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Now, damnly, NICKI, you figured out a sweet spot when it comes to investing in rentals.

Tell me what you're doing.

Well.

We found a spot in our area where we're very consistent on how much we're paying for a property, how much we can rent that property for, and it most of our portfolio looks just like that.

And what we found is whenever we tend to go outside of that, even though it looks like a good deal, it never works out as well, and we never make as much and there's always a few more headaches than we thought.

So now we just kind of stay in our lane the best we can.

On the podcast, they we're going to figure out where Nick has found that sweet spot to be where he's making the most amount of money with the least amount of hassle.

We'll figure out what he's buying and what's happened when he's veered off from that.

Joining us on the show today from San Antonio is Nick Disney.

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Nick.

Let's start off talking about your portfolio.

What does your portfolio look like.

Our rental portfolio is all single family rentals.

I guess there's one duplex in there, but pretty much all single family rentals in and around the San Antonio, Texas area.

That is a rental part.

We also, you know, have a portfolio of mortgage notes that we hold and so we have a balance between the two.

But yeah, we are single family real estate investors.

Now, you mentioned that there is kind of a sweet spot for the perfect type of property that you like to buy.

What is that?

So where we found the most success is in our you know, not a new neighborhood, middle income, typical blue collar neighborhood where there's a high demand for rental property.

So we always have a large pool of folks that want to rent there.

The rents are not too high.

Now, our rents are a little lower compared to the some parts of the nation here in San Antonio, but we don't want rents that are too high.

And also we've found found that avoiding spots where they're very low, like the lower income some of the really rougher areas, that is another spot that we we tend to avoid.

And say, writing between those two has been our sweet spot.

And what kind of price point, like if you look at what you're buying properties for and what they rant for, so.

You know, everything that we buy pretty much is a fixer upper.

So we're paying usually, you know, somewhere between one hundred one hundred and fifty for the property we're looking.

We have properties that the actual repaired value is two hundred and below.

Most of ours are kind of in that one seventy five to two hundred range on the value once we fix them, and those are runting for about about one percent of that, you know, so seventeen hundred, we have some fifteen hundred's and you know, in a couple in that eighteen nineteen hundred range, how.

Did you figure out like when you were just getting started, like, how did you figure out that that was a good area to be.

In trial and error?

So you know, almost anything can be rented, and there's different people who specialize in different types of investment property and even narrow that down different types of rental property.

What we found is for our area that in that price range, there's a huge demand for rentals.

There's a big just pool of people who want them.

Every time we would have one for lease, we have multiple applicants just kind of right out of the gate.

So that was a good sign that we were in our in our target market where we wanted to be.

And the other part was buying things you know, over.

The years that didn't really fit in there, that we tried to put into the rental pool and just finding out that it just didn't work as well as these other ones, and you know, we made a choice to try to avoid them.

So doing so many properties and having so many properties in the same niche and are they kind of in the same area, the same part of town.

The same general area.

You know, most of our stuff, if you know, if you're looking at San Antonio on a map, we're pretty much the south half of San Antonio, some of that southeast southwest and some of that central and kind of south area, but they're all in that general section of San Antonio.

So do you find that you have a lot of efficiencies like just knowing that the houses are are in similar neighborhoods, like similar type properties, Like you just find like that you just know what things are going to cost for repairs or when you're buying a property, you kind of know what you're getting into.

I think that you make a good point there because we find a lot of predictability in what we're going to run into.

And what I mean is we know how much the rehab is going to cost us, we know what our repairs are, We had a real good idea on what the rent is going to be in those areas, and we can really predict going in and I mean really, as we hold on to them as rentals, what more of our costs are going to be.

Obviously things come up, But when something comes up, what's it going to cost us?

How much money do we need to put that property in to turn it over?

Which I think people can do that if they're specializing in any section.

We found a lot of success here in this.

In our market, there are people that specialize in more expensive rentals, lower income rentals.

But if you're growing your business and you're starting, I would really encourage you to specialize somewhere, find something really really good at that thing before you try to do ten different things.

I agree with you.

I think that is really one of the keys to being successful with rentals is to become an expert or a specialist in whatever you're doing.

So every once in a while you have veered off of this and bought it, maybe a more expensive property or a cheaper property, And so what's happened?

Like, why have things not worked out when you've veered off this?

H I mean, I think a couple of different scenarios.

You know, we would with the more expensive ones, we'd find a good deal and it wasn't really exactly what we had as rentals, but man, you know it's it's at a good price.

We've got some good equity capture right out of the gate by you know, forcing the appreciation.

Man, let's just hang on to it, keep it as a rental, so be a little more expensive.

And what we saw, especially as prices were going up a few years ago, is our property taxes shot up, our insurance has shot up a ton, and what happened is the rents did not keep up with that proportionally, so you didn't have that much of an increase in rent but you had increased set costs.

Well, it really cuts into your cash flow.

And some of those turned into where yes, we had some equity in them, and that it's positive, and that equity was going to continue to grow, but it wasn't cash flowing hardly at all, and that is not something where we.

Wanted to be.

We want to have properties that have equity and cash flow together.

And it ran out really fast on the more expensive properties.

Yeah, that's a good point.

So it's almost like your cash flow evaporated like it was there at first, but then as the taxes and insurance went up, you didn't have cash flow at some point exactly.

And with the less expensive properties, you know, some of those were okay, man, this is a very cheap property we get in the rents are less, no problem, right, But what you'd see was when we had some repairs or turnover it with the lower rents, it took a lot longer for us to make up that money, make that money back that were in there, and so again your overall like annual AH really got cut into and there we weren't seeing as much appreciation in those properties, and so you know, what we found was the balance of what fit for us and where we would grow the portfolio was right in between those two kind of the best place we could be to find that stright spot.

So with those lower end properties that you were buying, like, did you have more turnover?

What were they more challenging to manage that?

Then some of the other properties that that's kind of your your sweet spot properties.

You know, the turnover was mixed.

It wasn't that there was so much more turnover across the board in those in those less expensive properties, they tend to be older properties, and older properties typically have more things that break than a newer property.

And when you know, some of the costs were almost the same as a little bit more expensive property, but we had rents that were hundreds of dollars less, so it just would take longer to kind of make back when you had expenses, and we didn't have as as as many quality applicants in those areas that we liked to choose from.

When we'd have something put out, you know, for lease.

So when it was all said and done, when you bought cheaper properties, did they end up making money?

Like what, were they still profitable at the end of the day or.

They were they were because we and a lot of that was because we do buy it a discount.

So for us in our business we are marketing, we buy houses cash for houses, so we're looking to be direct to seller most of the time.

But we've bought them at a discount.

And then we've rehabed the properties to become rentals and so we were always able to force some appreciation in there, and so they were still profitable, but not where we want to specialize and grow it.

And we didn't have as as a true rental property, we didn't have the same profits that we did and something that was a little bit more expensive.

Right, Yeah, I think the key there is that you bought the property right like, you got a good deal on it.

If you had paid market price for the property or not gotten a great deal, that maybe wouldn't have ended well.

I would completely agree with Yeah.

Now with the higher end property, the higher end properties kind of have a wrap that the tenants are maybe better, tenants are easier to deal with.

You have less payment problems.

Did you find that to be true?

Nope.

I think there's there's payment problems across the board.

You know, we didn't find that that we necessarily have less payment problems or less tenant issues.

There's people that make a lot of money and you know, they manage it maybe not the best way, and they still struggle with that payment even though they have a higher income and you know, a live in a more expensive rental property.

We did not see that.

What we've seen is in our in our neighborhood that we focus on the most.

They you know, they may not be really wealthy people.

They need a good quality home and if you give them that, you know, they may not have a ton of money, but they work really hard and they're happy to pay their bills and we don't see any more issues than we did in a more expensive house.

Now, was it hard for you to wrap your head around selling a property?

You know, because it's like when you're growing a rental portfolio, you want to add properties and grow a bigger portfolio, but when a property isn't working out and you need to sell it, was that what.

Was that hard to do?

Yes, you know, it's a short answer.

It's easier now that I've been doing it longer and to have more experience, But especially starting out, you know, I mean a lot of us working really hard to grow that portfolio, and you worked hard to get that property, to get it ready, to get it least and everything, and you're like, hey, this is one of my properties in my portfolio.

And even though when you look at the numbers, sometimes it's not what you want long term, it's hard to let it go after all the effort and the time that it took to get it.

But I have found that when you feel like one is not successful or it's not a property that you want long term, you need to put those thoughts away and commit sell it.

There's always another property you can go find something that fits better for you.

But I think it's a struggle for a lot of folks as you're starting out and growing it.

Because we want to have those properties in our portfolio.

That's why we started.

So with some of the properties that you've ended up saying like were you looking for a certain return to get out of the property or like did it because I guess like one thing that I struggle with I've had a few properties I've sold over the years, and I always feel like, well, maybe this tenant didn't work out, but if I get someone better in there, it's gonna do better.

I just need to give them more time.

Well, was that something that you've encountered or something you've struggled with?

Definitely, I mean I definitely have had the very similar thoughts like, well, maybe it wasn't this, it was that or this or that.

If the property is not producing and you can't really really pinpoint what it is, you have to look at what your goals are and what your needs are.

And when I say that, I mean, Okay, if your goal is cash flow or your goal is equity, what's the best way to get there today?

Not necessarily the choices you made three or four years ago when you got it.

What's the best choice to do with this property today?

And sometimes it is selling that you can reinvest that in another place or in another property, or something that you know is going to be better for you moving forward, and right or wrong.

I also just believe certain properties are just not right and they tend to have all the headaches over and over and over again.

And I don't care who you put in there what you do and there's some reason that I may not know.

And if you run into one of those, please sell it and just move on.

Yeah, yeah, because there is a on the flip side of that, there's a lot of properties that are just great.

I mean, you're going to get great tenants.

Nothing's going to come up, you know, it's just about finding that that good property.

Well, I want to talk to you about how you're managing your properties because I think this is something you've done a really good job at.

So how do you have things set up?

Like when a tenant has a problem, do they contact you or do you have someone that helps you out with that?

They don't, They don't contact me.

Unfortunate.

You know, we have a we have a team here and so they do contact somebody on our team.

Hey, here's the issue, here's what we're facing.

We and then that personal contact whatever contractor that we need to get out there, because that's typically going to be the issue for for us.

That works really well.

We have contractors that we are that we go to and we've set up relationships with them where hey, they know if we sent you a tenant and an issue, we have an agreement that they're going to contact them within twenty four hours at least reach out to them to schedule.

They can't always get over there that soon, but they'll at least contact the tenant, so the tenant knows, hey, we've been heard and somebody's on it, and then they will go out and kind of assess what we're looking at.

So break it down, like who do you have like contractor wise as far as like what the trades are that you kind of have on speed dial.

Absolutely so, and for anybody, uh, starting out, I would encourage you to get these folks right here.

So you need a good plumber because you were going to get plumbing issues.

You need a good handyman.

Give me a general contractor where really a handyman can fix most of the things.

You just need somebody good and somebody responsive, a good HVACT.

You know, somebody that can go fix those acs, especially like here we're in San Antonio during the summer, it's hot, we're gonna have AC problems.

Those ones you want on speed dial.

And then an electrician because things are going to come up.

You don't want somebody who maybe doesn't have that much knowledge but electrical going into it.

If you have those four people that you can contact and they can jump on it and go handle it.

That is going to handle ninety something percent of the issues that come up.

And we have found it's better just to build a relationship with those contractors.

Then understand, you know what your expectations are, and they will go out, they will handle the work, pay the bill, and then everybody's taking care of you and the tenant.

So you give them a dollar amount, like so when they get out to the property and they see what the problem is, is there a certain dollar amount that you tell them to just fix it, and then a certain dollar amount where they need to call you.

Right what we do two hundred fifty dollars.

If it's going to be less than two hundred fifty bucks, please fix it while you're there and lets me move forward.

If it's more than that, we usually get a phone call.

There are a couple of guys that we've worked with for I mean probably ten years now, so they get a little bit of leeway, but they already know what our answer is going to be.

But I think if if you find somebody that you can work with and set expectations, it's It's never been an issue contractors like, hey, here's what we got.

They'll step outside, they'll call you, they give you their opinion, Hey, this is what we're looking at.

And most of the time we're say, hey, let's go ahead and take it and fix it.

But you don't want them to just fix everything, and then all of a sudden you get a bill for four thousand dollars and you're like, whoa, what happened here?

You know.

I've found that when people are maybe just getting started with real estate, they feel like they want to do everything.

They want to wholesale, they want to flip houses, they want to do rentals.

Like do you think that that's a big mistake to try to do everything at once?

It's a huge mistake.

And I say it from experience, and so I think people see that, oh I could do this and that, and somebody's always going to come to you.

Even to this day, you know they're going to come to you with a Nusani object, Hey well why don't you do this?

I really really encourage everybody, especially when you're you're starting out.

Hyper focus, right, you don't even have to be one hundred percent correct, just know what you think you want to do now, and fully commit to it.

Because the person that I talked to that says, well, I'm gonna I'm gonna flip a house, I'm gonna wholesale some rent a couple, do some owner finance, and then maybe on an Airbnb and part of a commerce.

You end up doing five or six things really bad.

You're not good at anything, and you're pulled in too many different directions.

If you can be super focused on one thing that you're going to do really well and grow, then when you have your business set up, you can either adjust or you can add something else then.

But I would definitely encourage people to commit and focus, especially when they're starting out.

You know, it's interesting you say that because you know when you specialize in something, you're going to be good at it.

And like with you saying specialize in one thing, like you're also saying specialize in one type of rental.

So to go back to what we were talking about before that, like when you veered off and did things you weren't and one hundred percent of an expert in that's where you ended up getting into trouble.

Almost every time I was like, man, it's a good deal, we'll go do it.

It's not really what we do.

It ends up costing us more than we think, taking longer than we think, and we make less money than we think we're going to make.

And every time I'm like, why don't I just stay in my lane and do what I'm good at?

And it's true to this day.

So I really really encourage people to commit, focus, grow something, and then you can always adjust.

You're not committed for the rest of your life.

You can always adjust if it doesn't work for you or if you want to go in another direction.

If you want to hear more from Nick and how we used a helock to build his rental portfolio, you can check out my last interview with him.

It was episode number four ninety two, And if anyone wants to reach out to Nick, I've got his contact information on the website.

You can find it at Rental Income podcast dot com, slash EPISODISO five thirty three.

I'd like to thank Chailey Ridge for sponsoring today's episode.

If you're looking to buy a rental property, whether you're just getting started or you want to add to your portfolio, definitely reach out to Chailey.

She has a ton of loan programs and she can find something that works for you in your situation.

You can track her down at ridgelendinggroup dot com NMLS four two zero five six.

Thank you so much for checking out the podcast today.

Make sure you hit that follow button and that way you'll get notified when the next episode comes out.

My name is Dan Lane and this has been the Rental Income Podcast