BiggerPockets Real Estate Podcast - 996: Financial Freedom in 3 Years by Investing in “Boring” Rental Properties

Episode Date: July 29, 2024

Can rental properties replace your W2 income, lead you to financial freedom, and help you build multimillion-dollar wealth in the process? Yes, and Grant Francke is proof you can do it in a few years or less. After the burnout of forty-eight-hour shifts as a railroad conductor (yes, you read that right) left him searching for an escape, Grant stumbled upon real estate investing and the BiggerPockets Real Estate podcast. Within three years, he built up enough cash flow to quit his job and never looked back. In today’s show, Grant walks through the “boring,” stable, and safe rental property investments that have led him to complete financial freedom. He’ll touch on the first duplex he bought, why Grant prefers multifamily real estate to single-family homes, reverse-engineering your financial freedom to calculate HOW many rentals you need, and the sacrifices he had to make to get there. If you’re tired of missing out on time with your family, children, or friends and want to start living life on YOUR schedule while making MORE money than you would at your job, this is the place to start!  In This Episode We Cover How to replace your W2 income with real estate investing  Calculating your financial freedom number and how much cash flow you’ll need to quit How to test whether or not you CAN live without your W2 salary  Why Grant prefers the safety of multifamily rentals compared to single-family rentals  Financing and funding your first rentals and what to do when you start scaling FAST The “controlled growth” strategy Grant uses to safely build wealth and make more passive income  And So Much More! Links from the Show Join BiggerPockets for FREE  Grab Your Copy of “Rich Dad Poor Dad” Find Investor-Friendly Lenders See Henry at BPCON2024 in Cancun! 4 Serious Points to Consider Before Quitting Your Miserable Job to Invest (00:00) Intro (02:02) 48 Hour Shifts!? (03:17) Replacing His Salary (10:21) Quitting and Buying First Rentals  (17:33) Current Portfolio and Financing  (21:19) Real Deal Review  (24:37) Scaling with “Controlled Growth”  (30:39) Replace YOUR W2 Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-996 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

Have you ever wondered how to use real estate to replace your W2 income? Have you ever dreamed of time freedom and spending more time with your kids or giving more time to your passions? Well, on today's episode, we're going to hear a story about how an investor did just this so you can too. What's going on, investors? I am Henry Washington, and I'm solo today because several of our hosts are taking some time off to enjoy this beautiful summer. But today we're talking with Grant Frankie, who's an investor out of Nebraska, who has successfully replaced this W2 income through real estate investment. So we're going to talk about how Grant forecasted and planned to leave his W-2 and how he built up the cahonas to actually jump off that cliff. We'll discuss the cash flow that he needed to leave that job and how many doors that equated to in his portfolio.

We'll also talk about how Grant scaled from zero doors to this level and how he's adjusting or not adjusting his business to grow his portfolio in this current economic environment. Let's bring Grant on the show. Grant Frank you, welcome to the show. Thanks, Henry. Happy to be here. Awesome, man. It's so good to have you. I'm excited to have this conversation because I think there's some synergies between you and I.

So that's exciting. So let's got to paint the picture, man. Let's go back a little bit. When was the moment that you decided you needed to replace your W-2 income? So I hired out the railroad as a conductor in 2006. It's a great job. If you're single, you don't have any kids. It changed for me when we started having kids.

once Mallon and Brendan and my son was born. The job's very demanding on your time and weekends and holidays. So at that point, my wife and I, we decided we need to start looking at something else to do to get me away from that job. Wait, so you were a railroad conductor? Yeah, for BNSF Railways. Yeah, I hired out when I was 19. That's a job that like when you're a kid, you realize there's a job, but like as an adult, you never really hear people say that you're, you're a, the train conductor. How was, what is that like, what do you do as a train conductor? You said it's demanding, but what's that mean? Yeah, it's not a physically demanding job.

It's more of a time demanding job. So I live in Lincoln, Nebraska, so we would take trains from like, let's say Lincoln to Kansas City. That's a three-hour drive in a car, but it's a 12-hour drive on the train. So you got to take a train there, stay there for 12, 24 hours, and then bring a train back. So I'd be gone anywhere 36, 48, sometimes even more hours. And you're on call. It's in the middle of the night. It's just a rough life.

Oh, man. So, like, how many days out of the week were you home versus on the road? It varied. There'd be days where I'd be gone for three days, back for one, and then gone for another three days. So, and then you could have a couple days in between there where it'd be a little bit better where you're home. But it was a lot of time on the road away from family. Okay.

And this was, you said, 2006? Yep. So I hired out in 2006 when I was 19, pretty much right out of high school. And then I got married shortly after that. And once we started, like I said, once we started having kids, I knew that I didn't, I needed to make a change. Okay. So how long was that working period? Yep. So we started buying rentals in 2016. So in about 2015, I got the bug. Started learning everything I could from, you know, bigger pockets and all the books. 2016, we started buying rentals. And then by 2019, we had enough

cash flow to replace the job. Okay. So what led you to real estate? Like what made you figure that this was going to be your path to being able to have some more time with your family? Yeah. So I was, I've always been somewhat handy. Like, I don't love doing it, but I could do it. So I was like, I'll just be a handyman or a contractor. So I was Googling around and I saw some post that said, landlords are the best clients for handymen because you keep them busy, keep them happy. Yeah.

That led me to a bigger pocket episode of a handyman that became a landlord. He recommended a book in there called Rich Dad, Poor Dad, go to Barnes & Noble, read that and it was game was over. Man, did your head explode? That's what mine. That's what happened to me. Yeah, I just, I've never read a book that, like, I felt like it was written for me.

Like, I just felt like it was just speaking to me. So I read that book and then I gave it to my wife. She read it and we were on board. Bro, it's like looking in a mirror. So, so for me, it was pretty similar. So I had an epiphany at about three in the morning that I needed to do something to generate more income.

Did a random Google search, found a bigger pockets, blogs and started going through the blogs and started going through the forum posts. And I was just blown away at how many regular people invested in real estate. And I was like, this is, this is incredible. And so that's when I decided I was going to do it as well as through that Google search. And then I woke up the next morning and went to speak to the only person I knew that knew anything about investing in real estate, who I worked with. And I said, like, can you just help me, point me in a direction? Like, I don't even know how to

ask you for what I'm asking you for, just, but point me in a direction. And she brought back a box of books and said, pick a book. If you read this, one of these books, I'll help you. And so, Like, I was just sifting through this box of books looking for a title that sounded somewhat familiar. And I just happened to pick Rich Dad, Poor Dead. And then, yeah, my head exploded. But similar to you, I also gave the book to my wife. And we kind of read it at the same time. And that, like, really helped her get on board with this journey.

Was that kind of the similar experience to you? Was she on board from the beginning? She's always been super supportive of everything I've done. But once I gave her that book and she read it, we were able to sit down. So she's an accountant. So she's an Excel master. So we just sat down and we did some numbers. Like, well, if we do so many of this, so many times, like this is feasible.

Like you said, like real people are doing this. There's an entire community out there teaching people out to do this for free. We can do this. We can make this work. Okay. So you read the book. You guys are in. You're like, we can do this.

We know we need to do a certain number of deals. Like how long between that period to when you bought your first deal? So I started learning in the end of 2015. And then it was about six months later, six or seven months later, we bought our first duplex. Okay, okay, that's a solid time frame, six or seven months. Oh, you went straight into it with a duplex. Didn't even go single family first. Yeah, it went straight to a duplex, yeah.

Awesome. So you said you guys had kind of talked about how many you could do a year that would sustain you guys. So kind of how did you plan out your goals and like how did you prepare for generating the income you would need to quit your job? Yeah. So like I said, we were able to, you know, once we got that first one done, we were able to take that cash flow and just do the math. like, okay, let's do this six, seven more times and put everything we have into it right now because it's going to suck for a little bit, but the light at the end of the tunnel is there, you know.

Is that a train joke? It sounds like a train joke. It could be, but it's a good one. But if we do it, the certain amount of times, it's going to work. Like the math works. And we were able to do that. And then we're able to kind of start building our systems and processes around buying properties and managing the properties and working on the properties.

while I was still at the railroad. We do have to take a quick break, but more from Grant Frankie and his journey to quit his W-2 through real estate investing after this. For decades, real estate has been a cornerstone of the world's largest portfolios,

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You said you needed to do a certain amount of deals or generate a certain amount of cash flow. So like what were some of those goals. Yeah. So what we did, we took the math of what I was making at the railroad. So depending on traffic and, you know, how busy we were, I was making anywhere from $60,000 to $80,000 a year. So we took that, or my cash flow that I got from the railroad, which was after tax income. And then we put a formula together for our cash flow that we needed. And we also took into, to affect the benefits of real estate investing, right? So the depreciation, the write-offs, all that stuff. So once I became a full-time real estate investor. We were able to capture those losses and that's depreciation off my wife's income as well.

So we were able to come up with those numbers. And it ended up being about $4,000 a month of cash flow that we felt comfortable. Once I had that clean, pure cash flow coming in, of $4,000, we felt good coming. So it sounds like to me you did your math to figure out net cash flow, right? So we're talking after all of expenses, after all of the holding costs, after all of the debt service after all of the all of the maintenance and and capital expenses. This is the net number you would need to bring in each month in order to replace your W-2 income. So what did that turn out to be about how many doors did that equal out to be for you? And when did you feel comfortable

leaving that W-2? Because it wasn't comfortable for me to make that decision. That was terrifying. So we ended up once I had around, it was about 42 doors we had once I left the railroad. So that equaled out to about $4,000 a month in cash flow. So once we did that, and then we probably could have left earlier, but, man, that was terrifying, just going in there and resigning from that union job with a really great pension and, you know, really great insurance and all that stuff. Kind of doing that was pretty tough for me to do, so it took me a while to get up the guts to actually do it.

But then once I did it, it was the greatest feeling in the world, just so freeing. So was $4,000 your actual number or was your number lower than that? And then you just waited until you got to 4,000. Yeah, we just waited. So 35 was probably more accurate of where we could be. But we waited until, because I wanted a little bit of buffer just because I didn't want to eat, you know, peanut butter and jelly all the time. So we waited for a little bit more of a buffer. That's perfect.

It's like you're reading my mind because my next question was going to be, did you have to change your lifestyle before you hit that number and become more frugal? Or did you have to change your lifestyle after you hit that? Like, how did your lifestyle get impacted either before, during, or after the transition? Yeah, great question. So one thing that my wife and I did was, since it is a union job, you can bid around to like different, hold different jobs. So those two years prior to me leaving, once I started really getting into the railroad stuff, I bid to the lowest paying job on the railroad that I could hold. So we figured out if, you know, if we can survive on this amount of money a month from my lowest paying job at the railroad, then let's just get to that number of cash flow for real estate. And then it will be an even change.

So you were essentially like testing your cash. flow theory on your railroad income to see if you guys would be comfortable with that lifestyle ahead of time. That's super smart, man. One of the lessons that I'm learning is that as you start to build more income streams, it's hard to maintain that frugality, but sometimes you need to in order to kind of build up a cushion. And so you were able to kind of build that into your plan as you were growing. So I think that's super smart. And so it sounds like rental properties has been your main jam in order to help you build up that income. And look, so I quit my W2, right? But it was not an easy decision. So when I quit my W2, I was essentially, I would say forced to do it in a way. I was

faced with an option of either giving more hours per week to my W2 or not. And when they asked me to do that, it forced me to really do the math and figure out, well, what exactly? am I making per hour outside of my job? And so I did that math. I had to figure out, what is I making per hour on the real estate side? What was I making per hour on the teaching side? And then when I put all those numbers together, I was clearly losing money if I chose to give my W2 more of that time. And so I told people, I essentially didn't quit my job until it cost me money to have a job, but it was still extremely scary. So what were some of the, thoughts you had or decision points that you used to finally make that leap because I didn't do it

until I was forced to. Yeah, I had a similar thought process too. It got to the point where the railroad was almost getting in the way of my scaling and growing the real estate business. There'd be deals I'd want to go check out or go underwrite or go walk and I'd have to go to work. I'm like, well, this is, I'm literally losing money by going to work. So once it got to that point and like I said, once the cash flow was there, our number was hit, it made it a lot easier to make that jump. I don't think I probably could have went a whole lot earlier just because I didn't want, like I said, eat peanut butter and jelly all the time. Me too. I told my wife, I was like, we probably could have did this before, but it was a little scary. So you said you started with

a duplex and you used cash flow to retire. Is rentals all you're doing? Are you flipping to generate capital? Like, what's your strategy? Yeah, we're just straight by and hold boring cash flow real estate. That's kind of what our motto is. It's nothing super sexy, but just boring cash flowing buildings. Man, I say the same thing. People ask me what I do. And I'm like, man, I do old boring real estate. I buy properties to fix them up and I rent them out. Like it's not, it doesn't, it doesn't seem like nothing to write home about. But one day I'm going to wake up and be like, I'm really, really glad I did this. Yeah, it worked out well. Okay. So duplexes. Why start with multifamily? Do you do any single family? So we do have a few single families that will pick up every

once in a while. Like, I live in a smaller town outside of Lincoln. So if there's, if there's a house that comes up in this town, we try to pick that up just to have something close to home. Otherwise, it's really, for me, my mindset when I started it was if I have a duplex with two units, if one goes vacant, I still have half the rent coming in where single families, if they do go vacant, then all my income's gone. I just started with it that way.

And I'm glad I did. We do still have a few single families, but I prefer managing duplex isn't up. It just seems easier for me to do that. So it sounds like a lot of your decision process is based around cash flow, right? Because what you just talked about using the duplex is protection of cash flow, right? So if one side's empty, you're still making money on the other side. And you did mention one of the other ways real estate pays you when you talked about depreciation. But are you mainly, like, is your sole focus cash flow?

Are you worried about appreciation and depreciation and debt pay down the other ways that real estate pays you? Yeah. So our main thing. is cash flow, right? That's great. The other two ones, depreciation and debt paydown, those are awesome. Like, those are going to be coming in with when you make your payments. Appreciation to me is just icing on the cake. Like, I'm not, I can't spend depreciation. And if I want to spend depreciation, I got to go out and get a loan against that appreciation or do a cash out refinance or something. So for me and in my philosophy, it's pure cash flow

is the number one thing. Loan paydown is awesome too. After you've had a property for five or 10 years and you look at the balance, like, well, that's, that's a same. significant on money that was paid down by my tenants. Okay. And I think that investing for pure cash flow is a great way to invest because essentially it's a safety net. If you're making money on day one when you buy a property, you've protected yourself and then anything you can do to force the appreciation and add value and increase your rents increases that cash flow going forward. So I think it's a very safe approach to real estate investing. But it can also be a challenging approach, especially for new investors, because that means if you're not generating capital any other way,

then you've got to be able to afford to buy more rentals. Typically, there's a down payment that's associated with it. So how are you financing your deals that allows you to scale without doing any flips or anything to build up capital? Yeah. So the nice thing about what up my job was beforehand is I was able to work a lot beforehand, and we had a decent amount of capital saved up doing that. So that was able to help us scale pretty good when we were just starting. The other thing we were able to do is take out a loan against the 401K from my employer had.

So I did that. And then so you just pay interest back to yourself and you pay the loan back. And then once we left, we actually ended up just cashing that 401k out and throwing it all in real estate. Bro, I think we're twins. That's how I'd finance my first deal. We do. We have similar stories. Yeah.

Barred against my wife's 401K. I was not financially smart enough to have my own 401k at the time. And so, yeah, we took out a loan against the 401K. So for those of you who don't know, 401Ks are retirement vehicles that you have typically at corporate jobs, right? And you're putting money away and they're essentially putting that money into some investments for you. And if you want to use your 401k money before retirement age, you typically have to cash out your 401K. And then there's penalties and fees and things associated with that. But what a lot of people don't know is you can.

can actually borrow against your 401. So you can go to your employer or whoever is and find out whoever controls your 401k. And you can take out a loan from the money that you have in your 401K. Typically, it's a percentage of the money that's in there that they'll give you access to. And then you borrow that money. You do have to pay it back because it is a loan. But since it is your money, you're paying yourself back with interest. And the best part about when you use a 401k loan to buy really,

estate and buy real estate rental specifically is your tenants essentially end up paying back your 401k loan, which is interest to you. So it is a good way that you can leverage some money to buy real estate. But I want to make sure that people understand like it is a loan and you do have to pay it back. And so you must be extremely careful with the assets that you go and buy because if you go and you buy a bad deal and that bad deal is not making you money, you still have to pay for that bad deal and you got to pay that 401k loan debt. So you have to be careful with any leverage. But if you are smart with your money and you buy good deals, it can be a good way to help you get capital to build your business. And so it sounds like to me you were very smart financially by having savings plus turning in plus being able to utilize the 401k. And that's

helped you to build your portfolio. So what does that portfolio look like now about what, what's the size, what's the unit mix? Yes, we have about 104 doors. It's around 8 million in assets under management. We've got five, six single families. Then the rest are duplexes. And then we have a few four plexes, six plexes, and an eight plex in there as well. Okay, you said that was 104 doors?

Yep. 104 doors, mostly small multifamilies and some singles. Yep. Man, that is incredible. Congratulations. Thanks. Appreciate it. And so how are you typically financing these properties?

Are you using commercial loans? Are you putting them on 30-year fixed financing? How's that looking? In the beginning, it was a lot of 30-year fixed until we ran out of that option. You know, you can only have so many of those. And that was a sad day when that happened. But now we're just a commercial end. We've got really good relationships with a few banks in town.

You know, they trust us. They know what we're trying to do. We can bring them a deal. They're no, we're not hiding anything. We can get a transaction done pretty quickly. But it's mainly commercial debt now. Man, same. Same here.

And again, for those listening, conventional loans are typically capped at, what is it, 10 per person? And so can you have 10 and your wife can have 10? I don't think we could. I think we were capped out at 10. If we could, then we probably should have. So fixed rate mortgages are capped out at 10. So once you cap out at 10, you have to figure out a different way to finance your deals.

And so I do the same thing. I use commercial loans from small local banks. The loan structure is a little different where a conventional loan is typically going to be 30 years at a fixed interest rate, 30-year amortization at a fixed interest rate. Where commercial debt is a little different is it's going to be amortized on a 20 or 25-year note, and it's going to be an adjustable rate, meaning your rate will be fixed, but for a standard period of time. Typically, that's a three- or five-year adjustable rate. And so that means after three or five years, you either have to, your rate can adjust. It can either adjust up or down, or you'll have to refinance that loan into another commercial.

loan or into a 30 year fixed at that point, if you have availability to do so at that time. But what I do love is what you said is that commercial banks are relationship banks. And they can be a little more flexible on some of those terms that you have tied to that loan. So they can be a little more flexible with your origination fees and a little more flexible with the interest rates. So I'm getting a loan. Matter of fact, I'm closing on a loan next week. I think Prime is somewhere around eight and eight. and a half percent right now and I'm able to get eight and a quarter.

Right, because of the relationship I have with the bank. So right now, I like the adjustable rate because if, so if you're of the opinion that rates may come down in the next year or two and you lock yourself into a 30 year fixed at, you know, eight and a half interest and you're on a prepayment penalty because some of these conventional loans have prepayment penalties, then you can, you might hurt yourself if rates come down. So you just have to know when and how to use these. So love the relationships with commercial banks. Is that your plan to continue going forward?

And how are you looking at your portfolio in a sense of paying off debt? Are you in a situation where you're looking to pay off more properties? Are you in a situation where you're looking to continue to grow? Yeah. Financing wise, we're not really looking to pay down debt. We secured some pretty good interest rates during those COVID lows. And we were able to walk some of that in for 10 years for that. So we're going to hold that as long as we can.

So we're just paying down our usual payments on that. And as scaling goes, yeah, we're still going to continue with those commercial banks and building a relationship with those people and trying to find more lenders as well so we can always have a cup on our backpockets if we need them. We have to take one final break to hear a word from our sponsors. But while we're away, make sure to hit that follow button on your favorite podcast app so you never miss an episode of the show. For decades, real estate has been a cornerstone of the world's largest borderline. portfolios. But it's also historically been sort of complex, time-consuming, and expensive.

But imagine if real estate investing was suddenly easy, all the benefits of owning real, tangible assets without the complexity and expense. That's the power of the Funrise Flagship Fund. Now you can invest in a $1.1 billion portfolio of real estate, starting with as little as $10. The portfolio features 4,700 single-family rental homes spread across the booming sunbelt. They also have 3.3 million square feet of highly sought after industrial facilities, thanks to the e-commerce wave. The flagship fund is one of the largest of its kind. It's well diversified, and it's managed by a team of professionals. And it's now available to you. Visit fundrise.com slash BP Market to explore the fund's full portfolio, check out historical returns, and start investing in just minutes.

Carefully consider the investment objectives, risks, charges, and expenses of the Fundrise Flagship fund before investing. This and other information can be found in the fund's prospectus at fundrise.com slash flagship. This is a paid advertisement. People love to call real estate passive income, which is interesting because most of the investors I know are very busy. Busy finding deals, busy managing teams, busy worrying they pick the wrong market. Rent to retirement flips that model. They help investors buy turnkey new construction homes, often 10% below market value in top rental markets across the country. Their local teams handle the build, the property management, and the details, so you don't have to.

In some cases, investors even receive 50 to 75% of their down payment back at closing, and there are interest rates as low as 3.75%. They've been trusted partners with BiggerPockets for over a decade, and if you want to learn more, visit BiggerPockets.com slash retirement. Did you know your house gets bored when you leave? I can't actually prove that, but it probably misses out on the action, the footsteps, the late-night fridge raids. Yeah, when you're gone, your place is basically on unpaid leave.

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All right. Well, while we're on the subject of numbers and financing, can you tell me about a recent deal that you've done? So the most recent deal we've done was a fourplex that we got through a relationship that we built from a different seller. But we got a fourplex. We paid $300,000 for it, put 25% down. And after our underwriting and everything, we make about $330 a month of pure cash flow after all expenses on that one. $330 a month for the total building? Yep. Okay. That's awesome. And did you have to renovate this building? Nope. It was fully rented, just under-rended. You know, so that was the nice part about it is we were able to buy it and, you know, leave the tenants in there, slowly start increasing the rents here over the next six months to get everybody up closer to market. We don't technically go all the way to market usually. We're kind of under-market, let people stay there for longer, less vacancy. Okay. So no renovation, raise the rents to closer-to-market rents, kept the same tenants.

And you paid $300,000? $300,000, yep. And is that what it's valued at, or is it, or did you get it at a discount? So I would say, you know, when we valued it, it was like $360, but we were able to get it for $300 from the seller. They had some family issues stuff going on and wanted to offload it quickly, so we were able to step in and help them out. Okay. So you walked into equity and cash flow from day one. Yep.

That's a win in my book, man. Congratulations on that deal. Super boring building, but it cash flows. and gets the job done. Kid me, fourplexes are like my dream property. That's my sweet spot. My biggest property is an eight unit.

Everything is like single, small multis, and I have a couple of quads. Yeah. And it sounds like, based on what I'm hearing, that you manage your own properties. Is that true? No property manager?

That's correct. Yep, we manage all 104 doors. Oh my goodness. How is that for you? It's not bad. So about a year and a half ago, we brought on a full-time VA,

and that's really helped us out with the management side. She handles all the tenant communications and leasing, maintenance issues, all that stuff. She does that. But we really built it in the beginning with the end in mind, my management side. So I was able to start building those processes as we were scaling up before I left the railroad. So now in this, we have this 104-door portfolio, it's a lot easier to manage because we started doing it right in the beginning. Yeah. I mean, obviously that's super smart. And a lot of investors, you know, our highest and best

use is out there finding more deals to bring in more income and managing your own properties can take away from some of that time. So how much time do you spend per week managing your properties? Right now, it's about 10 hours maybe a week with my VA. Before that, it was, you know, 25, 30, depending on what was going on. The reason we brought on the VA is so I could start working more on the business instead of in it, which it has helped out with that a lot. So scaling up and building those systems right from the start helped us. get to that point where we could bring the VA in, drop her in, and then it just kind of runs itself. Well, it sounds like we need to bring you back at some point and talk about your self-managing,

because I know a lot of people want to do that, but not very many people do it well. Yeah, it's tough to do it well. It seems to be a better play for people to just hire it out. If you can find a good one, because good property managers are hard to find. That's always a conundrum. So looking forward, it sounds like you're still at a place where you're looking to grow. What are your goals moving forward? shifting goals. I know interest rates are higher now. Cash flow is harder to come by. So how are you

changing, if at all, in your real estate strategy? We're still just doing controlled growth. You know, there's still deals out there. Real estate's always about a building, but it's still mainly a relationship thing. So we're still out there building a relationship with sellers, brokers and trying to get the deals we can. We actually got a property under contract yesterday for the first time in about a year. That's actually cash flows and it's going to work. So we're really excited about that. And things are starting to pencil out a little bit more. But we, we underwrite so conservatively that, you know, if I don't make money or at least break even when we close, we're not going to buy it. And I know I've lost a lot of deals in the last eight years

by not buying them because they didn't pencil out of day one, but I slept better because I knew everything that I bought cash flowed and I had that safety net with it. Okay. I think there's a lot that I want to unpack there. But first, can you tell our audience what you mean by controlled growth? Yeah, controlled growth to me is I don't, we're at a point with our portfolio that I don't need to stick my neck out and buy a Class D duplex and just if it's going to make a couple hundred bucks a month. But I'm only going to buy stuff that I want to hold now for long periods of time. I'm not in that grinding mode where I need to make all the cash flow I can right away. We're just controlled growth. We're just going to continue to grow buying nice properties and nice areas that cash flow well.

So essentially you're saying you have a pretty strict buy box and pretty strict underwriting criteria. And if a deal does not hit your buy box and underwriting criteria, you pass on it no matter what. Yep. We're not going to hope that stuff works out. Everything needs to work out from day one for us. And cash flow is harder to come by. But what I like what you said is that, hey, you're not going to buy it unless it's either cash flow or at a minimum you're breaking even on day one. But you said you are talking to sellers. And so I assume that means you are mainly buying deals direct to seller. Yeah. So a vast majority of our portfolios come from off-marked. deals. We send out targeted mailers. We don't do like, I don't send out 90 letters a week. Like,

I send out 25 a quarter to certain sellers. We stay in contact with them. And, you know, like I said, a lot of my portfolios come from those off market deals, building relationships with people and just staying in contact with them. Did you say 25 letters a quarter? Yeah. Wow. So you sent 25 letters a quarter. So you must do a lot of follow up. A lot of follow up. Yep. In maintaining relationships. Maintain the relationships. Like, if they email me, then I keep their email and I'll check in every once in a while. I know what some of the owners are. So when I'm driving around, if I see them out by the property, I'll stop and say hi.

And I mean, that's wielded us a lot of deals in the past. You know, we had a property that we had an 8plex, and there was a 6plex right next to it. And I just stayed in contact with the seller. She'd call me. I'd answer every call she wanted to call and talk about. And we just stayed in contact and we ended up buying her property from her when she was ready to be done. So for people listening who think you got to spend a bunch of money to find deals, this is a great story to show you that you don't have to do that. What I call what you're doing is network marketing, right? And so you're reaching out with your mail and then you're building relationships with the people who end up calling you. And you're maintaining those relationships by continual conversations, stopping by and saying, hello, there's one thing that I do where I'll send out marketing to a specific list. And then the goal from that marketing isn't to buy a deal. It's to get them to go have lunch or coffee with me so I can build a relationship. And so this is a great

strategy if you want to have good deal flow, but it does require a lot of organization because you have to remember who to reach out to, when to reach out to, and what you talked about last, right? You can't just cold call somebody and be like, hey, oh, you think Gary, how are you, right? Like, what systems are you using to be able to stay on top of your leads like this? We've got a pretty good Google spreadsheet. Oh, your wife's the spreadsheet, So we've got to stretch you in there. So I know the properties they have when we've talked last and all that stuff in there. And I'll just keep it in.

But it's also like I also don't ever want it to come across as fake. Like we're genuine. Like we're not doing this to try to fake people out on who we are. Like we're trying to be good people to them. But so we just we, I want to keep track and make sure I know what I'm talking about with them. Man, that's amazing. That's a lot of hard work and dedication. But being genuine and being honest and truthful people will go a long way to getting deals.

and direct to seller is a great way to get good deals. And I tell people all the time, like, yes, it is harder to find cash flow right now. But honestly, every deal cash flows, every single deal cash flows at a certain price. You just have to be willing to make the offer at that price, even though it's uncomfortable. And you have to be willing to stick to your numbers. And it sounds like that's exactly what your guys are doing. Every deal you buy cash flows. So you are a testament to that works.

And lastly, to follow up on the financing, when you're buying these deals, are you putting money down to help that cash flow or are you buying them without much money into them? We're still putting the 20 to 25% down. I'm not over putting money down like 30 or 40% down at this point, just because I don't, I want to still want to save some capital for when I do have deals. So this deal that we just got under contract, we're still doing the 25% down on it and it's going to cash flow for us. Okay. Man, that's amazing. So it sounds like you have a. a very conservative, safe approach to real estate, yet still finding scale. I think a lot of the time when you hear people that say they are conservative or when you hear people talk about wanting to invest but doing a conservative way, they don't have scale along with it. Right. And I think that you found a great way to maintain being conservative, but also growing and

scaling your real estate business. It sounds like a super fundamental real estate strife. What advice could you give to someone who wants to do something similar, buy small multifamily and buy cash flowing assets and do it in a safe way? What are some of the things that they need to do ahead of time now to prepare themselves to be where you are now? Yeah, the big thing for me was education and getting the right mindset. If they're already listening to bigger pockets, they're ahead of the game for most people, but listen to all the podcasts you can, reading all the books you can. That gives you that confidence when you go in to make that offer. make that offer where you go in to do the deal or work with your tenant, then you already know what

you're talking about. You're not just shooting from the hip and hoping that you can figure it out while you're going. So having that education and that mindset shift of what you're trying to accomplish, why you're trying to accomplish it is huge for me. Once I figured out why I was in real estate, why I was investing in these properties, it made all the tough times a lot easier because things are going to go wrong. You know, ACs are going to break, tenants are going to do things, pipes are going to freeze. But if you know the reason why you're doing it, that makes the whole thing a lot easier. And on that note, you seem to have a very strong reason why you wanted to spend time around your family. And so can you tell us how your life has changed since you've gone full-time real estate?

And are you able to do the things that you planned or thought you were going to be able to do? Yeah, it's been unbelievable. It's the greatest thing I've ever done. You know, my kids are 10 and 8. So when I left the railroad, they were six and three. So like it was, I got to see them grow up more. I got to go to all the game so far. My son doesn't even remember when I was at the railroad. Like, that's how young he was when I left. So I was able to do all those things. We take trips.

We spend a lot of fun time as family together. So it's just been amazing. It's been everything I hoped it would be. Oh, man. I love hearing that because people use the word, like financial freedom is always almost like this buzzword now. And people say it and they don't really know what it means or have an emotion tied to what that means because it's such a popular phrase. But financial freedom can mean so many things to

different people. But the time I've been able to spend with my daughters is been amazing. And it's all because I've been able to invest in real estate. And I love that you set a goal. You planned. You took action. But what what I heard that's most important for people to hear is you stuck to your plan. Like you stuck to your plan. You're only buying rentals. You're only buying cash. You're only buying cash flowing rentals. You are making sure that they hit every box before you buy that property on day one and you're doing it in a way that mitigates your risk by a buying the good deals, B, putting some money down each and every time and making sure that you're not being super risky and sticking to your buy box, man. That's, that's incredible. Thank you so much for sharing those bits

of information. I think it's going to be very helpful for people. Well, thank you so much, Grant, for coming on and sharing your story with us, you have an amazing story. You should be super proud of what you've accomplished. I'm sure your family is super proud of you and proud that you're able to now be at home, spending more time with your family. And it's really, really cool and inspiring to see someone, have a goal, set a goal, stick to a plan, achieve that goal, and then now inspire others to do the same. So we really, really appreciate you. You bet. Thanks for having me on, Henry. And if you want to connect with Grant, you can find Grant Frankie at www. at biggerpockets.com slash users slash G-R-A-N-T-F-1.

Or you can simply just Google BiggerPockets and type in Grants' name if you'd like to connect with them. Thank you, everybody. We'll see you next time on another episode of the Bigger Pockets podcast. Do you ever notice how every passive investment somehow turns into a very active lifestyle, active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand-new construction homes, 10% below market value, in the best markets across the country without making real estate your second job.

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