The inspiring interviews with today is Top Landlords.

This is the Rental Income Podcast and.

No damnly, Michael, you had a job where you weren't making much money.

You decided to get your real estate license.

You figured you could sell some houses and make more money that way.

But after a while you kind of realized that the income was kind of spiky.

You might have some good months where you made money, but then you might have a couple of months where you didn't make money at all.

How did buying rental properties help you even out your income?

I mean, basically, if I didn't sell anything, I didn't need a commission, And you know, I was always trying to get business, but it was kind of spread it and it wasn't coming in that much.

And I noticed that if I bought rentals that I could increase my monthly income, and so it gave me a little bit of stability knowing that, you know, reasonable expectation, I can get so much a month, which with each rental involved.

On the podcast today, we're going to figure out how Michael was able to build a rental portfolio that provides him with stable monthly income.

So it really doesn't matter how much he makes at his day job.

Joining us on the podcast today from Montgomery, Alabama is Michael Atkins.

We'll take a quick break to thank our sponsors.

We'll come right back and we'll talk to Michael.

It's a lot of work to find a really good rental property, and when you actually find that property, you want to make sure you're working with a lender that can get that loan closed.

The lender that I recommend is jay Ley Ridge from Ridge Lending Group.

She's a nationwide lender and her specialty is helping investors' finance rental properties.

She has a ton of loan programs and she can find something customized to you for your situation.

If you want to find out more or you're ready to get started today, just go to Ridge Lendinggroup dot com.

That's our Idge Lendgroup dot com and MLS four two zero five six.

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That's midsouthhome Buyers dot com.

Michael, let's start with your portfolio today and then we'll kind of take a step back and figure out how you got there.

So tell me about your rentals.

I have fifty doors now.

I've probably bought three or four this year.

They're mostly single family homes.

They you know, they've probably ranged from a two bedroom, one bath in a c neighborhood to a four bedroom, two math and you know, a minus neighborhood, if that makes sense.

When you were getting started as a realtor and you knew that your income was was going to be kind of spiky, was your goal at that point to have the rentals pay all your living expenses so that you weren't relying on that commission income.

Oh yeah, I mean it was kind of the goal there, and to a certain extent, I'm you know, I've always been very frugal, but I knew my job at the Board of Education and the maintenance department wasn't you know, it wasn't my life goal there, and it was just kind of a job I fell into, And you know, I didn't I didn't like the idea of, to a certain extent, like the commission being based connected to the sale, because there's always the pressure to make the seal.

But I preferred to be like an unbiased advisor where I didn't really care whether you bought the house or not, and having the rental income coming in every month, I could kind of know that, you know, my house payments covered, or my car payment or whatever, my bills are covered, and I don't, you know, whatever I made from real estate sales was just extra.

You can kind of get the commission to get ahead, and it kind of turned into you know, early on, when I had multiple jobs going on, real estate, commission just went to savings account to buy more rentals.

And you know, I kind of had a threshold for savings there is around ten to fifteen thousand dollars.

But I could buy those houses and put on the roof and replace the ac in it and paint it, fix the floor, and get it ready to rent.

So I could.

I basically was saving up to buy the house, and then I'd save up the money to repair it and I rented out and then it's like I got to raise every month.

So thinking back to those early days, like what did you really at that point understand the numbers?

Like did you understand that there would be expenses to the properties or were you thinking, Okay, if I make X amount of mine money and rent every month, all my bills are going to be paid?

Like how much did you really understand in those early days?

No, I was I wasn't some kind of you know, mathematician or super genius over there.

I was just looking around, like, man, how can I make my money work for me?

And that was really the only thing I knew where I could kind of make my little small investment, and I knew I could get back.

Then I was saving up to buy the house for let's say fifteen thousand, and then I was saving up to renovate the house for another fifteen thousand, and you know, I'm in it for thirty thousand.

But then I was getting you know, six fifty a month for this little rental.

And you know, I was pretty handy, so I could make repairs myself if I needed to or had to.

And yeah, I mean these numbers sound silly.

Yeah deal.

So yeah, So was that Were those properties in like really rough neighborhoods?

Yes, and no, I mean I didn't feel uncomfortable in those neighborhoods.

I would ben find living in them.

Were you able to finance those houses or were they all cash purchases?

They're cash purchases for me.

And again, it was just one of those things where that's what I was comfortable with.

And yeah, you know, these houses didn't meet a FAJA standards.

It probably wasn't something that I could go to a conventional mortgage broker.

I probably had to go find a local banker.

And how did you save that money?

Because you know too, you were obviously very young.

I mean you were just out of high school.

You had been working for the school system, imagining you probably weren't making much money.

How did you save the money to buy those houses back then?

Yeah?

It was just always taught the kind of stilled into me to save money.

Okay, And you know, uh, it seems like I've always had about three jobs, and so you know, I didn't have any money, and I was rarely bored because if I was bored, I was finding something to do, right, Okay, So I always been grasped push aground for farmers, help buddies, cut trees, basically anything I could do to becca extra die, and that's what I was doing.

And okay, so that makes sense.

So you're working hard, you're you're saving your money, and then as you have the money, you're putting that into a property, and then that property then is generating rain for you.

And because you don't have a mortgage, I'm edge their cash flowing great.

Yeah.

Yeah, And today are you.

Still buying houses with cash or do you take out mortgages today?

It really depends on the price.

Some of these houses, they're not the best performers and so I might sell one of those houses and then ten thirty one of the money into a nicer house.

You know, maybe go sell one of the two bedroom, one baths and go buy a three bedroom, one bath, I mean three bedroom, two bath, and it would be pretty close to the same money.

And you know, I'm still saving up my real estate commissions, and I have extra money, I start around for a deal.

I think that's really the thing that motivates me is when I see one that's kind of undervalued or underappreciated.

That's, you know, that's if I don't have the cash, I'm gonna borrow the money.

So so would you say that your rentals today they have they made you a better realtor that you know that you can always do the right thing for your client.

You're you're not you're not ever trying to get a deal done.

Has it made you a better agent?

Just not having that pressure that you need a commission check to pay your mortgage this month?

Oh yeah, It's made me a better advisor in so many ways.

I Mean, there's the thing where you know, I truly don't care if you buy a house or not.

I might I might get annoyed with a client.

If they run me around town and we looked at a dozen houses or two, really doesn't don't mean for me, Yeah, a couple of dozen houses and you're not buying anything, and it's really like, hey, uh, you know, I think I think we need to re evaluate what you're looking looking for here.

But also from another perspective is that I've looked at these houses from most of contractor's perspective, where I just run across so many situations where something's broken or I see a little telltale sign that tells me something else is wrong.

And you know, dealing with property management companies, dealing with other property managers, dealing other agents, and you know, this one looks really good on paper, but when we kind of dig into the property, I mean they ever once fall run across properties where I can't really put my finger on what the problem is, but I know it's a money pit.

And you know, if you buy this thing, you're just going to be constantly eat up with maintenance expenses and it's just better for us to go and find another house.

Well, let's take a look at at one of your deals.

So tell me about this property.

How did you find it?

The agent was it had it listed Birmingham, which is, you know, one hundred miles away, and so nobody in Montgomery's looking at the Birmingham MLS.

None of the agents are looking at the Birmingham MLS for houses in Montgomery.

And I happen to be a member of that MLS, and so I have an active search for anything listed in my area in that MLS.

It'll send it to me directly, and I feel like it just gives me a slight little edge over, you know, my peers here.

And this property was listed in Birmingham and been out there for a while, and thinking, man, you know, buyers can still see it on SILLO or realtor dot com, but any of the local real estate agents they're they're not looking.

They're looking on their local mls for it.

And so it just was one of the houses I flagged.

I think it took me a little while to get the agent on the phone or get a code to get in the house and let them checked it out.

And like, man, the same pretty clean reflects, pretty good ac unit was missing that they didn't bother me any and so I made them an offer.

Turns out that they had already made plans to replace acy in it, and they paid for it.

They just were waiting for it to sail before they installed it.

And I felt like, you know, got a pretty good deal just because it was just listed in a different MLS.

Right, So because it's not listed, right, they're not getting the showings they should get.

Not every agent is aware of that property's out there, and that helped you get a better price on it.

Yeah, yeah, absolutely, that's great.

So what did you end up paying for the property?

I paid one hundred and seven thousand dollars for.

It and didn't need any rehab.

Yeah, you know, there's always things.

You'd come to the house I live in and sure we can find thousands of thousands of dollars worth of repairs.

Yeah, today I try to keep the house in my own house in good shape.

It's just the reality of it.

And uh so I probably spent around ten thousand dollars to fix the little odds and ends, install appliances, and I had the house painted.

I can't think of everything off the top of my head.

Probably around about ten thousand.

All right, so one oh seven purchase ten thousand dollars to fix it up.

So you're all in at one seventeen.

And what is that property rented for.

It's rented for fourteen forty a month.

Wow, okay, and how much is your mortgage on that or do you have a mortgage on that property?

Yeah?

Yeah, So how much is your mortgage payment?

It's seven to fifty three a month?

Okay, and that includes taxes and insurance.

Yes, okay, all right, so fourteen forty you've ran seven fifty for the mortgage, so you've got six eighty seven in cash flow before any expenses.

Now, how do you how do you budget for repairs in vacancy and anything else that might come up on the property.

So I have enough rentals at this point the monthly cash flows enough to cover any vacancies or repairs I might have, So I'm not I wouldn't say that I necessarily budget for it, but it's I mean I think that, you know, I've worked up a little equation of you know, probably a three percent for vacancy and easily for the houses I'll have like a flat.

So most investors will they'll budget for cap X and repairs and for repairs.

I didn't think it was fair to do a percentage just for repairs because the cheaper houses like that repair budget would be smaller, and the more expensive houses it might be out of proportion.

For the bigger and nicer homes.

And so a lot of the repairs, whether you're in a fifty thousand dollars house or half a million dollar house, is going to be about the same.

The cost of that hot water tank for the fifty thousand dollars house isn't going to be much more than the half million dollar house, you know, And.

So it's really interesting that it's it Almos.

We have a lot of people on the podcast that have bigger portfolios and they don't budget very carefully for repairs, and it seems like people with smaller portfolios really do budget carefully.

And I think you have a good point that as you have more rentals and you have more rental income, it's easier to pay for It's not a big deal.

I mean, if you've got fifty re rent checks coming in, if you have to buy a new roof on a property that month, like you have the cash flow to do it, it's not a not a big expense.

So do you think budgeting or sitting up percentage percentage aside for repairs is maybe more important when someone's just starting out than it is when they're more established and that they have a bigger portfolio.

I do.

But also it's one of those things that I have talked to some investors where you know, my advice was to save up a little bit more money because you know, repairs are going to happen, You're gonna have vacancies, and you need to be able to have the reserve there.

So if you're trying to keep five or ten percent and a save his account for repairs or cap X and that that doesn't like that takes time to build up.

You know, three months into it, you're then it loses a job and ak's quit Spain or the uh you know, all of a sudden, the tree falls on the house.

Uh, you know, any number of things happen.

Then you know it's not wise just leave the house taking or let it do nothing.

So you need to have the money to make those repairs.

You know they won I think.

That's the most important things.

Yeah, Like you got to have cash, whether it's cash set aside or cash flow coming in.

But you really it's so important to have cash.

I couldn't agree with you more on that now.

Let me ask you a question, how important do you think herb appeal is in your rental properties?

Like do you think that like a property, if it looks good, it's gonna attract better tenants.

Yes.

So that's one of the things, Uh, you know I've I've you know, spend months renovating these houses and done you know, full bathroom remodels, just remodel the whole house.

And I'd be very proud of all the work I've done and all the you know, deferred maintenance, decades of deferred maintenance.

I went and handled and fixed on the house, and you know, I'd go and take pictures to market the property and like, gole, he is, thing looks terrible, and you know, it's kind of deflating because I'm so proud of myself that I've done such good work.

And then I go to to take a look at the X year and like, man, this thing is not attractive at all.

And so it was one of those things to just go back to basics with kind of marketing in a way and think about literal curb appeal.

And so, you know, one of the things I've kind of implement it is I'll have the curb and the sidewalk and the concrete the side of the house.

I'll have it all pressure washed, and I think it's a pretty like it.

It makes your house stick out because literally, you can have a dingy sidewalk and once you get to the property line, it changes to this clean, you know, freshly pressure washed sidewalk and curve and makes your property kind of stick out.

And try to make pay a little bit more attention to the xterior and make it a nice, nice house, because that's what catches people's eyes.

And it's just one of the kind of things I've noticed is somebody who's not going to take care of your property and likely not going to pay the rent, they don't care.

They're happy to take the house in any condition.

The person who's likely going to pay the rent and be particular about the property, uh, they if the house looks dirty and dingy, they don't even consider it.

They don't put in the application, they don't they don't look farther than the front photo.

And so in my mind is you know, the the tenant that doesn't care, They're still not going to care this is a nice house.

They just seen rented as the bad house.

But the if your house is dingy, but if your house is clean the good particular tint, they at least have a shot, so they'll at least look at it and they'll put in their application.

And being in the pool and the other applicants, so I think on average, you're going to do better.

It's not really saving money to not pay attention to the shrubs and the lawn and the curb litteral curb appeal.

So yeah, I think a lot of people forget.

So I mean basically, if you're going to look at a house, there's a lot box, or you have an agent with you, like there's a you know, a thirty second minute, a couple of minute delay while you're at the front door while you're figuring out the lot box, and you're right there at the door.

Is the door clean, is the doorframe ice and freshly painted?

Is the porch clean?

Just things like that add up because they're getting their first impression while they're right there at the front door, right when they pull up in the car to look at the house.

And I think it just improves your odds of having a good tenant and you know, attracting the tenant that you're looking for.

If anybody is interested in investing in Montgomery, or if you want to reach out to Michael, I've got his contact information on the website.

You can find it at Rental incomepodcast dot com slash episode five.

I'd like to thank chay Lee Ridge from Ridge Lending Group 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, reach out to Chailey.

She's a nationwide lender.

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

If you want to find out more or you want to set up a time to talk to Chailey personally, just go to Ridge Lendinggroup dot com NMLS four two zero five six.

Thank you so much for checking out the podcast today.

Make sure you hit the follow button.

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