\n<\/p>\n
Darius Kellar<\/strong> went from making ten dollars an hour as a janitor<\/strong> to a real estate investor with over $1,000,000 in <\/strong>rental properties<\/strong><\/a> in less than a decade. By taking advantage of property auctions and investing in areas that most real estate investors wouldn\u2019t even consider, Darius has built a real estate portfolio that will soon bring in six figures in rent <\/strong>every year, most of which he\u2019ll get to keep. How he did it was a lot simpler than you\u2019d expect.<\/p>\n Before real estate, Darius had $100,000 in <\/strong>student debt<\/strong><\/a>, was making a close-to-unlivable wage, and knew he needed a way out. He bought his first home <\/strong>six years after the Great Financial Crisis in an economically devastated city. Darius couldn\u2019t get a mortgage and needed to save up to get out of the two-bedroom house he was sharing with six other people<\/strong>. Once he closed on his first house, he knew he had to repeat the system. But this wasn\u2019t easy.<\/p>\n Darius has seen everything from sewer problems<\/strong> to stripped copper piping <\/strong>and wiring, no electric hookups, and renovation headaches<\/strong>, but he never stopped. Now, he makes as much passive income per year as many people\u2019s full-time jobs<\/strong> and can show you how to do the same so you can make more money than you ever dreamed possible.<\/p>\n David: Rob: David: Rob: David: Darius: David: Darius: David: Darius: David: Darius: Rob: Darius: Rob: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: Rob: Darius: Rob: Darius: Rob: Darius: David: Darius: David: Darius: David: Darius: Rob: Darius: Rob: Darius: David: Darius: David: Rob: Darius: Rob: Darius: Rob: Darius: David: Darius: David: Rob: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: Rob: Darius: Rob: Darius: David: Darius: David: Darius: David: Darius: David: Darius: Rob: Darius: Rob: Darius: Rob: Darius: Rob: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Darius: David: Rob: David: Darius: David: Rob: Darius: David: Darius: David: Rob: David: Rob: David: Darius: Rob: David: \u00a0<\/p>\n<\/div>\n Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here<\/a>. Thanks! We really appreciate it!<\/p>\n Interested in learning more about today\u2019s sponsors or becoming a BiggerPockets partner yourself? Email <\/em>[email\u00a0protected]<\/span><\/em><\/a>.<\/em><\/p>\n Note By BiggerPockets:<\/b> These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.<\/p>\n
This is the BiggerPockets Podcast show, 839. What\u2019s going on everyone? It\u2019s 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\u2019s show to help them on their investing journey?<\/p>\n
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\u2019t have a crazy story where he had trust fund parents, or he didn\u2019t 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.<\/p>\n
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\u2019ve said, \u201cDon\u2019t invest in,\u201d at a time when everybody was saying don\u2019t 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\u2019s show. But before we bring in the amazing Darius to share his story, today\u2019s 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?<\/p>\n
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.<\/p>\n
All right, let\u2019s 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.<\/p>\n
Thank you. Thank you for having me today.<\/p>\n
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?<\/p>\n
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\u2019s 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?<\/p>\n
Wait, wait, wait. So they had light switches on the walls, but no electricity running to them?<\/p>\n
Yeah, and homepath.com is much different than today. Back then, it was an auction setting type of purchase that I did.<\/p>\n
What was going through your mind when you saw that?<\/p>\n
At first, I didn\u2019t realize how expensive it was, so that was actually a good thing. I didn\u2019t 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\u2019s dad, who was real handy, not real handy with the mechanicals, but he knew people who knew how to put work in with mechanicals.<\/p>\n
Wow, that\u2019s awesome, man. I cannot wait to hear how you resolve that and how you built your portfolio to over $1,000,000 today. It\u2019s 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.<\/p>\n
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\u2019s dad. It was a two bedroom house, six other people in the house. You can imagine that it didn\u2019t 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\u2019s essentially what it looked like, and I was still getting my master\u2019s degree at the time, so I can relate to a lot of the people that are out here watching today.<\/p>\n
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?<\/p>\n
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\u2019s 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.<\/p>\n
Did it have electricity or water?<\/p>\n
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\u2019s it. Hooray, that kind of thing. But it wasn\u2019t.<\/p>\n
Do you think the builder just decided it\u2019s not worth putting money into it, or was it intentionally supposed to be a scam? How do you think this happened?<\/p>\n
I think it was listed for sale, and then somebody came in during the sale and-<\/p>\n
Stole everything.<\/p>\n
\u2026 stripped it out. Yeah.<\/p>\n
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?<\/p>\n
Yeah, during that time, Pontiac was much different. There was a lot of vandalism in that time. It was going downhill. It wasn\u2019t getting better during that time.<\/p>\n
This was during around the time of all the auto companies leaving or getting shut down, is that right?<\/p>\n
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.<\/p>\n
Well, I\u2019m glad you made it through that. That\u2019d be enough to make most people say, \u201cI want nothing to do with real estate.\u201d You\u2019re clearly somebody who had been through some difficult times before, so you\u2019re able to handle adversity like this. But I am curious, what got you willing to jump into an asset class that you didn\u2019t know a ton about? What was going through your mind that made you want to do this?<\/p>\n
Well, I had a nothing to lose mindset. So getting a master\u2019s 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\u2019t have to pay the mortgage every month, didn\u2019t 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\u2019s 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\u2019s family into that home.<\/p>\n
You\u2019re the first person I\u2019ve 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\u2019t pay state property taxes, and they would give them away almost if someone\u2019s 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?<\/p>\n
So I had family members say, \u201cWhy don\u2019t you just get a mortgage and pay the mortgage every month?\u201d And actually, I couldn\u2019t get a mortgage, it was very tough to get financing during that time.<\/p>\n
Well, yeah, you can\u2019t get financing on anything that\u2019s that cheap. Banks aren\u2019t going to finance a $9,000 house. You can\u2019t get a mortgage that low, which is also probably a big factor in how you ended up buying a house that didn\u2019t have electricity or water, because normally that would\u2019ve come up during the appraisal. They would\u2019ve realized that was the case. But when you\u2019re paying cash for it and it\u2019s 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?<\/p>\n
Yeah.<\/p>\n
Was that just a powerful motivating thing that you\u2019re sitting there, sleeping in a room with other people, and cramped that you were just thinking, \u201cI really want to get my own spot?\u201d<\/p>\n
Well, no, you don\u2019t think of it like that. You\u2019re living and you\u2019re saying, \u201cHey, you\u2019re a man. You\u2019re living with your wife\u2019s dad.\u201d It\u2019s like a moral kind of thing. Just, you don\u2019t want to do that.<\/p>\n
It doesn\u2019t feel good.<\/p>\n
Right. But to go back to your question, there were a lot of people that just were shaking their heads, like, \u201cYou\u2019re just wasting your money.\u201d There was no value to the properties I was buying at the time.<\/p>\n
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?<\/p>\n
No, it was only student loan debt at the time.<\/p>\n
And what were you studying? What was the reason for even going and getting your master\u2019s?<\/p>\n
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\u2019t enough. And I\u2019m one of those guys, I take things to the extreme. So somebody told me that I needed a master\u2019s degree, so that\u2019s what I went and did. That was my instinct. That\u2019s what I was taught at the time, to go get as much education as possible.<\/p>\n
Nice. Did you end up finishing that master\u2019s degree, just out of curiosity?<\/p>\n
Yeah. Yep, yep. I finished the master\u2019s 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\u2019s what I\u2019m doing now at a Fortune 500 company.<\/p>\n
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\u2019s got no water, no electricity. Walk me through what you were feeling and thinking when you go to look at the house, you\u2019re flipping on the switch, and nothing\u2019s coming on. You kind of realize that you\u2019ve been had.<\/p>\n
Like I said, I talk to a lot of people. I don\u2019t shy around, so I go outside my door and there\u2019s 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\u2019s your primary residence. And that\u2019s 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\u2019s 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\u2019s also in Pontiac as well. So I\u2019m harvesting, I\u2019m 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\u2019re seeing them now. Just to give you some stats in the house, it\u2019s 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\u2019re a lot more competitive to purchase properties on. So when I tell people the prices on the websites, they\u2019re in shock, because they\u2019re only seeing what the Zillows, Redfins, and auction.coms look like today.<\/p>\n
So you\u2019re doing this sweat equity, you\u2019re 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\u2019t have before, and you realized that you could solve some of these problems?<\/p>\n
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\u2019t go inside the property. So here I am, I pulled $40,000 of equity out of my primary residence, and that\u2019s what I use to purchase the third property. So if there\u2019s no pressure on me for repairing the property, then I can put all the money up to assume the property.<\/p>\n
So from there you use the BRRRR Method so you could get more properties. So you\u2019ve got some confidence, you also know where to go get these properties. You kind of know what you\u2019re 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?<\/p>\n
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.<\/p>\n
So the order of properties, the first one was $10,000. That\u2019s the one that you bought, I guess, at the auction that didn\u2019t 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?<\/p>\n
Yep, so the second property, the $2,500 property, the third one was the $35,000 property.<\/p>\n
Got it. Okay, cool, cool, cool.<\/p>\n
So that\u2019s 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\u2019s 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\u2019t use the restroom, I can\u2019t use the restroom in my own house. So that\u2019s when I was like, \u201cOkay, 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.\u201d Because I was doing my own inspections as well, just to cut costs.<\/p>\n
So what\u2019s the process like of using a sewer camera to actually scope the line?<\/p>\n
So I use Forbest, it\u2019s a cheap $500 camera. You can actually get a used one. It\u2019s 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\u2019s 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\u2019s where I was going at with that. If I\u2019m going to lose in this game, it\u2019s going to become from construction, not because tenants didn\u2019t pay me rent, or I bought a bad deal.<\/p>\n
What we\u2019re 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\u2019ll 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\u2019t use the plumbing at all.<\/p>\n
Darius, I relate a little bit to this, because when I bought the house that I\u2019m 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\u2019re like, \u201cWell, they fixed it, so we\u2019re good.\u201d Well, they lied about it, and so we\u2019re settling in, it\u2019s been a week, we\u2019re into this house, we\u2019re enjoying it. And then I walk into my bathroom and there\u2019s ramen noodles inside my bathtub, along with a few other non-aesthetically pleasing things. And man, yeah, when you don\u2019t have a working bathroom, shower, kitchen sink or anything, oh man, it is pure agony and chaos in the household with kids.<\/p>\n
And of course, if they can\u2019t use the bathroom, tenants can\u2019t, you know they\u2019re not paying you rent. They\u2019re going to be fighting that.<\/p>\n
Which I think is not unfair.<\/p>\n
Right.<\/p>\n
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?<\/p>\n
Yeah, so the plumbing issue, you have to outsource that, just don\u2019t have the tools to do that. But after the third property, that\u2019s pretty much when I hit the ground running at that point. That\u2019s 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\u2019s 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\u2019re from the outside, you\u2019re right.<\/p>\n
That\u2019s a great point there. So you\u2019ve got a property that you bought at a low price because it\u2019s distressed, and now you put money into it and you fixed it up, and then it\u2019s cash flowing really well. If you were to build it from the ground up, it would be way more expensive than what you\u2019ve actually put into it. So there should be some equity here, but the appraiser\u2019s 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\u2019ve got the only house that\u2019s fixed up, is that kind of what the problem was?<\/p>\n
Yeah, they came back and said the house was worth $55,000. I\u2019m looking at them, like there\u2019s 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\u2019t 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\u2019s worth probably about $150,000. It sits next to a $200,000 house. It\u2019s literally less than a quarter mile away from Amazon, less than that.<\/p>\n
Now, appraisals can be tricky, and part of what makes it even trickier is, real estate is worth what someone\u2019s willing to pay for it. Which means that that doesn\u2019t fit in as a value on a spreadsheet very well, and people don\u2019t like that. They want to have a number attached to what something is worth in dollars, preferably. But with an appraisal, it\u2019s 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\u2019t make any logical sense, but that\u2019s 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\u2019s easy to get discouraged by that. It\u2019s easy to think you did something wrong. Oh man, I never should have done this. I only got $50,000 of value. That\u2019s 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\u2019ve doubled what the property will be able to generate in revenue. So there\u2019s lots of different ways to value property, appraisals can be tricky. What do you think, Rob?<\/p>\n
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\u2019re like, \u201cNo, that\u2019s way too high.\u201d
The second one was insanely low, and I was like, \u201cListen, we\u2019re tied here. We got to get a third appraisal.\u201d
And they were like, \u201cOkay, that\u2019s fine.\u201d So third appraisal came in right at the amount that allowed me to take 100% of my money out. I would\u2019ve been fine leaving some in, because that\u2019s 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\u2019s not as objective as you\u2019d think.<\/p>\n
But in areas where there\u2019s a lot of comps, you can start to get an appraisal that\u2019s somewhat predictable. That\u2019s maybe a better thing than saying accurate, because who knows what the house is worth. It\u2019s 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\u2019s like, \u201cThere\u2019s a million 4 bedroom, two bathroom houses for me to pick from.\u201d 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\u2019s one of the reasons that you just want to understand the area that you\u2019re investing in. I\u2019ve said you don\u2019t have to invest in your backyard, but you got to understand the backyard you are investing in if you\u2019re going to do long distance. So Darius, you\u2019re 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?<\/p>\n
Oh, I mean, you\u2019re creating an infrastructure around you. I\u2019m 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\u2019m buying. At that point in 2019, that\u2019s when I took off, because I don\u2019t have to do as much of research as anymore. I don\u2019t have to rely on Zillow, and Redfin, and stuff for the data. I\u2019m getting the data live, because I\u2019m actually in it.<\/p>\n
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?<\/p>\n
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.<\/p>\n
I\u2019ve noticed that, in my journey, I think Rob\u2019s 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\u2019ll 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\u2019t work out, or if you leave the security of a W2 to go to a 1099 opportunity or whatever, it\u2019s 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\u2019re easier to handle when you\u2019ve got a steady paycheck coming in and you live beneath your means, right? There\u2019s 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\u2019re working as a janitor, you\u2019re getting some momentum getting real estate, then you\u2019re doing some physical labor on the house, your confidence is going up because of what you\u2019re learning, you buy another house, you\u2019re learning stuff about the loan process, now that\u2019s giving you confidence in the job again, or did you see these as completely different independent tracks?<\/p>\n
No, I saw them completely independent tracks. I didn\u2019t 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\u2019re using passive income. They\u2019re not using the money that they\u2019re working for, earned income. So I really pushed that. I just spent over $50,000 in a year on vacations, and there\u2019s 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.<\/p>\n
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?<\/p>\n
Yes.<\/p>\n
Okay. You also have a perspective here on live data. So when you\u2019re at an auction and you\u2019re bidding, you\u2019re looking at live data versus someone on Zillow that\u2019s looking at stale data. Can you go into your perspective on that?<\/p>\n
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\u2019s 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, \u201cOh, don\u2019t buy in Flint because it\u2019s a bad area.\u201d
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, \u201cHey, that data that\u2019s on Zillow is not real. That\u2019s not live data.\u201d The live data is when you\u2019re in the auction, you\u2019re actually seeing it happen right in front of you. The live data is when I\u2019m in the auction online, getting beat and putting blind offers at $60,000 for two bedroom houses in rough areas.<\/p>\n
So what\u2019s the advice that you\u2019d 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?<\/p>\n
I would say actually go and see the properties. People think they can sit behind the computer and do everything. You can\u2019t 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\u2019ve been able to take the price down by like $10,000 on a property because there\u2019s some minor repairs that are needed that are not shown online.<\/p>\n
Are you still buying properties at auctions?<\/p>\n
Yes. Yes.<\/p>\n
Okay, what about that? If somebody isn\u2019t sure about it, hasn\u2019t done it before, can you just describe how that\u2019s different than buying properties traditionally using a loan, and maybe who this is good for and who it\u2019s not good for?<\/p>\n
Yeah, so there\u2019s 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\u2019t allow you to physically go and see the property. So there\u2019s a disadvantage to those types of auctions.
The prices of the properties, they\u2019re not evaluated, so they\u2019re just pretty much, they get the properties and they put them up for sale for whatever they\u2019re owed to the city, because they know the city owns the properties. Where if you\u2019re going to Zillow, or if you\u2019re going to MLS, the open market, you look at a property, at that point, the point you\u2019re starting at, somebody has already evaluated the property, they evaluated the condition of the property, that kind of thing. So you\u2019re likely to not get as good of a deal.<\/p>\n
I mean, buying four properties, or I guess four or five properties in a year, that\u2019s 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?<\/p>\n
Yeah, so really when I go to the BiggerPockets forums, I\u2019m looking for reassurance, and I think that\u2019s how other people can use the BiggerPockets forums. If you\u2019re investing in real estate, you\u2019re already a smart person, that says a lot about you. But if you\u2019re looking to know if you\u2019re doing things right or if you\u2019re organizing your portfolio correctly, you can go to the forums to find credible people for help. My issue was, I didn\u2019t 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\u2019t 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.<\/p>\n
And can you recap for us what your cashflow in your portfolio is looking like now, and what\u2019s on the horizon?<\/p>\n
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\u2019re looking at a total of $102,000 roughly a year from the rent. And I don\u2019t 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.<\/p>\n
What\u2019s the cause of why the rents are going to jump by that much? It\u2019s like a 40% increase.<\/p>\n
Number one, my rent is actually, because most of my tenants still been staying in my properties for a long time, so I\u2019m 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\u2019re very big as well over here. So that just happened in the last couple of years.<\/p>\n
But are rents increasing by 40%, or are you having new properties coming into the portfolio that are also going to be bringing rent?<\/p>\n
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.<\/p>\n
That makes sense. So you\u2019re adding a lot more cashflow because of these remodels that you have going on.<\/p>\n
Yes.<\/p>\n
Pretty sweet to be coming on as we may be heading into an economic recession, you\u2019re going to be making more money.<\/p>\n
And just to bring more clarity, those additional properties that I purchased, those have no debt on them.<\/p>\n
Whoa.<\/p>\n
I went to auction, I bought them pretty close to zero.<\/p>\n
Wow, that\u2019s crazy. So at this moment, on the $66,000 per year, what\u2019s the actual cashflow? Like the net profit to you?<\/p>\n
Yeah, I would say about 60%.<\/p>\n
Wow. And then will you get even more profit once those other three are live, because you own those outright?<\/p>\n
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.<\/p>\n
So now that you\u2019re pretty seasoned in all of this, are you still DIYing any components of your rehabs?<\/p>\n
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\u2019m 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.<\/p>\n
So you\u2019re thinking about creating a property management slash rehab internal team to work on your properties?<\/p>\n
Yes.<\/p>\n
And are they going to be salaried people<\/p>\n
Right now? Hourly.<\/p>\n
Okay. And then they\u2019ll just work when you have work, and then when you don\u2019t have work, they can do something else?<\/p>\n
Exactly.<\/p>\n
So have you thought about extending this into a business once you\u2019ve 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?<\/p>\n
Exactly. And that\u2019s where I actually got my employee from. I actually was able to refer to someone else for help.<\/p>\n
I love that. I think that\u2019s the future, going into this new market, that\u2019s how everyone should be thinking. It\u2019s 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\u2019ve got a great synergy.
You\u2019re going to save money by having people that do the work on your own remodels, because you don\u2019t have to pay a contractor who\u2019s going to keep a profit. And then in addition to that, you\u2019re going to make money by actually making that profit yourself, by having these people work on other people\u2019s jobs, because you\u2019re 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.<\/p>\n
Exactly.<\/p>\n
Good job on that.<\/p>\n
Thank you.<\/p>\n
Yeah. What\u2019s the total equity across the portfolio?<\/p>\n
So it\u2019s $350,000 in debt, of real estate debt, and $1,100,000 is probably what the portfolio is worth.<\/p>\n
Not bad at all, man.<\/p>\n
That\u2019s not bad. That\u2019s amazing.<\/p>\n
Yeah. Do you feel proud about that? What are your thoughts? Are you trying to grow it?<\/p>\n
I wasn\u2019t 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\u2019s 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\u2019s like $1,400 a month. I\u2019m thinking that the rent is going to get to $1,800 per house for a regular three bed, one bathroom house.<\/p>\n
So in order to get to the position you\u2019re 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\u2019t 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, \u201cHey, I\u2019m going to buy another one.\u201d And you were always finding stuff below market value that you added value to. That\u2019s 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\u2019t just get frustrated that you couldn\u2019t find a contractor, or the person that you hired didn\u2019t 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\u2019re adding equity, adding equity, snowballing, snowballing, snowballing. Now that you\u2019ve got a really good thing going, you\u2019re expanding. That\u2019s the last thing that I just want to highlight. You\u2019re 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, \u201cWhere are the jobs going? And I want to go there, and I want to own that.\u201d Because you\u2019re 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\u2019s an inspiring story. Rob, anything you want to add?<\/p>\n
Yeah, I mean, you\u2019ve 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?<\/p>\n
So it is given me a peace of mind. And then one of the things that I\u2019m proud of is, it helped my wife a lot. She\u2019s been able to be a stay at home mom and assist with the real estate. She\u2019s also a realtor as well. She\u2019s the one who sells me some of the properties as well, and gives me some tips there. But I\u2019m 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.<\/p>\n
Well, thanks for sharing your story with us today. We don\u2019t 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, \u201cI want to do what you just did.\u201d Where\u2019s the best place for people to go if they want to find out more about you?<\/p>\n
You can simply Google, Re with D. That\u2019s 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\u2019s RE with D, and you can also reach me on Instagram at Darius_oneofone. And that\u2019s all spelled out, no numbers.<\/p>\n
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?<\/p>\n
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?<\/p>\n
Much like Carmen San Diego, Rob is traveling all over the place, so if you do want to find him, you\u2019re going to have to do it on social media, not in real life. He\u2019s recording this from a hotel room right now at a conference. Busy man, traveling all over the place.<\/p>\n
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\u2019re like, \u201cBro, make your bed.\u201d And I\u2019m like, listen, it\u2019s just not the first thing I do every morning.<\/p>\n
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\u2019t help but state that you have an incredible portfolio and you\u2019re a powerlifter, not a Fitbit Walker. I know causation isn\u2019t 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?<\/p>\n
No, no. I think you covered everything. I really appreciate you for having me. I remember being on BiggerPockets back in 2015. I didn\u2019t think I would\u2019ve own as many houses as I own today, and having BiggerPockets is really helpful.<\/p>\n
Awesome.<\/p>\n
That\u2019s it. Well, thank you for sharing your story. And if you\u2019re listening to this, remember you too could have a result just like Darius is. It\u2019s just about finding the right pieces, putting them all together and staying focused on the goal. All right, Darius, we\u2019re 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.<\/p>\n