equity, massive cashflow in this portfolio. A couple of things you did really well that I just want to highlight. One, you jumped in and you took action, and when it went wrong, most people would be completely wiped out if they had found out that they bought a house that doesn’t have electrical or plumbing. You found a resource, which was the neighbor, and you jumped in and you did a lot of the work yourself, which built up a lot of skills that are now helping you at this point. You kept going. You said, “Hey, I’m going to buy another one.” And you were always finding stuff below market value that you added value to. That’s a very good principle. Just to take in mind that you were always paying less than what you could have by going to an auction, and then you were adding value to it by doing the work.
And you got in there and did the stuff. You didn’t just get frustrated that you couldn’t find a contractor, or the person that you hired didn’t do it on time. You went in there and did a lot of the stuff yourself. Then you used the BRRRR Method to scale once you had a good thing going with every single one of these properties, you’re adding equity, adding equity, snowballing, snowballing, snowballing. Now that you’ve got a really good thing going, you’re expanding. That’s the last thing that I just want to highlight. You’re looking at getting your own crew so you can buy more properties, and building a business. And then as a little bonus thing here, you picked the right location, whether it was on purpose or whether it just worked out.
Now you intentionally know, you say, “Where are the jobs going? And I want to go there, and I want to own that.” Because you’re looking at this as a property manager would, how can I get rents and how can I get a steady stream of employees? Which was buying into a market that at the time was incredibly distressed and everybody was saying to stay away from, you went against that, and you were able to build a pretty impressive snowball. So well done, my man. That’s an inspiring story. Rob, anything you want to add?

Rob:
Yeah, I mean, you’ve come a long way, man. A janitor making $10 an hour to having somewhere in the neighborhood of $750,000 in equity, plus some pretty generous cashflow here. What has this been able to afford you and your family? I know that you mentioned taking $50,000 worth of vacations, but what else has this done for you?

Darius:
So it is given me a peace of mind. And then one of the things that I’m proud of is, it helped my wife a lot. She’s been able to be a stay at home mom and assist with the real estate. She’s also a realtor as well. She’s the one who sells me some of the properties as well, and gives me some tips there. But I’m able to spend the passive money without pulling out that scrap sheet of paper every month, and seeing if I have enough money to pay my bills. It just takes a lot of pressure off me.

David:
Well, thanks for sharing your story with us today. We don’t hear about these too often. This is a great one. I am sure a ton of people are going to be reaching out to say, “I want to do what you just did.” Where’s the best place for people to go if they want to find out more about you?

Darius:
You can simply Google, Re with D. That’s Real Estate with Darius. I have my own website as well, so rewithd.com, I have coaching on there. You can also go to my Facebook, that’s RE with D, and you can also reach me on Instagram at Darius_oneofone. And that’s all spelled out, no numbers.

David:
O-N-E O-F O-N-E. Darius, O-N-E-O-F-O-N-E. All right, thanks Darius. Rob, how about you? Where can people find out more about you?

Rob:
Fine me on YouTube at Robuilt R-O-B-U-I-L-T, and on Instagram at Robuilt as well. I post content many, many times a week, and I teach you guys all this stuff and more. So go follow me there. What about you?

David:
Much like Carmen San Diego, Rob is traveling all over the place, so if you do want to find him, you’re going to have to do it on social media, not in real life. He’s recording this from a hotel room right now at a conference. Busy man, traveling all over the place.

Rob:
Hey, but I made my bed though, if you can tell, because I got in trouble on the Barbara Corkin interview by all the YouTubers. All the YouTube comments, they’re like, “Bro, make your bed.” And I’m like, listen, it’s just not the first thing I do every morning.

David:
You can find me at davidgreen24.com, or you could go online on any social media platform and find me at DavidGreen24. So please go give me a follow and reach out. Darius, thank you for being here, man. Awesome story. Love hearing this, and I just can’t help but state that you have an incredible portfolio and you’re a powerlifter, not a Fitbit Walker. I know causation isn’t necessarily creates correlation, but in this case, I really think it does. So Rob, just think about how rich you could be if you did more than just walking. Any last words for you, Darius?

Darius:
No, no. I think you covered everything. I really appreciate you for having me. I remember being on BiggerPockets back in 2015. I didn’t think I would’ve own as many houses as I own today, and having BiggerPockets is really helpful.

Rob:
Awesome.

David:
That’s it. Well, thank you for sharing your story. And if you’re listening to this, remember you too could have a result just like Darius is. It’s just about finding the right pieces, putting them all together and staying focused on the goal. All right, Darius, we’re going to let you get out of here. This is David Green for Rob. Where in the world is Carmen San Diego? Abba Solo signing off.