Cease Shopping for Leases and Begin Shopping for Rental Portfolios (Scale A lot Quicker)

Henry:
You need monetary freedom sooner, you could cease shopping for leases and begin shopping for rental portfolios. Think about if as an alternative of shopping for two rental properties, you would purchase 10 at a time. How shortly may you exchange your revenue? Then Jose Martinez did it in simply 4 years with none expertise, particular abilities or artistic financing utilizing a particular kind of mortgage that solely small banks present. Jose was in a position to purchase 28 models and solely two offers with lower than 5% down. Now he’s changed his revenue and is full-time in actual property. He went from waiter who spoke no English to proudly owning over 50 rental models, his supply for offers, a mentor landlord who confirmed him the ropes and offered him the properties. Your path to scaling might be nearer than you suppose, and so is monetary freedom. What’s occurring all people? I’m Henry Washington, and immediately on the podcast we now have an investor story with Jose Martinez from Albany, Georgia. Jose goes to inform us how he went from ready tables to proudly owning greater than 50 rental models in solely 4 years. So let’s carry him on. Mr. Jose Martinez. How are you buddy?

Jose:
I’m doing good. How about you, Mr. Henry?

Henry:
Nice, man. I admire you being right here. I simply needed to start out with a bit of bit about your background. So inform us how you bought into this actual property factor.

Jose:
So I got here from the Dominican Republic. That was in all probability 11 years in the past. I used to play baseball, in order that’s how I bought to the States. I got here right here, no English, I didn’t know principally anyone. I got here on to a metropolis the place I reside now, however I used to be at all times curious of studying and listening podcasts like this you guys put on the market, which is gold for me and free on high of that. However anyway, so 2022 I purchased my first plex and from there man, I simply began going. What metropolis are you in? So I’m really in Albany, Georgia proper now,

Henry:
Albany, Georgia. So that you come from Dominican Republic to play baseball, you don’t know English.

Jose:
Right.

Henry:
You play some baseball, you decide up the language and then you definitely’re like, Hey, this actual property factor sounds fascinating and also you determine to start out with a quadplex. So inform us about that deal. The place’d you simply discover

Jose:
A quadplex to choose up? Man, I used to be watching movies from you guys. That bug begin entering into your head. In case you purchase this many models, you need to ensure that it’s an actual cashflow. It’s not cashflow. However on my finish, being one hundred percent trustworthy, I didn’t know something I used to be doing once I bought at

Henry:
Qualex.

Jose:
I didn’t know something about rate of interest. I didn’t know something about who was my tenant in there. I imply, I simply bought in it and my first expertise doing an ambition was my first deal. In order quickly as I bought that deal, I needed to do an ambition and I discovered with that, that actually if you put your palms on it, it’s actually if you begin studying. I imply you’ll by no means be prepared in case you wait. Actually.

Henry:
Okay. So you acquire this Quadplex, how a lot did you pay for it?

Jose:
So on the time it was round $330,000. The Quale wanted some work, purchased it with out even having any contractors. I didn’t know something about fixing or something like that. That’s

Henry:
Right. Okay. And the way a lot cash did you find yourself having to spend on fixing that factor up?

Jose:
I spent proper round $20,000 fixing the quale, making it look higher so far as look, getting the tenant out, getting the unit prepared. It was round that a lot cash I spent.

Henry:
So that you paid three 30, you bought about $20,000 into it, so that you’re all in it three 50. How a lot have been the

Jose:
Rents? So on the time the rents offered like 450, so I purchased a worth add with out even figuring out I needed to worth out. So actually it’s loopy as a result of to date that’s been one in every of my finest offers.

Henry:
Okay. What’s it renting for?

Jose:
So proper now it’s 1195 every unit.

Henry:
I imply, that’s fairly good. You’re all in for 3 50. You’ve bought $4,800 a month coming in. That seems like constructive cashflow to me. And you acquire that deal available on the market, albeit it was again in 2022, however nonetheless there’s nonetheless nice offers available on the market individuals can discover immediately. Inform us the way you financed that deal. What sort of mortgage did you get?

Jose:
So on the common standard mortgage I put, it was like 15% down. I feel I bought on that property. For me, it was like some huge cash on the time as a result of I used to be prefer it actually empty. I needed to go to my financial institution accounting right here, there, pull some cash from in all places, however I used to be in a position to purchase it and it was 15%. Now

Henry:
You spent about 20 grand on a renovation. Now did you find yourself doing a few of that work your self or did you rent it out? How was the method of getting that renovated?

Jose:
I used to be there when my spouse was serving to me cleansing, so yeah, that was, sure. Then I bought some buddy of mine, I bought some building data and Hey man, I want you right here. I want to assist me out to do that rest room. You simply bought to show me. I need to learn to do that. And it actually was, like I mentioned, it was a bless as a result of I used to be in a position to get assist from shut individuals to really do some issues out. That’s why I ended up spending much less

Henry:
Cash. Okay. Yeah, I used to be going to say 20 grand looks as if not a ton of cash to renovate a 4 unit, however in case you’re doing a variety of the work your self and also you’re calling in favors from pals and paying them in pizza and beer, I assume you will get it achieved a bit of bit sooner, a bit of bit cheaper. Completely. Okay. Effectively it sounds such as you went by means of the actual property investor ringer in your first deal, discovered one thing hustled, put within the sweat fairness, put the cash down. I imply, that’s a strong, I imply it seems like a strong base hitter, a double, you’re making nice cashflow proper now. So how did you transition from that deal into your subsequent deal?

Jose:
So from there, it took me some time as a result of I purchased actual property only for badging actual property. I used to be like, I say, oh, let me see what it’s. So I wasn’t even relying on the cash that was coming in from the properties. So I used to be simply accumulating lease, holding a bit of money move and simply paying the mortgage. However then like I say, every thing occurred for a cause. I bear in mind I began going to the gymnasium 5:00 AM for some cause. I mentioned, you understand what? I need to go to the gymnasium early within the morning. And I bear in mind on the sauna I met a man, so this man owns over 150 properties and we have been simply speaking. I used to be like, man, that’s fascinating. And the factor is that ultimately I see some properties that come available on the market. This man is promoting principally his complete portfolio and I name him, I be like, Hey, so are you promoting properties proper now? And he was like, yeah, yeah, and I need to purchase a duplex. I instructed him, he mentioned, no, you don’t want to purchase a duplex. Purchase 10 or 15 homes from me. And I’m like, there is no such thing as a manner I can do this. So principally he type of walked me by means of, he needed to promote, I needed to purchase, and he walked me by means of the method and man, I ended up shopping for 10 homes. That was my second deal. So I used to be at 14 doorways.

Henry:
Okay, so you acquire 10 doorways from this man. How did the method go? How a lot did you find yourself paying for him? And that’s some huge cash. So how did you financial 10 offers? So

Jose:
Principally once I bought within the state, like I discussed, I performed baseball. I went to a faculty right here, I left the college after which I opened a restaurant. So I began doing a little restaurant enterprise. So on the time I had two or three operating, however I principally simply began saving cash. I imply, I didn’t know what to do with cash, so I simply began saving cash, saving cash. I didn’t purchase the good vehicles. I used to be simply saving cash, saving cash, saving cash, as a result of ultimately I knew one thing would come out, what I needed to park it. The restaurant enterprise was good, however I don’t suppose that was going to be the place I’d put my legacy.

Henry:
Okay. Submit baseball, you opened a restaurant and it’s doing so nicely that you find yourself opening two extra.

Jose:
Sure. So I begin doing a few mores within the metropolis. Yeah, that’s appropriate. I was a waiter, so I labored as a waiter in a Mexican restaurant for some time. So I discovered a enterprise in there. Then I opened, like I mentioned, the primary restaurant bar, type of sports activities bar kind of locations, and I had three on the time and I simply tried to save cash and do actual property,

Henry:
Man. Effectively that’s spectacular in itself as a result of the restaurant enterprise is a tough enterprise to get into. It’s. You bought into the restaurant enterprise and located success, which is hard to do. So that you pivot this into actual property. So what did the finance construction seem like? Did you purchase all of them individually or was it like, did you purchase it with one mortgage as a package deal?

Jose:
Yeah, it was one mortgage, it was a package deal deal. The way in which how issues went there, this man, which I name it, he’s like my mentor in actual property, he launched me to the financial institution. He was like, Hey, y’all want to satisfy this man. He bought one thing, y’all want to speak with him. So I had a gathering. I didn’t know banks have been like that the place you’ll be able to sit on a desk, speak with the president. Okay, inform me what you do right here. So it really feel like an interview to a degree I used to be feeling like, oh my God, I’m not getting a job or getting alongside. They requested me a variety of questions and I figured that every one they needed to know was that I used to be severe about this and that I knew what I used to be doing on the

Henry:
Time. Okay, so what was the acquisition value for the ten properties?

Jose:
1.4 million, one thing like that.

Henry:
Okay, 1.4 million. You bought a mortgage from the financial institution, how a lot down did they require?

Jose:
I put 20% down.

Henry:
That’s a giant chunk of change. And also you had all that saved up from the restaurant enterprise

Jose:
And each time I put a p.c down, it’s like on zero I went again to zero. It’d be like, oh my gosh, again to zero. Again to zero.

Henry:
Okay. And did these properties want any work?

Jose:
No, they have been all occupied. They didn’t have any property administration firm. It was the owner operating it himself, all these properties. So he took nice care of it. And yeah, they have been all lease. They have been all bringing lease in and I simply wanted to lift rents to match the return that I used to be searching for.

Henry:
And at this level you had 4 models, however now impulsively you’re sitting at 14 models. Are these properties, have been you managing them your self? Did you might have property administration?

Jose:
I used to be managing them together with my spouse. Yeah, we have been backwards and forwards, Hey, what this cash that you just spend you loopy. You spent years, we went by means of all that. Sure, we went by means of all that as a result of at first I needed every property to seem like my home. I used to be like, alright, we bought to get in, we bought to carry all people. So then I begin studying, I needed to get this property. That doesn’t imply they needed to be on dangerous form, however there may be rental supplies that you just purchase primarily based on, okay, which rest room ought to I get? Which life function ought to I get? So yeah, I used to be spending some huge cash. I wasn’t making no cashflow in any respect at first, however then I discovered, okay, that is what I have to do. Like I mentioned, I used to be dealing with then myself together with my spouse and we find yourself studying about these rental softwares to really handle them now. And yeah, I imply it makes my life simpler to having the ability to acquire rents by means of there.

Henry:
Are you self-managing nonetheless to at the present time?

Jose:
So I’ve some assist now, however yeah, I’m on day-to-day foundation. I’m nonetheless round. Yeah.

Henry:
Alright, I’ve bought a pair extra questions for Jose in regards to the mentor relationship that introduced him 10 doorways. We’ll get to that proper after the break. As an actual property investor, the very last thing I need to do or have time for is to play accountant, banker and debt collector. However that’s what I used to be doing each weekend, flipping between a bunch of apps, financial institution statements and receipts, attempting to kind all of it out by property and determine who’s late on lease. Then I discovered baseline and it takes all that off my plate. It’s BiggerPockets official banking platform that robotically types my transactions. It matches receipts, it collects lease for each property. My tax prep’s achieved and my weekends are mine once more. Plus I’m saving a ton of cash on banking charges and apps. I don’t want anymore. Get 100 {dollars} bonus if you join [email protected] slash bp. Alright, we’re again with Jose Martinez on the BiggerPockets podcast. Jose, so you might have a mentor, he sells you 10 properties. What was subsequent? Did you proceed to purchase extra properties or did you proceed to foster this mentor relationship or was it type of a one deal and achieved factor?

Jose:
No, so we stored speaking on my finish. I used to be the fortunate man that he needed to promote his properties to and assist me by means of the method. So yeah, principally simply bought a variety of questions day by day. Even immediately’s date I calling for lots. So after that deal I purchased 18 extra properties. 18? That’s

Henry:
Right. From the identical man, appropriate? Sure. He offered you 10 properties, you’re pleased with these properties, nevertheless it wasn’t like he offered you 10 properties and fell off the face of the earth. You continued to foster a mentor mentee relationship, so you would name this man for something you wanted assist with and he was explaining to you and instructing you the right way to handle the properties and run an actual property enterprise, it seems like.

Jose:
Completely. Completely. The largest factor I discovered whereas I used to be doing that with he must run this as a enterprise.

Henry:
He’s

Jose:
Not simply shopping for oh one property, you get rents right here or there. So understanding that it is a enterprise similar to a restaurant, sports activities bar enterprise kind. So understanding that he helped me put that mentality on me after which we put a deal package deal collectively once more and I bought a crew extra properties

Henry:
Earlier than we leap into the 18 extra properties. I do need to contact on that. It does sound wish to the typical particular person listening that possibly this man simply needed to dump a bunch of properties to any person who was new. However I would like individuals to know true mentorship relationships are one of the best when there may be mutual profit. I feel a variety of new individuals need to discover a mentor, however they don’t suppose they’ve something of worth so as to add or they only anticipate somebody to pour into them and so they don’t have to offer something in return and people aren’t true relationships. Now, sometimes you’ll discover any person who desires to offer to you and you may simply take, take, take, however an actual relationship is give and take each methods. It sounds to me like on this relationship, sure, there was worth for him as a result of he offered you properties, proper?
Right. However there was a variety of worth for you, not simply since you have been in a position to construct your portfolio, however now you had a mentor you would name on for any questions you had. Completely. That’s a real relationship, and I’m not saying you bought to go purchase properties from somebody for them to mentor you, however I do need individuals to consider what worth can I carry to any person? Possibly I can go do work for them, possibly you’ll be able to babysit their children. There’s one million issues that you are able to do. It doesn’t need to be actual property associated, however attempt to lead with worth. That’s tremendous cool, man. So how a lot time handed between if you purchased the ten models and if you have been shopping for the 18?

Jose:
It went like a yr or so after. So principally it took me some time as a result of that was a giant factor to, it’s a

Henry:
Massive chunk of change,

Jose:
However bear in mind, and that is when it comes, the mentor half, this man sit down with me and say, look, if you purchased these 10 properties from me, that is how a lot fairness you bought right here. And was like, what’s that every one the cash I’ve? Sure. In order that imply that now I understood what kind of deal I bought as a result of it wasn’t that he gave them away for me, however he may had charged me far more. And I spotted that every time I went in, we did some value determinations on these properties. So I used to be like, oh my goodness. Okay. So now I used to be in a position to purchase my 18 homes a yr after utilizing my 10 homes that I bought from him earlier than. So I exploit cross collateralization.

Henry:
So to summarize, you acquire the ten models, however the man didn’t attempt to benefit from you. He offered you the models at a good value that allowed you to stroll into some fairness on these properties. So when the chance arose to purchase the package deal of 17 homes, you employ what’s referred to as cross collateralization. So for these of you who’re listening, cross collateralization is the place you pledge fairness from current properties and you employ that fairness as your down fee primarily for the opposite properties. So as a result of the 17 properties had fairness in them, the financial institution principally gave you a mortgage and also you pledged a few of that fairness. In different phrases, they put a second mortgage on a few of these different properties to will let you have entry to the funds that you’d want because the down fee. So have been you in a position to get into the 17 models with out having to the touch any of your personal private money?

Jose:
I needed to put actually little quantity. It was round $40,000, one thing like that. I needed to put, once more, we return to badging it, proper? We’re speaking a couple of yr after. It wasn’t even like 2, 3, 4, 5 years a yr after we redo value determinations and this come to don’t have any fairness to purchase these 18 extra properties. And on the time I didn’t even know that I may do this, that I may really use these properties to purchase different properties. So this man set me down and was like, Hey look, this how a lot cash you might have, continue to grow and purchase extra properties even when it’s not from me, that’s what you say. You bought to continue to grow and rising and that’s how I did it.

Henry:
Yeah, cross collateralization is without doubt one of the cool instruments that small native banks have at their disposal. Now, not each area people financial institution will make the most of cross collateralization. You must name group banks and speak to them and ask them, are you keen to cross collateralize or are you keen to let me pledge fairness in an current property? So this solely works in case you personal actual property that solely has a primary mortgage on it. So in case you’ve bought actual property with fairness, both it’s paid off or you might have just one mortgage on it. In case you’re on this, you’ll be able to name area people banks. You need banks which have beneath 4 billion in belongings. These banks generally is a lot extra nimble than a few of these large banks. However the important thing to this technique is precisely what Jose mentioned is you need to purchase deal since you’re utilizing leverage, you’re utilizing borrowed cash as a down fee. So in case you use borrowed cash and purchase a foul deal, nicely now you’ve bought a primary and a second mortgage you can’t pay again and it will possibly put you in monetary pressure in a short time. So that you solely need to do that when you understand you’re shopping for phenomenal offers that even have a ton of fairness in them.

Jose:
That’s appropriate, that’s appropriate. And likewise what you talked about relating to the banks, I went to a variety of banks and so they instructed me no too earlier than a variety of banks instructed me they couldn’t do it. It was an excessive amount of danger. However going to the proper group financial institution will assist you, your investor life quite a bit, each financial institution is a unique enterprise. Each financial institution have totally different rules. So simply get to know your group banks and that may change your life for good.

Henry:
Yeah, man, that’s an outstanding level. You’re completely proper. Generally you’ll speak to banks and it may be very discouraging once they inform you no. Generally it has to do with you. Possibly they don’t such as you, your credit score rating or your present portfolio. Generally that has nothing to do with you, nevertheless it nonetheless sucks to listen to. No. However some keys to having the ability to discover a financial institution that does do what you need to do is at the beginning, ask the financial institution what sort of belongings they wish to lend on. Some area people banks love lending on giant multifamily, some love lending on smaller single household. It’s actually going to rely on the financial institution and the place their focus is on the time. You probably have deal within the asset class that they wish to lend to, it’s much more doubtless that they’ll need to work with you.
B, heat introductions are at all times higher than chilly introductions, proper? So Jose had a heat introduction, he had any person who had a relationship at that financial institution, introduce him to the lender. That’s at all times going that will help you when it comes to favorability than simply reaching out chilly. An important tip, if you would like a heat introduction to banks, is to go to your native Chamber of commerce or Rotary Membership conferences. You possibly can go to Rotary Golf equipment. I feel as a visitor, in case you get somebody there to carry you with them, it’s a member. Or you’ll be able to go to the Chamber of Commerce conferences. I feel you’ll be able to go as a visitor off the road if you wish to. However usually financial institution group financial institution presidents and industrial lenders are members of native chambers of commerce. And so in case you be part of the native Chamber of Commerce, simply being part of that chamber of commerce is your heat introduction. So these are some ideas that will help you begin to discover these relationships in case you don’t have that mentor who can introduce you. Alright, we’ve bought to take one other quick break. We’ll be proper again speaking with Jose Martinez about how he was in a position to buy one other 18 models proper after the break.
All proper, we’re again with Jose Martinez, man. Jose, what a terrific story of rising your small business and your portfolio to go from a quadplex to then including 10 models after which including one other 18 models and leveraging group banks and leveraging cross collateralization that will help you get artistic in regards to the financing so that you just have been in a position to purchase these properties. The place has that led you? The place is your portfolio sitting proper now? About what number of models?

Jose:
So proper now I’ve 51

Henry:
Models, 51 models. That’s unimaginable. So that you began in 20, 22, 4 years in the past, and now you’re sitting at 51 models, however you probably did transition away from a profitable restaurant enterprise into this actual property enterprise. So now that you just personal 51 models, are you glad that you just moved away? Has it been useful? Is the cash related?

Jose:
Effectively, one hundred percent. I can inform you I go away it strictly from actual property and my spouse is happier as a result of I don’t need to be one. That’s a win in itself. Yeah, positively. I imply, it’s been a blessed, I’ve been in a position to be house and see my ladies rising. I bought two ladies and that’s for me, it’s a win rider. Having the ability to keep right here with the household and having the ability to see them day by day and assist my life-style. After all,

Henry:
Man, congratulations. Restaurant trade now full-time actual property investor, and I like that you just talked about the way it’s afforded you the power to spend extra time along with your spouse and along with your youngsters. Possibly you would speak to us a bit of bit about what different advantages or what else is actual property allowed you to have the ability to do to your group?

Jose:
Man, it’s a variety of offers on the market nonetheless, and I’m doing my finest to attempt to pull my data into my group, which is the Spanish group that we actually don’t perceive what number of alternatives are within the states proper now. I inform all people that is one of the best nation of the world as a result of there’s a lot alternatives on the market. So I’ve been blessed and to study from issues such as you guys do, however now I’m placing that into them, translating that into them. And I’ve some those who have purchased duplexes, plexes. So only for me, that’s a win too. I imply, having the ability to pull that into the those who I do know and see them rising as nicely.

Henry:
Yeah, right here’s what I really like about this man. It’s type of a full circle factor and you’re doing this the proper manner. So I typically inform individuals if you’re searching for a mentor, among the best methods to draw a mentor is to attempt to discover a technique to be a mentor. I feel lots of people desire a mentor after which possibly they discover one and so they get assist. However I feel our accountability after you acquire the knowledge, you act on it and it begins to be useful for you, is to be keen to do this for any person else. That’s what creates one of the best type of symbiotic relationship within the investor group. And the investor group is simply superb already. We’ve talked about this one million occasions on the present, however actual property investing is without doubt one of the weirdest industries when it comes to individuals will simply assist you.
They’ll simply offer you info. Individuals don’t actually hoard info. They’re not scared to create competitors amongst themselves. Individuals will share info and if we would like actual property investor communities to proceed to function like that, we now have to be keen to offer as soon as we get from any person else. So I really like that you just’re taking what you’ve discovered and now you’re serving to individuals who in all probability simply don’t have entry to the knowledge or don’t perceive that that is one thing that they’ll do, and now you’re being a beacon for them to spend money on being a blessing to your group, man. In order that’s superb, man. Thanks very a lot.

Jose:
I feel additionally so as to add there, Henry can be being hungry and to really go after that data that you just’re lacking, understanding that, okay, if Jose Henry did it, what’s the road that I have to observe?

Henry:
You

Jose:
Don’t have to go precisely such as you did or I did it, nevertheless it’s a variety of choices on the market. You guys put one of the best content material each single week. I imply, you undergo that and that permitting, that may positively change your life for good for me, with none doubt, man. I imply, greater pocket helped me quite a bit. I imply, that is greater than half of my data come from right here on 4 years, and my different data come from my mentor after all. However once I go and sit down and ask questions, it’s since you guys discuss, okay, group lending, how do you deal with a scenario? So I am going, Hey, so I examine this, how does this work? And your mentor may also see you doing your personal researches and being hungry about it. So for me, this podcast had modified a variety of life and I’m a kind of too.

Henry:
Oh man, that’s nice to listen to, man. It’s at all times superior to type of see the impacts or the constructive impacts you’re having on individuals. So we admire the sort phrases, however we additionally admire the worth that you just’re bringing to your group. And earlier than we get out of right here, Jose, is there any plans for the long run? What’s subsequent, man?

Jose:
So I’m doing flippings as nicely on the aspect. So I bought a separate enterprise from what I’m doing, so I’m need to extra about creating too. So I’m actually simply, I’m in love with actual property. I imply, I begin with one and I simply stored going, stored going. And now, I imply, I actually get pleasure from to repair a home, lease it, or promote it. So I actually, I find it irresistible. I imply, that is life for me.

Henry:
I find it irresistible too, man. You bought the bug. I do the identical factor. I’m doing my first new growth this yr.

Jose:
Wow,

Henry:
Good. Effectively, thanks a lot, Jose, for becoming a member of us and sharing your inspiring story. Thanks a lot to you, the listeners for tuning in. We hope you bought some nice worth for this episode and we’ll see you on the subsequent present of the BiggerPockets podcast. And in case you discovered this story with Jose inspiring, go forward and take a look at one other episode of the BiggerPockets podcast, episode 1, 2, 3, 1. That’s my interview with investor Neil Whitney from only a few weeks in the past. That’s episode 1231.