Joe:  Welcome. This is the Real Estate Investing Mastery Podcast.

Joe:  Hey guys, welcome. This is the Real Estate Investing Mastery Show. Glad you're here. Got a special guest. His name is Dustin Heiner. Now, if you've been in the real estate investing world through podcasts and all of that, and for a long time, I've always gone to iTunes when I used to care about rankings. And maybe I still do. That's why I'm bringing it up. But I would search for real estate investing and this guy, Dustin, was always number one. And for years and years, I just wondered, man, this guy's really cool. He talks about passive income. And finally, a mutual friend introduced us recently. And so it's good to finally meet this guy, Dustin, and his passion for helping real estate investors find passive income. The easy way, not the complicated way, not the confusing way, not the way where you have to have hundreds and hundreds of apartment buildings. No, it's just real simple passive income for everyday folk like you and me. That is Dustin Heiner. And so I'm glad to finally get Dustin on the show. Dustin, how are you?

Dustin:  I'm blessed, Joe. Thank you so much. That's a great introduction. I really appreciate it. But I've been listening to your show. I think I started listening to it back in like 2014-ish, 2014, 2015, right? Yeah, right when I was starting to start mine, I was like, oh, I like Joe's show. But man, it's so great because we make our money through real estate and I'm successfully unemployed is the term. I like being retired early. And then now I just hang out with my family, go to the gym every day and come on podcasts and talk to amazing people like you. So thank you so much for having me on.

Joe:  You know, I wanted to get a t-shirt that said unemployable because you're wearing, those of you can't see, Dustin's wearing a shirt right now, successfully unemployed. And I wanted get one that said, unemployable. But my wife shot that down. She does not like that idea of me wearing that in the grocery store at Sam's Club with her. So good, man. Glad you're here. Dustin, you've been in business for a long, long time. Talk about how you got started into real estate. I think this was in 2005, 2006. Is that right?

Dustin:  Yeah, totally. So in 2006, I started investing in real estate, bought one property. I was living in California at the time and I, the prices were crazy and the rents were really low. So I couldn't make cash flow. And my goal was to become successful and employed or retire earlier, not work for somebody else financially independent. So I invested in Ohio of all places and didn't know what I was doing. But in the end, bought that first property and then started scaling from there. But what really got me into it was something that really shook up my entire life. So let me tell you this quick story of what got me into, like where I'm at now, 30 plus properties, apartment complex, and all that sort of stuff. So I am taught, just like everybody, we're all taught this same thing. You go to school, you get good grades. You take those good grades and you go to college or university, get in thousands and tens, 20, $100,000 in debt and then get a piece of paper called a degree. And then you go shop around to other companies and hopefully get a quote unquote career and then work 40, 50 years into life and then retire on 40% of what you managed to save that entire time working at J-O-B. I like calling it J- O-B because you're living just over broke working a J-o-B, but I'm doing that exact same thing, Joe. And so I'm working for a local county government doing IT in California. And so the most stable, secure, risk-free job you could ever think of, government, California and IT. They're definitely not going away. But I bought one property and I knew I needed to be an investor. But you know what happens, Joe, life started getting in the way. My wife and I started having kids, one, two, three, four kids. But this, let me tell you this quick story, what really shoved me into becoming an investor.

Dustin:  So when my wife had our fourth child, my daughter, you can see him in the background if you can't see this on YouTube. Our fourth child was born and I went on paternity leave. That's where the dad stays home with the mom, changes poopy diapers and all that good stuff and bonds with the baby. Well, after two weeks, I go back to work. And in that same week, I'll go back to work on a Friday at 3.30 in the afternoon. I get a call from my boss's boss's, boss's secretary, like the top dog. And she says, Dustin, would you please come to the office? I said, sure. And I hung up the phone. I paused for a second. I thought, why in the world are they calling me to the office like this is not normal. I've seen plenty of movies. Friday at 3.30 is not a good sign. So I get up and I start thinking as I'm walking out of the house, I start think about my life and I started realizing that there were potentially rumors of layoffs coming in the county because this was before I went on paternity leave because there was budget issues.

Dustin:  This was 2010. I said I shook it off. There's no way I can get laid off. I have great seniority here. My boss's give me raises because I do a great job. So I start walking down the hallway to my boss's office. Well, this hallway isn't very long. In fact, it's kind of short, but every single step that I took, it felt like the hallway got longer and longer and longer. And it felt like my feet became lead bricks because the way to potentially losing my job started to weigh down on me. Well, I get down the hallway and I turn the corner and I see my boss' door. His door is closed and I see his secretary there. Super sweet, nice old lady. And she says, Dustin, would you please have a seat? And she's trying to sheepishly kind of grinning at me, trying to console me with her eyes because she knows everything about what's going on. I know nothing about what is going on, so I go and I take my seat and I start thinking about my life. I realize, like, oh my goodness, this entire plan that somebody else told me that I needed to follow. If I get laid off right now, did I just waste my life doing the somebody else's plan? And then I thought, oh, my goodness. We just had our fourth kid. How am I going to, if I can't feed my family, does that make me a failure as a father? Does that make me a failure as a husband, as a man trying to provide for his family? Well, as I'm sitting there, my hands get all clammy. My forehead gets all sweaty because the nerves are just crushing me. Well, the door to my boss' office opens up and out walks a coworker of mine with a piece of paper in her hands. She's noticeably distraught, very upset, not necessarily crying, but you could tell her world has just been devastated. She walks by me and my boss says, “Dustin, would you please come in the office?” So I get up and I go into his office and I get laid off. And remember, this is the government. Nobody gets fired or laid off the government, but I did. So I take that layoff notice and I go and I sit down at my desk, just getting laid off. And I realized two things sitting there.

Dustin:  Well, number one, I need to get another job. I need a bill of provide for my family. So I was really blessed, praise the Lord, to find another job in the same county. A different apartment wasn't having those budget issues. Check. The second thing, sitting in that chair, just getting a laid off, I realized I need make sure this never ever happens to me again. I didn't make sure that nobody can take away my ability to feed my family. So right then and there, I realized whenever anybody asked me the question or we get the question, what do you do? I would reply with my job. Oh, I work for the county doing technology. We answer with our job. We're projecting out to the world that a value that we put on ourselves comes from our job, no, my value doesn't come from my job, my value comes from my God, from myself and from my family, so right then in there, I made a commitment. I will always, when everybody asks me the questions, I will say I am an investor because I knew I needed to be an investor, but life got in the way. Now it may so happen that almost 100% of my money comes from my job. That's not my part-time job. I'm a full-time investor. So quickly, fast forward the story. Started buying property after property after property, each one making me $400, $500, $600 or more dollars a month in passive income. Eventually I had 30 plus properties.

Joe:  You were buying homes before you got laid off, right? Started buying homes in 2006.

Dustin:  Yeah, I think I had three, three, maybe four at the time when I got laid off and I just took my eye off the ball. I said, okay, those are going great and you just kept working. We had soccer practice and just, and even had a business that I was running my own business as well on top of my job at the top of the family. And so I had four properties, but I didn't buy for at least a year or two just because it just took me off the wall. But what happened was I went after I had, I think had three properties and each one making me four or five, $600 a month in passive income. I went to my new boss, good boss and all. I said, boss, I'm laying you off. Like here's your layoff notice and you know, jokingly and he laughed as well. He says Dustin, what are you going to do? I said I don't have to do anything. I own real estate that makes money for me without working. So last quick part of the story. I would walk to and from my car to my job a mile and a half every day. I've been at a thousand times. This is a downtown of Too Frugal to Pay for Parking. Well, the last time I walked to my car, I knew that I would never need a job again. So I felt like I was walking on clouds because no longer will I be beholden to somebody else. And the reason why I tell this story too is for you listening. I want you to realize you are worth so much more than anybody could ever pay you. And you'll know this exactly because your boss is paying you just enough to keep you working without quitting but not so much money it takes money out of their pocket. If they paid you what you were worth, they would go broke. So what I suggest obviously Joe and I are in the same boat find a way to make money outside of working for somebody else who can take that job away from you and then you have your value that you put in instead of making somebody else rich, making yourself rich. So I'll pause the story because you probably got plenty of questions.

Joe:  Well, that's cool. It reminds me too of where I was at. Like I remember just being man, I'm one pink slip away from bankruptcy. I was living paycheck to paycheck. And I felt like I had this burning desire to be an entrepreneur, just run my own business. But I knew that this riskiest thing that I could do is keep a job and not have something to fall back on. So I just knew like the safest, best, smartest thing I can do for my family. And I'm not saying entrepreneurship is for everybody. But I knew that if I wanted to really provide for my family and take away as much of the risk as possible in doing that, I needed to have my own business. I needed it to have assets. I needed understand and create cashflow. So it's fascinating to me. And I remember back in, because you got started in 2006. That's about when I was getting started thinking about real estate. And at the time, Rich Dad Poor Dad was a big book at the times, right? The cashflow quadrant, the cashflow board game and all of that. And there was, you signed up for a real big expensive coaching program back then in 05, 06, right? Talk about that a little bit. How did you get into real estate?

Dustin:  Yeah, so I just like every employee go to school, or sorry, go to go to work and then watch TV just over and over and again. And you watch TV and eventually get a late night infomercial where the guru quote unquote, guru comes on and says, Hey, we're coming to your town, a free two hour seminar. So I went to that free two-hour seminar, but it was terrible. All hype, all sales pitch. Now run to the back. It's normally a billion dollars, but it's like 10,000, 20,000 30, but I can't remember what it was. But then it was also for a two-day seminar where they wanted even more money, like 80 grand out of me. And I was like, I don't even have that much money. So I couldn't, by the way, I took what little they taught me in those little bits of all the money that they took out of me, what little tiny little bit that they taught me and I bought one property in Ohio. But here's the thing. When I bought that property in Ohio, my property manager started stealing from me within six months because I didn't know what I was doing and I was following what they said. You know, gurus, what they'll tell you, oh, just find a property, enter in the country, run the numbers, make sure you're going to be making a little bit of money and passive income, but you're gonna get appreciation and you're in a love appreciation, which I don't know best for appreciation ever. It's great. I'm going to hold on these properties though. I'm gonna give these to my kids in generational wealth. They'll get stepped up basis, which means they're not going to pay taxes on it. It's going to be amazing. But what happened was I followed what they were telling me. So here's the, and you know this, but for the people listening, I'm to give you the wrong way that all these gurus will tell you, but then you'll quickly forget it. Well, Joe and I will help you know the right way. So they said, find a property anywhere in the country, run the numbers and you're going to get appreciation. That's what you're gonna love. Then they say, now spend thousands of dollars to buy the property, spend thousands of dollars to fix up the property, then try to find a tenant and then try and find a property manager. Well, in my opinion, that's backwards. Literally backwards. What we do, and actually before I get there, people have come to me. I've coached thousands of people just like you just love helping people and people come and they say, Dustin, I bought a house and then spent all this money, fix it up, try to a tenant, couldn't, and then tried to find a property management and I couldn't. And everyone I called, they said, I will not manage it because I'll get shot there. I'm like, oh yeah, you don't have an asset anymore. You have a liability.

Dustin:  So what I suggest, forget what those quote unquote gurus will tell you. What we do is we build a business first and then we get the experts in that business. Every single city is different. And so we build a business, get the expert and then instead of calling property managers after you bought it and say, you know, will you manage it? They say no. Before you buy it, you say, hey, property manager, I'm looking at this house, number one, Happy Street and you know tell me about it. Will you rent it or will you manage it and if they say no, you don't waste your time and money. They say yes, but you ask them a question. Okay, great. Well, how much will it rent for? What's my clientele like? What's the vacancy factor? Tell me about the area and you'll know an expert when they reply. Oh, yes. I know that street. In fact, we have a house two streets down. We were trying to get $1,400 or $1 500 a month. Zillow said we can get $1 5,000. We couldn't. We can only get $13 50 for it. So Zillowsnot expert. Who are the experts? Is those people on the ground? So that's what I did wrong. But the right way now is building the entire business getting the right people and they're going to help make sure you buy the right properties, fix them up properly and get good tenants in there and they are going to be the ones making you money every single month.

Joe:  Oh, that's really good because a lot of times those property managers will actually have properties for you too, won't they?

Dustin:  They sure will. And they also have other investors. Like people ask me, well, Dustin, how do you find good properties either off market or on market? But let's just say off market. Like I have everybody knowing me as an investor. So I get deals sent to me all the time from other investors, even title companies, property managers, Facebook groups, like everybody that is out there, wholesalers, they all know me as investor. They know my buy box and so they just send me deals.

Joe:  I love it. OK, so I've got a bunch of questions. I'm writing this down. You quit by the time you did eventually quit your job. What year was that?

Dustin:  2016, almost 30 properties. Now I have like 35 properties. And honestly, like it's kind of one quick anecdotal thing. When I was quitting my job, my wife, she's very risk avoid. It's like her dad was a stay-at-home, sorry, her dad, was a teacher, her mom, a stay at home mom. So no risk tolerance. I've got like so much tons of risk tolerance, she said, hey, if you're going to quit your job, we need to pay off majority of these loans. I'm like, oh, babe, but if I do, then I can't buy more real estate. She says, I don't care. We have plenty of money coming in. Let's pay off these loans. So I'm blessed now. Majority of my homes are free and clear and this just cash flow coming in. And that is what I guess our risk tolerance was. But then with all that cash flow, I just keep buying more and more properties. One quick thing, because I know you had more questions. This year, I just bought three properties, two for me and my daughter. You can see her right there if you're watching this on YouTube. She's 16 years old. She bought her first property. She got all of her life savings. I taught her just like I've taught thousands of other students. Bought her first properties, making $315 or $16 every single month. And like even right now, in this quote unquote terrible market, I'm buying real estate. My students are buying real style all the time.

Joe:  Okay, good. I want to ask you a lot of questions about that. So was it easier for you to be able to buy the properties because you had a W-2 job? So it was easier for your to get the loans?

Dustin:  First, yes. And the big reason why because the W-2 banks are looking at you, especially if you're getting conventional loans, which are the best you can get 30-year fix. Those are amazing lowest interest rates because banks want to verify that you can work your tail off to pay them back. So at the beginning, yes, it was really, really tough, but I've used at least 20 different creative strategy, creative financing strategies, everything from hard money, private money, soft money, seller financing. I've even gone to a bank and gotten a secured line of credit, unsecured line of credit, which is a signature loan. Use that. I've even used a credit card to buy real estate because I know my business. I know, well, let me give you a quick example. So in the financing idea, people might be saying, well, Dustin, isn't it really expensive to borrow money from your credit card? I'm like, yes, but here's what you realize. Let's say you had a candy bar business where you knew all day every day, you can sell a candybar for a dollar, but it costs you 50 cents to buy that candy bar. Well, you'd be thinking, I want to buy as many candy bars as I can because I could sell them for 50 cents and make 50 cents every, or a dollar, make 50 every time. Great thing about real estate investing. Let's say you didn't have 50 cents, but it costs you 25 cents to borrow 50 cents. You're out of pocket 75 cents and then you sell it for a dollar. You make 25 cents every single time. You're thinking, how do I borrow more money? That's the same thing with real estate investing, as long asyou account for all your expenses and then, you borrow money, use leverage or use other people's money. Access to capital is another way to say it, but you account for those expenses, even a high interest rate. And here's the thing. I am actually sad that interest rates are going down and people like, people that blows their mind, like, don't you want them to go down? I said, no, I want them to go up because what happens is who is our competition as real estate investors? It's not other investors. It's homeowners. They're the ones that fall in love with the property. They're ones that wayoverpay for the property and so when interest rates go up, they get price out of the market and I don't pay my interest. In fact, I'll say it this way and you definitely would appreciate this. I don't pay my taxes on my properties. I don't pay the mortgage. I don't pay for repairs. I don't paypay for property managers, meaning I don't have to get a job to pay for that. My tenants pay for all that. Now, fast forward to back to your question about getting financing with the W-2. It's very helpful. But with all the strategies now that you and I both know, all these creative strategies, I've done 20 different creative strategies. Even just a DSCR loan, a Debt Servage Coverage Ratio Loan, is absolutely amazing. You don't even need a W- 2 because the property, as long as it makes money and the bank gets paid and you get paid, they'll give you that loan. It's absolutely amazing and so I've used at least, like I said, 20 different creative strategies, financing strategies to buy properties. Nice.

Joe:  Okay. I was thinking of a couple things because you started buying properties in 2006, about two years before the market crashed. Did you lose those properties?

Dustin:  Yeah. So I did not lose them. I still own them. And the rents have almost tripled since I bought them. And here's the thing. The people that in 2008 that were, maybe they were real estate investors, but they were hoping for appreciation. You and I probably know lots of people who went bankrupt in 2008 because they were helping that the values would go up. It'd be like thinking, I'm going to buy this candy bar that I know I can sell for a dollar right now. I'm gonna buy it for $1.25 because hopefully in the next five years I'm gonna sell it for $2. Well, if the price goes down because you're hoping it goes up, then you're stuck. I knew that the appreciation is icing on the cake. I refinanced the property, tax-free loan to buy more real estate. I'll give it to my kids. Like the equity is great, but I can't feed my family on that. And so what I shoot for is 50, or sorry, $500 every single month from every property that I buy. $500 a month, that's $6,000 a year. 10 properties is$5,000 month, $60,000 year. 20 properties is $10,000 dollars a month. $120,000 a year. And so what I realized was the appreciation is nice. We'll utilize that as much as we can, but I'm never gonna sell these. I'm gonna give these to my kids. And in the end, the people that got hurt in 2008, nine and 10, they went bankrupt is because they were sadly doing it the wrong way. That's how I would say it because I made more money in 2008. Nine and 10. And here's a quick thing. Sadly, when there's a economy crash or something, there's problem in the economy. Well, we make money when you invest for cash flow. If the market goes up, if the market go down, or if the markets go sideways, especially if the marketplace goes down and people sadly lose their jobs. Sadly, they're gonna lose their homes and foreclosure, but they gotta live somewhere. And so the pool of renters go up. I, my rents went up in 2009 and 10. I was worried, but I was like, oh my goodness, is this the amazing thing about real estate investing? You invest fora cashflow and you do it right, get other people to do the work for you, hire experts, your tenants paying all your bills and putting money in your pocket, $500 a month. You can't lose.

Joe:  Okay, so I wanna talk about what is passive income? Well, I want you to define that for me because I don't understand. I'll be honest. When I've owned rental properties in the past and I don't own any rental properties now, the reason why is I'm not a good landlord property manager. I invest in businesses. But anyway, then I put a lot of my money back into. My business is to grow them and paying off my big old fat house mortgage. Okay, but here's my question. When I owned a ton of rental properties, that little money that I thought was cash flow, you know, every year, every two or three years would quickly disappear to the hot water heater, the roof that needed to be replaced, the tenant that took me three months to kick out. And then I had to clean, replace the carpets and the paint the walls and take another two months to get that new tenant in and then pay the property manager one month's rental fee as a tenant finders fee. And so what I thought was cash flow was just never there. It was just always disappearing. Now, it was true. The tenant was paying down, paying the mortgage. They were building in the equity, right? I was getting tax benefits. So there are a lot of benefits for owning rental real estate. But I sometimes wonder, is it really passive income? Like, can you really take that $500 a month and just spend it?

Dustin:  That's a great question. So to answer your question on the definition that I like to use for passive income. So active income, the opposite, is you work one time and get paid one time. The opposite of that was obviously passive income, you work on time and you get paid over and over again. Sothe working one time was I worked my five hours, give or take, to buy one house and that worked one time and now that house is working for me. That's the asset that's making me money. And so I worked one time to buy it, but then it's going to work over and over again. Now the way to make it to where you can actually spend that $500. So the biggest thing that I realized was when my property manager started stealing from me with my first property, I realized that I didn't find the right people before I bought the property. And I also didn't account for all the expenses. So here, expenses are very, very simple. Like, more than likely for you listening to this, you are much smarter than me. I'm not that smart. I only know addition, subtraction, and a little bit of multiplication. That's really what it comes out to. You just add up all your expenses, property management fee, vacancy factor, if you have any taxes, insurance, all that sort of stuff. Like you count for all those expenses, you just add them up. That's your, let's say it's a thousand dollars, but you add up those. But one thing you must do, and this is how we account for that $500 a month that goes into our pocket. That's another expense line item that you're going to add on there. So all your expenseare five, or sorry, let say a thousand dollar, you make sure that you have another expense-line item that's your passive income or your cash flow that you make. Let's say if you want to make $500 a month, well, you need to make sure that it rents for over $1,500 to pay for everything else. So when you're doing that, you're making sure that everything's accounted for, and that's even including any repairs the entire year. So you should be saving some money aside for the repairs, and then you're also putting money in your pocket. And honestly, the reason why I love the $500 mark for every single property, people might be thinking it's hard to get. No, it's not. It's actually not that hard to. You can actually getit and we can walk you through it. But when you get that $500, that's $6,000 a year, that's a big buffer, huge buffer for you if you have a furnace go out or a water heater go out. But then at the same time, you're also accounting for all those expenses of repairs, capital expenses, like the roof going out or something like that, and you're saving money for that as well. Does that all make sense?

Joe:  Yeah, so you're saying after vacancies, maintenance, repairs, property management, taxes, insurance, and CAPEX, because there's certain repairs that have to be done, right, and there's vacancies. When you can also set aside money for the future water heater that needs to be replaced, right, or the toilet that needs to be fixed and replaced, whatever, you still try to cash flow, net, net, net cash flow $500 a month. Okay, so let's talk about how you find those deals because I hear a lot of people saying, no way, no way Jose Canseco, you can't do that. Like, so walk through how do you find a deal where there really is a net, net, net cashflow of 500 bucks a month?

Dustin:  So I'll give you an example. Just one of the properties I just bought like five months ago, five or six months ago. So I invest in Ohio, Texas, Arizona, Tennessee, and Indiana. And in each one of these places, I build in business, like I told you in the beginning, that we build a business and make sure the experts do the work for us. But in one of my areas in Ohio I bought a home for $67,000. And fix it up. It was like $20,000 to fix up. So let's say closing costs and everything with everything all in about $90,000. Well $90 thousand dollars. Now the value of the home is a 140 maybe $150,000 so I found it off market. Another investor was trying to offload it. So I bought it from him. He was going to sell it to a wholesaler, but he's a friend of mine. So he's like, I'll just I'll sell it to you for the same price as this wholesaler. I'mlike, that's great. So I brought this property out of pocket 90 grand. It's worth $150 thousand dollars and then I want to say like the mortgage and every all the taxes and everything. I think we're probably 600 bucks a month. Nah, probably seven or $800 a month total and then it rents for $1,300. So these properties are out there and so when you find you know this like and hopefully your listener for you listening you know, this too. You don't buy the best house on the block. You buy one of the worst ones that nobody wants and then you fix it up and you make the forced appreciation, which means if I put in $20,000 worth of work or expense to make this property worth more. Now it's gone up another $30,000 on top of that of what how much money I put in and so I have that much more equity now and then I cashed out refinance pull out to buy more real estate in the future. I haven't done that yet, but so these properties are out there and people might be asked with Dustin with interest rates really high, you know when price is really high. How do you do this? Well, you need to figure out what your expenses are and then decrease your expenses because you cannot force the rents up like if you put granite countertops in there and make it the Taj Mahal, you're not going to get much more because there's only so many people in that area that would rent it for that much. You might get 50 bucks more. It's not going, so we look at how do we get our expenses down? The number one, like taxes you can't, you might be able to appeal it and save 50 bucks, but the number one thing is your mortgage and how do you get your mortgage lower, your payment lower? You get the purchase price lower. Interest rates, whatever it's going to be. I mean, you could definitely buy it down and you'll get a rate reduction by buying it down. You can do that, but in the end what it comes down to finding the properties and buying them for lower so that it fits your criteria for the passive income.

Joe:  So you're buying properties that need updating, they need fixing, right? So you are not going to a turnkey provider and buying a property that's already fixed up.

Dustin:  I'm not a big fan of turnkey providers personally. And here's the big reason why it's really, it's not hard to do this investing thing. It's not easy because everybody would do it if it was, but it's simple. It's really really simple. If you put a little legwork in the beginning, getting the right people, finding the property managers, I'd look for them first because they're going to be the ones that are going to manage the property, making money for the longevity. In fact, I love just getting checks or getting a direct deposit and never talking to my property. I don't want to talk to them. You just run the property, make me money. But if you have other people making sure you're doing the work for them, they're doing to work for you, the property is going to be making you money. And in the end, as you're building up that cash flow, you're like, let's say there's cap X's or stuff like that. Like those are all baked in to your expenses. And in, I kind of got lost track. What was your original question? I went off track with the property manager for a second.

Joe:  The original was like, how are you finding a deal that actually cash flow? And then are you buying deals from turnkey providers? Just so people know, a turnkey provider is somebody that gets the properties, fixes them up, puts a tenant in them, and then sells it as a package deal to the out-of-state investor from California.

Dustin:  So the number one, there's a few reasons, but the number of reason why I don't like buying through turnkey companies, it's not that you're spending more money for the property, it's definitely not that. What it is, is you're getting a property that somebody else has built a quote unquote business. They got the contractors, they have their own property management company. So a lot of turnkey providers, they have own property manager management, but it's like a secondary thing. Like, oh, we just got to manage it. So let's go ahead and just put that random business together. They're not actually property managers. I've known quite a few. And the people who buy properties from these turnkey companies, they don't continue buying because the management's terrible. So you're getting somebody else's business. That's when I boil everything down, you're going somebody else business that they built that they don't care about, that they're just going to sell you the property. That's the number one. I don't want to have somebody else' business. I want to build my own. But number two, is you're leaving so much money on the table, or giving it to the turnkey company because they're buying, I'll give you an example. So there's another guy that I know who does turnkey. He'll buy it for $55,000, $60,000 a property in Ohio. He'll put in, because he has a big crew, $15,000 into it. So let's say he's out of pocket $80,000. He'll sell it for a $145,000 turnkey. He's pocketing $60 grand every single time he gets a property. That's all that money that could be in your pocket. That's how I make the cash flow is because I buy it just like a turnkey provider would, and I don't do any work. I don't go hammer. I don't do any of that stuff. I say, hey, contractor, I got another property for you. They'll fix it up, click, they're done. They run off and they do all the work. Now, the reason why I have those is because the contractors and the right people is I build the business first, vetting all these people. The reason why my property managers at the very first started stealing from me is because I did not hire well. Let me give you a quick example of what that looks like. So when you build a business, like let's say a convenience store. If you're going to start a convenience store, you're not going to sign a lease on a location, open the doors and sign up, put a box of candy bars on the ground. You go out of business in two seconds, but what you would do is you would build the business first. You get the gondolas. Those are the shelving units, all the candy bars go on the countertops, cold storage, bank accounts, cash registers, insurance, employees, everything in the business before you buy any inventory. Then once that's entire things built, then you buy the inventory and put into your business. Same thing with real estate investing. We build the entire business, get everybody in the business and then our properties are our inventory that we put into the business. Now with turnkey or, you know, having somebody else do all that work, they're building that business and giving it to you. You don't know what you're getting. But at the same time, you would be able to capture, let's say I bought it for $67,000 and then it was at the time worth maybe about 110 just as it sits. So I boughtfor $60,000. I captured what? Let's say, let's be generous, $30,000 in equity, but then I put 20 grand into it. Now it's worth 150. So that's another 40 grand on top of that. And so when you piece everything together, if you build your own business, you'll have the experts doing the work for you and people will send you deals. I get deals all the time and I don't need a turnkey provider because I did all the work upfront and it's really not that much work. It's just a couple of phone calls and you're vetting the right people.

Joe:  Okay, so what kind of homes are you buying? What's your preference? I love

Dustin:  Homes that are three bedroom, two bath, 1,200 to maybe 1,600, 1,700 square feet, not too small that families don't want to live there, not too large that I have extra walls to paint, extra electrical sockets and extra bathrooms to repair. But these are the homes. I love it. It's like a cookie cutter type home. They're the homes that everybody either wants to rent or if I ever want to sell it, they want to buy it. They're just, they're everywhere. And the best tenants you will ever get are either grandmas because they never move or families. Families that have kids that go to school right down the street. Parents work right down the street, they have a community, maybe their church is right there. They don't move very often. Who are the worst tenants? Single adult males. Like if you're a 25-year-old, they'll leave a microwave and a couch and they'll live. You don't want, you want people that are going to love the property. I don't say love. That's kind of a harsh or too flowery. They're going to be living in there for a long time, I guess I would say, because you know who's going to love something that they rent. But at the same time, they're not going to want to move very, very easily because they have their life built around that house and I don't want them to ever move. So I keep the rents just a little bit lower. So it's not enticing them to move to something else.

Joe:  Andso would you say they're Class B, Class C, Class D type of neighborhood?

Dustin:  So to get started, you gettinginthe Class D is really difficult. Not buying. Anybody can buy it. In fact, it's how a lot of people get hurt because they buy a Class D and it's a crime-ridden area. Nobody's going to manage it. And that's terrible. It's so much, it's easier just to buy that. But to make money, you're not going to be able to do it. I would suggest if you're just getting started, look for the C Class areas. B is great. Don't get me wrong. I love B areas. Aareas obviously are really good, but it costs a lot money. I want lower purchase price, higher rents, so I get more cash flow. If you're going to buy a, let's say a $400,000 house and your mortgage payment, what would that be? Let's say $2,500 or something like that. And you're making $200 a month in passive income, $300. Like if you don't have enough passive income one month of that mortgage hitting you, that's going to take you your entire year. So what I love are lower priced homes that my mortgage is like $300, $400 a month. And if I can weather the storm if it's not rented for one or two months. They're like a minimum year. That you like to use or look at. Man, I've never been asked that question. No, I even own homes that were built in the 1900s, like 1902 or something like that. I even know, but here's the thing back then they were built very, very well. Now here's what you're always going to have to realize. So this area when I first got started, again, I didn't know what I was doing. It was a D area. Definitely a D Area. When you buy it for a lower dollar amount, your repairs are going to be a lot more. If you buy for a higher dollar amount your repairs going to a lot lower. So you got to understand that business, the business model. Since then, I love playing Monopoly. You know, Monopoly, you start with land. I know you do land. You start with the land. You build and then you eventually get to multifamily. Just keep growing. You keep scaling it bigger and bigger. So what I did, I started in the D area because I didn't know what I was doing back in 2006. Eventually went into C areas, a lot of properties in C areas. Now I'm buying predominantly in B areas. I don't like A areas unless I'm going to do Airbnb. But even then it's just too much hassle. But what I love is when you have a good B area, you have options. You could long-term rent it. You could mid-term, which is 30, 60, 90 days. You can also do short-term and you could also do co-living. So you have a lot more options when it's in a B area. But a C area, you're going to do long- term to mid- term and co- living. Short-term might not be the best. You and I both love coaching people. And when we show people all the options that are out there, the whole problem with most people, most of our students, comes because they don't know the options. They don't all the different things that they can do to make money for them or to find properties. What we love to do is show that there are so many options out there, just like a tool in your tool bed. Like all the 20 different ways that I got financing to buy properties. Think about 20 different tools on my tool belt. Whatever deal comes my way, I just pull out the tool or three tools and buy that property and then start making money from it.

Joe:  Okay. I want to ask you about property management companies because that's a big component of this. You need a good property manager. It's kind of like the first person that you need to find. And there are good property managers out there. And guess what? The good property managers will not let you buy a Class D house, right, in a bad neighborhood because they don't want to manage it. But how doyou go? Do you pick the market first or do you pick the property manager?

Dustin:  Fantastic question. So market first, meaning of the entire country, your option is the entire country. So you got to drill it down. So find a state. I suggest not going in states that are not landlord-friendly. California is terrible. Oregon is terrible, there's plenty of terrible ones, but there's a lot of good ones. And so drill down number one, this market, which would be a state and then start drilling down to a specific city. If I'm going to build a business, I want to find a city that has lots of homes and lots of property managers that I can pick from. So if you find some tiny town that has maybe like three properties there, you're only going to have, you may have one property manager to choose from. It's not going to be that great. So I like looking, start with a city, then drill down, sorry, state, then drill down to a city that has a lot of inventory. Remember, properties are inventory. So lots of inventory, lots of inventory means there are lots of potential property managers. So once I see a specific city, to give you an example, a lot of my students are investing in Birmingham and Alabama right now. It's a big city. And so there are lots of property managers to choose from. So area, drill down to the city, then you call your property manager. Now, Joe, I'm sure you've asked this question, but I'm going to give for you to listen. I want to give you, listening, I'm gonna give you the best question you will ever ask anybody in this real estate investing business. This is like coaching stuff that you have to know this. So drill down, you find a great city. You're like, oh man, this looks like a great City. I don't live there, but where is the crime? Where's the bad areas? Where are the good areas? You don't ask a realtor. A realtor, they just want to sell a house. I'm not for realtors. Realtors are salesmen. I mean, they're there. I've got thousands of realtors working for me. That's just, everybody sends me deals. But my property managers, those are the ones that are going to make sure that you buy the right home in the right area. But here's the number one question. Number one question you're ever going to ask a property manager. If you were to invest your money right now in this city, where would you invest your money? They'll tell you exactly the right areas that are the best places that have the highest cash flow, lowest crime, that would be great for you to invest in. I have asked the opposite. I have ask, where should I not buy real estate in this city? And some property managers say, oh, I don't want to get discrimination. So I'm not going to say that. Oh, let me change it. Let me say, where's the best place that you would put your money? So your property managers, they're going to make sure, because like I said, experts. We don't live there. Zillow is not an expert. Redfin, Trillia, like all those, they're just databases. Chad GPT, they're all just companies that had no clue what the experts know. So you find the right expert. They're going to make sure that you buy the right properties in the right areas.

Joe:  That's a great question. I love it. It reminds me, when we were in Italy, somebody gave us some advice. A taxi driver. We were asking him, where are the good restaurants? No, no. Let me rewind. Somebody told us before we got there, if you want to find a good restaurant in Italy ask somebody local, where would you take your grandmother to go eat? And so we asked a taxi driver that question. He's like, oh my, he couldn't believe that was such a good question. And he told us, I would tell you exactly where to go. And he sent us to this place that was off the beaten trail in Rome. Wait, there were no tourists in there. It was kind of sketchy. But we went into this place and it was amazing. The food was so good. And when the owner of the restaurant came out, because he was kind of surprised to see tourists in there, I guess. And he said, how did you find this place? And we told him, a taxi driver, when we asked him that question. And it was the greatest compliment that he could have ever gotten. He's like, he was so excited. He gave us a bunch of free bruschetta. That's a really important question to ask. I like it. Okay, so I want to ask you more questions. You were talking about short-term rental, co-living, mid-term, long-term. It's getting harder and harder to do Airbnb in a lot of cities these days. Co-living means you're renting it out by the room. Are you starting to see more cities and neighborhoods passing laws against co-laving? Are they going after that now also?

Dustin:  So Airbnb, obviously short-term, you know that they're passing laws, especially big cities. They're doing that. And the way around that is right now, co-living and mid-term. Mid-term is fantastic. I have mid-terms properties. They make me a lot of money. So if I were to pick the personal, between short-term and midterm, definitely mid- term. Now laws for co- living, I have not seen any laws for co-lifting yet. I have now. If they did pass laws for co-live, they have to realize the type of also the co-Living that they are going to have to affect senior living facilities, halfway houses, you know, sober living places. So they're going to have to really think hard about co-living.

Joe:  What do you prefer co-living or midterm rental? Now midterm for you is what month to month?

Dustin:  30, 60, 90 days. Yeah. Usuallythe most people normally stay would be 90 days, but here's a great one. I'll quickly say, but I'll tell which, which I prefer. I had somebody stay 90 days it was a company. They put their employees in there and then they said, Hey, can we just sign a lease with you for the same price for 12 months instead of going through Airbnb and save some money. I'm like, absolutely. So 12 months. Yeah. I can, I get long-term rental for 2100 maybe at most. I'm getting 3600 bucks for it. So it's amazing.

Joe:  So what's the difference in rent that you would get if it was a long-term rental versus midterm? What's the difference in rent?

Dustin:  So well, you have to furnish it. That's one thing with the midterm short-term co-living. You have to furnish certain areas. But anyways, what I found long-term is the least amount of work least hassle. And it's, it's I love long-term. In fact, 80% of my portfolio is long- term. The other balance are midterm and short- term and so what I look at is long term. I'm going to rent it at minimum or I'm thinking one specific house that I have right now, and this is indicative of most places in the, the amount of cash flow or the amount of money you could rent it for. So $2,000 is probably maybe 2100 is the probably top but per month that I can rent it for long-term not furnishing it. They take care of all the other expenses are if you do co-living or midterm short-term you have to account for the internet. You have to account for water, sewer, all that sort of stuff. Those expenses are expensive little higher, but this one I'm renting it for $3,600 instead of 2000 or $2100. So let's just say $1,500 more doing a midterm than a long- term. But my expenses are probably about three to four hundred dollars a month maximum. So I'm making a thousand dollars more doing midterm at minimum than I would a long-term.

Joe:  Do you manage the midterm rentals yourself or do you still use a property management company for that?

Dustin:  This one, the one that I have right now is a midterm. I manage myself because it's been fantastic. I was going to hire a property manager, but I just put it on Airbnb and somebody took it and it just was easy for me to do it. But for the midterm and short-term I would much rather and co-living to hire somebody else. I don't have time. I don't want to I'm not a good landlord. I don't want to deal with any of that stuff. In fact, I'm more of like I was such a pushover in the beginning 2006 seven and eight. I had people staying in my home for so long. Oh my son got arrested for the second time this month and I can't make the it's like it's just what How can you ask you about that?

Joe:  I had a friend in a mastermind at one time who owned a bunch of rental properties and they had the hardest time finding good property manager. And so they just decided, you know what? We're going to hire somebody full-time. I don't know. They maybe had 50 70 doors and they just hired a full- time assistant and I don't even know if it was a virtual assistant or they didn't even have an office. So somebody they hired their sole job was to manage all their rental properties. And what they did is they gave that person some books on managing being a landlord, you know landlord for dummies or whatever and some courses that they bought and how to be a good property management company or how to manage rental properties and they said the problems went down their expenses went down. The rent was long-term tenants werewere happier because they were getting more better attention and things like that. So they did bring it in-house, but they said it was the best decision they ever made in their business because they we're able to control it more and keep costs down and make sure the tenants were getting better like, you know with a property management. Sometimes somebody calls because there's a leak and it may not get any attention for three or four days. Have you ever thought about that maybe doing property management in-house with just a full-time dedicated assistant?

Dustin: I have so all my so 33 35 properties are however many I have they're spread out. And so in certain areas, I have economies of scale. So if I hired somebody for like one area has like 10 properties or eight nine ten or something like that. It's not enough for a full-time person, but it's a great idea. Like if you have 50 properties in one area 100% you should absolutely hire somebody you can get somebody full- time. That would be fantastic for the price because let's say you're renting it. I'll do easy numbers $1,000 a month. That's your renting it for that's $100 per property. That's five was a $5,000 a month that you're paying to a property management company that you can basically put it back in your pocket and or hire somebody else and have them maybe even be part-time. So it's economies of scale. So if you have five five to maybe 10 properties that might not be the best but at the same time it's a great thing to even look into. You're doing this in virtual markets of you're buying and owning rental properties in four or five different markets and all of them out of because I keep your question. So out of all the properties that I own I've only seen one of them. I've always seen one. I'm physically all that was the first one I ever bought all of them I saw it by him sight unseen, but I get pictures and experts sending me all the information.

Joe:  And I love that idea of you're finding the good property managers first and that is the key to making all this work because without a good property manager this whole thing falls apart.

Dustin: It's terrible and you're miserable. You're pulling your hair out.

Joe:  All right, so you're buying the worst property in a good neighborhood class C mainly right and you're fixing them up not the Taj Mahal, but you're they're nice properties. They're good bones. How are you finding good tenants? Is that just the property managers job?

Dustin:  And then they bring them to me and say not all property every property managersdifferent, but usually they want to get a sign off from me saying yes, I approve this one pro tenant and so there's criteria is everything from I tell him I don't want anybody that's ever been evicted. Now, maybe if they've been evict it like eight years ago, I might look at him. But if it's been two years, I'm going to be the next eviction on them. So that's one criteria another and in the C class areas, you have to lower the credit score It might be like 580 that you have to lower it to but where it comes down to I found evictions are terrible. You know if they have a lot of give everybody for you. Listen, I'll give you a something you have do but if somebody has a felony, it's like man. I don't know if I really want somebody like that. But here's the thing if you are ever not bringing somebody into your home for whatever reason is I don't care what the reason is never tell them the reason just tell them you don't fit our criteria. That's all they might be asking you over over again. Well, what what did I admit what did I miss? Like what's the problem? You just don't fit our criteria. They can ask you to tell you blue and if they're blue in the face do not reply because in the end they can come back and say well you didn't like me.So I'm going to sue you for that. Now just leave it just say you didn't fit or criteria and move on.

Joe:  While you're talking, have you ever heard the software called deal check.io I have I'm while you were talking I looked up a rental property that I could buy right now in a decent area in St. Louis and I'm putting in the numbers into deal check and it's a calculator that helps you calculate your cash flow right after all your expenses and then it does all of those fancy ratios and what I'd like to do is walk through this with you. You wouldn't mind and tell me where I'm off now. Maybe you have a better calculator that you could show.

Dustin:  They're probably the same. I've used it and I've sent a lot of students to it as well, but they're all the sameis going to be the same what we have to look at is how are we going to fix our expenses to come bring them down. So let's walk through it.

Joe:  Now what I did is I went to St. Louis County. There's St. Louis right there. I did three bedrooms only not three to four three bedrooms one and a half plus baths and then I did house only max square feet 1800. I'm just trying to trim it down. I don't want too big and built after 1950. All right. So that takes away a lot of the properties if you're familiar with St. Louis here in the hood right North St. Louis right here is really bad. Okay, so you can see there's not many green dots there. And I just scroll down and I found this thing right here. It's currently they're asking 99 grand for it three bedroom one and a half bath about 1400 square feet. It's brick. It doesn't have a garage, but it's converted bedroom maybe or something.

Dustin:  So that's how that's what makes it a three bedroom then.

Joe:  Yeah, probably I'm guessing and it needs obviously work and but it's been on the market for 208 days. So it's way overpriced and so but I know this area well enough. It's a good rental area. It's A good class C neighborhood and brick houses tend to in in the St. Louis area tend to be more desirable, right? So I went into Zillow and looked at the rents estimate just to see what this property would rent for and it's better on the market for a long time.

Dustin:  Scroll down has a very rest of the price history. Let's scroll down and see if there's any hit show more. Let's see if there ever had been rented. Okay, now it doesn't sometimes if it's been rented and is shown on the MLS as rented. It'll show you how much they're asking for. So I question like, what do you think like I know that area is just somewhat. Okay, 1500 sounds expensive for that area.

Joe:  Well, rents have been going up. Let me open up a map here and zoom out so you can kind of see where it is in the St. Louis area. Okay, it's kind of border line pretty much depending on the investor. You get less comfortable over here and more comfortable over here, but I think 1500 is kind of high for this area of St. Louis. Okay, but it's you know, it's a decent neighborhood. If you were to drive the street do Google Street View. Let's just say it is.

Dustin:  So I think Zillow is going to air on the side. It's going to be too high. So it says 1545. I would probably personally I run my numbers at like let's say 1495 that I would feel a little more comfortable doing that.

Joe:  Well, that's what I did. Now this program called Deal Check. It's pretty cool. It's a great way to analyze properties and get all of your details on it. So let's let's start here with property description. This is the address of this property. It's A House 3 bedroom one and a half baths built in 1961. Here's the description that came from the listing. All right purchase worksheet here. It's listed right now for 99,000. So maybe you know, I make I offer 80 and I might get accepted it if I could pay cash close in 30 days quick. I think I wouldn't want to pay more than 80. I'm just kind of throwing that number. I pulled that number out of my you know what I have to repair value if it's completely fixed up 129 is the number that they came up with and I that might be this estimate value. I don't know, but I think that might be fair 129. So this now using financing 20% down is that pretty good?

Dustin:  Yeah, that's probably fine. I've standard my students we've been getting 10% some but obviously the deal changes just a little bit. Yeah, 20% is on average.

Joe:  Seven and a half percent interest. Would you say that's a good number?

Dustin:  That's so DSCR. I've been I got a $550,000 loan. I bundled six properties together and it was a 6.5% pull at 550 but I would say probably about 7% is probably a little better, especially with interest rates that should be coming down.

Joe:  And this is let's just assume that you know, you've got a W2 job and it's easy to get loans for rental. 7% 30 years. This is a traditional conventional whatever mortgage and the cool thing about deal check is you can customize all of this like you can have additional loans and and whatever purchase costs about 3% of the purchase price that would be closing costs or whatever. You can make that less or more, but keep it there rehab. I just said, you know 35 grand that could be paint new flooring, new kitchen, but I don't know maybe 50. What do you think?

Dustin:  Oh, I wouldn't I'd say I would probably put $20,000 into it. You don't need it to be the best because you need to rent ready. You need it to be the average rent flooring looks like it's probably pretty decent paint the walls. If it's 1,300 square feet, let's say 1,400 square feet about $2 a square foot. So about $25,000 to paint everything flooring with somewhat decent kitchen. You don't need to replace the kitchen like if we're flipping it or wholesaling it into this kitchen, I would just clean it up. I just clean it up really just clean but it's like clean it really really well, but the cabinets look fine tenants going to rent it just fine. Everything is you wouldn't wait for it wouldn't replace anything in the kitchen. You would I would place the cabinets. No, I wouldn't I'd say in most you're going to be 15 to $20,000 on this property because of how because the condition is in and right now.

Joe:  Let's say 20,000 in rehab. I'll do 5% overrun which is what 5,000 bucks. No, no 10% is two grand. So that's a thousand dollars overrun. Let's see gross rent 1495 a month.

Dustin:  High 10% that's pretty high. It's usually around six to seven percent at most.

Joe:  Let's do six percent. So that would be let me get a calculator here 1495 times 0.06 that'd be $90 a month times 12. That'd be a thousand seventy six a year and you think that's enough.

Dustin:  I think so and here's another thing to the property manager will know better what the what the rate you should put in there.

Joe:  Yeah, sure. And you could even just if we had the time here, I would go to Zillow and look to see what other properties are renting for in that area, right? And the cool thing too is deal check will give you recent rental comps in this area. Did they do their own rent cast the average listed rent? So they're estimating fifteen hundred and you can look at each of these individual properties here. But yeah, some are less. Some are more. OK, let me go back to this property. A purchase worksheet. OK, 1495 a month in rent, six percent vacancy. We're not no other income operating expenses. You can edit. These are all itemized. So this filled in there's 1800 a year in taxes insurance maybe 500 a year does that sound approximate? Property management, ten percent.

Dustin:  Oh, yeah, yeah. Sorry. Yes, ten percent and then maintenance and in capital expenditures, ten percent each. That's pretty high. I do ten percent both maintenance and so five percent for each of those. That's what I would put in there.

Joe:  So maintenance would be if it's renting for 1495 times 0.05 that'd be seventy five dollars a month. You're setting aside for maintenance that is needed in that year and that times 12. That's about nine hundred dollars a year. You're setting aside for any maintenance and repairs for that property. Is that enough? Do you feel?

Dustin:  Yes, I do.

Joe:  Okay, you're also saving nine hundred a month for future capital expenditures. So after two years you'd have about eighteen hundred dollars after four years in that pot. You would have about thirty six hundred dollars after four years in your CapEx account savings for this property. So is thirty five hundred dollars enough? Do you think for four years for capital expenditures?

Dustin: I think so, especially when you buy the property, you're going to see you know, what's the water heater like? You know, if the water heater is on its last leg, more than likely you replace it. I would suggest getting the seller to pay for it by getting a credit. Say, hey, the water heater is going out and you're going to get me credit for it or the roof is going out. You know it's got two year life on it. I need to get a credit for the roof. You look at the big mechanical type things that are capexpenses and try to get those paid for by the seller when you buy it.

Joe:  Okay, okay, good. So then for you personally, like do you actually have a savings account for you know, like you read the book Profit First, right? Do you set aside money for vacancies or vacancies, maintenance and capex?

Dustin:  So at first I did when I had let's say five, ten plus properties. Now with thirty plus properties and hotels and apartments that I invest in, we have so much money coming in. Basically, it's a big, big account that we keep all of our money and I dip into it by real estate and then I replenish it. And so now I don't, but it comes like you don't need five thousand dollars per unit or for a property that's stored. If you have ten properties, fifty thousand dollars, you're more than likely you're not going to be able to need or you're not going to need that at all. You're going to need maybe let's say twenty grand, even ten, fifteen grand. Like in one month, you're not going to get every single roof go out, every single furnace go out so it's going to be replenishing.

Joe:  So this is somebody's, it kind of depends on how much money they kind of already have on the side, right? Correct. So, but if you're just starting out, what would you recommend to somebody? To five percent for maintenance and capital expenditure?

Dustin:  That's what I'd sell my students. Yeah, capital expenses, five percent, maintenance, five percent and then more than likely when you buy the property, you're going to be doing very well in getting it fixed up first, meaning like I said, furnace, water heater, if they're on their last leg, you get the seller to pay for it with a credit, things like that.

Joe:  The reason why I'm harping on this, this is so important to me because one of the biggest reasons why I got in so much trouble when the market crashed is I didn't have any margin for error. All, like every rental property I had, I was spending all that cash flow and I was also doing stupid stuff like doing cash out refinances, taking profit early out of a deal, borrowing too much money from private investors, like that's a whole thing. But I did not have any money set aside for vacancy and so all of a sudden after two, three months of vacancies, I'm freaking out, anybody who could fog a mirror and I would take the first person in that could just pay me a first month's rent. I didn't need to make it worse. And then I kept on getting worse and worse and worse and worse tenants. Just kept on spiraling. So this is so important. I would just throw this out there for people wanting to buy rental properties. You have to set aside this money for future things.

Dustin:  Absolutely. 100% maintenance and capital expenses don't like I have a I have a lot of money just stored up that when there's problems we have that money to make things. Now with so many properties now and with my property managers they don't even I don't even send checks anymore. They just take it out of the rents that they've already collected and so I never really have expenses coming out anymore.

Joe:  Yeah, okay. Makes sense. Now do you factor in you said you don't count on appreciation, but do you factor that in in your No.

Dustin:  No, I don't even care about that. I mean, it's great. Don't get me wrong. I love the appreciation, but I don't factor. I donbother it's seeing what it's going to go to especially C classes. It takes a long time for them to appreciate as opposed to B and A classes, but the homes that I bought in 2006 to 2010 they're double if not triple what I bought it for. So, you know, it's it's great, but I just yeah, it's not something I personally care about.

Joe:  I feel 3% is good. For this area and we'll get 2% income increase 2% expenses increase every year. And if and when I sell it, I'm going to pay about 6% of the sales price. You can write off depreciation. I don't understand this. That's why I have CPAs, but that's going to factor into this and you can even factor in long-term refinance. All right. So here's property analysis. This says it's going to cash flow. I'm gonna need $39,000 to buy this property. Like that's my purchase price closing costs and rehab. This will cash flow 493 a month cap rate 13.8% cash on cash return in my first year. I believe that's what that is 15%. Do you feel like does that sound about right?

Dustin:  Yeah, it does. It does especially for the rent amount. That's that's the number one thing is getting the expenses lower, but you can't change the rent them out. Even if you put in like a hundred thousand dollars to fix it up. It's not going to raise the rent that much. So it does seem like that's a pretty good number.

Joe:  Now this is all predicated on me buying it for 80, right? So let's say I buy it for 90,000. It's right now listed for 99,000 and let's say the rehab is 25,000 and the rent is actually 1395.

Dustin:  You can get hurt if you're not doing it right 100%.

Joe:  Yeah, and let's say you stay with the vacancy. Okay, and then let's go now to property analysis. My cash flow drops to 365 a month. Still not bad, but my cash on cash return dropped.

Dustin:  So Joe, let me let me explain. So when I started coaching people, I realized I had to give them like criteria's to hit and all like the depreciation is going to take care of itself. All of the rehab and all everything is going to take of itself as long as we get the cash flow higher. If we can get the Cash Flow high everything else streamlines back with as long as we're accounting for it. Like if you're saying no maintenance and no capital expenses like that's you're not smart. Like you got to do it right, but as long as we are hitting our cash flow and make sure that we have the right percentages in there. It's going to be very hard to lose because the cash flow is so great. Like right now even with a higher purchase price if it's still rents for the same amount, you're going to be making close to $400 a month. That's that's not bad. Now a lot of people watch is like.

Joe:  For me whenever I've looked at this before I've always done 8 to 10% vacancies right and then in my operating expenses. I've Always done 8 to 10% maintenance 8 to 10% capex. So let's just keep that at 10% property management. Let's bump up maintenance to 8% capital X to 8%. And let's see what that does to the numbers. I go back property analysis here. So now my cash flow is 283 because I'm setting aside more money in my savings account for future vacancies and maintenance and repairs and all.

Dustin:  But at the same time Joe and you know this like if you don't spend it, let's say after a year or two years, you've got $5,000 per property. Then that's just money back in your pocket. We're just making sure we're accounting for worst-case scenario. That's the number one thing we don't want to get stuck. We're like, oh my goodness. Now I'm negative every single month. We don't want that. We want the worst- case scenario in our numbers before we buy the property.

Joe:  So, but would you say to somebody just getting started, hey, don't you, I know you don't care about appreciation, but would you also tell them, listen, you're getting quote unquote $283 in cash flow, but when you're just starting out, don't even think about that. Don't count on that. Don't think that you cave. Well, if I want to quit my job and I want to make $10,000 a month to quit, my job don't take $10 thousand divided by 283. So that means I need to get 35 of these homes because I'm just wondering again, I'm wrestling with this. Can I really spend that $283 in cash flow?

Dustin:  For me personally, yes. And I've my, you know, since 2006, that's what we fed our family. That's how I quit my job. So the big thing for us was making sure that we have the right tenants in place and how to do that is getting the right property managers and all Honestly, it all goes back to what you said, the property managers, they're key. If you do not have a good property manager, and this is, remember, my property manager started stealing from me within six months of buying my first property, which was terrible. But giving that idea or analogy of a convenience store, let's say you're building a brick and mortar business, you do all the work to build the business. You get your inventory, you start doing things, and then you look across the street and say, hey, you have a pulse. You want to be a manager? Come on in here. You're not going to do that. You're going to interview many, many people to make sure you get the right person in the right place to run the business.

Joe:  Okay, okay. Let's keep on going through this because this you might think guys listening to this man, $283. That's bad. Well, okay, maybe it's not great. It's not 500 bucks a month. But this is one of the really powerful things about owning rental property. Long term, long term. If you check this out, I mean, I remember reading the rich dad, poor dad. And one of those metrics that he talks about is cash on cash return, which is the yearly cash flow divided by the total cash invested. And he recommended, I think in the book, I don't remember, it's been so long, you know, 10% is a good number to shoot for, right? That's 10% return on your cash in that first year, but that's not the only thing you should look at. There's cap rates, obviously in return on equity, yada, yadaya. But what, and the cool thing about deal check too, by the way, is you can see, you can have different criteria. You can do 1% rule cashflow greater than a rule cash on cash return, but check this out, buy and hold projections. If you hold this thing for 30 years, scroll down your cashflow month to month is that, you know, but this also factors in the equity you have built up. Soat the 30 years you've got $313,000 in equity. Mortgage… Just showed you say again, sorry.

Dustin:  Mortgage is gone. Your tenants paid that off.

Joe:  Mortgage is gone. Your total profit, 440. This is just one property. And these are all the, and your rents.

Dustin:  Your rents go up over time. I guarantee your rent will double in 30 or twice over. So if you, let's say you rent a 1500, it will double at least one time to where you're bringing in $3,000 a month in rents from this one property in 30 years and your expenses don't keep going up, your expenses are basically the same and, or go down once the mortgage is paid off.

Joe:  Well, the operating expenses, I think are the, uh, we had those going up at 2% a year, I, think is what we did. That's going to be taxes. So whatever, but then the equity over time, this is a great thing right here, right? Your loan balance is going down, the value is going up and your equity is going out until you own it free and clear. So, and then this also factors in depreciation. So this is another thing that you got to think about, right. You get, and on year one, you're only getting 3,300 a month in a year in cashflow, right, but you're getting $15,000 in deductions in just the first year, which depending on what tax income bracket you're at and all of that, that's going to be, that significant. More significant for others, but it could be, if you have enough of these, you don't pay any taxes at all, you know, income taxes. So anyway, it is powerful. And I kind of geek out over these things. And the cool thing about this is if you are selling properties, Oh, this thing too, I, I'm not, I don't know, I don't have any interest in deal check, but if you go to offer calculator, you can actually calculate an offer based on different rules that you want. So if your minimum cashflow you want on this scenario is 500 a month, it'll tell you, then you need to buy this property for 44 grand. If you're, if you want to do the 1% rule, you need to buy it for that. If you want minimum of 15% cash on cash return. Well, that number is limited by the cashflow. So let's say your minimum cashflow instead is right here, a 300 a month. Now you need a buyit, for $49,000 because it's limited by the cash on, cash return where you need to make at least 15% on your money.

Dustin: Joe, as a property, I believe this property is worth for an investor $50,000. That's like the top I would spend for this property because I want to fix it up, because I wanna make it work more. So this is probably about right. Cause it's not, it's not a good property to buy. You don't buy it market value. So I would say $50 thousand, fix it up for 20 grand. You're in 70 grand and you're going to be making great cashflow.

Joe:  And this is where, this is why I've preached this a million times. You need to learn if you're an investor, you know, whether you're buy and hold investor, or you're a landlord, you're a rehabber, a wholesaler. The most important skill you can learn is finding good deals and knowing what is a good deal. And you just nailed it on the head. That number, these numbers probably won't work buying it for 80 grand. Like I was originally doing here, but if you bought it for 50 grand, all right, let's look at the numbers here a little bit. It is kind of changes things a little rehab, 25 grand rent. Let's just be conservative. Keep it at 13.95 a month. Let's be conservative. Well, no, let's just keep it vacancies. You have 6%. I think you said, right.

Dustin:  Yeah, 6%.

Joe:  Let's do maintenance 6% and CapEx 6%, like you had it. And then we'll go back to a property analysis now. Now look at this. Boom. There you go. $5.50 a month cash flow on this deal.

Dustin:  And it's going to have $100 less than what we would probably rent it for. So we're conservative on the low end. So we are not going to get surprised. That's the thing. I want to be surprised with making more money. I don't want to surprise with making less money.

Joe:  Exactly. Cash flow is solid, right? Now you don't get as much depreciation. That's interesting.

Dustin:  Well, it's just not worth as much. It's, you know, $50,000. It's not depreciate.

Joe:  So yeah, this is fascinating stuff, right? Like, and people are wondering, okay, how, how can you buy this property? It's listed for 99. How can you by it for 50? Well, you know, how you buy it for 50, you offer 50.

Dustin:  I would also, I'll say one thing. I probably offer $39,722 and I don't like offering specific, like $40,000. I don't want to do that because it tells it just like psychologically, okay, they're willing to know. I know my numbers. I need three, $39.722. That's what I need. And then that gets them to think, Oh, this person has a specific number they got to get to. So that's how that is psychology of negotiating. I love, I love negotiating.

Joe:  And if you zoom out, I'm in this same neighborhood. These are current active listings right now in this neighborhood. And yeah, there's already properties that are listed for $39,7278. And if I switched to solds in the last year, look at these things that you see. Now these are smaller homes, right? You could create the filters, but there are properties selling here for $50,000, $52,725. So there is a place for that. Yeah. Okay. Cool. Very interesting. I appreciate you. Let me share the screen there. I love it. Good stuff, man. I don't know if I have any questions. I asked them all. You've got a free course, right? For people that are wanting to become successfully unemployed like you, you know, we got to get some shirts, unemployable. I think that might be good. I got it. I got to do that again and just not even ask my wife. I'm just going to do it. I'll just do it. Just do it, so how can people get more information about you, Dustin? And how can they get your free course?

Dustin:  Yeah, absolutely. So my, I'm on a mission to help 1 million people to invest in real estate. So hopefully you're one of them. I want to give you my course completely for free. I've had people invest just for my course. So if you text the word rental, R E N T A L rental to 33777, rental to three, three, seven, seven seven. I'll give you, my course completed for free, or you can go to masterpassiveincome.com/freecourse, all one word. Masterpassiveincome.com/freecourse. It'll show you how to find a property or a country anywhere in the country to find real estate, to buy real estate to scale your business, to get 30, 40, 50 properties, to be able to quit your job. You could even, I have my own podcast. Joe, you're going to be on it in just a little bit of the Master Passive Income podcast. It's, it's mainly just a solo show, me just coaching how I do this. And so Joe's one of the few people that I get to come on and, and be a part of it as well, which is going to amazing. And then at the same time, if you find me on YouTube or anywhere, master passive income, you can find me one, one quick last one of Joe. I've actually been having a lot of fun with social media and I'd never thought I would, but on Instagram, I grew, grown my Instagram coaching people, how to invest and get finances in order and get financial independence. I met 200 and almost 40,000 followers on Instagram without buying any of them. These are all art earned. So yeah, so you can reach out to me. Actually, I handle it myself. So if you want to DM me, I love chatting. Let me know you listen to Joe's podcast. I'd love to know, but if you could, you could find me the Dustin Heiner and it's the only handle I can come up with. I'm not the, you know, the arrogant Dustin Heiner, but it's just the only handle I can come up with, but there's my way to connect with people. I'm an extrovert. So it really helps me to be able to chat with lots of people, but Joe, this has been great. I'm so glad to be on the show and can't wait to have you on mine.

Joe:  Yeah. Thank you for letting me ask you a million different questions. Again, text the word rental to this number 33777 to get Dustin's free course. And you can also go to masterpassiveincome.com/freecourse, go check it out. Appreciate you, Dustin. Look forward to be on your show and go listen, go just go here. You want to find Dustin's podcast, just go to Apple podcast or Spotify and type in real estate investing and he'll be at the top of the list. Okay. Just do it. And then go search down to like page six to find mine.

Dustin:  Well, I love how long you've been doing it. I remember listening like 2014 or something like that, listening to your show, I was like, man, this is great stuff. I got to do my own.

Joe:  I love it. All right. Thank you, Dustin, for being on my show. Appreciate you. Have a good one, man. All right?