BiggerPockets Real Estate Podcast - 746: 28 Rentals Before 28 Years Old (and Doing it All in Just 3 Years!) w/Jake Radawick

Episode Date: March 30, 2023

Twenty-eight rental units before turning twenty-eight years old? That takes some SERIOUS drive. But after talking to Jake Radawick, the whole story makes much more sense. Within three years, Jake built a rental property portfolio that brings in over $200,000 a year in rent and provides Jakes with a full-time salary’s worth of passive income. But Jake wouldn’t have done any of it if it weren’t for his family—specifically his brother. Jake’s older brother has been his “why” for as long as he can remember. He broke through barriers and was able to achieve what most thought impossible of someone with autism. This gave Jake the confidence to go after goals that others told him weren’t achievable. And now, after three years, a lot of work, and some serious goals, Jake has a real estate portfolio that would have taken most investors decades to build. But it didn’t come without its struggles. From financing blunders to pipes bursting and flooded basements, this episode will open you up to the realities of building a sizable rental portfolio. But, if you’re willing to take risks like Jake, pivot when possible, and build a team of investing experts, you too could replace your W2 income with real estate profits in just a few years!  In This Episode We Cover: How to build a sizable real estate portfolio in three years or less Knowing your “why” behind investing and why you NEED one to be successful How to save up for a down payment and why side jobs are a MUST when building wealth Live-in BRRRRs and capitalizing on equity to build your portfolio even faster  Investing out of state and why balancing cash flow with appreciation is a must The “snowball” method that Jake used to buy properties faster than most investors What to do when no one will finance your loan and why you should always have a great relationship with your banker And So Much More! Links from the Show Find an Investor-Friendly Real Estate Agent BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch BPCON2023 Listen to All Your Favorite BiggerPockets Podcasts in One Place Learn About Real Estate, The Housing Market, and Money Management with The BiggerPockets Podcasts Get More Deals Done with The BiggerPockets Investing Tools Find a BiggerPockets Real Estate Meetup in Your Area David's BiggerPockets Profile David's Instagram David’s YouTube Channel Work with David Rob's BiggerPockets Profile Rob's YouTube Rob's Instagram Rob's TikTok Rob's Twitter Network with Other Investors at a BiggerPockets Meetup Book Mentioned in the Show: Buy, Rehab, Rent, Refinance, Repeat by David Greene Investing in Real Estate with No (and Low) Money Down by Brandon Turner SCALE by David Greene Connect with Jake: Jake's BiggerPockets Profile Jake's Instagram Jake's Facebook Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-746 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

This is the Bigger Pock's podcast podcast show. 746. Oh, man, that felt good. I can't believe three years ago I was buying my first property and today I'm collecting over $200,000 in rent. So, welcome to the show, everybody. That was Rob's attempt to try to sync with me on an introduction. As you can see, there's a reason that I usually do it alone.

But Rob, thank you for trying. My Fusion brother. Yes, that's right. Let's do that again. Put your hands up. You have to watch this on YouTube to see to see the magic happen. Today's episode is going to make you laugh, make you cry, make you want to go run through a brick wall, and make you want to go hug your kids and pet a puppy. It is fantastic. Rob and I interview Jake Rattowick, who is a 27-year-old who has 28 rental doors, over $200,000 in income.

And he's done this all in just three years, getting a humble start as a valet parking car. moving into live-in flips, using the Burr Strategy, putting low money down on properties, and then scaling into a different market and buying a 20-un apartment complex. That and more in today's show. I could talk about this forever. Rob, what were some of your favorite parts of the show? I think it's a really great story. If you start out with the trust fund and you have a ton of money to get started in real estate, this is how you scale. No, obviously that's not what this is. This is actually a very, a perfectly, I don't want to say normal because it's like it's very abnormal how quickly he was able to do this. But I love his story that he just, you know, he wanted

to save up $9,000 and he did that. I mean, there's a lot more to this. We'll get into it in the episode. And then he got into his property. And then he scaled again by putting another three and a half percent down. And he scaled again and again. It's this snowball that I think anybody listening at home today can achieve. And he made that very obvious because it was all mindset for him. That is such a great point. It was how he built the momentum of a snowball that got bigger and bigger and bigger and now that snowball is taking out the obstacles for him. He's not having to do all that work. If you are a new listener, you're going to love how he got his first deal with less than $10,000 and he gives specifics on exactly what he did to save that $10,000. And if you're an experienced

investor, you are going to love how he approached going to banks to get a loan when they kept telling him no. He eventually figured out a way to get them to say yes. And when you listen to this guys and gals, I promise you, you're going to think, is it really that simple? Does that actually work? answer is yes. He did the right moves. He took the right steps. He went to the right people. And he just kept doing it until he got what he needed. It is not that complicated. This is an awesome story. You're also going to love that Jake shares his why. It has to do with his family, what he saw his parents going through and his older brother. This one is one for the record books. You're going to want to share this with other people. It was moving. It's a moving story. And I think a lot of people today

would take action. And I'm excited for everybody to listen to this one. Yeah. And you want to watch all the way to the end because you'll get to see Rob Cry and who doesn't want to see that. Just a little. So someone was cutting onions over here. That's right. Before we get into today's show, today's quick tip is surround yourself around people who are smarter and more successful than you. That's something that Jake talked about a lot and how he was able to level up and scale his entire portfolio. Yeah, his idea to buy that apartment complex literally came from a meetup that he went to and he just asked honest questions. Guys, where should I be investing? He didn't have to pay for for a super expensive course. He didn't have to

overthink it. It was literally just talking to other investors. So get out there. Share your love of real estate. Find other people that love it and make some progress yourself. And get on the BP forums. Ask there. I mean, there's hundreds of thousands of people there that will answer your question. Yeah, now more than ever this is important because it's hard to find anywhere

that works for real estate. So if you haven't been talking to people, now's the time to do it. Okay, we're going to shift gears for a minute to cover something important, especially for new landlords. The shows often talk about getting stuck, doing everything ourselves, and the cost of sweat equity. The key question is simple. Is my time better spent elsewhere? I use a tool that cuts down on a lot of landlord hassles. And the wild part is, it's just $12 a month. It handles

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There's even a dedicated bill inbox for each property to keep everything organized. Ready to simplify your workflow? book your free demo at bill.com slash bigger pockets and get a $100 Amazon gift card. That's bill.com slash bigger pockets. All right. Let's bring in Jake. Jake Radewick, welcome to the bigger pockets podcast. How are you today, my friend?

I'm doing good. Super excited to be here. Well, I'm glad to hear that. Before we get into your story, I want to hear where do you live and where are you investing? Great question. So I live in Spokane, Washington. It's roughly 15 miles west of the Idaho state border.

I'm investing locally. using owner-occupied loans here, and then I'm also investing in Memphis, Tennessee as well. And I hear you take advantage of those beautiful outdoors in Spokane. What outdoor sports are you into? You know, I have a great girlfriend. She's super active and she loves CrossFit. So anything I can do to keep up with her. I love to mountain bike, love to snowmobile, ski snowboard. The cool thing about the inland northwest is we have tons of lakes and tons of mountains. So whether it's a ski resort or just hanging out in Lake Quarterlyne, just tons of opportunities to enjoy summer and winter. That's cool.

It's important to like where you live. Rob and I were having a conversation about why is there people that still live in certain areas? I don't want to say any names because we probably have listeners there, but you're like, it's freezing cold. It's so boring. You know you can leave, right? You don't have to stay there. And I was wondering if there's a form of Stockholm syndrome that some of these geographic regions have a hold on the people that live there. Because it is important.

And you have to enjoy where you're at. Otherwise, what's the point of doing all this? Now, I know you started investing only three years ago. You made a remarkable amount of progress in that time. What was going on in your life three years ago that made you decide to get into real estate? It's a great question. So it was March of 2020 and I was working as a project engineer for a construction company in Seattle, Washington. And then on the side, so I would do that during the day.

And on the side, I was working as a valet at night and on the weekends. at a higher-end restaurant in Everett, Washington. And so I was grinding. I was working during the day and then taking as many shifts as I could at night. And I was talking to the owner of the restaurant, and she was talking to me, and I was like, I need something more. I'm looking for something more. And she's like, Jake, you're super driven.

You've got to get in real estate. And I was like, I hadn't even thought about it. And so that kind of pushed me towards real estate and buying my first property over and near Seattle, Washington. That's funny because I also got my start in restaurants. Yeah. So, Jake, you were looking for more. What was the reason for that?

Was it because you just wanted more money? Were you not liking the paycheck that was coming out of being of LA? Or just general, like, the idea of wanting to kind of progress in your career? Yeah, Rob, great question. So I just, I feel like all my life, I've tried to take as little as I can from my parents. My parents have always taught me to work hard. but my brother lives with them and my brother's super important to me. And so they spent a lot of time taking care of him and enjoying life.

And so I try to be as self-sufficient as possible. And so I got in real estate because the idea of passive income, I was working as many hours as I possibly could in a week. And I just needed a way to make more without working any more hours, which wasn't possible. What would you say was driving you to need to make more money? Well, I have this dream and call it far-fetched, but I really want to have a life where my wife doesn't have to work. And then I have a brother that's autistic and he's 35. And I want to be able to take care of him and not have that impact my future family as well as the life that he deserves as well.

So I really wanted to, I felt like it's my responsibility to ensure that I can be there for my future family as well as the family I have currently. Okay, that's some pretty heavy pressure that you're feeling with. And you were 24 at the time. Yeah. So you're looking at this realizing I don't want my spouse to have to work when I get married. And my parents are stressed out from having to care for my 35 year old. I guess at the time he would have been 33 year old brother that you said was autistic. Yeah. And you also recognize that someone's going to have to take care of him. So you feel all that pressure on your shoulders. And what was your plan originally? Just work a lot of shifts at restaurants? Or were you going to try to get into? the higher end restaurants. Like what, what was going on in your heart that facilitated this conversation?

Because the manager of your restaurant didn't see this going on and just go initiate a conversation. I'm sure you were reaching out trying to put together the pieces of this puzzle. You know, I don't know. I was just, I really liked the idea of being self-sufficient.

My parents always taught me to work hard and they were really good at working a lot of overtime and a lot of, they were really good at working hard as an employee. And I really wanted to break out of that cycle and identify a way that I can, could start being an investor. And as soon as I rented out my first townhouse and I had my first taste of passive income,

I was like, wow, this is remarkable. I could do my day job and invest in real estate. And the passive income from there can support my brother while my active income can support my family. Yeah, that's, I mean, that's exactly how real estate works. I'm just curious why you think you, you really chose to take on the responsibility of caring for your brother as opposed to. I'll just let somebody else do it.

I'm just going to stay in my lane and do my thing. What is it about you? Maybe up to that point in your life, values that someone had put in you? Like, where do you think that came from that you ran towards responsibility and answer that call as opposed to what most people do, which is just, well, that's my brother's issue and my parents' issue? You know, I think it was just me growing up and, growing up and watching my dad, he did a lot for us.

And to include, he worked as a contractor in Afghanistan where he worked. out of country for all of all of all but 29 days out of the year for four years straight and he did that so we could have the great life we did but he sacrificed being present in our lives through my whole high school career and so growing up I noticed that and I took note of what he sacrificed for us to give us a good life and my goal was I wanted to give that same life to my future family but I want the opportunity to be present because that's so important. He used to call up his buddies that he, so to give background, he was 20 years military. And then he was 10 years. He was a police officer before he became a contractor for a private company in Afghanistan. And during a police officer, while he was a

police officer, just like you, David, he was taking on every overtime shift he could. And I was growing up and I saw this. I saw that, you know, dad was always gone. And I didn't want that for my kids. And so I wanted to figure out a way to break the cycle. And I saw it. I was like, you know, if he's giving all this time now, I'm going to give all this time before I have kids so that I can be present in those moments. That's some powerful stuff. So you saw, your dad really set the example of work ethic. So you understood I want to work really hard. I want to continue the legacy and continue the momentum that my father built. But you also saw the downside of the way he took to working hard. You didn't get to see your dad as often. He didn't get to see his family. I know what that life is

like. You're tired all the time. You're sleeping at weird hours in the day. You're always grumpy. You just have this sick, nauseous feeling that you care around all the time for being sleep deprived and exhausted. You never really feel healthy. You never have a lot of energy. So you realize I don't want to go that way, but I'm not going to rebel completely against hard work and say, I don't want to be like my dad. You actually found this like perfect medium. Yeah. Yeah. It's nobody in my family before me, has ever owned more than one piece of real estate. So they, I was kind of seen as a crazy person when I got into it. But, you know, I appreciate them supporting me all the way through. And it's done me pretty good so far. Okay. So what was the conversation like with your

restaurant manager? How did they bring real estate into the conversation? Did they paint a path for you? Well, she, so I was currently managing her whole team of valet drivers. And I was just talking to her name's Jan. I was like, Jen, you're, you're doing so great. I mean, what's the next step here? And she's like, Jake, you're, you're an awesome employee, but you got to be more than an employee. You got to be an investor. And so I, she just said, he's like, you got to buy a piece of real estate.

The real estate markets, it's probably 2019 at this time. And she's like, you got to buy a piece of real estate. The real estate market in Seattle, Washington is booming. And I'm making so much equity. It's like that equity is going to be so much more than you could ever make. You can work as many hours as you want here, but it's never going to be as much as you can gain just by owning a piece. of real estate. And so that's what I did. I didn't have a plan. I didn't know what I was doing.

I didn't even know what an inspection or an appraisal was when I put my first offer in. I just took it step by step. I said, what do I need to do? I need to contact a real estate agent. I did that. They directed me to a mortgage lender. And then I went there and I just took it one action step at a time and it kind of fell in my lap. I think that's a good point to hit because even though it sounds simple, there's a lot of people don't take action at all until they know all 27 steps or however many it's going to be. And they get to 26 and they're not going to start until they know that 27. Whereas the way it typically works out is you take the first step and that is what opens the door to the second step. And then you ask the loan officer, well, what do I have to do

next? Well, you're going to find an agent. Do you know one? Yeah, I know three. Here you go. And you talk to them and you talk to other people. Now that agents, you don't want them to say that. You want them to say this. And each of those steps opens doors to the next step. It's, it's kind of like walking through the fog or Brandon Turner used to have the analogy of driving through the fog. You can't see what's 100 feet in front of you until you get closer to it. And that's, I mean, I love that you just said, okay, I'll just keep taking it one step at a time. What did that first deal look like? What caught your eye? What advice were you given? What made you say that's the one? David, I would love to say I was a genius here, but I wasn't, I was a, I had,

$15,000. Actually, not even that, I had $13,000. And I just had to find something that I could afford and fix up. And so we found something in Lake Stevens, Washington, and I was able to buy this townhouse. Didn't have a plan, just knew that I was going to buy it and then move into it. Ironically, this is right when COVID was hitting. And so I bought it. And then I lived in it temporarily, fixed up. Add some more LVP flooring. Now, at that time, I read the book by Brandon Turner, How to Buy Real Estate with Zero to Low Money Down. And I'm like, oh, my gosh, there's actually like a strategy to this. And then I read your book, Burr. And I was, from there, it was like a rocket ship taken off. I immediately realized Seattle was great for appreciation, but I could move six hours away and invest in Spokane, where I was able to get a triplex with an FHA loan for 3.5% down.

I left my job, found a new job, just to travel over here to invest in real estate. And that's where my journey took me. So after that deal, it kind of opened the door to what real estate could offer. And then from there, I read a few bucks and it was off to the races. So that's actually the secret to success for everyone listening. read Brandon's book, read my book, and you'll be on a rocket ship to millions, really. And read your upcoming book scale, right? That's coming out pretty soon. Oh, I love how this is becoming a running thing here. If you ever listen to the really old episodes of the Bigger Pockets podcast, Brandon and Josh would have these frequent callback jokes like Brandon couldn't pronounce the word rural. Josh did not like the city of Detroit. Josh would repeatedly make fun of Brandon because everything, really, he was very good at doing that. But there would always be these like callback jokes.

And my book scale is being one of the only books that Rob has ever read other than his Japanese comic books. This is coming up all the time, Jake. So if you're curious why he's doing that, it's because Rob has developed a sense of humor. It's like he's going through adolescence right in front of our eyes. We've got a child actor. Well, you know, every new book that's coming out, we're coming out with so many great books to help people like Jake out in their journey.

So, you know, it's promotion month for you, David Green. I can't say that word either. So I'm just like Brandon. I can't say that word. Well, because you're investing in a. rural area. Yes, that's it, Spokane. So, okay, here's what I like so far.

You did not overcomplicate things. You just said, I'm buying small multifamily. I'm using an FHA loan. I'm going to buy an area where I believe I can get tenants. And then I will see where it goes. There's really limited downside to that. Really, the only way you mess this strategy up is you buy in an area where nobody wants to rent or there's high crime or other undesirable attributes or the property doesn't

cash flow. So if you know how to do basic analysis on a deal, you don't need that much money to get started. How much did you end up putting down on this property? I ended up putting down, I think, 9,900 is 3%. So if there's a program through Freddie Mac, I believe it is, or Fannie Mae, the first-time homebuyers program, and you can put down 3%. And so I put down 3% on something that was $320,000.

It's amazing, right? That's amazing, yeah. So I went first deal was 3% down. second deal was 3.5% down. And so within 12 months, I had two properties, three tenants, and I only put six, I mean, less than $20,000 into deals. So Jake, tell me a little bit about how much were you making as of L.A. If you don't mind talking about this, because it probably took you a while to get there.

And I think this $10,000 number, you were at $9,000. But did it take you a long time to get to that $9,000? or is this something that, you know, were you hoarding your whole life? It did not take me a long time once I was, I decided I was going to do it. I made the mistake, of course, a lot of young guys will do this. When you get out of college, the first thing you want is a new truck. So I bought a new truck, and that put me behind. Wait, real quick.

How much did you put into that truck? How much did you spend on it? Or, like, how much did you put down? I put the same amount as I put in my first house. That's what I was wondering. Nice. Well, you know, I love, though, that you said, the most important thing you're going to say this interview is like it didn't take long as soon as

that I decided I wanted to do it, right? So you put down $9,000 on a truck and then you're like, I want to buy a house and then you saved up the cash? Yep, I saved up. So I always had, you know, you guys did a podcast about side hustle. Side hustles are so important. So in college, I work two jobs. Out of college, I got a job. Everyone that gets a full-time salary job, usually just does that salary job. Well, I did my, I did my salary job and then went and worked at a restaurant where my coworkers were coming for happy hour. I would leave early, set up the valet team, then valet my co-workers cars, and then stay there till 930, 10 at night, work there, and then see them at work again at 6.30 in the morning. Then I moved to Spokane. I obviously

don't have that ballet job anymore, and I'm like, okay, what am I going to do now? Still managing my house in Seattle, moved to Spokane, have my triplex. And I hear this new app called Turro. And so I'm like, okay, I got this new truck and this hefty payment because I'm a dummy. And I was like, how am I going to offset this? I'm going to turn this liability into an asset. And so I just start turrowing it as much as possible. I buy a little dual sport motorcycle. So I would put the motorcycle in the back, drive the truck to the airport, drop it off, take the motorcycle out, ride that for however long it was rented. And then it was time to pick it up. I would just come and ride this little dingy motorcycle back, put it in the back, and then just get my truck back. So were you actually making

money on Turro? I used to do that back in the day. And I just did it so that I could break even on my car payment, but you were actually turning a profit doing this? You know, it was until it got saturated. In 2020, it was pretty good. 21 was not as good. And then 22 was pretty slow. But yeah, you know, with COVID, a lot of the rental car companies sold off a lot of their fleet to increase their revenue. And so that meant they had less cars, which meant Turro was prime for that, for that period. Nice. Okay. And so it was basically through valet and side hustles and Turro that you were able to get up to your first $9,000 or so? Yes. Yep. Cool. And so if you don't mind me asking, what was the, you know, were you making any cash flow on these first couple of

properties? Yeah. So in that townhouse, I was making $100 in cash flow. So I really had no cash flow. But I moved, but I only had it. I closed in March and I accepted a new job in December over in Spokane. So I knew I was moving over 250 miles away. And so I immediately rent rented it out and then I moved and then I used my FHA loan to buy the triplex. I knew it was a good idea and I looking back I didn't know how to run my numbers exactly the way I should have but it worked out really well. I bought something that was under rented, increased the rents on them, was there on site. I managed that until today and I got some great property management experience and was able

to go from there to buying a few more. So we're going to get more into your story and we're going to learn about how you scaled your portfolio. But I want to take a quick second and dive into how what you're doing is what we call the snowball method or building momentum. Most people understand this from the perspective of I have three houses. I pulled out the equity. I reinvested it. I got to nine.

They see the snowball once it's already pretty big. But I love about this is you're explaining what you did to push the very first pebble down the hill and all the ways that that built momentum. So you start off as a valet. You're doing a good job in the position you have in life. so that they promoted you to be over the other valets. They don't do that to the bad employees. They do that to the good ones. Your boss likes you, which meant you are sacrificing.

You have a servant's heart. You're bringing skill. You're bringing value into the marketplace where you are. You're not waiting until you get a better lot in life before you bring value, right? Those values that your father gave you and your mother translated into success in the workplace. That led to advice that you need to buy real estate. So now you get a side hustle and you come up with this Turro idea where you were able to take a bad decision, which is buying a truck and mitigate the loss, right?

You're building momentum. You come up with this clever idea to put your motorcycle in the back of the truck so that you have a way of getting around while you're getting your truck payment paid for doing this Turo method. That led to you buying the first house, which you did from the money that you saved, doing something anyone can do. There's nothing different about your story that any other American couldn't do if they wanted to go get a second job, rent out their stuff on Turo, work.

Like you said, you would work at the valet place and you got a second job. to make more money and you would then serve the people that were your employees, basically. Like the people that worked for you, you're now taking their keys and parking their car. Okay, like that's incredible that you had that level of humility because you were that driven. This is the work it takes to build up your down payment to get the snowball moving in real estate. Okay, and yes, you did use a low money down strategy, but you still needed some kind of money. And I love the approach you took was, I don't have $9,000. I guess I can't invest in real estate.

It was what would it take to make $9,000? You're correct, Dave. Yeah. Rob, what are you thinking here? Because you also did the Turro thing, you did the house hack thing, you guys both have great hair. Like, there's a lot you got in common with Jake here. Yeah, I love it, man. I think a lot of people say that they want to make more money or they want to get into real estate. But the actions that they take to do that never really lead up to fulfilling that desire, right? And so you said that you wanted to do this, right? But I think the

the thing for you that I'm seeing in your story is that you needed to do this, right? You needed to succeed in real estate because you had your why, right? Your family, your brother, you talked about that. And with that fire burning under you, you're like, I need to figure out how to make $9,000 bucks to get into real estate. And I think that's a very easy mindset change that a lot of people can just think about, right? Like, I need to do this. If you need to do it, then you will go out and make it happen because a lot of people, like I said, they want to do this stuff, but they don't actually take the action because, you know, a lot of us work nine to five jobs and you're really tired afterwards and no one wants to actually like work after their nine to five job because they

feel like they've worked enough for the day. You know what I mean? Yeah, so I want to add on that. Not only did I have my why, but my why is my brother and he's not, I choose my words carefully here. He's my biggest inspiration. So this is actually him right behind me right there. And growing up, I remember he was always told there's no way with your disabilities you'll ever be able to get a driver's license. And yeah, it took him a few times. And yeah, he didn't get it to. He was about 19 years old, but he eventually got it. There's so many people when you have a disability that try to tell you what you can and cannot accomplish. And he never listened. He never listened to anything they said. And he really wanted to go to WSU and get his zoology

degree. And yeah, it took him seven to eight years. But he did it. He sat in tutoring for six hours. a day. He can't type. So he had a tutor that type form. And I mean, that those two things right there that he did showed me that if you don't listen to what people say, if you, if you don't let other people, other people tell you what you can accomplish, you can do so much more. And so he was my biggest why and my biggest inspiration. That's amazing, man. The thing that stands out to me is where others might say, that's a lot of work. You're working two jobs. You're driving to the airport. You're dropping it off. You've got to get the motorcycle out of the truck. That's just too much work. Real estate's supposed to be passive income. You're comparing yourself to your brother and saying, I got it easy compared to what he's got to do. It really does change the way you approach these things when you look at this and say, well, whatever I have to do now is much easier than what my brother's having to struggle with. This is easy work compared to him, which I think probably had a role in why you took such a vigorous approach to building up this momentum in your snowball. Yeah.

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BiggerPockets.com slash dominion. Again, that's biggerpockets.com slash dominion. Well, that's awesome, man. So you get into these two deals. You said that you're making some cash flow. You're starting to kind of figure things out. Now I think we get to the point where it's, how do you actually scale from this point, right? Because we know that you've got the tenacity, the grit to make this happen. What came next for you to sort of figure out how to expand your portfolio? One thing at a time. One thing at a time. So we're living in the tri-plice. and we get this opportunity. You know, I cannot,

I could not have accomplished what I have accomplished without great agents. I had an agent, my girlfriend and I had an agent that brought us a deal and they said, hey, this is a great flip. And we're like, all right, let's go for it. We didn't know what we're doing. I had never flipped a house before.

I'd thrown in some LVP, but I've never done a full flip. and that was the biggest learning experience ever, not only for my relationship, but for learning how to flip a house and what to sub out and what not to sub out. I mean, and I flipped this house with my girlfriend. We lived in this, we lived in the house. We had no way to cook our food besides an air fryer and a toaster. We had lawn furniture set up in the middle of the, in the middle of the house for a summer.

How much were you spending on hair care products during this time when money was tight? You know, it's so funny. I'm such a frugal guy and my girlfriend and my friends make fun me for it. I just go to great clips and I tell them, hey, you know, just cut the sides off, keep a finger-laced on top, make it easy. So this is a humble brag. You're like, it just looks this good on its own memory. It just looks this good at all the time. I appreciate the compliment. Can you define what LVP for us is? Yeah, luxury vinyl plank flooring. And if you're going to do any sort of rentals, I definitely recommend it. It's just this, uh, You can get at Lowe's Home Depot, and it looks really nice and it's renter-proof.

Yeah, you could beat the credit out of it. So you mentioned you moved, you were working a new job at this point, right? What was that job? Yeah, so I moved over. I was a project engineering construction, which basically is an assistant project manager. Moved over, took a job as a project manager for a company over in Spokane, Washington. So now I am managing up to 15 to 16 commercial construction jobs. jobs at one time. So I'm managing the HVAC and plumbing specifically, but I'm managing 15

budgets, 15 construction crews, and I'm staying in communication with 15 clients slash customers for my main job. And so I just took what I'd been doing commercially from my W2 and I said, well, if I can manage a budget and a schedule for a full-time job, I'm pretty sure I can do it. it for this residential house. But the funny thing is, guys, just because everyone thinks if you work in the trades, it means you know how to do the trade. I managed the budget.

I use a keyboard, and I tried to do my own plumbing and my flip, and my poor girlfriend, I actually ripped a pipe in half with a wrench on a Friday night, and we flooded the basement, use all the towels, I used all the towels to mop up the basement. Then I told her that she had to shower at the gym. We had to go to the gym to take showers for the weekend because I wasn't going to pay a plumber overtime to come on the weekend. And then she's like, okay, can I have a towel?

And I was like, well, all the towels are actually in the basement soaking up the water in the basement. So we had to go buy new towels and shower at the gym. Oh man, nothing solidifies a relationship like living in a remodel. Okay, so this is really great. And this actually goes back to what we were saying earlier, where people work their nine to five job and they get home and they don't want to work more, right? You were not only working a nine to five job, you are working in construction. And I'm sure the last thing you wanted to do was come home and actually continue doing more construction and remodeling. But you mentioned you were living in this property at this point, was there ever a moment that

you were like, yeah, you know what? Maybe we're just going to go rent or go buy another place and not live in the same area, in the same like house. Yeah. Yeah, you know, I promised my better half. I would not have her live in an unfinished house again that we would, if we did another flip, that we wouldn't live in it at the same time because I think it's fair that she deserves a working shower and a way to cook food. But, you know, you're young, you live, you learn. And I grew so much through the experience. I had no idea what I was doing going into it. I subbed out some stuff that I probably couldn't done myself and I tried to do some stuff myself that I probably should have subbed out. I mean, I definitely don't recommend trying to replace a dryer outlet by yourself. I learned that

the hard way. So I think, yeah, there's stuff that I learned that I definitely help propel me forward. And I think if you just go in and you're just willing to fix it. it out, you can accomplish it. I'm mostly, I think I mostly agree with all that. David, what do you think? Because like, for me, when I was building my tiny house, I ran out of money and I kicked the crew out and I had to finish the last like 40, 30, 40 percent. And so I actually did all the final electrical. I had several outlets blow up in my face. And then I broke several pipes doing it. I'm really glad that I did it though. But Dave, did you ever find yourself in the middle of like your own remodels just doing tasks that you that had to get done for the sake of

budget or were you always pretty good at delegating that stuff bro i i can't even call it a remodel like i tried to do some stuff myself like there's two crazy stories one was trying to take a bush out of a backyard that ended up in an entire day thousands of dollars spent i ended up hacking into the pipe that the pool you would use to like filter the water and flooding the entire thing because I don't want to spend 150 bucks to have some professionals pull this bush out. I could take up the whole podcast telling that story. The other one was changing the door locks after a tenant left, which was like five trips to Home Depot to buy different tools.

It was so bad that I realized I could have literally just gone to work, made overtime, and it would have been it would have been 10 times more money than what I had to, you know, saved by hiring somebody. So I've never even attempted to do a remodel. I've always just focused on the number. numbers and then kind of staying in my lane. I have respect for you guys to do this. You know, like Brandon Turner has tons of stories of carrying toilets out of houses that were literally filled with feces and crawling through basements at six foot five trying to fix things. Like,

I think he likes doing that stuff. Maybe each of you guys have a little part of you that's like, I like taking on the challenge. It feels like going out into the woods and coming back with a deer draped over your shoulders. I did before I went full time into it. You know, back when I was first getting started, real estate was a hobby. right? And so when it's a hobby, you know, you kind of enjoy learning and everything. Now, of course, you know, it makes sense from a scale standpoint. And it seems like that's something that you were starting to figure out as you were going, Jake. So were there any systems or habits or anything that you were working on that helped you determine your scale strategy? There wasn't necessarily

systems. So I, after the triplex, we flipped the house and then we moved into a duplex, that I put 15% down on. And after that, I knew I had to, I knew Spokane was a great appreciation market, but I wanted to invest in a cash flow market to diversify my portfolio. And so I actually, I talked to some friends, and there was a meetup.

So you guys on Bigger Pockets have local meetups listed on your website. And there's this local meetup and mastermind meets in Baltha, Washington. It's called Addicted to R.I. And I connected with this mastermind. I strongly advise, I don't care what mastermind you join. Just join a mastermind. Surround yourself with people that are doing more than you. And you'll be surprised in how far you can go. And so at that time, I realized the price of equity in my Seattle townhouse had gone up so much that I could sell it and make over 10 times what I put into it. So I determine I'm going to sell it. And then from there, I'm like, all right, I need to figure out where I'm going to plant this new capital through a 1031 exchange.

And so I used this mastermind group to start picking others brains that like, hey, where are you investing? Where are you investing? And I got a ton of different results. I surveyed those markets. And I found out where I could collectively establish a good team. And now is Memphis, Tennessee. I like that it's a cash flow market. It's a little riskier than Spokane, so it's adding some risk to my portfolio, but higher cash flow.

And so I'm going to say, I'm going to go to this market. No experience investing out of state. I take the money for my flip that I just talked about, and I buy two duplexes in Memphis. So this is my first experience investing out of state. I mean, I had my rock star realtor. She went to my inspection. She helped me out finding a local lender. And that's how I kind of projected to out-of-state investing.

It was through joining a mastermind and then just surrounding myself with people that are doing more and people that are investing out-of-state. And I started to realize, well, maybe my market isn't the most bang for my buck. maybe I can go further and do better by doing what's uncomfortable. And the whole process of what I've done has been super uncomfortable because I didn't know what I was doing until I did it. That's how it goes, man. So just so that I understand the timeline a little bit, you buy these first two properties, you put down six and a half percent.

Yep. Then you do a live in burr. Yep. And then you do another live in burr. And then you said you bought two more duplexes. So I took the money from the flip, bought the duplexes in Memphis. this and then I buy this property with 15% down this duplex and then I remodel it. The one half of remodel it completely. So I'm totally invested in this duplex, $57,000.

And I'm like, oh my gosh, I'm broke. What do I do now? What do I do now? I've heard about this thing called the HELOC. So I started talking to people in a mastermind. I'm like, how can I get this money back? So I was like, oh, you should open a HELOC. It's a great opportunity. You get 90% loan to value. if you live in it. And so I opened this hellock and I get 50 grand. So now I'm only really seven grand into this property. Like I have access to 50 grand again. And so at this time, I closed on, I'm still in the process of selling this townhouse in Seattle. I'm opening a he lock in my primary, my duplex that I've lived in for six months, and then I'm buying these properties in Memphis. So it sounds like you're starting to pick up some momentum as far as analyzing

deals, finding opportunities. You're buying these properties in Memphis, but you can only make so much money work in a W-2 job, especially as a young guy, to be able to buy them, right? So you kind of run into the problem of, I have more opportunity than I have capital to get into it. And I can't really save my way. Like that worked to get your first $9,000, your next 12 or $13,000. Now that you're buying these 20 unit properties, you're not, you can't park enough cars to get enough money to do that. You're so right.

Right. So you've, you've learned one of the secrets of real estate is when you buy it right and you add value to it. There is value that you can pull out of it through these equity on lines of credit. Was that really the bridge that you needed to get from the way you had to got started into scaling up into these 20 unit properties? Yeah. So after, so this is a last year around July.

I closed. So I'm living in a duplex. I still have my triplex. My, I have this 1031 that got me a six figure return. And then I was like, okay, I find this 19 unit. I actually put an offer back in February of 2022. And then he denies it.

And so I'm just like, you know, that four. 45 day window you're searching for deals out of the blue he calls up my my agent says hey I'm ready to sell well times have changed interest rates are different and so we were able to talk them down we get under contract on this 19 unit property I was able to buy this property so I was gonna throw my 1031 at it and I knew I needed about eight thousand dollars more right so I opened a HELOC for 50,000 of my primary and I determined that I'm going to save $30,000. There's nothing I'm going to do to make this deal not happen.

Now, me telling myself that was huge. Guys, because I went to three different banks. I went to two hard money lenders and all of them told me this wasn't going to happen. Like, Jake, there's no way to get a loan over your net worth. Jake, you only have small multifamily. There's no way to buy a 20 unit property. Jake, the market's changing. I was like, okay, thank you for your time.

I really appreciate it. Next call. And eventually I started talking to this specific bank and this business relationship manager back in February about these duplexes and that didn't work out but what I did was I called them once a month and just checked in and this 19 unit came up and he's like oh let's make it happen all right and then so we went into underwriting and I got denied right not enough reserves okay let's bring on a cosigner denied again need a need

more experience okay let's bring on a different co-signer signer with more experience, denied again. And so I'm talking to my agent, I'm like, are they just denying me? Just didn't deny me? It's like, so I had to figure out what to do. And so I just called up this banker and I said, his name's Dan. I said, Dan, Dan, you're the man. Tell me what we need to do to get this closed because I'm not going away. And then he said, it's like, well, let's get, they could see because I had money in the bank, how much money I had in the bank. And they're like, well, if you could throw another 7% at it and then get a co-signer, we can make it work.

I said, all right, done. You already had the co-signer at this point, right? Didn't you have? You don't have to try to make it make sense. It didn't make sense to me either. Okay, that is how in underwriting. They ask you for things you've already given them, but it's just slightly different. Yeah, so, like, remember the first time they said I needed more reserves?

Well, they just stripped me of all those reserves. And they said I need to throw it in the deal. And so I put 27.5% down on this deal. And then now we're in the process right now. So this was back in October I closed, right? The reason was the rents were so low. They're only generating $6,000. But now I have it making $11,300.

Wow. So you almost doubled it. Yeah. And that's why. It's a beautiful property and I want to give credit my agents a rock star down there. Without her, I would like having agents work, when you're investing out of state, having agents that are investor savvy is so critical. And she was able to find this deal and she was able to make it work. So yeah, so I, we ended up closing and now I just had employment today and we're opening up a, we're opening up a second.

to get my money back down to 20%. So I had to get really creative with the financing. And on top of that, I was able to utilize the market swing and always look at the rent ledgers. I've done a lot of things wrong before. One of the things I did right was I looked at the rent ledgers and I found that right before closing three people I moved out. So I ended up getting 50,000 back at closing. Wow. That's cool.

Can you define what a rent ledger is for us? Yes, so important. So a lot of sellers will give you what's something called a rent roll. A rent roll is a list of all the leases and how much the rent is for each unit of a property. A rent ledger actually shows you what they're paying. So the difference between a rent roll, which you'll get a lot of times, shows you what they're supposed to pay. A rent ledger shows you if the tenants are up to day, if they're behind, what they're actually paying their price. It's basically a profit and loss statement. And it's really important to get these from the seller because a lot of times they'll try to bluff you with a rent roll and you'll figure out some people have a rent that much, but they're not actually paying.

So the truth always comes out with the rent ledger. So the rent roll is what it could be. That's potential a rent ledger is what it is. Yep. And you recognize, hey, these three units either aren't paying, aren't occupied, there's no money coming in. So you owe me this much money at closing. because we had agreed upon numbers that were based on the rent roll. Is that accurate? That is accurate.

So let's hear, I mean, this is a pretty cool story, man. Tell us what your portfolio looks like today. How many units are you currently owning? So I currently have 28 units. If you include my girlfriend's duplex we live in, that's 30 units. And what's the annual gross rental income on both, on all, I guess, 30 units? Well, not including her two doors, it's $235,000. Okay. That's pretty freaking cool. And then how much of that is profit? What's your cash flow on that? My net is $75,000 a year. Is that more or less than you were making when you were parking cars? David, that is a great question. I am making more in passive income than I was my first salary position out of college. Which is awesome. And how old are you, man? Just for everyone's edification?

I'm 27 years old. So you're making $75,000 passively as a 27-year-old? That is correct. And you're done? That's it? Absolutely not. I wouldn't be doing my brother very much justice if I did that. Would I? I got to keep going. My goal is I want to retire my family. It's amazing, man. Have you talked to your brother about this? What does CJ think about all this? You know, you guys are going to get to my heart here. He always calls me and he says, he's like, you know, Jake, I just wish I could do as much as you do. And the truth is, I wouldn't have done anything if it wasn't for him. So he's successful through me and I would not be where I am without him. It's amazing, dude. I think what's really cool about this is real estate is a really tough journey sometimes, but I think when you have a purpose like that, like you're going to love this game. You're going to love so much about what comes next because it's true, man. You're 27. You're making $75,000. You're doing this for your family, but you are just at the beginning. You got so much to go. I know. I really just want to think, like, all the people that took me under the wing, I just went, kept, I didn't know what I was doing.

I just took action and I asked questions to people that were more intelligent and further along than me, which I was able to find through a mastermind group. And I even, I remember, I had to go to my mastermind group and I had to schedule the one on one call with this woman named Jennifer. And I said, Jennifer, everybody at my work is telling me that what I'm doing is crazy and I'm over leveraged. And then she's just like, Jake, don't listen to anybody. It's like, don't listen to anybody. Remember your why and just don't stop trying and it'll work out. So you don't have to figure it all out today. You just got to take one action and just be willing to fail.

I've failed. But just take one step at a time. And before you know it, it's insane. And especially with masterminds today, with Bigger Pockets podcast. The younger generation has so much opportunity to excel in real estate with the education that's available to them. That's awesome.

If people want to learn more about you, they want to connect with you after the show, which I'm sure many of them will. Where can they find out more about you? I'm just a normal guy. I got a Facebook and Instagram. My name's Jake Rattowick. And if you want to connect, if you're interested in investing in Memphis or Tennessee, Memphis, Tennessee or Spokane, Washington, let me know.

What's your Instagram handle? It's just Jake Rattowick. Nice. Okay. R-A-D-A-W-I-C-K, right? You got it. Awesome, man. What about you, David? Where can people learn more about you?

They can find me at David Green 24 everywhere. That's YouTube now. You can go to YouTube.com slash at David Green 24. It's kind of cool YouTube-made handles. They can find me on Instagram or social media there, and then they can check out David Green24.com. Don't ask me why the 24. It's not a cool story, but it is what I'm stuck with now. I'm married to that handle. How about you, Rob?

You can find me over at Rob Built on YouTube or on Instagram. But what I would really love if this episode inspired you in some way, because I know it inspired me, please consider leaving us a five-star review on Apple Podcasts with something that you learned today or wherever else you download your podcast. It really does help us. It helps move us up the charts, get served to new audiences so that we can reach other people that are looking to get started in the world of real estate. Yes, thank you. And if anyone here would like to send Jake or Rob free hair care products because they still have hair, please consider DMing them to get the correct mailing address. Jake, thank you so much for being here today, man. And thank you for sharing your story. Everybody likes to come on these podcasts and they like to brag about how many units they have or how well they did. You gave us an authentic, transparent, vulnerable look into how you did this, what mistakes were made, what went well, how tenacious you were. And most importantly, the why. I'm going to give you the last word. Is there anything you want to leave? people with regarding having a why and how important that is in building a portfolio?

I just think if you have, if you, it's important to have a why that's not only yourself, but whether it be your son, your daughter, your brother, your sister, your parents, having that why and then using that as a motivation just to just to keep going. And you know, there's going to be mistakes. Just keep going and just learn through actions. Just take it one step at a time by that first multifamily property. By the second one, and before you know it, you don't know where you could end up. You could be so far.

Looking back, it's only been three years, which is crazy. But I mean, you blink and you're there. Awesome, man. Rob, anything else you want to say? Oh, not after that. That was amazing. Yeah, thanks, Jake. We really appreciate your story, man.

Appreciate you guys having me on. Thank you, Jake. And if you like this show, if this is your first time listening, if you're getting back into this because you've been away for a while, welcome back. Go to YouTube and leave us a comment. tell us what you thought about the show, something you want Jake to hear or know, what you'd like us to get into. We read these comments. We'd love to hear what you guys think. So go there and let us know. I'm going to let you guys get out of here. This is David Green for Rob. My personal promo code, Abasolo, sign here.

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