BiggerPockets Real Estate Podcast - 11 Rentals in 4 Years with SMALL, Affordable Multifamily Properties

Episode Date: April 28, 2025

We always say it, but buying just ONE rental property can change everything! For Jesse Walters, a coffee roaster by trade but a cash-flowing investor now, buying his first rental property opened up an entirely new world of not only passive income—but freedom. After his wife became a real estate agent, Jesse noticed the sizable commission checks and thought hundreds of dollars a month in passive cash flow beat wholesaling three-dollar bags of coffee. Was he right? Jesse didn’t do any expert-level real estate investing moves to get his first deal done. It was 2021—he found a listing for an affordable house, put 20% down on it, and rented it out. That strategy seemed to work, so Jesse did it again, finding another on-market, affordable rental property to purchase. Then, he took it up a notch, purchasing a fourplex (four units) by putting—get this—$0 down! He used a strategy ANYONE with access to a local bank can try, and this property lit the rocket fuel for his portfolio. Now, he has 11 rental units, runs multiple house flips a year that pay him five-figure checks, and is building a new triplex that will hit the 1% rule from the start. Jesse shares the exact playbook for building a small but profitable rental property portfolio, even with high interest rates, even in a small town, and even if you have no experience.  In This Episode We Cover How Jesse used his two small rental properties to put $0 down on a fourplex! “Building” the 1% rule and why brand new rentals may make more sense than existing ones  Why you CAN cash flow with affordable real estate in small towns  The investor cheat code that Jesse has (thanks to his wife) and why you NEED an investor-friendly agent to get the best deals How Jesse made $21,000 on a quick, cosmetic, low-cost flip (as a complete newbie)  And So Much More! Check out more resources from this show on ⁠BiggerPockets.com⁠ and ⁠https://www.biggerpockets.com/blog/real-estate-1114 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email ⁠[e-mail]⁠. Learn more about your ad choices. Visit megaphone.fm/adchoices

Guess what, folks, you can still buy real estate today and build an investment portfolio that cash flows monthly and build wealth long term. Yes, even with the current interest rates and home prices. Today we're speaking with an investor who bought one single family home in 2021, then bought one more in 2022, and then he added a few more small multifamily properties over the last two years. It's not a complicated strategy, but it can have a huge effect on your financial future. Today, he's left his job to focus full-time on investing. What's going on, everybody? I'm Henry Washington. and I'm guest hosting the Bigger Pockets podcast today in place of Dave Meyer.

On this episode, we have an investor store for you with Jesse Walters. Jesse started investing in Columbia, Missouri in 2021 and has accumulated 11 doors in the last five years. If anyone thinks they can't find cash flow in this market, Jesse is doing just that, even with some interest rates at 8% because he knows how to identify strong opportunities. He knows how to buy undervalued properties and how to grow within his means. it's a tried and true playbook that almost anyone can follow. If you're on the fence about whether real estate investing is right for you or about whether or not now is the time to grow your real estate business,

this conversation might just convince you. Let's go ahead and bring on Jesse. Jesse, man, thanks for being on the show today. Yeah, thanks for having me. I really appreciate this opportunity. Oh, man, amazing for you to be here. Why don't you give us a little background? Tell us where you were or what you were doing when you first got into real estate.

I'm an entrepreneur at heart. I was actually a coffee roaster for about seven years. During that time, my wife, she became a license agent, and that started growing in the background while I was doing this. And I just started getting the bug. And in 2021, we found an opportunity. We just bought our first rental property. It was on MLS.

We put 20% down. There was nothing crazy about it. And the thing cash flowed. So you said you were a coffee roaster. I assume that means you like owned a coffee business. you weren't like the barista at Starbucks. We were a wholesaler. So we got a cafe, but it was like years later.

Yeah, so we own the business. I sold coffee to cafes, restaurants, grocery stores, things like that. So I was on the back end. I'm sure buying an appreciating asset, it's got to feel more comfortable than buying coffee and hoping you can sell it to somebody. We ran through COVID through all that too. And like coffee prices like doubled during that time. But at the same time, the price on the shelf, it didn't really go up much.

So like we were eating a lot of that cost. I just, yeah, it was a lot of sleepless nights in that distance for sure. Yeah. Okay, well, that is definitely a great transition into real estate entrepreneurship. I don't know that the sleepless nights get any less, but it sounds like real estate might be a little less stressed in coffee. So 2017, your wife, Megan, got her real estate license. I think oftentimes what happens is people either are working in the real estate industry or they're exposed to the real estate industry. And typically it's on a side. that isn't an investor seeing the getting the payouts.

And so was that what made you realize, hey, I want to be on that side of the closing table? Yeah, it was, I started seeing her commission checks and like what I was bringing in. You know, I'm selling a $3 cup of coffee. I'm like, you know, what am I doing with my life? I need to figure this out. So 2017, she was an agent.

Was it four years, 2021? You bought your first one? Yeah, 2021. So four years later, we finally dove in. Bought your first deal on the MLS. Traditional 20% down, financing. But you said it cash flowed, so that's pretty positive. It must be a low interest rate at that time frame.

Yeah, at that time, that was like the glory days. I think we're at like a 3.6 30 year fixed loan. Like, we're just going to let that ride till the end for sure. But yeah, it's, I think the mortgage tax insurance like around 850. And like we're renting out right now for $1,600 a month. Oh, wow. Yeah. So how did you move on from that deal?

Because it's tough to find deals like that just sitting on the market now. Actually, the next two deals we found on the MLS. two. So the first three investment properties we bought, but all MLS. The second one, a single family home, like a three, two. It needed some work. We were able to get that one locked in. We put 15% down on a commercial loan and they covered all the renovation costs, everything like that. Still relatively low interest rate. We're able to cash flow that one. And then it really started to snowball after that. In 2023, we bought our first fourplex. It needed work. We were able to use the equity we had in those first two properties.

We put some money down in them and then they were also appreciating and we added value to that second one. So the bank, what they did was they used the equity from those other properties as collateral for a down payment. And so we were able to do $0 into that fourplex and it needed some work but not a lot. And we put like maybe $25, $30,000 into it and between all four units, which was pretty minimal. That's what really set the cash flow going and it just, it just, you know, it just, you know, it just just sustain the whole business after that.

That's when you're really playing the game. I have several questions about that deal, but before we get to that, we're going to take a quick break. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore. You need to go out and create opportunities. That's where PropStream comes in. With PropStream, you get instant access to over 160 million properties nationwide. Use 20-prebuilt lead lists such as pre-foreclosures, tax delinquencies, and vacant homes to

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about how he started to scale his real estate business. It sounds like you said you bought a fourplex. This fourplex did you buy it on the market or wasn't an off-market deal? It was on the on the MLS, but you said you were able to do something that a strategy I like to use. Essentially, it's called cross collateralization. So you bought this duplex, but since you had owned a few other single family rental properties and those rental properties had appreciated it, it sounds like the bank allowed you to pledge equity from other properties and use that as your down payment. Was this a local bank that you used or what kind of what kind of lending? was this? Yeah, correct. It's a small local bank here in my area. I didn't even know about it. They offered it to me like, hey, you should do this. And I'm like, what is that? And it actually

took two different meetings. He explained the whole thing to me. I took notes. I went back home. I'm like, I still don't understand this. And I went back to him again. I'm like, explain this one more time. How this works. That's, I mean, that's the power of relationship banking, right? So relationship banking is typically going to be a bank like a small local community. bank. And the reason they are called relationship banks are because local community banks must lend to local community businesses in order to generate income. They're not like bigger banks who originate loans and then sell those loans off. They originate loans and they keep them in their portfolio. And so what they're really looking for are good investments to put their money into

that they and then they're looking into good operators that to entrust what these. loans. And so essentially when you build that relationship, what you're doing is you're showing them that, hey, I can buy good deals. I'm buying deals that are going to have equity in them. And that makes the bank feel comfortable. Banks typically like real estate investors who are good operators and can buy good deals. And typically, they will go out of their way to figure out how to help you to continue to grow. The same thing happened to me with one of my first deals. The bank basically was like, hey, man, I want to give you a line of credit on this property so you can keep bringing us deals like this. For people that are listening, like if you have a relationship with a local community bank already,

if you've done some deals already, go talk to them about cross collateralization. Go talk to them about if you've got existing properties, go talk to them about pledging equity in your properties to use as your down payment. This is something that a lot of banks do. But if you have a good relationship, sometimes these banks just bring you these ideas and really help you, girl. That's super cool to hear. So you bought this quadplex. You used this cross collateralization strategy. What did you pay for it?

And what was it, what is it rent for? Yeah. So we bought it for $190,000. We paid full price asking on the MLS for it. We just, we knew there was an opportunity there. And this is in a smaller town outside of where we do a lot of our investing. It's actually my hometown.

So I knew the market pretty well. So bought it for 190. We put $23, $24,000 in it. between all four units. At the time, rents were very, very low. And it was actually lower than I thought it was. Three of the four units went up for rent when we purchased it. So one was vacant when we bought it.

And then when we took ownership, two voluntarily left. And we only just had one of the original tenants left. So we had to turn all three of those very quickly. So the first unit, we rented for $700 a month. Turns out that was way too low. We should not have done that. Is that tenant still there now? Actually, no, she ended up leaving.

But yeah, we had, my phone was ringing off the hook. I was like, okay. So the next one, we put it at 800 a month and then it started leveling out a little more. But that'll be in said, so we left the original tenant place. We raised his rent a little bit, but we didn't want to put him up to market. He'd been there a long time. We got rents up to about $2,400 a month and we had, whether they had like $215,000 in it, 220 in it.

So like we were over the 1% rule on the M1%. less buying this deal. Yeah, no, that's great. That's great. Kind of a bonus, too. There was a vacant lot with it next to it, and it was all part of the package. I got a vacant lot just sitting there free and clear too on the deal. Oh, man, I love doing that. That's another strategy I really enjoy is finding properties that have either lots big enough that you can split off a vacant lot. So like legally go to the city and split it off and then you'll get a vacant lot free and clear or specifically marketing to properties that have additional lots. Because typically when you buy the property at a discount, you essentially get the land for free, which you can use to develop later.

I've either, I've done all scenarios. I've bought land with a free lot and then sold the free lot to cover my down payment on the, on the property. I've also bought land with a lot and then we're looking at developing some of that land right now. So it really gives you options for later on down the road. And it's free land. Right. Like why, why wouldn't you do that and have those options? So I also want to talk to you about, so you dabbled in this multifamily now. So did that become your main strategy going forward or are you still focused on singles? It definitely put a light on my head for multifamily. I really look for them. I want to buy more of them, but it's not my only strategy. I still do a lot of single families. We actually purchased a condo last year because the numbers worked.

Yeah. And we did that too. You're like me, man. I'm going to, I'm going to buy it if it's a good deal. I'll figure it out after I buy it. Sometimes I'll keep it. Sometimes I'll say. So one of the things that's unique about you, Jesse, is your wife is an agent and a broker. And there's a lot of new investors who always asks the question, should I get my license to get started in real estate? And I'm not going to throw that question at you. But I am going to say, do you feel like it's been a benefit to you to have somebody around you that has a license?

Or do you feel like it's been a hindrance? I'm biased with it being my wife. I'm going to say she's a really good agent. but she actually is. Like she is one of the top producers in our area. And I go to her, when we flip a house or if we have a rental or anything like that, I'm going to her like asking all these data points and like, what do you think we should do, XYZ?

Even on the design, like, you know, hey, what are you seeing in houses that are selling? Like, should we, what color should the walls be or the, what kind of floor if you put in? Like she's like, yeah, the XYZ, you know, these homes with this Floreington that sell better. And it has been a huge help. And I, you know, I can get a pretty good idea of like what a value of a house will be, you know, after we do repairs, things like that. But like, she is way more accurate at it than I am. And I think that goes for most agents. Probably the most important person on a real estate investor's team is that investor-friendly real estate agent.

And luckily for you, you're married to yours. I always tell people that if you're getting your real estate license just because you want to be a real estate investor, that's probably not the best. first move because they don't really teach you about real estate investing at agent school. That's not really helpful for you. I think there are other things that you can do that are more beneficial. But having an agent, a good investor-friendly agent on your team is great. Like I would love for someone that was directly tied to my business to have their license. Luckily for me, I have a phenomenal agent. And instead of, since you married yours, I just moved into my investor-friendly agent's office.

Like, I rent a space in his office so that I can be that much closer to them. I like that strategy. Also, like, just the ability to have someone that can help you accurately comp because, I mean, the best way to comp a property is with MLS data. And so, I mean, that alone will save you a ton of money. So I don't know that you need your license to be a real estate investor, but having somebody with a license close to you is absolutely a cheat code. If my wife was not licensed, I probably wouldn't be either. But really the sole reason I have my license is to help her out with her listings, things like that.

If I was just full-time investor, I probably wouldn't have my license either. For those people who are considering getting their license, what are some of the benefits being licensed as an investor? So you specifically having your license, what benefit does it have for you in your investing business? One, I do have access to NLS data. That's probably the biggest one, especially where we're located. So we're in Missouri and it's a non-disclosure state. So sales price for homes and multifamily in the state are not public data. You can only get it through the MLS.

So there is Zillow, things like that, but they're not accurate. And so having that data is crucial to an investor. And then also the other big one is commissions. You can kind of leverage your commissions when you're buying and selling properties too. Talk about kind of how you do that. Like that 4plex we were talking about. When we went to put in an offer, this thing was on the market like one day. And there were other people getting ready to come in place other offers.

So what we did, we placed a full price offer on this thing and waived our commissions. So they got kind of an over asking offer without us having to overpay. Okay. In other words, they were able to actually pocket more money because they didn't have to worry about agent commissions because the seller typically pays the commission. So you waive your commission. So instead of them selling for 190 and then paying 6% or 3% in this case to an agent, they get to put that 3% in their pocket. Thinking about wholesaling or flipping your first property, but not sure where to start. The truth is, deals don't just fall into your lap anymore.

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So you know you're making smart offers. Plus, you'll have access to PropStream Academy to guide you step by step. Start your seven-day free trial and get 50 free leads at Propstream.com slash BP. That's P-R-O-P-S-T-R-E-A-M.com slash BP. Don't just dream about real estate. Make it happen with PropStream. The rise of the tech-savvy investors here. You don't need a huge team or tons of overhead teams. to manage rental properties. Just the right tools.

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That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. All right. We're back with Jesse Walters out in Columbia, Missouri. Let's talk about flipping houses. So Jesse, it looks like you had some experience, buying rentals and figuring out how to get a little creative with the financing so that you're not having to put 20% down every time. I know recently you have started flipping houses. Can you talk to us a little bit about what your flipping business looks like and how you got into that? I kind of flipped my first house on accident. Yeah, it was actually a condo here in town. We bought it for my grandmother-in-law to live in at one point.

It was just going to work out there. And then all of a sudden it didn't work out. Like it turned out she needed to go to a nursing home. And it was one of those things of like, well, I can. rent this thing out. I was like, but it's not really going to cash flow much. I wasn't buying it for the cash flow, so to say. I'm like, well, I can just turn this around and flip it. So that's what we did. We could put a good chunk of change in our pocket. I was like, huh, maybe I should keep doing this. Tell us about the numbers on that. It was kind of an interesting story how we got it. It was listed for

$150,000, which was already under market value. No photos or anything. I went and looked at this thing. It was tenant occupied. I spoke to the tenants for like half an hour. An older woman and her daughter was living there, things like that. And they kept asking me, you know, like, if you buy this, what are you going to do with it? Can we stay here? All these things. And, like, I just, I mean, I was very blunt and honest, but I was like, I mean, my

intention is, you know, for my grandmother and a lot to live here. However, like, I'm not just going to kick you out. Like, we're going to come with a plan to find you another place. I'm not going to make you homeless, things like that. Like, I will definitely help you in those ways. Well, it turned out those tenants were very in the ear of the owner. So the tenant was really driving this whole transaction. I guess I was the only one that came in there and told the tenants, I would not kick them out.

Everyone else said they would. I was the lowest offer on the table and they took my offer. You know, I often tell people that real estate is not a real estate business. It's a people business that transacts in real estate. The more we can find ways to take care of people, the more your business will thrive because there are people's lives at the other end of our real estate transactions, at the other ends of this wealth we're trying to build. A lot of investors, I don't want to say most,

but a lot of investors are very transaction focused. It's all about the numbers. If the numbers work, it's great. If the numbers don't work, then it's not great. And if I need to get rid of a tenant to make the numbers work, then I'm going to do that. I've often just found that being of service to people is the best way, for me to a grow my business but be sleep at night like if i lose a deal because i can't take care of the

because i wouldn't have been able to take care of the people then i'm fine with that i'll go find another deal where i can where i can help somebody so i i appreciate you taking that approach because i think that's what people need to learn how to do they need to learn how to take care of people first the money makes itself it took a little longer in this process but it we really didn't lose any money of it and or any sleep but we found these people actually a better place to live in the future and it was it just worked out for everybody okay so you bought it for 130 you put how much into it we put uh 18,000 into it is a pretty easy cosmetic that's a great deal yeah yeah paint carpet uh some light fixtures a couple new appliances and that was really it and you sold it for

we sold for 175 nice after commissions closing costs it was a little over 21,000 dollars Nice. Yep. And so now you definitely got the bug because I know I did after I did my first flip. Definitely. Yeah. Yeah. It was a another light bowl moment for me in my investing career. I was like, we need to do more of these. Yeah. Okay. So how did you how did you expand that part of your business? And what does it look like today? I rely pretty heavily on my outreach is mailers, but I've also bought from wholesalers. I bought a house from my, uh, it was a referral from my junk removal guy. So my contractors send me houses now too. So it's, it's, it's a, kind of all around. I still look on the MLS all the time. We bought one on the MLS last year,

and then actually another agent sent me a couple of duplexes last year to before it hit the MLS. What kind of volume are you doing in your flipping business? Last year, I closed out five flips. And this year, I already have five. I've closed one. And I've got four under construction right now, and then they're all in different phases. But, yeah, I, I assume. assume we'll probably be 10 to 15 by end of this year if we keep doing what we're doing. Yeah. Okay. That's amazing.

And so you said Columbia, Missouri is where you live and invest. Is that the only market you invest in? For the most part, yeah. So Columbia and then my hometown is Boonville, Missouri. Small 8,000 population. It was going to say, it sounds like you made that up, to be honest. Yeah. It kind of is.

The thing Boonville is known for is to have a casino. It's probably one of the smallest towns in the nation that has a full-blown casino in this thing. Yeah. But it really helps the economy there. And it's a commuter town for Columbia, which is the University of Missouri is, a lot of hospitals. It really economy-driven town, like with a lot of jobs, a lot of people moving in and out of here, things like that. So Boonville has naturally kind of grown with Columbia as Columbia keeps growing. Like, as Columbia gets more expensive, Boonville becomes more and more attractive to renters for sure.

And we've definitely learned that in our experience. So I have more luck within the rental market in Bumble than I do Columbia now. It's a lot easier to get into it. It's easy to find renters, good runners, too. And yeah, they're appreciative and want to be there. Yeah, man. I would encourage everyone who is investing in a specific town, especially if that town is a larger town,

to look for a smaller town within 30 minutes to two hours away, that share some of the same market dynamics and have a good strong economy. In Jesse's case, this is fueled by a casino. Typically, there's always a small town in and around your larger town that has similar market dynamics where it may be easier and cheaper for you to find a deal, but still get that consistent cash flow. All right, before we get out of here, Jesse, it sounds like each year you've kind of improved and progressed as a real estate investor and become more mature.

What are you doing now or in 2025 that's different than what you've done in the past? A big change we're making this year in our investments. So that fourplex we mentioned, we actually sold it. So going back, we bought it for 190. We put 20, 25 in it, I think. And we sold it for 311. Oh, wow. two weeks ago.

But anyway, all those proceeds, we're 1031ing it into a vacant lot, a block over. We are going to build a brand new triplex on that. Do you mind sharing the numbers for this new construction? Yeah, so this triplex, we're estimating to cost around $400,000 to build. And with it being in the smaller town, the land that we're buying is hardly anything. I think we paid $17,000 for this lot. Yeah, so there really isn't much going into. It's really just the build itself is what we're investing in.

Based on my experience with rentals there, there's a huge need for it. And especially three bedrooms, there's a lot of twos and ones in these smaller markets. There are no three. So we're building all three bedroom units. And it'll have off street parking. It has laundry, like things that like these smaller towns just don't have, especially where we are. It's a lot of older homes, 100 plus years. And there isn't laundry hookups or anything like that.

So it's kind of become known that you just don't get laundry in this area. Well, we're going to have that. So we're going to offer something else. And I think our rents, I'm projecting to be between 13 and 1,500 a month per unit. Wow. So I'm building at the 1% rule just about. Yep. So it sounds like on the low end, you're at 3,900 a month in rents on the high end.

You're like at $42, $4,300 a month in rent. You're bought the land for 17. You're building for 4. So you're all in at 417. And you're hitting the 1% rule on New 10%. construction. And we all know, like, the 1% rule is a great rule of thumb, but I think, I think the cool part about it is you're at the 1% rule in new construction. A lot of your expenses with rental properties are maintenance and capital expenses. But when you do new construction, your maintenance and

your capital expenses are typically going to be far lower because the property is so brand new. So you kind of put that off for five to 10 years, which allows you to actually make. more cash flow. So I think that that's great. And I also love that you, you, you didn't just say, I'm going to go build something. You said, I'm going to go build something, but I'm going to build something that's going to have demand. And that's why we always tell people like, real estate is such a local game. You have to understand your local market. And your understanding of your local market told you that there's a shortage of three bedrooms and that there's a shortage of rental properties with laundry. And so essentially by building something that doesn't exist, you get all the demand

for that product because there isn't that product anywhere, which essentially is going to allow you to probably get the top rents in the market because you have a brand new product and you have amenities that don't exist in your market. So it sounds like if you want to invest in Columbia, Missouri or Boonville, you need to build three bedrooms or you need to go buy laundry mats. Give me a couple of years head start, but yeah, you guys have come. That's okay. Go go find all the laundromat owners in the area. Let's start marketing to them and I'll go on on a laundromat business with you down there. I love it. Let's do it. All right, Jesse. Thank you so much for sharing your journey in real estate investing with us here. Do you have any last minute advice for somebody who's brand new and looking to get started? If I could say one thing that really propelled me forward and success of all this, get in with a group of like-minded people. It gave me so much more complex.

confidence, like my problems are not unique. Everyone's dealing with the same stuff. And if you can hear other people talk about it, either you guys can, you know, kind of drink a beer together and just talk about it or the other person will have a solution for you, one the two, you know, it's it has helped me tremendously. 100% man. Who you choose to be around will show you what's possible. I've always said that. And it's hugely important. So change your circle, change your circumstances, man. Thank you again, Jesse for joining us. We appreciate it having you. Hopefully you will all learned a whole lot. And if you think the BiggerPockets audience could learn from your own investing

journey, you can apply to share your story on the show just like Jesse did at biggerpockets.com slash guest. I am Henry Washington and we'll be back with another episode of the Bigger Pockets podcast in just a few days. Thanks for listening. Thank you all for listening to the Bigger Pockets Real Estate podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday, and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K, copywriting is by Calicoe content, and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.

www.com. The content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk. So use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose. And remember, past performance is not indicative of future results. BiggerPockets LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.