Turning a $25,000 Rental Property into a $5,000/Month Rental Portfolio

0:00This investor bought his first property for only$25 ,000 right in his hometown. Now, his cash flow from real estate averages$5 ,000 every single month. He was able to accumulate 20 units in seven years, all while working a day job by maximizing his own strengths, understanding his local area, and adapting as the real estate market has changed. If you want to repeat his journey, keep watching to find out how.

0:31Hey, everyone. I'm Dave Meyer, head of real estate investing and bigger pockets. And on this show, we teach you how to achieve financial freedom through real estate. Our guest on the show today is investor Dustin Cardenas from Western Illinois. Dustin didn't start in real estate with any sort of built-in advantages. He calls himself an everyman and has worked a series of very regular jobs, including bug exterminator and car salesman. But Dustin also saw an opportunity right in his backyard. Low-priced homes that could be worth much more if someone just took the time to fix them up and maximize their value.

1:06So he thought, why not me, and bought his first property for only$25 ,000. That was seven years ago, and today Dustin has a cash-flowing portfolio that's allowed him to cut back his hours at work and dream of a retirement that otherwise might not be possible. Let's bring on Dustin and hear about this amazing investor journey. Dustin, welcome to the BiggerPockets podcast. Thanks for being here. Thanks for having me. Huge fan of the show. Oh, that's great to hear. We love to hear that. What was your background? How long ago did you get into real estate and what had you been doing prior to that? It's funny you ask that because I just had to think about the age that I started investing in real estate and I actually wrote it down.

1:45So I was actually 35 years old when I started investing in real estate and I'm currently 42. Before real estate, I had my W-2, which I still have at this point. I'm a car salesman here at the local dealership in town, and I've been here for nine years. Previously to that, I was a pest control manager for about four years. And previous to that, I was a juvenile detention officer for almost six years. Wow. And my wife is currently a nurse practitioner here at a hospital in town. Nice. Wow. You've done a little bit of everything, it sounds like. A little bit of everything. Very varied career. Yeah.

2:19So why did you decide to get into real estate at 35? There was a handful of investors around here in town and one guy I went to school with and he was kind of born into it. And I was at a local establishment one night and he told me, he said, you know, you could do this. There's there's room for everybody in this field. And he said, hey, I know you got a good job. I know your wife has a great job. You guys have good credit. So there's more than enough to get around. And what he said to me stuck with me and lit the fire right there. and I still, I never forgot it. What he said was, you know what I want to do with my life?

2:52I want to do whatever I want to do whenever I want to do it and I want to get paid for it. And real estate does that for me. So right then at that moment, I just started reading every sort of book material I could get my hands on. And it was on and going from there. Oh, that's super cool. I love that story. And I love the mentality of this guy you met or friend or mentor, if you will. What was your instinct at that point? Where did you want to go with your investing career and how did you start thinking about doing your first deal? But the first deal I hunted down, it was a great deal with my realtor and she's still my realtor to this day.

3:29I was selling a vehicle and I had to take the vehicle back to the real estate office. So I went in and had a conversation with her and she was probably eight years younger than me, but she actually broke everything down to me and said, you can do this. so you know just to piggyback on the helping each other yeah she said you can do this and so we instantly started looking at houses then and I had a lot of different realtors kind of shy away from me because I was looking for the smaller deals I wasn't looking for a hundred thousand two hundred thousand dollar houses anything like that I was in the range of twenty to forty thousand dollar houses so the first deal that we found it was they had a list at forty one thousand dollars And it was a move-in ready house in this area.

4:12Right place, right time. The people had moved to California. And the house had already been redone, move-in ready. I ended up lowballing them, and I got the house for$25 ,000. Oh, my God. Wow. And I still own that house to this day. And that house right now with equity is probably worth$70 ,000 because I bought it in 2018. But that first deal was the one that sparked it that I said, okay, I can do this. and after that deal then you know the snowball happens and you just start going from there wow that's i mean hearing those numbers about the price of house is crazy to just imagine that you could buy a house for 25 grand where most people would be probably pretty happy to find a house for 10 times that amount like if you could find something for 250 but what what is your market like is it rural our market our town is currently about 35 000 people so we're in a perfect we're in a perfect area.

5:05We're right in the middle of two higher volume areas. 45 minutes north of us is called the Quad Cities, and it is probably about 100 ,000, 120 ,000, and 45 minutes east to us is called Peoria, Illinois, which is also about 115 ,000, 120 ,000 people. So we're right in the middle, which is a great area. I love listening to the podcast all the time, too, because you guys talk about the Midwest and it's by far, I don't want to give all our secrets away, but it's by far the top spot to invest in the whole country. That's what I'm saying, man. I agree. And that's true. And I have the numbers to prove it.

5:43Yeah, it sounds really cool. When you buy a house for$25 ,000, you said it was move-in ready. What can you rent that for? I originally, I rent that house now for$700 a month. And that is a two bedroom house. It's two and a half bedroom, uh maybe a little small office it's non-conforming because there's no closet it also has two bathrooms in it so i rent that house for 700 currently i was renting it for 650 but with time you know it just goes up and i have long-term renters there that you know they they take care of the home that's great you know they love the home and not only that the lot is huge so it's a great house and that's unreal it is completely unreal i figured you guys would be somewhat shocked with these numbers that I tell you here.

6:26I am. I mean, people are saying you can't get the 1 % rule. You have nearly a 3 % rule right now. On multiple properties, Dave. Wow. That's awesome. Well, just for everyone who knows, there's this thing called the 1 % rule that got really popular maybe like 10 years ago. And basically the idea is that if you can find a property where your monthly rent is 1 % of the purchase price, you're probably going to have pretty strong cash flow. And in the last couple of years, it's been harder and harder to find that, especially outside of the Midwest. But you find deals that are 0.7, 0.8, which you could still cash flow, but 1 % is like a solid deal.

7:05But people rightfully are saying it's hard to find those, but apparently Dustin's finding 2 % and 3 % real deals, which is pretty incredible. I could see why this has snowballed for you because that's an incredible first deal. Congratulations on figuring that out. Once you did that, were you just ready to go for the next one immediately? So 2018, that was August of 2018 is when I bought the first one. So I let that roll for a couple months. Then November came back around and I found another home, which I still own to this day. Two bedroom, two bath. Once again, the same scenario. People were moving out of it.

7:39I ended up getting that house for$30 ,000. And it's moving ready. The same tenant still lives there to this day. Going on to the third one, I bought a third one, three houses in 2018. The third one was in November. Same exact scenario. I ended up buying that house for$18 ,000. And that was also semi-moving ready, but I had to do very, very few cosmetic stuff to it. And I added central air to the home. But the scenario behind that one, an elderly gentleman had moved to a nursing home. I was driving by one day and his brother was mowing the yard. And I just stopped and talked to him. He showed me the house immediately.

8:15And he said, hey, we're getting ready to list it for$28 ,000. And I said, okay. And I said, well, would you guys take$18 ,000? He took my information. And within one week, I had it rolling to purchase that home. Oh, my gosh. On the third deal, just to kind of back up on that, on the third deal, the financer, the bank, said, hey, you know, we usually like to wait about a year or so before we give you any more money, you know, because we want to see how it works. And I kind of just was direct and forward. I said, hey, I have this business plan, and it's going to work. I said, me and my wife both have the finances to back this up, but I'm going to start this business and put it in an LLC.

8:56and either you guys are going to give me the money or I'm going to go down the street to another bank and they're going to finance us immediately. Once I put the business plan out there, they accepted it. They knew that it was going to work because I had everything in play. And from then on out, now I have a business line of credit through them. I don't even have to go through there. I don't have to run credit. Do you think this is a strategy or approach that is repeatable by the average investor? If you live in a small town, do you think this is just something that anyone can do? I really do.

9:29And I definitely think 100 % of it is the demographic. I really do believe that anybody can do this. But I think there's just a fear around investing in real estate. A lot of people are pessimistic about it instead of being optimistic about it. Me personally, I think that you're doing yourself a disfavor if you're not investing in real estate. That's just my opinion. Because the bank needs people like us. They need us to pay our interest rate. They want to give us money so they can loan our money out to different people for, you know, different houses, cars, whatever it may be. But I definitely believe that it is easily possible, especially in the Midwest.

10:08Yeah, for sure. And yeah, I mean, I think in the Midwest, it's definitely something that is more achievable, especially from the affordability standpoint. But I, you know, we talk a lot about markets on this show and in BiggerPockets in general. And there are some great markets across the U.S., all sorts. But I think your story is just, you know, reinforcing the idea that, like, you really can make almost any kind of market work if you have the right approach and the right strategy. And it sounds like what you're doing, Dustin, is just working with what you know. Like, you know this market really well.

10:43You know who wants to live there. You know who's selling properties. You know what the tenant base is going to be like. and you're using that very effectively to your advantage. That's awesome. I love that. Well, this is a very cool story and I want to hear more about how your investing career has progressed. But we do have to take a quick break. We'll be right back. A couple of weeks ago, I traveled to the East Coast for my dad's wedding. It was quite the trip. I had the honor of walking my 71-year-old father down the aisle, which is something I never imagined I would get to do. I spent time with family and friends I hadn't seen in years, soaked in the East Coast charm, and of course enjoyed a lobster roll, which always makes a trip out there even better.

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14:43Welcome back to the BiggerPockets podcast. I'm here with investor Dustin Cardenas talking about how he has scaled his portfolio very effectively with very affordable properties. Tell me, Dustin, what happened during COVID in your market? Most places in the country started going crazy price-wise. You were starting at a pretty low entry point. What has changed and what happened in COVID? I'm very glad that you asked that question because COVID for me, 2020, was kind of a breakout year. So even in my W2, the car industry was great. We sold a lot of cars. Yeah. And I bought a lot of houses. I actually bought five units, one duplex and the rest were single family homes in 2020.

15:29One of them was a duplex in a less desirable neighborhood, but it's all about finding those deals too. I listen to Henry Washington a lot. It's all about finding those deals. So I ended up finding the duplex on the less than stellar side of town. behind a liquor store. I know it sounds cliche, but it's actually true. And it actually was just placed on Facebook marketplace. And my sister messaged me and well, she tagged me in the post. And so my wife actually went and looked at it first and I got off of work. And I remember to this day, I walk upstairs and she's sitting on the couch, just glaring at me.

16:03And she says, I want it. And it was a very nice house. It might've looked kind of like, it still looks like crap on the outside with old shingles, but it was actually owned by a maintenance man, upstairs and downstairs duplexed, separate utilities, furnace, separate furnace, separate water heaters, locked down like a fortress. And I bought that house for$24 ,000. And I still own that house to this day. And I have long-term tenants there as well. So that was a beautiful home. So I had absolutely no problem in COVID. What are the condition of these properties? because I'm trying to just wrap my head around what a$7 ,500 or$10 ,000 property looks like.

16:42I mean, I pay more to resurface my driveway than that property. The$10 ,000 house I have, it was pretty nice. It wasn't bad. I rented it for approximately two or three years, a couple of different tenants, and then the floor started sagging. So I ended up going in there just to make a quick repair. But of course, when we got into it, I ended up rehabbing the whole house. So I rehabbed that whole house for about 11 grand. I wanted to spend 5 ,000, but it's such a small square footage. I just don't even understand. How does that happen? How do you like, do you do a new kitchen? I did everything in that house.

17:21It was such a... How do you do a kitchen for 11 grand? The bedrooms were fine. It was two bedrooms on one side of the house and a bathroom in the middle. On the other side of the house is an open living room that goes into your kitchen that is separated by an island. Okay. So I tore it down to the rafters, completed all brand new wood, rafters, all the wood, everything. And then I bought a lot of stainless steel appliances, but I buy a lot of stuff secondhand. Yeah, okay. And then I have a plumbing and heating company that went in there, and they redid the whole house for about$700 for plumbing.

17:57But you got to think about the square footage is so minimal. There's not a huge area that they're going. That's fair. Yeah. But it was very, very cost efficient. And if you were to go and sell that property today, how much do you think you could get for it? My realtor has already offered me about 30 for it. I think if I put that house on the market, I could probably sell it$35 ,000,$40 ,000. I think I could get out of it. Okay. So you put$15 ,000 into this thing and you could probably double that. And what would it rent for? I rent that house for$500 a month. All right. Still a good deal. I want to hear how your portfolio looks today, what you're buying, what your goals are.

18:36But we do have to take one more quick break. We'll be right back.

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22:39So let's fast forward to now where we sit in 2025. What does your portfolio look like today? Currently in 2025, I own 20 units, five duplexes, and the rest are single family homes. And one of my favorite homes that I bought too, and I ventured out into a different field in real estate, I bought a house in Peoria, Illinois, once again, a private deal through a friend who was a realtor. The same family owned this house since the 70s. And their daughter lived there, They live there, central part of town. I ended up buying a house for$30 ,000. They wanted$45 ,000 for it. I ended up getting it for$30 ,000, and they left everything in there.

23:20Move-in ready house. So I sold all of the possessions in there, and then I just basically gave the house a facelift. All new paint, of course, all cosmetic, nothing. I put a new water heater in it. But that current house, I tried Airbnb for a while. And Airbnb was not for me. It was not for me. Just because I was 45 minutes away, the high turnover rate, the cleaning. So I switched from that to Furnish Finder, which has been absolutely phenomenal there. I get long-term tenants, and there's two hospitals located there. So that home, I currently can rent for almost$2 ,000 a month. And that's absolutely everything included, of course.

24:00But my power, water, insurance, everything like that is very minuscule. compared to the profit margin that I make off of that home. And I'll tell you, traveling at Furnish Finder is an amazing thing because all nurses really care about is cleanliness, a place to sleep, Wi-Fi and air conditioning, and a nice comfortable bed. And we provide all of that, and I'm more than happy to do it. Awesome. So right now you own 20 units. Are you still self-managing them all? One guy, me. So I self-manage every single one. I listen to you guys every single week when I mow yards. So I mow about 10 to 15 yards.

24:39And I'll add that into the rent too, which I've listened to your podcast for about five years. And I know what role I fall into. I'm definitely an active landlord. So I like to keep my eyes on the property. I have no problem mowing the yards. I actually educate myself while I'm mowing these yards. And I hear your podcast every single week, which is definitely interesting. and I've learned so much off of it. But I completely manage every single thing, all Google Sheets. And that all came with time. Because when I first started, I'm writing stuff down on a piece of paper. I'm doing this, I'm doing that.