BiggerPockets Real Estate Podcast - 839: From $10/Hour Janitor to Making $40K/Year in PASSIVE Income w/Darius Kellar

Episode Date: November 2, 2023

Darius Kellar went from making ten dollars an hour as a janitor to a real estate investor with over $1,000,000 in rental properties in less than a decade. By taking advantage of property auctions and investing in areas that most real estate investors wouldn’t even consider, Darius has built a real estate portfolio that will soon bring in six figures in rent every year, most of which he’ll get to keep. How he did it was a lot simpler than you’d expect. Before real estate, Darius had $100,000 in student debt, was making a close-to-unlivable wage, and knew he needed a way out. He bought his first home six years after the Great Financial Crisis in an economically devastated city. Darius couldn’t get a mortgage and needed to save up to get out of the two-bedroom house he was sharing with six other people. Once he closed on his first house, he knew he had to repeat the system. But this wasn’t easy. Darius has seen everything from sewer problems to stripped copper piping and wiring, no electric hookups, and renovation headaches, but he never stopped. Now, he makes as much passive income per year as many people’s full-time jobs and can show you how to do the same so you can make more money than you ever dreamed possible. In This Episode We Cover: How to buy properties at auctions for THOUSANDS of dollars each (seriously) The one thing you MUST do before you buy any property (getting this wrong could cost you thousands) DIY rehabs and how to outsource your home renovations so you can focus on investing How to use BRRRR (buy, rehab, rent, refinance, repeat) to build your real estate portfolio faster Why Darius’ overlooked area could be a cash flow goldmine for investors Turning your real estate skills into a business to make even more money And So Much More! Links from the Show Find an Agent Find a Lender BiggerPockets Youtube Channel BiggerPockets Forums BiggerPockets Pro Membership BiggerPockets Bookstore BiggerPockets Bootcamps BiggerPockets Podcast BiggerPockets Merch 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 Davids's BiggerPockets Profile David's Instagram Subscribe to David’s YouTube Channel Rob's BiggerPockets Profile Rob's Instagram Rob's TikTok Rob's Twitter Rob's YouTube 10 Deals on a $20K Waitress Salary With Ashley Hamilton Book Mentioned in the Show: Pillars of Wealth by David Greene Connect with Darius: Darius' BiggerPockets Profile Darius' Facebook Darius' Instagram Darius' Website Click here to listen to the full episode: https://www.biggerpockets.com/blog/real-estate-839 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 Pockets podcast show 839. What's going on, everyone is David Green, your host of the Bigger Pockets Real Estate Podcast, the biggest, the best, the baddest real estate podcast on the planet. Every week bringing you the stories, how-toes, and the answers that you need in order to make smart real estate decisions now in this current market. And boy, do we have a show for you. Rob, what are some of the things that people should keep an eye out for in today's show

to help them on their investing journey? Darius is a very relatable, very inspiring fellow. He, uh, you know, comes from humble beginnings. And I think a lot of people will just be a little relieved to know that he was able to achieve so much by taking baby steps and scaling accordingly. He doesn't have a crazy story where he had trust fund parents or he didn't raise money. I mean, he was funding all this while he was working an hourly job. So I think for everyone at home, just understand it is a marathon. not a race. And so for Darius, he took steps, you know? 100%. 100%. I mean, not only did he take steps, but he actually did the work. Darius was able to do this in a market that most people would have said, don't invest in at a time when everybody was saying, don't invest. Basically, he had a lot of resistance and people going against him, which is the same thing that happens when you live to wait and it builds strength. This will all make sense later as you get into today's show. But before we bring in the amazing Darius to share his story, today's quick tip. It's simple. Go ask a question on one of the bigger pockets forums. This was a game changer for Darius. He talks about how it really helped him in his own journey and stay tuned for some clever ways that he optimized his forum questions. Rob, anything you want to add? I guess I will say,

you know, quick tip number two, make sure you always bring a sewer camera to an inspection because, you know, one day you might walk into your bathroom and find ramen noodles in your bathtub. I have an uncomfortable question for you. If you're really, rent collection drop to 80% next month. How long would your cash flow hold up? What about 70% for the next three months? Would your cash reserves cover it? I talk all the time about scenario planning. Smart investors don't just model the upside. They also pressure test the downside. This is even more important in a down market. And that's why I like Stessa's stress test report. It lets you model different rent collection scenarios, adjust expense assumptions, and instantly compare the results

to your real bank balances. It's one of 12 professional grade reports inside Stessa Pro. Try it for yourself. Visit stessa.com slash mkTG slash bigger pockets and get six months of Stessa Pro for free because it's better

to discover your risk in a report than in a recession. There are two kinds of real estate investors, those who have reviewed their insurance and those who think that they have. Most don't realize their coverage wasn't built for how they actually invest. Vacancy periods, rehabs,

short-term rentals or LLC held properties. These gaps are, surface only when filing claims. That's why investors work with NREG. They specialize exclusively in real estate investors, understanding portfolios, risk at scale, and cash flow protection. One claim can erase years of returns. If you own a rental property, don't assume you're covered. Have NREG review your insurance with someone who gets investing at NRE.com slash BPPod. That's nr-eig.com slash BP pod. Have you ever lost a DSCR deal because the financing just took too long? Red flags popped up late. The lender needed more time. The deal fell apart. Well, our friends at Dominion Financial just launched a program to help prevent that. With their new express rental loan, you can close in 10 days or less. And they still offer their price beat guarantee so you can get great pricing and a timeline you can count on. Fast, simple, reliable. That's Dominion. Check them out at biggerpockets.com slash dominion. That's biggerpockets.com slash dominion.

All right. Let's bring in Darius. Darius Keller, welcome to the Bigger Pockets podcast. Very glad to have you here today. Darius has been investing for nine years, owns eight rental properties, mostly single families, lives and invests in Michigan near an Amazon center, has used the Burr method to snowball his gross. Currently make $66,000 a year in gross rents and is on track to make over $100,000 in gross rents in 2024.

And as a fun fact, Darius is an elite power lifter that also played college basketball. Darius, welcome to the show. Thank you. Thank you for having you day. All right, before we get into your backstory, can you paint a scene for us about what you discovered when you bought your first property?

Yeah, so when I bought my first property, it was back in 2014, and the thing I discovered was there was no copper in the house, assuming that there was a sink and stuff, and there were switches, and the walls were up, you would assume that there's electrical in the house,

but when I went to the basement, there was no furnace, no hot water tank, no electrical panel. what do I do at that point? Wait, wait. So they had light switches on the walls, but no electricity running to them? Yeah, yeah.

And, you know, HomePath.com is much different than today. It's more, back then it was an auction setting, like type of purchase that I did. What was going through your mind when you saw that? Like, at first I didn't realize, like, how expensive it was. So that was actually a good thing. I didn't like, you know, put myself into shock. But I did, I was questioning myself, like, how am I going to get this done? So what I did is I just kept like a good mindset and reached out to people, you know.

So I had my mother's, my wife's dad who was real handy. He would like not real handy with the mechanicals, but he kind of knew, he knew people who knew how to do put work in. So with mechanicals. So, yeah. Well, that's awesome, man. I cannot wait to hear how you resolve that and how you built. your portfolio to over a million dollars today. It's pretty crazy, man. But before we get there, and before we get this beautiful resolution, can you paint a scene for us about what your life

looked like before you found real estate? What was your job? What was your living situation? Give us a little bit of a taste here. Yeah, so right before 2014, before I made my first purchase, I had to move in with family. Okay, it was a, I went from paying rent into moving in with my wife's dad. It was a two-bedroom house, six other people in the house. You can imagine that it didn't have a basement or nothing. So it was just, you know, one floor, two bedrooms. And during that time, I hit rock bottom financially. So I ended up totaling my car right in front of the house. And I was still a janitor at the time. So I was only making like 10 bucks an hour. I even keep my, that pay stuff still just as a reminder, you know, of what it looked like before I started. So

Wow. That's essentially what it looked like. And I was still getting my master's degree at the time. So I can relate to a lot of the people that are out here watching today. Yeah. Well, what did it feel like? I mean, I know you said you were making $10 an hour. Was that at all a comfortable living at that time?

Was it super, super tight? Did you have to – were you able to save money? I was able to save a little bit of money. You know, I was doing like little side jobs here and there. And while I was living with other people, that, you know, everybody was like – sharing the bills so that kind of helped that kind of uh helped me as well so i end up saving almost ten thousand dollars and that's when i start you know went into my first home and i you know i purchased that at a nine thousand one hundred dollars so it was just a single family three-bed one bath

colonial and that was the one off a home path dot com did it have electricity or water yeah so it had it had it had this just to paint the picture what it looked like it had a um it had the sink the walls were up Like I said, there were switches in the walls. The exterior was pretty new, everything but the siding. So, like, you had a new roof, new gutters, that kind of thing. I thought it was, like, a move-in type of situation. I bought it off the auction. I won, you know, that's it.

Right. Hooray, that kind of thing. But it wasn't. So what do you, do you think the builder just, like, decided this not worth putting money into it? Or was it intentionally supposed to be a scam? Like, how do you think this happened? I think it was listed on, listed for sale.

And then somebody came in during the sale. and stole everything. Stripped it out. Yeah. Okay. That makes more sense. It sounded at first like somebody built a house and put lights switches, but never actually ran electrical to it because they intended just to make it look like something.

But you think somebody came in and they stole the pipes and the electrical and everything while it was sitting there. Yeah, yeah. During that time, Pontiac was much different. It was, you know, there was a lot of vandalism than that time. It was, you know, going downhill. It wasn't getting, it wasn't getting better during that time. So this was during around the time.

of like all the auto companies leaving or getting shut down. Is that right? It was we were hit by the recession hard. So we had a lot of blight boarded up homes. There were schools that were boarded up. It was it was more of that kind of situation. GM Chrysler were still here. But, you know, things got significantly better when Amazon showed up, which was like in 2019 roughly. Well, I'm glad you made it through that. That'd be enough to make most people say I want nothing to do with real estate. Like, you're clearly somebody who had been through some difficult times before, so you're able to handle adversity like this.

But I am curious, like, what got you willing to jump into an asset class that you didn't know a ton about? What was going through your mind that made you want to do this? Well, I had, you know, nothing to lose mindset. So, you know, getting a master's degree, you know, you're going to run up the debt, you know, so I had, you know, $100,000 worth of debt at the time. So I was just trying to survive. That was literally my goal.

Like, I just needed a house to cut the cost. So if I figure if I owned my house, didn't have to pay the mortgage every month, didn't have to pay any rent, that was enough cushion for me to, you know, to be financially stable. So I had no intentions of investing or anything like that. I was just trying to buy a home and, you know, that I could live in. And that kind of like pushes me into the second home because that's when I started to think, man, these homes are like cheap.

So like I told you, the first home was like 9, $9,100. the second home I bought for 2,500, which is like two streets away. Yeah. So what I did is I moved my wife's family into that home. You know, you're the first person I've talked to that actually bought real estate at that time. I remember hearing about the stories that houses were $2,000, $1,500, that basically the state just wanted someone to pay property taxes on these things. A lot of them had been foreclosed on by the state and because they didn't pay state property taxes and they would, like, give them away almost if someone's willing to pay. what was the prevailing wisdom at the time where people telling you that this is a great idea to buy these houses

or were people thinking why would you ever want to buy any of those things? Oh, so, you know, I had family members say, why don't you just get a mortgage, you know, and pay the mortgage every month? And actually, I couldn't get a mortgage. It was very tough to get financing during that time. Well, yeah, you can't get financing on anything that's that cheap. Banks aren't going to finance a $9,000 house. You can't get a mortgage that low, which is also probably a big factor in how you ended up buying a house that didn't have electricity or water, because normally that would have come up during the appraisal.

They would have realized that was the case. But when you're paying cash for it and it's your first home, I can see that that being something that slips beneath the cracks. You were living in a two-bedroom property with six people, right? Yeah, yeah. So was that just like a powerful, motivating thing that you're sitting there, you know, sleeping in a room with other people and cramped that you were just thinking, I really want to get my own spot?

Well, no, you don't think of it like that. You're living in and you're saying, hey, you're living with your man, you're living with your wife's dad. It's like a moral kind of thing, you know? It's just you don't want to do that, you know. Doesn't feel good. Right, right. But, you know, to go back to your question, there were a lot of people that just

were shaking their heads like you're just wasting your money because there was no value to the properties I was buying at the time. Yeah, and Daris, you mentioned that you were $100,000 in debt. Was that all student loan debt or was it other debt as well? No, it was only student loan debt at the time. And what were you studying? What was the reason for even going and getting your master's? Yep.

So I started off in graphic design and then I moved to business administration. And it was simply because I needed a boost in income. You know, I understood that 40, 50 grand just wasn't enough. And I was, you know, I'm one of those guys. I take things to the extreme. So I needed, you know, somebody told me that I needed a master's degree. So that's what I wouldn't did. You know, that I just, that was my instinct.

That's what I was taught at the time to go get as much education as possible. Nice. you end up finishing that master's degree? Just out of curiosity? Yeah, yep. Yep, I finished the master's degree. The graphic design helped me get into the engineering area, corporate, in the corporate world.

And then what happened is I became a design engineer. So that's what I'm doing now at a Fortune 500 company. Okay. So you bought this first deal at an auction in 2014. You paid $10,000 for the property, and you had to go through a bidding war. You show up to see your prize. and you realize it's got no water, no electricity.

What was your, like, walk me through what you were feeling and thinking when you go to look at the house, you're flipping on the switch and nothing's coming on. You kind of realize that you've been had. You know, like I said, I'm a, I talk to a lot of people. I don't, I don't shy around. So the first, you know, I go outside my door and there's other young guys who, who are investing as well. And what I did is I was, I was friendly to him.

I asked, you know, I asked the guy if you needed any water, like I had water bottles and stuff available. If he needed anything, just let me know. Because his home was in the same condition as mine. Like I told you, like, there was a lot of vandalism at the time. There was a lot of boarded-up homes, a lot of investors out there. So what happened was when I introduced myself to him, it was kind to him. He offered to look at the property.

And he happened to be an engineer as well. So I'm an electrical engineer. So he ended up assisting with like the furnace, the hot water tank, because I because it's my primary residence at the time I was able to uh you know do go through the permanent process myself that's they allow that here in a Pontiac if it's your primary residence and um that's kind of that's that's really where I kind of like that initiated my learning experience making friends with the guy across the street I mean he took me you know I pretty much learned everything once you learn the electrical the plumbing was like I learned the plumbing like

within a day yeah and then I was able to learn the gas um You know, within a few weeks after that, learn how to do that as well. So I learned all the trades, you know, pretty quickly. And then, like I said, when I bought that second house, you know, you pay what you get, you get. So I bought a $2,500 house at the time. And it looked like a $2,500 house. And once I did that house, I pretty much could redo, you know, I could remodel the entire house by myself at that point because I had all the skill. I do I want to know.

Like I said, I had the skill. You know, that pushes me up into 2017. because, you know, it takes time to fix the houses because, you know, I had no money at the time. I still had no money. So in 2017, I actually, that's when I started moving up the corporate ladder. I started making a little bit more money. I ended up quitting my janitor job at the time. And then I financed, well, I took a heat lock on my primary residence and I bought my third property.

And I bought that third property from auction.com for like $35,000. And it wasn't like a, that's also in Pontiac as well. So like I'm harvesting, you know, I'm a farmer in Pineyac essentially, you know. That property now is probably worth about 180, anywhere from 150 to 180. So you can imagine, you know, purchasing it from 35 grand and the home's being worth nothing to what you're seeing them now, you know. Just to give you some stats in the house, it's like a three bedroom, two bathroom, colonial. And at that time, again, back in 2017, the website just weren't as, they were not as, sophisticated as they are today. Today, they're a lot more competitive to purchase properties on.

So when I tell people the prices, on the websites, they're in shock because they're only seeing what like the Zillos, red fins, and auction.coms look like today. So you're doing this sweat equity. You're doing some of this work yourself on the property. What did that do for your confidence as a real estate investor as you learn new skills you didn't have before and you realize that you could solve some of these problems? Yeah. So, So once I learned how to fix everything, that took a lot of pressure off me because, like I said, I went to auction.com and I bought that property blind. I couldn't go inside the property. So here I am. I put 40 grand of equity out of my primary residence, and that's what I used to

purchase the next property, the third property. So if there's no pressure on me for repairing the property, then I can put all the money up to, you know, assume the property. So from there, you use the burr method so you could get more property. So you've got some confidence. you also know where to go get these properties. You kind of know what you're stepping into at this point. So you feel more comfortable going big. What was the pace that you started acquiring properties at? And how were you funding them initially?

So I would say the second property took me almost two years to redo. Like I said, I bought it for $2,500. The third and fourth property, things got a little bit faster. But I would see on average, it would take me about eight months to repair a property, then put a tenant inside, and then take maybe another month to get the final. financing to pull the equity out the property. So the order of properties, the first one was $10,000. That's the one that you bought at the, I guess at the auction that didn't have all the stuff in it.

The second property was $2,500. The third properties when you, was it, did you say it was like $35,000 or $60,000? Which one of this? Yep. So the second property is the $2,500 property. The third one was the $35,000 property. Got it. Okay, cool, cool, cool.

So that's when I learned how to, you know, all the financing, you know, I was really stuck on how the financing goes when I got to that third property. But I also had a, I hit a wall during that third property. It had a big plumbing issue. So that was a, when I got to third property, that's when I started to, that's when I assumed my actual non-family member tenant as well. So that's when I really, I would consider that myself a real investor at that point where I had, where I started to deal with a lot of the problems that normal investors deal with.

So the plumbing issue I had was a, was a, um, the pipe had a, had a, had a, um, the pipe had a, had a, had the snake coiled up inside of it in the yard. So we had to, you know, I had to pay like $5,200 for, for them to dig and put a, you know, a tea in the yard from the pipe. So we would call it a clean-out drain. And within that same, like, two-month time frame, I also had another pipe break in my primary residence. And, you know, when pipes break, everything stops.

The kids in the house can't use the restroom. You know, I can't use restroom in my own house. So that's when I started, that's when I was like, okay, for now when I buy these properties, I really have to take a sewer camera to the auctions and, you know, into these showings with me when I do inspections. Because I was doing my own inspections as well, just a cut cost. Oh, so what's the process like of using a sewer camera to actually scope the line? Yeah, so you can, you can use, I use Fairbest. It's a cheap $500 camera.

You can actually get a use one. It's disgusting to say, but you can. It comes on a battery. you know, you pull the screen out. As long as you have a fly trap, you can easily fish the camera from inside all the way out to the street. And you can see the cracks. You can see roots. It comes with an LED light in the front of it.

You can record it and send it to the, you know, and send it to the seller, you know, to bring the price down. I mean, essentially, it's extremely important to have one because in some cities it could cost $7,000 to $10,000 just to, to get the permitting just to cut up cut out the street yeah you know if you have to repair a pipe so that's where i was going at with that you know if i'm going to lose in this game it's going to become it's going to become from construction not because tenants didn't pay me rent right or i bought a bad deal you know so what we're talking about here is also called the sewer lateral right this is where the the sewer line that runs to your house from where it ties into the city typically goes under the front yard and you'll get tree roots that can climb into that or you can get different things that

cause a problem. So when your house is trying to flush the waste out too tight into the city plumbing system to have it taken away, it can get back up. It can start leaking into the front yard and then you can't use the plumbing at all. Darius, I relate a little bit to this because when I bought the house that I'm in right now, there was an issue with the sewer. We got it scoped and they said that they, you know, they agreed to fix it. And we did not get it re-scoped afterwards because we're like, well, they fixed it, so we're good. Well, they lied about it. And so, you know, we're settling in.

It's been a week. We're into this house. We're enjoying it. And then I walk into my bathroom and there's ramen noodles inside my bathtub, along with a few other un-aesthetically pleasing things. Non-aesthetically pleasing, I guess. And, man, yeah, when you don't have a working bathroom shower, kitchen sink, or anything, oh, man, it is pure agony in chaos.

in a household with kids. And, of course, if they can't use the bathroom, tenants can't, you know they're not paying you and rent. They're going to be fighting that, so. Which, you know, I think is not unfair. Right. There are two kinds of real estate investors, those who have reviewed their insurance, and those who think that they have.

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how to do that yourself, or were you outsource things sort of right from the get-go? Yeah, so the plumbing issue, you have to outsource that. Just don't have the tools to do that. But after the third property, that's pretty much when I hit, you know, hit the ground running at that point. That's when things got real interesting. I had an appraisal issue as well with the third house. the, you know, quick loans during that time again, you had some house they were praising high and some that are low, but it's still very tough for an appraiser when you, when half the neighborhood is just distressed, you know?

So it's kind of, I would say it's like the baby Detroit. You know, that's, if you're from the outside, right? That makes a, that's a great point there. So you've got a property that you bought at a low price because it's distressed, and now you put money into it and you fixed it up. And then it's cash flowing really well. if you were to build it from the ground up, it would be way more expensive than what you've actually put into it. So there should be some equity here. But the appraisers looking at a whole bunch of abandoned

houses in the same neighborhood that are maybe worth $2,000 or $3,000. That does look at their valuation because how do they know what to compare this to if you've got the only house that's fixed up? Is that kind of what the problem was? Yeah, they came back and said the house was worth $55,000. I'm looking at them like there's no way, absolutely no way. And so what I did is, I went and got a second appraisal and it was worth that little $500 was worth the money because they said it was worth $85,000. So I was able to take the, you know, 75% loan of value that got me around $63,000. And I took and I bought a fourth property, which is a condo, which was pretty much what we would call a turnkey at that point, you know. And I bought it in HOA. I mean, I had that thing rent it out within like a few months, literally.

The issue with the HOA, I had issues with the HOA and the ticketing. And I didn't understand that, They were giving just about they were giving the tenants nearly the same amount of power as the landlord. So the tenants could actually show up to the board meetings just like the landlord could and stuff. So that rubbed me the wrong way. So what I did is I sold the condo and I bought a replaced it with a single family home. And I got the single family home from my actual wholesaler. And I mean, I got this right on time. It was like in 2019, the same.

same month as Amazon came in. And I bought it for $42.9. Like I said, the wholesaler got it for $10,000. And it's worth probably about $150. It sits next to a $200,000 house. It's literally less than a quarter mile away from Amazon. Right. Like less than that. Yeah. Now, appraisals can be tricky. And part of what makes me even trickier is real estate is worth what someone's willing to pay for it, which means that that doesn't fit in as a value on a spreadsheet very well. People don't like that. They want to have a number attached to what something is worth in dollars, preferably. But with an appraisal, it's so subjective, the appraiser gets to the side. I have a cabin in the Blue Ridge, Georgia Mountains that I bought, and I basically built a second cabin on the property, right?

The appraiser came in and gave me an additional $50,000 of value when I doubled the square footage of the property that was on that lot, right? It doesn't make any logical sense, but that's just what the appraiser gets. to say, I think that they look at what you bought it for and they try to keep the new price as close to that as they can. So for everyone that hears this, it's easy to get discouraged by that. It's easy to think you did something wrong. Oh, man, I never should have done this. I only got $50,000 of value. That's not true. Because if I were to sell this thing to someone else, they would pay way more than just $50 grand more than what I paid for it. And I've doubled what the property will be able to generate in revenue. So there's lots of different ways to value property. Appraisals can be

tricky. What do you think, Rob? Yeah, definitely. I had to, when I built my tiny house in Joshua tree, it was really tough because there were no tiny. I was like the first tiny house. So I actually had to fight for three different appraisals. The first one, they're like, no, that's way too high. The second one was like insanely low. And I was like, listen, we're tied here. We got to get a third appraisal. And they were like, okay, that's fine. So third appraisal came in right at the amount that allowed me to take my 100% of my money out. I would be. and fine leaving some in, you know, because that's just how the nature of the game with Burs is sometimes you might leave 10, 15, 20 grand in the deal. But man, yeah, appraisals, you know,

it's like not, not as objective as you'd think. But in areas where there's a lot of comps, you can start to get an appraisal that's somewhat predictable. That's maybe a better thing than saying accurate, because who knows what the house is worth? It's just worth what someone will pay for it. But when it becomes predictable, it could benefit you. So areas like Phoenix or Las Vegas, they have a lot of track housing. The appraiser's like there's a million. in four-bedroom two bathroom houses for me to pick from. They get a very tight number that comes in, and then you can kind of plan your brer or your flip based off of that.

That's one of the reasons that you just want to understand the area that you're investing in. I've said you don't have to invest in your backyard, but you've got to understand the backyard you are investing, and if you're going to do long distance. Darius, you're in a specific area. How do you feel that just buying the majority of your portfolio in that location has been a benefit to you? Oh, I mean, you're creating an infrastructure around you. I'm using the same contractors.

Though the populating tenants in the properties is where it becomes like word amount. I have a good eye of the rent flow. So I know exactly how much the rent is for each property that I'm buying. That's literally like at that point when in 2019, that's when I took off because I don't have to do as much of research as anymore. You know, I don't have to rely on Zillow and redfin and stuff for the data. You know, I'm getting the data live, you know, because I'm actually in it. I know you had mentioned that you were working as a janitor when you bought that first house, which I love, right?

Because I had a same blue collar approach where I just worked blue collar jobs, saved my money, worked as hard as I could, put it in real estate, and started to climb my way out of that hole. At what point did you switch from being a janitor to taking that corporate position that you mentioned and did, And did real estate play a role in helping you make that jump? In 2014, so in 2014, I was still making like $14 an hour. I was a contractor at the time at Chrysler. When I made the bigger jump in income, it was probably in 2017. So that was like right after I bought my third property, which makes sense because you need income to qualify for the loans, you know?

Real estate helped when I refinanced that third property. because now I had the equity, plus I had the monthly net profit to use for repairs and purchases. You know, I've noticed that in my journey, I think Rob's might be a little different because my understanding is that Rob scaled his initial portfolio with partnerships. So that might not be the best example, but I'll let you wait in a second here, Rob. I noticed that there is a relationship between the money that you make at your job or your business. and the real estate that you buy. And what I mean by that is when you develop some kind of passive income, you can take risks in the job that are not as risky.

If you go for another job and it doesn't work out, or if you leave the security of a W-2 to go to a $1099 opportunity or whatever, it's easier to do when you got a little bit of cash flow coming in. And the same is true for some of the risks that go with real estate. They're easier to handle when you've got a steady paycheck coming in and you live beneath your means, right? Like there's this kind of like both hands work together to make the wealth building journey a little bit easier. Did you notice a dynamic like that, Darius, in your world where you're working as a janitor, you're getting some momentum, getting real estate, then you're doing some physical labor on the house.

Your confidence is going up because of what you're learning. You buy another house. You're learning stuff about the loan process. Now that's giving you confidence in the job again. Or did you see these as completely different independent tracks? No, I saw him completely independent tracks. I didn't I didn't look at it that way. I looked at my 9 to 5 as something that that gives me stability.

And I looked at, I still look at the real estate like, okay, if this thing turns out well, it could, you know, give me the financial freedom, you know. The job is great, but, you know, when you turn on the Instagrams and, you know, the YouTube, you see people buying the cars and stuff, they're using passive income. They're not using the money that they're working for, you know. know, earned income. So, you know, I really, I really pushed that, you know, like I just spent over $50,000 in a year on vacations and there's no way my 9 to 5 would be able to support that, you know, the passive income is what supported that. So I look at it separate, yeah.

But you were getting loans by these properties. So having some kind of steady income helps you get the financing that you were able to use to build a passive, right? Yes. Okay. You also have a perspective here on like live data. So when you're at an auction and you're, bidding, you're looking at live data versus someone on Zillow that's looking at stale data. Can you kind of go into your perspective on that? Yeah, yeah. So between 2021 and 22, I bought five properties, okay? And people, you know, I went to Flint. I went to an entire 40 miles out from Pontiac. You know, Flynn is not, it's very distressed. It's, it's, you know, they had the water crisis. They had the recession. We had COVID out there. I mean, there's a lot of things that hit Flint. They got different kind of problems. out there. So I went to a high risk area to buy properties. I had a lot of people out there who were saying, oh, don't buy in Flint because it's a bad area. And what I did is I actually went to the auction, stood in line, saw how many people were waiting for the properties. And I started

telling people, hey, that data that's on Zillow is not real. You know, that's not live data, you know? And, you know, the live data is when you're in the auction, you're actually seeing it happen right in front of you. You know, the live data is when, you know, I'm in the auction online getting beat in putting, you know, blind offers at $60,000 for two-bedroom houses in rough areas. So what's the advice that you give to somebody who tends to make their decisions about where to buy, what to buy, what to pay off of data that they get from the internet, like sources, like Zillow? I would say actually go to the, actually go and see the properties. You know, people think they can sit behind the computer and do everything.

You just can't, you can't fully inspect a property from behind the computer. You actually get up and go to the property. And sometimes it pays off too because you may see something to use, you know, as a negotiating factor to bring the price down with you and the seller. So, you know, sometimes I've been able to take the price down by like $10,000 on a property because something, you know, there's some like minor repairs that are needed that are not shown online. Are you still buying properties at auctions? Yes. Okay, what about that? Like if somebody isn't sure about it, hasn't done it before, can you just describe how that's different than buying

properties traditionally using a loan and maybe who this is good for and who it's not good for? Yeah, yeah. So there's some auctions where you can use a loan. The auctions I go to, generally, you cannot use loan. You have to use, you know, hard, card cash. The auctions, like, for example, in Flint, the good things about those is that you can actually go and see the property. Many times the online auctions don't allow you to physically go and see the property. So there's a disadvantage to those types of auctions. The prices of the properties, you know, they're not evaluated. So they're just pretty much, they get the properties and they put them up for sale for whatever the cities,

whatever they're owed to the city because they know the city owns the properties. Where if you're going to Zillow or if you're going to MLS, you know, the open market, you look at a property. at that point, the point you're starting, as somebody has already evaluated the property, they evaluated the condition of the property, that kind of thing. So, you know, you're likely to not get as good of a deal. I mean, buying four properties,

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

How did that help you? Yeah. So really, when I go to the bigger pockets forums, I'm looking for like reassurance. And I think that's how other people can use the bigger pockets forums. You know, if you're, if you're investing in real estate, you're already a smart person. That says a lot about you. But if you're looking to know if you're doing things right or if you're organizing your portfolio correctly, you can go to the forums. to find credible people for help.

My issue was I didn't know how to scale. And somebody told me what they did is they refinanced their four unit and bought a bunch of single family homes. I didn't have a four unit. I didn't have, you know, I only had single family homes. So what I did is I did multiple refinances. And then I bought a spread of single family homes in a small period of time, which is what I did in a 2021 and 2022. And can you recap for us what your cash flow and your portfolio is looking like now? what's on the horizon? Yeah, so nine total properties. One I live in, three are currently being

a remodel right now. They should be finished at the end of the year. And then five are actually occupied and rented. So those five bring in about 66,000 annually. And after those other three are remodel, we're, you know, we're looking at a total of 102,000 roughly a year from the rent. And I don't have, I don't have any partners. I only, you know, I only partner with the bank. So, generally I use the same lender for the investment properties and I go to a, you know, like a credit union for my primary residence. What's the cause of why the rents are going to jump by that much? It's like a 40% increase. Number one, my rent is actually, because most of my tenant is still staying in this. I've been staying in my properties for a long time. So I'm very

conservative on the rent increases. And the rent is still going up. You know, values are still going up over here. Like I said, we have GM, Chrysler, and I have Amazon that just, just arrive here. We also have United Shore. They're very big as well over here. So that just happened like in the last couple years. But are rents increasing by 40%? Are you having new properties coming into the portfolio that are also going to be bringing rent? Oh, I see. So the current rent is of between the five properties, the total of 66,000. But those three, those additional three properties are going to bring in another 36,000. Sorry about that. That makes sense. So you're adding a lot more cash flow because of these remodels that you have going on. Yes. Pretty sweet to be coming on as we may be

heading into an economic recession. You're going to be making more money. And just to bring more clarity, those additional properties that I purchased, those have no debt on them. Whoa. So I went to the auction. I bought them, you know, pretty, you know, pretty close to zero. Wow. That's crazy. So at this moment on the $66,000 per year, what's the actual cash flow, like the net profit to you? Yeah, I would say about 60%. Wow. And then does that, will you get even more profit once those other three are live because you own those out right?

Yes, yes. But my plan is to refinance everything and put debt on them. Number one, because it protects you. And number two, my plan, my original plan was to buy, you know, a spread of homes really quick and then refinance all the homes once I get my cash flow up. That way, my DTI is a lot lower when I go to the bank. So now that you're pretty seasoned in all of this, are you still DIYing any components of your rehabs? Yeah. So what I try to explain to people like, we look at just the, we look at just the houses, but I also own the refrigerators, I own the process as well. I own

about 20,000 power tools. So what I'm trying to do is build my own internal team. So, like, right now I have one person, like, working part-time. My plan is to make them full-time eventually, you know, in the future. Just, you know, for the repairs and, like, as my own internal property manager to take some of the load off of myself. So you're thinking about creating, like, a property management slash rehab internal team to work on your properties? Yes.

And are they going to be, like, salaried people? Right now, hourly. Okay. So you get some, and then they'll just work when you have work and then when you don't have work, they can do something else. Exactly. So have you thought about extending this into a business once you've got these people that are working under you that maybe you have other investors in the area that need a crew and you just charge the difference or keep the difference with you what you charge that person, what you pay the people? Exactly. And that's where I actually

got my employee from. I actually was able to refer to someone else for help. So I love that. I think that's the future going into this new market. That's how everyone should be thinking. It's in pillars of We talk about how we have to be thinking about investing as a way to make money, but also offense. What are you actively doing in the business world or in your job or in a commission space, whatever it is to make more money? And you've got a great synergy. You're going to save money by having people that do the work on your own remodels because

you don't have to pay a contractor who's going to keep a profit. And then in addition to that, you're going to make money by actually making that profit yourself by having these people work on other people's jobs. because you're willing to build this expertise and do the work, which I will add, you probably have the confidence to do that because you had to step into that nightmare project in the beginning and learn how to do it, right? So while that look like a reason to quit, you turn that into a possible business that you can use to make money and scale your portfolio even more. Exactly. Good job on that. Thank you. Yeah. What about what's the total equity

across the portfolio? I would say total. So it's 350,000 in debt, a real estate debt, and $1.1 million is probably what the portfolio is worth. Not bad at all, man. That's amazing. Yeah, you feel proud about that? What are your thoughts? What are your thoughts? I wasn't looking at it like that from the beginning.

Like I said, I was buying $2,500, you know, and $10,000 houses. It wasn't, that was not my motive originally. Like I said, when Amazon came here, that's when things got interesting because, you know, Piney was more so of a lower class city as far. as like the home values, the income per household and stuff. So back in 2014, rents were probably around between $550 to $700 now for like I said, a two-bedroom rents like $1,400 a month. I'm thinking that the rent is going to get to like $1,800 per house for a regular three-bed

one-bathroom house. So in order to get to the position you're at, three-quarters of million dollars of equity, pretty massive cash flow in this portfolio, a couple things you did really well. that I just want to highlight. One, you jumped in and you took action and when it went wrong, most people would be completely wiped out if they had found out that they bought a house that doesn't have electrical or plumbing. You found a resource, which was the neighbor, and you jumped in and you did a lot of

the work yourself, which built up a lot of skills that are now helping you at this point. You kept going. You said, hey, I'm going to buy another one. And you were always finding stuff below market value that you added value to. That's a very good principle. Just to take in mind that you were always paying less than what you. you could have by going to an auction. And then you were adding value to it by doing the work and you got in there and did the

stuff. You didn't just get frustrated that you couldn't find a contractor or the person that you hired didn't do it on time. You went in there and did a lot of the stuff yourself. Then you use the Burr method to scale once you had a good thing going with every single one of these properties. You're adding equity, adding equity, snowballing, snowballing, snowballing, snowballing. Now that you've got a really good thing going, you're expanding.

That's the last thing that I just want to highlight. You're looking at getting your own crew so you can buy more properties. and building a business, ooh, and then as a little bonus thing here, you picked the right location. Whether it was on purpose or whether it just worked out, now you intentionally know, you say, where are the jobs going, and I want to go there, and I want to own that because you're looking at this as a property manager would. How can I get rents and how can I get a steady stream of employees, which was buying into a market that at the time was incredibly distressed, and everybody was saying to stay away from. You went against that, and you were able to build a pretty

impressive snowball. So well done, my man. That's an inspiring story. Rob, anything you want to add? Yeah, I mean, you've come a long way, man. Janitor making $10 an hour to having somewhere in the neighborhood of $750,000 in equity plus some pretty generous cash flow here. What has this been able to afford you in your family? I know that you mentioned taking $50,000 worth of vacations, but what else has this done for you? So it's giving me a peace of mind. And then one of the things that I'm proud of has helped my wife a lot. She's been able to be a stay-at-home mom and kind of assist with the real estate, but she's also real estate as well. She's the one who sells me some of the properties as well and gives me some tips there. But I'm able to spend the passive

money without pulling out that scrap sheet of paper every month and seeing if I, you know, have enough money to pay my bills. It just takes a lot of pressure, pressure off me. Well, thanks for sharing your story with us today. We don't hear about these too often. is a great one. I am sure a ton of people are going to be reaching out to say, I want to do what you just did. Where's the best place for people to go if they want to find out more about you? You can simply Google RE with D. That's Real Estate with Darius. I have my own website as well. So rewithd.com. I have coaching in there. You can also go to my Facebook. That's RER.E. With D. And you can also reach me on Instagram at Darius underscore one of

one and that's all spelt out no numbers one o n e o f o n e darius o f o o o'n e all right thanks darius rob how about you where can people find out more about you find me on youtube at rob built r obu i l t and on instagram at rob built as well post content uh many many times a week and i teach you guys all this stuff and more so go go follow me there what about you much like carman san diego rob is traveling all over the place so if you do want to find him you're going to have to do it on social media not in real life he's recording this from a hotel room right now at a conference busy man traveling all over the place hey but i made my bed though if you can if you can tell because i got in trouble on the barber quirk and uh interview by all the

youtubeers all the youtube comments they're like bro make your bed and i'm like i had listen it's just not the first thing i do every morning you can find me at david green 24.com or you could go online on any social media platform and find me at david green 24 so please go give me a follow and reach out darius Thank you for being here, man. Awesome story. Love hearing this. And I just can't help but state that you have an incredible portfolio and you're a power lifter, not a Fitbit walker. I know causation isn't necessarily creates correlation, but in this case, I really think it does. So Rob, just think about how rich you could be if you did more than just walking. Any last words for you, Darius? No, no. I think you covered everything. I really appreciate you for having me. I remember

being on bigger pockets back in 2015. I didn't think I would own as many houses I own a day. And having bigger pockets is just, it's really helpful. That's it. Well, thank you for sharing your story. And if you're listening to this, remember, you too could have a result just like Darius is. It's just about finding the right pieces, putting them all together and staying focused on

the goal. All right, Darius, we're going to let you get out of here. This is David Green for Rob. Where in the world is Carmen San Diego Abas Solo, signing off. Thank you all for listening to 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. Bigger Pocket's LLC disclaims all liability for direct, indirect, consequential, or other damages arising from a reliance on information presented in this podcast.