He Was Making Just $12/Hour: Now He Owns 7 Rental Properties (10 Units)

0:00Real Estate Rookie:What if the secret to building a seven-figure real estate portfolio isn't a big market, a big salary, or even a college degree? Today's guest is prove that a promise to your spouse, a willingness to see value where others don't, and the discipline to run your investing like a business from day one can take you further than any zip code.

0:25This is the Real Estate Rookie Podcast. I'm Tony J. Robinson.

0:29Real Estate Rookie:And I'm Ashley Kerr. Today, we are joined by Nathan Shelby, a real estate investor out of Pope, Mississippi. Nathan, welcome to the show. Hey, I'm excited to be here. I feel like this is a long time coming or a long time wanted to be here, I guess. It's a little bit of both, man. And the pleasure is all ours. And we're excited to get into your story, man. So I guess give me the quick 30-second version, Nathan. Who are you? Where are you coming from? And what does your portfolio look like right now? I am 34, just turned 34, based in North Mississippi. Portfolio right now is three single family homes, one mobile home, and four mobile home lot rent units with two new constructions underway going right now.

1:16One is being, the wiring is being finished today, and the other one, the plumbing is being finished today. So we're 10 properties, too under construction and um going going every direction all at once dude i love that man and nathan how long have you been investing when did you start building this portfolio um we've been investing since about 2016. um we started with the mobile home lot uh rents and kind of built that slowly you know as we we got married the same year in 2016 and just trying to get our lives you know, off the ground and try to figure everything out. And then one single family.

1:54And then we really started growing probably about two or three years ago.

1:59Real Estate Rookie:Now, Nathan, what were you doing before real estate? Out of high school, didn't go to college. I worked construction for a few years. I worked for a land surveyor for a few years. I guess about 10, maybe about eight years ago, got into sales. And I worked for a lighting company selling lights, ceiling fans, doorknobs and stuff like that to contractors. And so I've been around construction remodels, basically, you know, from the civil engineering side to the land surveying to the actual jobs. And now I have a sales jobs no longer in the construction industry, but just working, you know, throughout the whole past 10 years of trying to try to grow the portfolio and trying to.

2:48you know, get further in. Of course, I started, you know, to replace my W-2, which, you know, I've done that because, you know, it was a lot less 10 years ago. But, you know, I just really enjoy it.

3:01Real Estate Rookie:Well, Nathan, 10 years ago, what made you decide that real estate was the wealth building tool, the tool to replace your income compared to other investments that are out there? Well, I mean, at the risk of every single podcast I've ever listened to, you know, It started with bigger pockets. My wife's grandmother had a few rental properties. And when we got married, she passed away about the same year, maybe a year later. And we inherited a property that had driveways and septic and all the infrastructure already in place. And that's how we started off with the lot rent, with the mobile home lot rent.

3:40because I took, you know, trying to take what we had with, you know, minimal investment because we didn't have much at the time and just to try to get something going. And getting that first lot rent was really the, you know, I guess proof of concept. But BiggerPockets really, you know, just I came across it, I think, maybe a podcast first and then, you know, got my hands on a few books and just tried to follow along. Nathan, I'm curious. You said you guys didn't have a whole lot when you got that first property. What do you mean by that? I guess I would have still been working construction just as a laborer and probably making$12 an hour.

4:26And my wife was still in college and that was it. I think a lot of people in that situation, Nathan, would have maybe said like, hey, let's sell this property and maybe get like a big chunk of cash. What was the thought process for you guys to try and turn it into the beginnings of your portfolio? Well, one part of it being, you know, her wife's grandmother's land, you know, that she had, you know, her grandmother grew up, you know, picking cotton here in Mississippi. I mean, and she, you know, had several businesses. She was a great entrepreneur. She was tough. And part of her, you know, portfolio or everything she did was real estate.

5:03And so we, you know, we didn't want to sell it because it's, you know, family property. We don't ever really plan to sell it, but just trying to get started with what we had without, you know, little to no money down, you know, or no money in our pockets. But I do have one regret. When we first got married, her grandmother still had one property, and it was a mobile home. And we lived there. My wife already lived there while she was going to college. and we lived there for about a year after we got married. And after we moved out of it, I sold it. I sold the home off the property. And I regret that.

5:45I've regretted that ever since because I could have put some money into it, fixed it up, and that would have been an actual rental. And I would have made more money than just a lot rent.

5:55Real Estate Rookie:Nathan, when you started investing and you this first property with the lot rent. How did you treat this? Was this a hobby to you or did you treat it as a business right out of the gate? I treated it like a business. I ran full background credit. I tried to do software. I tried to make it into a large business, even though we only had one property. I think at that time, it was maybe$150 a month for that lot rental. But I started, I think, Cozy.co. And then over the years, of course, that went to Apartments.com. And then I moved to Inago. And this year, actually moved to TurboTenit. I've never heard of Inago, I don't think.

6:45Real Estate Rookie:TurboTenit, I use also, too, and love. Yeah. Inago, it's a good software. It does the full credit, collects rent, does what they all do. It's kind of like a rent-ready comparable, I guess. but it's free for the landlord and they make their money off process in the payments. But I turned over to TurboTenant this year for the accounting side of it. Okay. We're going to take a short break, but when we come back, Nathan is going to walk us through a Facebook marketplace deal that turned a$43 ,000 house into$120 ,000 in equity in just six weeks. We'll be right back. Finding great real estate deals is harder than ever.

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10:16Real Estate Rookie:Learn more at biggerpockets.com slash BAM. Only for accredited investors, past performance is not indicative of future results. Okay, welcome back. So we are here with Nathan and we're talking about building a real estate portfolio and actually in some markets that most investors may overlook. So Nathan, tell us about this$43 ,000 house that you purchased. So I'll say this before I get into it. So when I first started doing the rentals and hounding my wife about wanting to do it and telling her all about it, But she finally, one day she told me, that's fine, but I don't want anything to do with it.

10:57Fast forward to last year, I was on Facebook looking at properties. I've jumped between there and Zillow, and I'm always looking. And I saw a house about 10 minutes from where we live. And I looked through it, looked at the listing, looked at what the guy said just for sale by owner,$43 ,000. and I just went on about my day. And I guess about 30 minutes later, she sent me the same post. And I said, yeah, I saw it. You know, I kind of looked at it and she said, we need to go look at it. I said, okay. I said, you know, I was excited. She was excited, you know, so we went and looked at it. I think we were, I was standing in his living room with him, I think about three hours after he posted it in Marketplace.

11:46So it was a three bedroom, two bath, 1400 square feet on a corner lot in the county in a good school district. And I think he wanted originally a little over 50 ,000. And we worked our way down to about 43. So we closed on that in about six days. Just a cash purchase with a line of credit on another property. We put, I guess, about 20 ,000 into it. and it appraised for$120 ,000. And I rented that property for$1 ,400 a month in about a day and a half. That's an incredible deal. That's an incredible deal. I guess a few questions, Anthony, but the first one is you went direct to seller. And I think for a lot of rookie investors, they tend to really just focus on Zillow, Redfin and what's listed on the MLS, but you decided to go directly to the seller.

12:46How did you open up that conversation? Obviously, he listed it, right? But you said you were able to negotiate. How did you actually open up that dialogue to get from, hey, I saw this on Facebook Marketplace to, hey, we're closing in six days. What did that negotiation process look like? I think there were two pictures posted and a little bit of information, not much. and so I you know sent him a message said hey I'm really interested you know do you have any more pictures can you give me any more information after my wife sent it back to me and um we kind of went back and forth and he he didn't really act like he was really wanted to sell it at first you know I was asking for of course I'm sure he was getting just flooded with messages because you know, a lot of people saw what I saw.

13:33And I was basically on my way there. And because he said, well, I've got some people coming to look, you know, well, maybe tomorrow, maybe, you know, this weekend. And so I called my banker, you know, and said, you know, hey, do I have this much money? You know, can we can we move some things around? I said, can you send me a letter? and she emailed me a letter saying, you know, has whatever. And I sent that to him and I said, I'm, I'm very interested. And he said, okay, I'm home. You know, I mean,

14:12Real Estate Rookie:you know, he had a lot of people, you know, asking for this and asking for that, but you know, I wanted to, I wanted to prove it. Like, you know, I am actually interested. I'm not just, you know, hitting you with the, is this still available like everybody else? Yeah. And what did you see, Nathan, when you actually got there? Like, was it a validation of what you initially thought? Were there some surprises? What did you actually see when you got there? So it was pretty rough. It was old carpet. It was several dogs in the house. It was an older house. And it was kind of funny because when we got there, my wife actually went with me.

14:51And when we got there and I saw all of that, I got a lot more excited. And she was a lot less excited. she was thinking oh my gosh and i was thinking we could pull this carpet we could do this so you know it was it was rough but i saw i saw the potential i thought i was i was pretty sure what it would appraise for as is without changing anything and um and that we negotiated there on the spot um in the guy's living room just because you know i went through and said you know well i'll have to do this and I'll have to do this. I'm going to rent this property. I'm not going to live here and I'll have to do it as quick as possible.

15:35And threw some numbers around and we went back and forth and made a deal. And then I sent him a typical little contract letter and we both signed it the next morning.

15:47Real Estate Rookie:Now, Nathan, what about the funds for this? You said you had emailed your banker to ask to move things around to write this letter to show that you had the cash to buy it, what did you actually use to fund this deal? So I used a line of credit on another property. So we've kind of done that over the past, I guess, four years, five years. We fixed up this house, increased the equity and used it to do the next and do the next and do the next. And that's kind of put us over into the new construction. would be the same way I'm doing those now. So you're having these properties that are completed as the collateral.

16:28Real Estate Rookie:Is it just one line of credit or are you doing like separate lines of credit on each one as they're done? Separate right now. Yeah. Yeah. I'm, of course, like everybody else, I've been waiting for rates to come down and then they did for five minutes and then they went back up. But I feel over the past couple of years, I've been waiting to term some things out but i feel like i haven't slowed down enough to do that just because i've kind of just rolled into the next project um but i'm i want to after we get these two going now finished actually do that but we'll we'll see and nathan you mentioned you've been moving quickly and well first congratulations on that deal because that is a phenomenal deal um but you mentioned that you've been moving super fast and yeah you're doing a few different strategies.

17:20And you mentioned this at the beginning of the episode where you've got the mobile home play, you've got the BRRRR strategy that you're leveraging, and then you've got some new construction. I guess break down each one and what you feel kind of the benefits are and why you've spread to multiple strategies. So we started with a lot rental and we inherited about, I guess, about 15 acres in total from her grandmother. And that was her grandmother's house and then some, you know, just property. And then on kind of on the south side of that property were the mobile home lots that she already had. So our strategy has kind of been, we got the lot rentals filled and that became kind of our base.

18:07And then we moved into her grandmother's house after she passed away, had to do some, rebuild the foundation and put some money into it and went ahead and did a full remodel and then got that stable. And then that was, you know, kind of, so we've kind of, we've grown slow over the past 10 years. I feel like, I mean, if you, if you went back or I look back now at where we could be, but a lot of that was just trying to not overextend, but we've kind of, you know, we got the mobile homes to a base and then we've kind of moved into a couple of single family and gotten back to a place of being comfortable.

18:48And then we just kind of keep moving up.

18:51Real Estate Rookie:Now, you kind of built this portfolio mix as you're talking about here of the different strategies that you've done. But what would you say was maybe your biggest mistake that you've made along the way? And is it specific to one of those strategies? The first would be selling that original mobile home. And then, of course, I've had some, you know, letting people move in quick. I've had some, you know, kind of turning my head to a few things on a credit report because I wanted to get somebody in there. And that's, I guess that's really the main, the main couple. Maybe if you wanted to get real deep, maybe keeping up with expenses a little better throughout the journey.

19:36But that's really it.

19:37Real Estate Rookie:When you say about keeping up with expenses, are you talking about insurance costs or your standard expenses? Or what do you mean by that, clarify? Well, that and just the accounting of going, sitting down every 90 days or whenever I kind of had time or thought about it and just kind of sitting there and physically catching up, going back through bank statements and credit cards and catching up. This was for this house. And what was that for? That's why this year, when I knew we would be stepping into the new construction back in January, I really started looking into different softwares and tried a few and seeing the best thing to kind of automate some of that.

20:22Because it can be a chore, especially when you get to several properties and you're doing a little remodel here and then you're thinking about this. then this comes up. And even like you said, with the typical, you know, just insurance and the bank and, you know, a couple of utilities here and there, just if you only do it every few months, it's a lot.

20:41Real Estate Rookie:Yeah. I think that is, especially as you're growing and scaling, that is a super common problem that investors get themselves into. I mean, I went to school of accounting and finance. I knew how to do bookkeeping, but the acquisition side, so much more exciting, so much for fun to go buy another property than my computer entering data. Right. And not going to college, but you are looking at the main bookkeeper, the accountant, the tax expert, the contractor, the maintenance man. You're looking at all of them. They're sitting right here. So it's been a learning experience for sure. And Nathan, one thing I'm curious about, and not to say that this is a mistake, but I'm just curious what drove it, but you bought your first property, I think you said in 2000 or you started in 2016, but you said you really didn't start aggressively growing the portfolio until a few years ago.

21:32What was happening in between that time? Like there was already some proof of concept with that first deal. What was it that prevented you guys from scaling that portfolio sooner? I would say, I would say just kind of just life. We, um, we moved out of her grandmother's house and, um, moved in with her, my wife's brother, and we built ourselves a personal house. And we hadn't, we only had the mobile homes up until that point, the lot rents. And so we moved out and got somebody in that house and then just kind of building our personal house, life, job changes, just, you know, just kind of taking our eye off the ball for a few years and just kind of just hanging out with what we had.

22:18And then, you know, kind of got to the point last year, because I've always had this, you know, 10 years from now idea, you know, with the rental property and other things in life. And I looked up and said, man, you know, 10 years from now, you know, was 10 years ago. I was like, you know, if we don't, you know, we have this, you know, that I've, you know, been, hey, we want to do this eventually. And, you know, we're kind of staring down the barrel of eventually. And so I felt like it was just, we were at a place and it was time to really go all in to see what we could do and just try to make the most of it.

22:58Real Estate Rookie:What are the first steps that a rookie investor needs to take to actually start new construction? Where do you start if you want to go on this investing strategy path? I would say, I mean, property is a big thing. We're in a very unfair place, have an inherited property. I mean, I have, I have land that's free and clear. So that makes it, that makes it pretty easy. But I mean, if you, you know, I mean, looking for land in the right place, you know, paying attention to school districts, paying attention to the utilities, you know, water, septic, you know, power, what, what are you required to do?

23:39What is your county permitting um and like here where my personal house is we poured concrete and it's on a in the county on a local water association and we poured concrete to build our house and the guy that works for the water association called me and said hey the health department just cut us off on new service. And so we had to drill a well for our personal house. But that would be something to check into because, you know, you're, you know, looking at a large expense that you definitely weren't planning for. And the association here, I think we're going on three years now. They have not been able to offer new service.