Scaling to 10 Rentals in 2 Years & $6K/Month Cash Flow with Low Money Down

Ashley :
This is the Real Estate Rookie podcast. I’m Ashley Care, and I’m here with Tony j Robinson.

Tony:
And welcome to the Real Estate Rookie podcast where every week, three times a week, we bring you the inspiration, motivation, and stories you need to hear to kickstart your investing journey. Now, today we’re going to tell a story about JJ who broke into real estate investing by buying an RV that he and his wife then turned into an Airbnb to bring in some immediate cashflow. Then they quickly scaled their portfolio up to 10 doors with three properties in just two short years. So guys, in today’s episode, we’re going to discuss creative ways to get cashflow to scale your real estate portfolio, how you can incorporate different real estate investing strategies into one single property and the power of your community to help you source deals.

Ashley :
Jj, welcome to the show and thank you so much for joining us. To start off, how long have you been investing in real estate?

JJ:
We just had our two year anniversary on the 4th of July, so two years.

Ashley :
Congratulations. So did you close on a deal on the 4th of July?

JJ:
That was the proof of concept through a conversation. We actually had a 4th of July party and we talked to someone who did Airbnbs, and I think a week later is when we got the RV that we’re talking about.

Ashley :
Okay, that is awesome. And now that you’ve hit this kind of buzzword RV as in a recreational vehicle as your first investment?

JJ:
Yeah, absolutely.

Ashley :
Okay. Tell us a little bit more about that.

JJ:
Really, we were interested in doing Airbnb and investing beforehand. We live on five acres, and so we were considering getting a yurt or something similar to that to put on our property, and we had some friends over, one of the guys had I think five units and also did an rv, and we had a conversation with him and it was just like, okay, we’re going to do this. There’s no doubt about it. So we bought the RV and we put it on our property. I think we bought it 4th of July. I think by the eighth we had it, and by the 10th I believe it was on and ready to go on Airbnb.

Tony:
Wow,

Ashley :
Awesome.

Tony:
I just want to add one thing because I’m almost embarrassed to say this, but I consider myself a decently smart guy. I had never thought about what the R and the V actually said for in rv, so you just taught me something new recreational vehicle. I know SUV, right? I know a TV, but I never thought what RV said for, so thank you Ashley for pointing that out to me.

Ashley :
That’s why I pointed out, I knew the listeners knew what it was that I knew that you didn’t.

Tony:
So jj, you jump in man, and it feels like you’re moving pretty quickly, right? You have this 4th of July party, you get the bug, like you said, 10 days later you’re already up rocking and rolling. So I guess maybe walk us through what were the numbers on this recreational vehicle? How was the loan structured to take that deal down so quickly?

JJ:
Yeah, so I mean it was really simple. I just called the dealership and talked through how the terms go and what the price would be. So we bought the RV for $30,000, five-year terms. I was expecting some sort of crazy down payment or something, and it was just a $500 deposit to hold it. So I won in and we picked out the RV we wanted and it was ended up being $254 a month. And I’m thinking, well, that’s two nights of being booked. I’m ready to take that bet. So that’s kind of how it all started.

Tony:
Jj, one follow-up question to that, you moved pretty quickly, but how did you know what type of RV to purchase, right? Because you think about box when you invest in a traditional property. I guess how did you identify what your quote buy box was for the rv?

JJ:
Well, we knew we wanted it to be pretty small, so we were looking for something that had just a bed with a shower and a little kitchenette. We didn’t want to get a giant fifth wheel and we had a certain amount of space on our property for it. We actually had a tree take out, we have a four car garage detached and a tree took out half of it, so we built the garage back up, but had that pad there, and so I built a pergola there and then, so we knew how long we needed it to be and everything, and so that kind of fit our buy box with it being just like a couple’s retreat and on our property. So that’s what we wanted to do.

Ashley :
Did you do just a trailer rv or was it actually like a motor home?

JJ:
No, it’s a trailer

Ashley :
Rv. Okay. Yeah. So who is the clientele? Who is the end user on Airbnb that is searching for an RV to stay at?

JJ:
I mean, we get a lot. So that I think that first night we finished the listing like 7:00 PM and by 10 we already had eight bookings. That was a crazy exciting night for us. And at first it was we’re by a college, so it was a lot of college students, families visiting, and then some couples in there too. But we get a lot of different people. We have a refinery maybe 20 minutes away. We have people that come in the refinery and stay a week and stuff like that. So a little bit of everything.

Ashley :
What’s the price comparison of somebody who’s staying in the RV compared to if they’re staying in a one bedroom house or apartment in your same area?

JJ:
So looking at the market, we’re up there in the price, but we’re kind of providing experience. We’re on five acres, so there’s lots of animals. It’s really private. The scenery is just really incredible. So we’re comfortable with having our price up in that top tier level, like a two or three bedroom would be in our area just because we know it’s unique and we kind of have the market cornered there.

Ashley :
Tony, I know what your mind is sinking. Every Airbnb and Joshua Tree is now getting an RV pad and an RV put on it.

Tony:
Well, it’s interesting because the permitting in that town specifically no longer allows for properties that aren’t on fixed structures to get permits. So jj, for you, what did the permitting process look like for this rv?

JJ:
There were really no restrictions. It was actually the opposite since it was not a permanent structure and we didn’t have any utilities or anything that were tied permanently to the rv, we didn’t have any issues with it. So we were easy, ready to just go and get it ready.

Ashley :
I guess for both of you as to how would someone find out what the rules and regulations are for somebody looking to rent out an rv? Where’s the first place to look?

JJ:
Do some research on the good old Google machine and then call the city? I do that a lot. We’re looking in rural markets, maybe an hour outside of large cities, and so I’m always calling and discussing, trying not to use the word Airbnb, use it as a vacation rental, and then I’ll usually get a pretty good answer.

Tony:
Yeah, totally agree. I think calling up, going online for a lot of the bigger cities, you can find that information, but getting on the phone I think is the easiest way. But jj, I guess the million dollar question here. You get this RV, 30,000 bucks, five year note, a couple hundred bucks a month to cover the cost. What do you actually cash flow on this thing once you take it live?

JJ:
So it’s definitely seasonal. We’ve had months where we’ve netted over $2,000 and then I think our lowest months are usually about $600 net. So pretty good investment for us. We’re happy, it really is. As long as it paid for itself, we’d be happy, but it’s done really well. It’s paid for our mortgage quite a few months, and that’s all we could ask for on that.

Tony:
I mean, you’re talking about a $500 deposit that’s netting you on some months, $600. It’s an incredibly strong return on that initial investment. I guess. jj, do you still have that RV in your portfolio today?

JJ:
We do. So actually we had a bit of a hail issue in my town, and so it took a beating, so it’s been in the shot for about three months, but they’re finishing it up right now and ready to get that back and going because the fall time is really busy season for us with that.

Ashley :
So what do you have to do to kind of upkeep in the maintenance? When you ran the numbers on this deal, did you have to put in any kind of repairs and maintenance for the rv?

JJ:
No, so we got a pretty good warranty. We’ve had a couple issues with water pumps and stuff like that, but it’s free. So any issue we’ve had, we’ve gotten taken care of, so that hasn’t really been an issue. And then as far as upkeep, it’s just we have a cleaner for the rest of our properties, but my wife cleans this one, I help with that. And then obviously the waste and stuff, I have to pull it off site and drop it off, but that’s a 20 minute process, so as far as time in on it, it’s nothing crazy at all.

Ashley :
Yeah, I guess that’s a really good point too, as to you’re not connected to a sewer. I mean, I guess you could maybe eventually go to that step where you are connecting into the public sewer and the water, but how often do you have to actually go and dump it and actually fill it with water? Are you able to just connect it to a faucet at your house to keep water there?

JJ:
So it has a huge tank, and so we just fill it up from our house, but then for the waste part of it, we do drive off site and I try to do it after every guest just because it does have a huge capacity, but I don’t want it to be full and have any issues, so we take care of it.

Tony:
Jj, more of a tactical question. Where do you go to dump the waste and is there a cost associated with that?

JJ:
Yeah, I think it’s $10 per time we dump it. We’re in an area where there’s quite a few of RV parks and stuff like that, so I drive to one that’s pretty local, maybe 10 minutes away and then it’s 10 minutes to dump it and then I’m back.

Ashley :
I grew up with a camper a lot, but when Tony asked that question, I had to laugh because jj, did you ever see the movie rv? Tony’s never seen any movie that I’ve ever seen the movie rv. It’s with Robin Williams and him and his son take this motor or his family take this motor home and they go to a campground. It’s their first time emptying the waste out of it and it just shoots up, explodes everywhere, all these things.

JJ:
If that happens to me, that will be out of my portfolio

Ashley :
Of all the years that I’ve been camping, I’ve never seen that actually happen to anyone, but it is a funny movie soon. Okay, so we’re going to take a quick break and when we come back we’re going to be talking about unique ways to start real estate. And if you’re looking for them, you can check out biggerpockets.com/camp to actually find out how to find finance and upgrade your ideal RV park property. Welcome back to the Real Estate Rookie podcast. Let’s jump back in with jj. So doing an RV and having this as your entry point into your investing journey is definitely unique and an incredible amount of cashflow immediately, but how did you actually grow capital to continue to scale your portfolio?

JJ:
So we were really fortunate it didn’t take too much capital for us. One of the things that I’m real big on is talking about real estate. I really enjoy it. It’s something I’ve been interested in since I was a little kid. So I talk to people about what we do a lot and people get interested and some of those people have properties. So everything we’ve gotten so far has been through creative finance.

Ashley :
That’s pretty cool. We love that creative finance over here. So what specifically, how have you gotten creative? Do you want to give us an example of a deal you negotiated with?

JJ:
Yes, so one would be for this historic home that we renovated that I’m in right now, I used to have a training company and one of the women I trained, her name was Diane, and she has this 9,000 square foot historic home. She was originally going to renovate it and she had an accident and I think like 2008, which caused her not to be able to do it. So she’s always, she runs a framing shop out of the basement and has always wanted to do something with it. And then after us kind of talking about what our goals were and what we wanted to do, she was like, Hey, I have this property, I’m willing to finance it for you, whatever we got to do. So on this deal we bought it for $125,000. We put 10,000 down, and then I think we probably like 70,000 in the renovation. So now it’s three units in the main house, and then there’s a tiny house in the back of the property.

Tony:
Sorry, did you say 9,000 square feet?

JJ:
9,000 square feet. It’s huge

Tony:
For less than $200,000. Yes. That is wild man.

Ashley :
And only you think about it, 70,000 in renovations for that large of square footage. Yeah, it’s pretty good. Yeah.

JJ:
Yeah, we got lucky. I hear horse stories with contractors, but my contractor gave me a number. I mean, this was truly a shell of a house. There was no plumbing. There was HVAC in the basement, but it didn’t run upstairs. And so we did it on budget. A huge help is that the tiny house? It’s like an old carriage house in the back of the property. We were able to get that done and I think two weeks. And so that covered the note on it plus some to help with the construction piece of it. So that was huge for us.

Ashley :
What were the terms of the note with this lady when you did the seller financing?

JJ:
Like I said, so it was 10% down and then 30 year note no balloon at 5% interest.

Ashley :
Where else are you going to find that? And you said that there was a business too. So was this a mixed use building?

JJ:
It was. So she ran a framing business out of the basement. She does frames really nice art and stuff like that. And then the upper level used to have 20 rooms in it. It was actually a chiropractic office.

Ashley :
So you wouldn’t have been able to go and get residential financing on this property such as a,

JJ:
No, it wasn’t livable at the time,

Ashley :
So you would’ve had to go and get a commercial loan since it’s a commercial property, which has a lot more hoops to go to, has way worse terms than getting a residential loan where you don’t rarely ever see 30 year amortizations for a commercial property and only sometimes five, seven or 10 year fixed rates where now you have it amortized over 30 years and a fixed rate for five years. And also a bank would’ve made you do an environmental study on the property too, which can end up being for phase one maybe $1,200 if it goes to phase two, $5,000 goes to phase three can be up to like $10,000. So even just saving on all those upfront costs associated with purchasing a commercial property with doing bank financing is great right there that you were able to negotiate for the seller financing?

JJ:
Yeah, we’re really lucky. I always tell my wife we have pretty lofty goals and I just say if we could do this six more times, we would reach all those goals. So I’m hoping to find another one just like this.

Tony:
Yeah, well, sounds like a killer deal, man. So you got a little bit of creative finance there. You’re using some of the cashflow from the initial rv. I guess in terms of actually growing the capital though, is there anything else, JJ, that you guys had done to stack some additional cash to help you keep growing the portfolio?

JJ:
So I pulled some money from the stock market. I started investing in that when I was quite a bit younger, so that’s where we got the money for the rehab. And then in savings I had the 10% down for the 125,000. So that was pretty easy.

Tony:
So let’s shift to your current portfolio today. So I guess how big is that portfolio now?

JJ:
So we have 10 doors plus the rv and that’s over three buildings. Two of those are arbitrage in the same building.

Ashley :
Can you explain what arbitrage is?

JJ:
Yeah, so there, there’s a four family home in St. Louis City and we rent two of those units from the landlord and then we put those on Airbnb and rent those out. So we get the spread in between what our rent is and what it makes on Airbnb.

Tony:
So you guys are doing arbitrage, you have the RV as a rental. Are the other units, are they also short-term or are you doing a mix of long-term midterm? What strategies are you using across the other units?

JJ:
They’re a blend. So I try to underwrite everything to where if everything is rented, we’re making money. So say I have a threeplex and somebody is paying long-term and that covers my payment, I can do mid or short term to, that’s my cashflow. So that’s how I look at it. I don’t stick to one thing. If somebody wants to play it over market rent to do a one year lease, I’m happy to have them midterm, love midterm whenever I can get it. And then I mean shortterm is the best, but

Ashley :
I think it’s great that you have the option to kind of pivot between strategies as you are kind of seeing what the market is commanding in that area at that time as far as not having to be stuck to just short term that you are able to float to having it as a midterm rental too if needed.

JJ:
Right. We worry about restrictions too. So that’s something that I really think about. I don’t want to ever be stuck in a property, so whenever we underwrite it has got to make sense as a long-term and if not, I won’t do it.

Ashley :
So jj, as you’re looking for deals, how have you created a buy box when you’re looking at different properties to purchase next? So maybe right now if you’re looking for a deal, what is your buy box for your criteria?

JJ:
One of our big goals is to have super unique properties. So right now we’re looking at schoolhouses churches, stuff like that. We actually just put an offer in on a church and didn’t get it. Unfortunately we found out last night about that. So we’re looking at things like that, just really unique stays. And then we’re now starting to look at vacation properties, so we’re looking in a few different markets, destination markets and kind of underwriting things. We haven’t found anything there that’s really making sense financially currently. But

Tony:
JJ you mentioned going after some of the more unique type things you put an offer in on a church. I guess what’s driving that desire for the unique states to kind of add those to your portfolio?

JJ:
I just think it’s setting yourself apart. So something that was so rewarding is this historic home that we did. It just felt so nice. So looking at something that has a lot of history that’s really unique and going and making that into something new and given that guest experience is something we’re super interested in. And when we talk about what we want our portfolio to look at, it’s definitely a lot of those unique spaces and historic homes and stuff like that just because making a big impact on the home and hopefully in the community we were into.

Ashley :
I actually stayed in an Airbnb when I was probably 21, 22 maybe for my cousin’s wedding. And it was a church that had been converted into an Airbnb and it was one of the most beautiful properties. It was amazing. They had taken where the altar was and put a big huge kitchen in, and then the rest was the dining area in a living room and it was just all big and open. And then they had a loft up where the choir had been and turned the basement and to the huge bunk room and it was just really incredible what they had taken the church from and kind of turned it into livable space as a residential property. So now that you’ve kind of done this one historic home and you’ve kind of built your buy box around it, are there any kind of rules or regulations? Are you doing stuff with the preservation society and following things like that or you’re staying away from properties that have those strict regulations against them?

JJ:
No, we’re interested. So this property was not under the historic registry. We do have properties in the city of St. Louis that are, and so we have to do a yearly inspection there to make sure we’re not messing with the integrity of the history of the home, which is a little cumbersome. We put a fence up, for instance, they made us take it down. So it’s tough, especially when you have a strict kind of group that’s in charge of that. They come by often and look around and stuff like that. So currently we haven’t ran in any situations where we’re buying new properties that are under the historic registration, but this one was not

Ashley :
When you’re purchasing one of those properties. So with that historic society, are there any kind of tax benefits or tax breaks to buying a property that is listed on that historic preservation list?

JJ:
I believe there are. So looking into it, you can get a lot of tax incentive money, especially if it’s a place that is currently not housing anyone or it doesn’t have any, it’s just dilapidated. You can go into a lot of communities and if you’re able to build those up and provide housing for people, I know that you can get some tax incentives there.

Tony:
Jj, so one thing I want to follow up on because I feel like we kind of touched on it, but I just want to make sure we can lay it out for all of the listeners, but how did you actually scale so quickly, right? Because you said within two years, right? Give or take, you’ve got these 10 different doors and I think for a lot of people, the first transaction, the first investment, that one makes sense, but it’s like that kind of quick movement that’s where people start to get lost. So what do you feel was the key ingredient to allowing you to scale so quickly?

JJ:
So I’m in sales, so I’m huge on setting goals and then taking action steps. And so I knew after this first property that this is what we really wanted to do and we wanted to scale it. And so one of the huge things was talking about it to everyone and then also just taking those daily steps to look at properties, to underwrite properties to talk to people. That’s without a doubt, kind of how we scaled so quickly is just having the goals, knowing what we want, and then talking to people about it. We’ve been really lucky to, but kind of putting your neck out there and talking to people about what you want, you can often get what you want.

Ashley :
And I think jj, that’s a great example of you don’t have to have experience in the real estate industry to have some kind of skillset to help you with real estate. There’s a lot of skills that can come from your W2 job or your current business that can help you kind of build your portfolio and be a successful entrepreneur as a real estate investor, just like it has with you with your sales skills, being able to talk to people and negotiate deals and to close on the properties, I can see as to how someone think, well, I sell cars, how is that going to help me buy houses? There’s so many different things. If you really look at what you do day to day for your job or your business, that will translate over into helping you develop your skills for real estate investing and actually give you an advantage compared to other people.

JJ:
Yeah, it’s reverse engineering. It’s like, why are you good at sales? Why are you good at sports? Why are you good at whatever you do? Kind of identify what those are and bring those into something else and typically it’ll work out for you.

Tony:
Now, jj, I know you mentioned that you’ve kind of used different strategies depending on the property that you’re looking at, but I guess let’s maybe go back to this massive 9,000 square foot home. I guess, what are the different strategies that you’re using within that property specifically? Is it all short-term? Is it a mix between short and mid? What are the strategies there?

JJ:
We’ve mostly done, we did have someone do a four month lease that just ended. So currently all the units are short term.

Ashley :
So let’s kind of take one more final break here and then we’re going to come back with JJ right after this. Okay. Welcome back to the show. So jj, what are some other ways that you have been able to optimize your properties to increase the revenue on them?

JJ:
One is design. So my wife handles all of that and she does a really good job. We do the enemy method, so we’ll look at the other units in our market that are doing really well and see

Ashley :
The enemy method. Did you say

JJ:
The enemy method? Yes. So we’ll look at what other people are doing in the market, why they’re profitable, and if I have a two bedroom and I’m looking at the top performing two bedrooms, what sets them apart? So is it design, do they have a hot tub, things like that. So we look and really focus on things like that. We want to be the best in our markets and we really take those steps to do that.

Tony:
Jj, what have you found is maybe the best way to, I guess, capture and identify those data points? Are you just looking at Airbnb? Are you looking at other data sources, get an idea of revenue and who’s doing well? But I guess what tools are you using to really capture that information?

JJ:
So Air DNA is a big one. They do that, the top 10 whatever performers, and you can actually filter between one, two, however many bedrooms. So we use that a lot. And then I’ll also just type in stays in St. Louis, Missouri, and I’ll look to see who has the most reviews, who has the highest rating, and what is unique or cool about their property.

Tony:
For all the rookies that are listening, air DA is one of those tools that aggregates a lot of data from short-term rental listings. Price Labs is another one, and you have the ability to export a lot of that data as well, and you can chop it up in Excel and get really nifty with it. But I love the idea of using the competition to get a gauge on what is necessary to be successful. So I guess maybe zoom that a little bit, jj, if you look at your entire portfolio across all the different properties, different doors, just like ballpark, what kind of cashflow do you think you’re bringing in on a monthly basis?

JJ:
Well, I would say the historic home we did is by far our highest grossing property, but altogether we do between 16 and $20,000 a month, and we’re probably around 40% of that is net cashflow,

Tony:
Dude. So to go from talking to some person at a party on 4th of July to two short years later, having, what is that about five or six KA month in actual cashflow is incredibly impressive, dude. So incredibly impressive. And you say it very nonchalant, jj, just another day in the park, but it is an impressive thing to do in such a short period of time, man. So I guess one follow up question to that, I guess, what’s the actual end goal for you when it comes to real estate? Is it, Hey, I want to get from 5K to 50 K, is it, Hey, I’m going to kind of let this grow on its side or on the side and whatever, when I feel like retiring now I’ve got a portfolio that’s just kind of on autopilot. What is the end goal for you?

JJ:
So the goal is to be able to retire. That doesn’t mean I’m going to, I do really like my job, but I definitely want to have the option. And then the goal is $30,000 a month in net cashflow. I feel like the way we’re going, we could do well over that, but that’s kind of the point where I’m going to be like, okay, we’re good, and then reassess all the goals and see where we want to move moving forward after that.

Ashley :
So jj, what would be your advice for someone that’s looking to invest in today’s market and to get started, how would you approach it today if you had to start all over again?

JJ:
You just got to do it. I mean, that’s what everyone says. It’s like looking back, I should have bought this property 10 years ago, five years ago. You never feel like it’s the right time to buy, but in three years when you have all this equity or all this cashflow and you’re in a good spot, you’re going to be really happy you did. So obviously, you want to minimize your risk by underwriting things and not making any crazy decisions, but if you do it, you’re going to be happy without a doubt.

Ashley :
Jj, I want to kind of wrap this up with talking about the management piece of your property. So you work a full-time job who is taking care of the management of your properties?

JJ:
So my wife and I both do it. We have a lot of automated messages. It’s really, we get the random like, Hey, this lock doesn’t work, and stuff like that, which we take care of. But as far as when you look at the scope of a week, it’s very minimal in what we have to do because we have everything automated. And then we’re really lucky. We hired a woman who’s doing all of our cleaning and she’s been hiring people and she’s really takes ownership. And so that’s been really great. We have had some bad cleaners in the past that were really stressful right now. We’re kind of in a streamlined position and it’s going really well.

Ashley :
Yeah, Tony, you can probably speak to that as to how crucial a good cleaner can be to your business, because I 100% agree with that too.

Tony:
They’re probably the most important hire that you can make in the short-term rental industry because they’re the only people who are going to see your property after the current guest leaves and before the next guest checks in. And if they don’t do a good job, you’re pretty much setting yourself up for a hard time with every single guest that checks in. So the cleaners are the linchpin of success in a short-term rental business.

JJ:
We literally, when we think about going to other markets, it’s like, do you think Terry would move there for a few months to hire a cleaning crew for us? That’s the things we talk about. That’s how important she is. She’s awesome.

Ashley :
Well, jj, thank you so much for joining us on today’s episode of Real Estate Rookie. If you would like to learn more about jj, you can check out the show notes where we’ll have his information linked for you to reach out to him to ask some questions or to learn more about him. I’m Ashley. And he’s Tony. Thank you so much for listening to this week’s Real Estate rookie.

Tony:
This BiggerPockets podcast is produced by Daniel ti, edited by Exodus Media Copywriting by Calico content.

Ashley :
I’m Ashley. He’s Tony, and you have been listening to Realestate Rookie.

Tony:
And if you want to be a guest on a BiggerPockets show, apply at biggerpockets.com/guest.