8 Rentals on a Teacher’s Salary by “Reverse BRRRR-ing”

0:00This investor has acquired eight units in only three years. Now he's cash flowing$1 ,600 per month and is on a path to financial freedom that would have been impossible with only his middle class day job. He didn't start with a huge pile of cash or any other built in advantages. Some of his Midwest properties cost less than$100 ,000 and he's buying and managing them all from his home in California thousands of miles away. This is a simple, repeatable investing formula, but it yields life-changing results.

0:37Hey everyone, I'm Dave Meyer. Been investing in rental properties for more than 15 years. I'm the head of real estate investing at BiggerPockets. Today's show is an investor story with Ben Vidovich from Santa Clara, California. Ben is a high school teacher and he's passionate about that job, but he knew it didn't provide the financial upside that he was looking for. So in 2022, he bought his first rental property in Indiana. Since then, he's scaled a portfolio by repeating the same investing formula. Buy affordable homes, fix them up a little bit, then rent them out. There's no tricks here. There's no gimmicks, just a proven path to a better financial future for Ben and his family.

1:17During today's episode, we're going to discuss how Ben found the confidence to buy his first investment property in an out-of-state market he'd never visited, why he's comfortable buying properties with existing tenants in place, and how he decided putting more money down could actually accelerate his timeline for purchasing additional units. Let's bring on Ben. Ben, thanks for being here. Welcome to the BiggerPockets podcast. Great to be here, Dave. Thanks for having me on. I'd love to start by just learning a little bit about you. Where are you from? What brought you into this world of real estate investing that we're in?

1:52Well, I'm from the Bay Area. I was born and raised here in California and still here to this day. I've always kind of seen real estate at play. My dad worked as a property manager for some apartment buildings that are kind of in the family. So I've been watching him do that. Never really learned the business per se, but you know, I'd get in there and paint the walls and rake the leaves and that sort of stuff. So I think it was just something I grew up around. And then when I got older, and I was about to have my first child, I was like, man, I really got to do something to change my trajectory.

2:25I work as a teacher, I love that job. But I needed to do something to change the course we were on if I wanted to provide a better future for my family. Because as all the old people say out here in the Bay Area, the Valley has changed quite a bit. Did you go into teaching at a young age? Like how long were your teaching before you realized you needed something else in addition to teaching to secure the financial future that you're looking for. Yeah, I joined a school and started teaching and I loved it. So I was doing that for a long time and was able to save a good amount of money. I always kind of lived frugally and somewhere along the lines.

3:00I think I read Rich Dad, Poor Dad, like many people. And during COVID times, I read that and started really thinking about investing out of state just because there weren't a lot of options here. And so I spent the next, you know, maybe a couple of years in analysis paralysis, scouring the forums of bigger pockets, listening and reading everything I possibly could. And then, like I mentioned earlier, as soon as I was going to be a dad, I was like, OK, I got to I got to take action. We got to stop. You can only learn so much. Like at some point, you have to take a first step. You have to dive in and you'll get better from the practice and the implementation rather than just thinking about it all the time.

3:34And what about real estate in particular appealed to you when you sort of realized, hey, I need something to augment my teaching. What about real estate made you think that's it for me instead of going into another job? Or there are other entrepreneurial pursuits you could consider? I think it was the best avenue for the amount of time that I had and the amount of money that I had. So prior to investing in real estate, my wife and I invested a lot just into low cost index funds. And we put most of our savings in that for a long time. And that was great. But then once you sell the index funds, which we did to buy a mobile home that we lived in for a while, like that's it.

4:10You know, you've done what you can with it. Whereas with real estate, you can you can keep saving the money and you can benefit from the cash flow, the appreciation. And there's just more ways that I think it generates wealth than what the traditional path is for a lot of other Americans, which is just putting it in the market in some form or another. It's just that level of control is so nice to again, it's kind of the idea behind flexibility too. If you put in an index fund or a 401k, it's kind of locked in there. But real estate, yeah, you can buy something, hold onto it for 30 years. You can also optimize, you can refi, you can just get more creative and have a much more hands-on tangible thing that you control and can really contribute to that financial freedom, which is such a nice part of real estate investing.

4:52Now, I don't want to be presumptuous, Ben, but I'm guessing on a teacher's salary in California, the options for investing locally were not abundant when you were getting started. Now you assume correctly. It's just, I mean, it's tough out here to buy a home with a down payment and then rent it out. That's just the reality of it in the Bay Area. It's really high costs of everything that you would have to put into the home to maintain it. And then you have property taxes, which are higher out here. Interest rates went up. So yeah, it's not really tenable. So, So you run one or two deals analyzing it here and you're like, okay, it's not going to work.

5:27So I turned just to other parts of the country in the analysis paralysis phase and eventually wound up in a Southern Indiana, made some calls. And as I finally took action and just hit it off with some different people that I felt good about working with and eventually was able to muster up the courage to buy the first deal. That is a bold first step. It takes a lot of people some understandable time to get comfortable with the idea of investing out of state. So how did you go through that process of thinking about buying something that is cash intensive so far away without really being able to see it and feel it and have your hands on it?

6:04Yeah, it was it was weird explaining it to my dad. You're not flying out there. You're not. What? What? So it does take that. But, you know, I would say a lot of people have done it before me. So that gave me some confidence. I like I would scour the forums of bigger pockets to just read about what other people did and things I could avoid and, you know, just telltale signs. The long distance investing book by David Green was really useful. I just tried to apply all the steps from that, like literally, you know, read a chapter. OK, look up the property taxes on this website and make sure it lines up.

6:35So I was just really trying to apply everything when I was finally taking action and it led to phone calls. And then as you start making phone calls, you know, you can kind of see who you enjoy speaking with, get a sense of who's going to call you back or not on the property manager side of things or agents, whatever. So that was all really critical. And then just leaning into referrals. So if I talk to you, Dave, I'm going to ask for some referrals and then I'll call those people. And what do you guys think about working with Dave? And so there's a lot of that. And you can get pretty far with it.

7:04So eventually, after having someone tell me no to a couple of deals who I was looking to work with, who was a property manager, which, by the way, that's a good thing. If they tell you just don't buy the first thing. I was able to find one that, looking back on it, probably overpaid a little bit, but it got me in the game. It gave me proof of concept, which is what I think all the newbie investors need, really. And it's been rolling since then. So it really is true. That first one opens a lot of doors and confidence. I want to hear about this first deal. But before we do, you know, you could have picked anywhere in the U.S.

7:37You know, you're investing from California. Why? What about this area of Indiana appealed to you? It felt affordable. It was not too big, not too small, about 100 ,000 people or so diversified job industries. They got a good hospital system, good school system. There's a steel industry across the river because it's right on the border of Kentucky. So, you know, there's a good amount of people living out there. So that was good. And then just the affordability was huge because on the first deal, I did do a 25 % down payment and I had a 30 year fixed loan and that came with a certain loan payment every month.

8:13And I just didn't want to feel like, gosh, if there's no tenants, what am I going to do? So the price point needed to be one that I felt comfortable with if there was a vacancy for a little bit. And just the people I ended up talking to there, because I spoke with agents in other markets and stuff, just felt like I hit it off the bus with them and really connected with some people that had worked with other out-of-state investors before. So I didn't have to reinvent the wheel and took the leap of faith. I really like that approach of not stretching yourself too thin. Everything else you said about figuring out where there's demand, something you can afford, is so important.

8:46But whether you're investing in your own backyard or you're going to invest somewhere further afield, making sure that you are super comfortable, that you're going to sleep at night if things don't go well, that is so important on your first deal, especially while you're still learning. You may have a little bit more vacancy than an experienced investor before you learn how to market things and how to turn things over efficiently. Just not using every single dollar to maximize what you can buy and instead making sure that you find something that you can comfortably hold, even if things go a little off track in the first couple of months of your business plan is such a good approach.

9:24And it sounds like you found a really good area of the country, Ben. So let's hear a little bit about this first deal. Did you have a very specific buy box you were looking for? Not entirely. I was just looking for something that was in a good area. I didn't want to get too risky with the location. So I had to be in a better thousand I wanted to spend on the down payment. So it couldn't have been any more than that. So I was looking like two hundred thousand as a price point in below. And after, you know, looking at some things here and there that just didn't make sense, I found a duplex or I should say my agent found a duplex that I probably wouldn't have found on my own.

10:00And she sent it to me and they wanted, I think, two ten. We put in an offer much lower because it had been sitting a while. And I think we ended up getting it under contract for one seventy. Oh, wow. And this is in twenty two. yeah it was in october it needed a new roof so that's part of the reason why there was a discount so that was a bit concerning and it was like all right we'll see if this property manager knows his stuff or not and uh i closed on it and what i really liked about it dave is that it came this is not everybody likes this but it came with tenants who were paying rent and so not everybody likes inheriting tenants but those tenants were paying rent that i knew would cover the mortgage taxes and insurance from day one and they those rents had a lot of room to go up so i was like if I can just get this thing, fix the roof and kind of hold on for a while, like eventually I'll do a turnover.

10:45I'll get the rents up. And then I think the first, you know, rent, everything's paid after the, you know, there was no roof cost. I think I got like 200 bucks and I was like, all right. And this is only going to go up. So that was in 2022. And I was pulling in just short of 1500 on the rents for both combined. Yeah, both combined. Okay. And then now in 2025, five, they're pulling in over 1700. And honestly, I think it could pull in, you know, more than 2000, but I don't really want to force a turnover if I don't have to. And, you know, everybody's paying on time. So we'll just kind of let that thing keep riding.

11:18So let's let's dig into this a little bit. You paid 170, you're getting 1500. That's close to a 1 % rule deal. So you're probably getting a pretty good amount of cash flow right off the bat. What'd you put down 20%, 25 %? I'd put 25 % down. Okay. And then how much did that roof cost? Only about$7 ,000, which out here and where I'm from, for context on the listeners. Put a zero on it? More, like three exit. Okay. So you were probably all into this thing for what, 50, 55 grand, something like that? Yeah. Including the roof, I think around there. Okay. And then talk a little bit more about inheriting tenants, because this is a debate.

12:01And I'm curious, how did it play out for you? How long had those tenants been tenants in that place? And how did it work out for you now that you've owned the property for three years now? One is still there. We've increased her a little bit over time. Nothing crazy. She pays on time. She keeps it clean. So, you know, we got no issues there. And I just know that at some point when there's a vacancy, we'll get the higher rent. So I'm not worried about it. I think the people that perhaps don't love inherited tenants, they're trying to maybe force appreciation and kind of a get in, get out, maybe a burr.

12:34Cause I I've been there on some projects where I'm like, ah, it's going to make this a lot harder if there's a tenant in place. But if you're just buying and holding, uh, it's already kind of livable and the numbers kind of work and you know, they're going to get better in time. I mean, as long as there's proof that they're paying rent, that's something I would ask for before you close on it is just, you know, proof of the rent roll. I don't really have a big issue with it. And if my property managers don't have an issue working with those tenants, I'm all for it. I personally really like the approach that you're using.

13:03I do the same thing where it's like, I could buy this property and having these tenants who I know are gonna pay rent reduces so much risk. To me, the risk of having one of those tenants not be great is less than buying something with vacancy, especially in a market that you don't know because you don't know how long it might take to fill. And so to me, the idea of just, hey, I know I'm gonna be able to make my mortgage payments for the first couple of months. I could build up a little bit of a cash reserve. or I could get this thing rolling well, that often outstrips the downsides unless you wanna do that forced appreciation.

13:36Like if you're just eagerly trying to do a burr, that's a different situation. But for those of you who listen to the show a lot, you know I like this thing called the slow burr, which is kind of the same thing. I just wait until people move out to do the renovation. I'm not gonna force anyone to leave. I want people to stay in an apartment if they like it and they're living there. To me, that's great. and it just allows me to be more opportunistic about the upgrades that I make instead of putting this time pressure on myself to get things done really quickly. All right, well, this sounds like an awesome first deal.

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18:13Welcome back to the BiggerPockets podcast. I'm here with investor Ben Vidovich talking about how he bought his first property while living in California as a teacher in Southern Indiana. Ben, it sounded like the first deal was solid, right? You're making good cashflow. It seemed like you bought in a good part of town. Once you did that, what was your next thought? Where'd you go from there? Well, I have to credit my lenders for really helping me here. And a key piece of information I gave them when I was kind of researching what lender to use on that first deal was I made sure I let them all know I was looking to scale.

18:45Like I didn't want to just buy one and be done. And the lender I used kind of picked up on that thread and they transferred me to their commercial side of the lending business that they run. And in commercial lending, man, there's just so much fun stuff you can do. So the second deal actually came from those lenders who are pretty connected. They invest themselves in the area. And they said, all right, Ben, we have this special loan that's called a subject to appraisal loan where you can buy a property and then also get money for the renovations. And the funds you get are based on what it's going to be worth when those renovations are done.

19:22So it's what they described it as is kind of like a reverse burr where you get the money up front. It's all kind of rolled into this loan. You don't have to do a refinance at the end, you get it up at front. And all of those loans that I have are less than a hundred thousand. They're 20 year adjustable rate every five years, which I know is not, you know, maybe the, not every investor loves that, but my kind of thought pattern is 20 year loan, less than a hundred thousand dollars. Even when that rate adjustment happens, it's, it's not going to be a crazy difference because the loan amount is very small to begin with.

19:53And in those five years, like you're probably going to get some rent increases over time too. And it's adjusting on the new principle, not the original principle that you pulled out. Well, OK, that makes sense. Yeah, I never really considered something like this. And I'm a big fan of fixed rate debt. But I do think there are applicable times to do it. I've used arms. I've used interest only loans for certain times. And I think that's a really good point that I never really thought about that with an arm. You know, if it adjusts after five years and it goes from five to seven percent, like, yeah, that stinks.

20:24But the amount when you're borrowing 80 grand, I don't know what that comes out to, but I imagine it's maybe less than 100 bucks a month in difference. I think so. And I mean, just looking at the way interest rates have been, I mean, hopefully it doesn't swing big in the up direction, but it really hasn't been swinging all that much. It's been a slow trickle to come down to where it is now. So on some of these subject to appraisal loans, you can, because you're baking the equity into the deal by saying it's going to be worth this and the LTV is kind of already baked in at that 80%, I didn't have to really bring any money to the closing table because I just had to float the costs of the loan while I had it before a tenant got in there.

21:03So my thought pattern is if an adjustment comes, I can always put a down payment and kind of recast the loan if I need to, if the payment gets too high. So it's just been a cool tool that I've been able to use to help scale a portfolio without having to come out of pocket on a lot of the deals I've done. What did that do for you? Without that, would you have been capped out or sort of delayed in buying your second deal? Oh, most definitely. That second deal, like I said, I didn't have to really bring anything to closing because the margins were good enough that the bank was willing to lend the money.

21:35They knew all the guys that were going to do the work. They knew the property managers. And I kind of just got brought into the fold, I think because I was a strong borrower and followed through on that first one with them and just kind of showed credibility and got the roof done. And, you know, banks know your information once you do a conventional loan with them. So yeah, they're like, all right, we can we can do one with him and see where it goes from there. And so the second deal was not really anything out of pocket except for, like I said, those monthly holding costs. And what did you buy?

22:04It was a single family, three bedroom, two bath, but it had a tenant that had been living in there for a long time. So the upstairs was pretty much unlivable, kind of a destroyed home by the end of it sadly. And it took about six months to renovate because it was pretty big to turn, you know, turn it back into the three, two. But again, another thing that I should point out here is I wasn't using like a general contractor. I was working through my lender and they have their guys that do in house property management. So it's more of a property management company that's doing this turnover. So they probably are moving a little slower than a GC might've, but I was just making the loan payments on this subject to appraisal loan.

22:42And it was like 500 bucks. So 500 bucks a month for six months. And then after that, the tenant got in there and that tenant's been there ever since. And it pulls in about 200 bucks every month now. So I think it's a win if you can scale and just kind of hold on to assets. That's kind of my philosophy right now is I'm just kind of trying to grow slow and smart. And then, you know, as those principles get paid down and properties appreciate a little bit, you can have some options in the future. I love slow and smart. Slow and smart is the way to go. You know, you've got plenty of time to figure this out.