Making $4,000/Month Cash Flow with 10 Rental Properties (In Just 4 Years)

0:00Our guest today started out living in a small apartment, separated, broke, and convinced that real estate was only for people like her landlord. But one listing changed everything. A single-family home that was secretly a duplex, and that surprise became her first house hack. Today's guest, Alana Lipman, went from saving every dollar she made bartending, even flipping a camper to fund a down payment, to building a portfolio of short-term rentals, long-term rentals, mid-term rentals, a flip, and a mixed-use building that cash flow liked.

0:35this is the real estate rookie podcast i'm ashley care and i'm tony j robinson and with that let's give a big warm welcome to alana alana thanks for joining us today yeah thank you so much for having me alana your story really starts out with a moment a lot of rookies can probably relate to sitting in an apartment feeling stuck and suddenly realizing your landlord might be onto something so can you take us back to where you had that light bulb moment? Yeah, absolutely. So I just remember sitting in my apartment. I was separated at this time from my now ex-husband, but we were separated for like a year and a half, almost two years at this point.

1:14And I had moved to a new town, was renting for almost two years at this point and my whole life up until then. And I was like I was sitting in my apartment and I was writing out my rent check to Mark, who's my landlord at the time. And I lived in a fourplex and I just literally had that light bulb moment of Mark has one mortgage and he's getting four rents for probably all at least eight 50. And I was like, oh my gosh. Yeah. Like you said, like maybe he's onto something. And so I can actually pinpoint that exact moment that I had that thought that maybe I could do that too. Before that realization kind of turned into any kind of action, describe for us what your life looked like for you during that time.

2:06Yeah, so that was close to the end of my separation. I ended up moving back to the town I had been from. Partially me and my ex-husband were going to try to make it work, but I also wanted to adopt my little through Big Brother Big Sister. So I'm in Minnesota, Big Brother Big Sister. It is a national organization, but there's a really big presence of it where I'm from. And we had been matched at that time since she was seven. At this point, she was like 15. And so I was trying to get custody of her as she's in like a really rough situation. And I thought, well, I can't be living in this small apartment separated from my husband.

2:46That just won't look great to a judge. It doesn't look like stability for her. And so I decided to start looking at houses. And at that point, my little, she had known my husband for like eight years or whatever at that point. So she loved him. She knew him. And so I found this house that looked really beautiful on the MLS and went to look at it. And yeah, it changed my life. It changed the whole trajectory of my life. What a strong motivating factor, Alana, to have someone in your life that you want to take care of. I've shared on the podcast before that I had my son when I was 16 years old. And I think just like that motivation of wanting to provide a better life for your kids effectively can be a strong motivating factor.

3:31So this kind of, you know, the combination of being annoyed, writing this rent check, you know, wanting to adopt your little through the Big Brother's Big Sisters program, that gives you the motivation to jump in and get started. So you said you just like jump on the MLS and start looking. Did you know what you were looking for? Like, did you have a sense of like a buy box? Like, or were you just kind of like open it up and just like window tap and see what was there? Like in my head, when I was, um, had my light bulb moment, I thought, man, someday it'd be really nice to have like a fourplex or a duplex or something.

4:06But then at this point, um, my whole motivation was just to find a nice house that was big enough for me, my husband and my little, um and so yeah when i showed up it was uh it was a duplex they had listed it as a single family and my wheels i remember standing in that driveway and i'm like this is it i am not letting this house go and that was in 2021 when the market was a little more competitive so i was like a little bit worried like i need this house it's everything i want um and more so can we just talk about that agent for a second because like to be in 2021 and to like misrepresent a duplex as a single family home that had to be like one of you know and I don't want to disparage anybody but that's got to be like one of the biggest fumbles from from an agent that I've heard of in quite some time like everything was selling like hotcakes in 2021 so it's crazy that they would let that slip yeah yeah my uh so my realtor on my end was uh my former brother-in-law um and so he called right in front of me he called the selling agent that he knew pretty well.

5:08And he's like, come on, this is a single, or this is a duplex and you know it. And yeah, they had marketed as a single family with a mother-in-law suite, but it had separate entrances. Like it was a duplex. I believe they just did that because single families are, you know, worth more. Like the average person doesn't want to live in a duplex. They don't want to think that, they don't think they can really invest in real estate like that. So I'm thinking that was why, but it did work in our favor to be like, come on, this is a duplex. So yeah, it worked out really well for me, incidentally. I think that's really market dependent too, especially at that time, whether a small multifamily would be better or a single family.

5:50And I think it depends really on the neighborhood too. If it is primarily homeowners in a neighborhood, then yeah, I could definitely see why they would list it as the single family with the in-law suite compared to if it's more investors in a neighborhood that it's more beneficial to actually list it as a duplex in that area. So I kind of see what they're trying to pull there. So after you walk this property, I'm assuming you're thinking I'm going to house hack that. And what did you end up doing to that other side of the property? Did you list it as a long term rental, short term rental? Yeah, so I did a short term rental.

6:29And part of the reason for that was since I had separated, it all just kind of worked out since I had separated, I had went and bought all my own stuff, like my own bed, my own couch, my own dishes. I had everything already that you would need for like an Airbnb. And I had nothing to do with it besides put it in an Airbnb or sell it all since me and my husband were back together. And so, yeah, I put it all in the other unit. So I didn't have to invest and like, you know, barely any money that way to furnish it. And so, yeah, I put it on Airbnb and it just filled up right away. um whether it filled up with like traveling nurses just on um Airbnb people for the weekend or whatever um at that point I didn't have like a minimum stay or anything because I just wanted it to fill up and it was never an issue and to this day I've owned that property for now a little over four years and I've never paid my own mortgage on it so it was a win for sure yeah it's like the perfect house hack, right?

7:29It's like everything coming in covers all of your expenses. Let me ask Alana, how did you fund that deal? What type of debt did you use? Just give us a quick snapshot of what it actually cost to acquire that first duplex. Yeah. So I got the 5 % conventional loan. It was my first time buying a home. So that was really great. And I wanted to lessen the cash I had to bring to the table during that time because, I mean, a big reason I wanted to get into real estate is to have more cash flow to make more money. And so, yeah, I did like the 5 % down. I offered a little bit more than asking price actually.

8:10And so then I asked the sellers to pay the closing costs. So it kind of evened out just to lessen the amount of cash I would have to bring at closing day. And yeah, so we can talk exact numbers. I think it was listed at $217 ,000. And so I offered like$223 ,000 and asked them to pay all the closing costs. So it really evened out. And we've talked about that strategy before, but for the Rickies that are listening, who might not be following, if you buy a property for, just for round number sake, let's say you buy a property for$190 ,000, but it appraises for$200 ,000. If you actually adjust the purchase price up to$200 ,000, the seller can then give you that additional$10 ,000 back as a credit towards your closing cost.

8:57So again, for round number sake, if the purchase price is$190 ,000, and let's say you're doing a 20 % down payment, well, 20 % of 190 is$36 ,000. If I'm doing that math correctly, 20 % of 200 ,000 is$40 ,000. So it's more, but you're getting a $10 ,000 discount because you're giving you that credit. So you're actually only paying$30 ,000 down. So I know that's a lot of numbers and maybe you're following, maybe you're not, but basically if you can actually increase the purchase price in some scenarios, you can get less, have less cash out of pocket to acquire the deal, which is what Alana did here.

9:33So it sounds like it went incredibly well for you on the short-term rental side. I'm curious before we move on to your next deal. Had you ever managed a short-term rental before? Like, Like what gave you the confidence to say like, man, I can manage this property as well? No, I never had before. However, my best friend and to this day, she still runs a shared space Airbnb. But I just knew there was a need in the community for it because she was always full in a shared space. And so I thought, how much more full will I be giving them their own entrance, their own bathroom, their own everything?

10:05And so I had the confidence that there was a need for it in our community. but I had never managed anything like that before. So you got really creative with your down payment and what was your career at this time that you were doing during this time and was it easy to actually get funding on the property? Yeah so I work full-time I still do for the American Heart Association and then at that point I had worked there for two years so now I'm going on like six six and a half. And then I also bartended. So when I had moved to this other town and separated and was kind of living that life, I needed more money.

10:45I didn't have, you know, my, my ex-husband's income or anything like that at the time. And so I started bartending as something to keep me busy, keep me down there, help me meet new people in a new town. And I just made a lot of money bartending. And so that was really, really helpful as well. So I had no problem securing the funding for my first house. And I want to bring that up because I think one of the first steps to getting your first deal or your next deal is to figure out that funding piece. And so what did you do first, the chicken or the egg? Did you get the funding lined up? Did you get pre-approved and then go find the house to kind of know your budget?

11:28Or did you find the house first? And how did you feel comfortable with the price range without getting a pre-approval for a loan? Sure. So I really didn't know anything. And that's kind of how I do things. I really jump in like both feet and then figure it out as I go, which is what I've been doing for the last four years. So I actually was on my way out of town for a work thing. And I wasn't the one driving. I'm looking at Zillow just because I had this idea like I want to adopt my sister or my little. I should be looking. And I loved this house where I was like, I want to turn around right now and go home before it sells.

12:04And so I went, contacted my brother-in-law at the time, set up a day to look at it, looked at it, like same day went to a mortgage lender and just did everything as quickly as I could. So, yeah, it's very nostalgic thinking back on it. Now, you only ended up staying there, Alana, I think six months before you got the itch and you ended up buying another house just a few doors down. What was the thought process behind that move? Well, yeah, that house, a few houses down came up for sale. And my ex-husband, which we got divorced not too long after this, so I just kind of kept going with everything.

12:42But he didn't really like living in a house hack. he just like didn't he we have two dogs and he like didn't like feeling like if they were barking that we were disturbing our our tenants downstairs and stuff like that and so when this one came up he asked to look at it and I thought well we've saved so much money we've never paid a mortgage or utilities on this house we have the money for it you know saved up and so we went and looked at it and then I thought I kind of got went to back to the same lender got an idea on what a mortgage would be on that house and thought this will be paid for too with the other side of the duplex.

13:19So the unit we had been living in, that paid the mortgage for our new house. And then the Airbnb side of the duplex paid for that house. And I wanted to do, I didn't want to short-term that one. I wanted to find a long-term renter for just diversifying and mitigating the risk of having at least one house paid for through like a 12-month lease instead of relying on Airbnb solely. I mean, how great is that to be able to move into another house and like, oh, I still don't have a mortgage, but I get to live in my own house. So what did the numbers look like in this property? And I think we have to go back to that duplex too and talk about the cash flow on this thing if you're able to cover both mortgages with those rent payments.

14:06Yeah. So the next deal, the new house I bought or we bought was asking price was$169 or$169.9 and replayed the same thing with the closing cost strategy, offered$175. If they would cover closing costs, they agreed. And so, yeah, within six months, we were moving into this new house. And the mortgage on that one was about$1 ,200, but we were able to rent out the half we had been living in for$1 ,700. So, yeah. Today, that property is both sides are long-term rented and it cash flows really well. I feel like that's another thing we need to get into is why did you decide to switch? Because I think a lot of people started Airbnbs around that time and some have pivoted out of that.

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17:15Protect your real estate business at biggerpockets.com slash next. Okay, before the break, Alana showed us how creative you can get when the capital is tight. But once she started scaling, she ran into a whole new set of challenges, juggling a full-time job, bartending, and growing a portfolio fast. So Alana, you work full-time, as you mentioned, at the American Heart Association and you're bartending. How did you manage to also grow and scale and manage your acquisitions and operations for these properties? Absolutely. So staying really close, like with that Airbnb, moving a few houses down, um being that close was was easy to keep managing it and doing tenant turnovers I also lengthened the amount of time like the minimum stay and I also started marketing that Airbnb on Furnished Finder um because at that time like there was still a lot of traveling nurses especially with COVID happening and everything like that and so I was able to you know book like more midterm rentals as well.

18:18And then, I mean, it really helps. The bank likes to see a W-2, a full-time job that you've been at for at that time, four or five, now six years. They have a lot of confidence in lending for new properties and stuff like that. Just a very busy schedule though, working weekends and nights at the bar, making a lot of cashflow. But that cashflow, I was able to keep doing it because I was saving every dollar I made from bartending to put towards a down payment on a new house. And so I had a bigger why. And if I didn't have that big why, I think it would have been hard to keep up with everything. I think bartending would have had to go at some point.

19:02But yeah, at one point I was able to actually save every single dollar I made for four months. I bought a little safe, would come home from my shifts at 1am, put it in the safe, didn't ever count it really for a few months. And after four months, I had$10 ,000. That sounds so exciting. How fun. It was really fun. Yeah. I'm like, that's easy money. I mean, I was still using my bar paycheck and stuff, but yeah, every single dollar I made funded, actually bought a camper first with that. So I found a camper for sale for 5 ,000, went and checked it out. It was like a really nice camper, but like very outdated.

19:39Flipped it in three days, like flooring, painted everything, like made it like this luxurious camper in three days, took it on one trip to Colorado, just because, you know, got to test it out, came back and I sold it for 10, five. And I only had$1 ,000 in material invested into it. And three days time. Yep. And so then profited even more. And then that went on to a down payment of another house. Oh, and I love that you're such a hustler with your different sources of income. And I also love the idea of having an actual safe. I've never thought about saving money in that way, but it's just like, I guess it works if you get a lot of cash tips, you come there, you drop it in the safe, but it's just such an easy way from a behavioral perspective to make sure you're not touching the money that's meant for something bigger.

20:27So I love that approach. Now, you've dabbled in a few different things already, right? Like you mentioned short-term, you mentioned traditional long-term, flipping a camper van. But what about the actual management process? Because I know that obviously you're still dealing with people. I know that you've had some issues with eviction, which is maybe like a very scary thing for a lot of new investors that are getting started. So maybe walk us through, like you've gotten into some trouble. What did that look like? What was maybe the lesson learned from that story? Yeah, yeah. So I think it's important to say today I have 15 doors of all amazing tenants.

21:05They're all just so great. But that's because I had a couple questionable tenants that really kind of took advantage of my empathetic, compassionate nature, my willingness to listen and kind of took advantage of that. So those two tenants. So one of the gals, I also marketed, I didn't really like talk about this part, but I had a passion for women in domestic abuse situations. Not that that's anything I've ever been through. However, when I had separated from my ex-husband, I went to this apartment, I had nothing. I'm like man like good thing I have a job and I can like you know buy like a bed and dishes and stuff like that but I started thinking like what about women that are stuck in a bad situation and they can't leave or they feel they can't leave because they don't have their own stuff and so that's keeping them in a bad situation and so since I already had a furnished place um through word of mouth I had some domestic abuse survivors come and stay and I would give them you know really like reasonable rates and stuff like that.

22:08Um, and I had one gal and I think it's important, important to say too, she was really, really scared of her, um, fiance when she left him and came to stay at our, at our place. Um, but he passed away three weeks after she moved in. So like, it w it was like no longer an issue that she was scared of, of, um, her fiance and stuff like that. So it's important to say that when I say that, like, she was always paying her rent like three to four weeks late. And thankfully at this point I had some other tenants that were like still keeping up on the mortgage and stuff, but like I, you know, I, I need that rent money.

22:44And so then she worked with transitional housing, which is a program we have here that will help tenants in like a bad situation. And she went through transitional housing two times to pay her rent, but they called me after the second time and they said, Hey, just want to let you know, like as the landlord, like we're not going to help her again. Like just so you know, like this isn't going to be an option for her like a third time. And we had only signed like a six month lease and we were coming up on that six months and it was approaching winter in Minnesota, which makes it a lot more difficult to evict a tenant.

23:19And so it was like September. And so I just told her like, I don't want to continue our, our contract after this. And she had, oh man, I got paragraphs of text messages for like a month about how she was going to sue me for age discrimination and just all sorts of like wild things. I mean, thankfully she had come to my door and apologizing about how she never pays rent on time and about how I probably want to evict her. And that was all on my ring camera at my house. So, I mean, I had that, but never had to use it. She didn't actually end up trying to sue or anything like that. Thankfully her profession was a cleaning lady, So she didn't leave my place like trash or anything like that.

24:01And then the second tenant. So he came to me, he wanted to long-term rent and it was perfect for him in the sense he was like 21 at the time, just wanted to like leave his parents' house, but he didn't have any of his own stuff. So he's like, Hey, I heard you have this furnished unit. And he had no like renting history or anything like that. But I really, you know, to this day, I like this kid as a person, but rented from me and it went well for a while. and then the company he was working for shut down and I knew that was true and so um he had you know I just got stories for like months about like excuses like why he was late or why he thought he couldn't pay and I kept kind of giving into that um and okay I understand but like if this happens again like we're gonna have to go separate ways and stuff like that anyway I finally was able to stick to it because I thought I'm running a business here like it is the business of people but like, it's also like I'm running a business and, um, yeah, I, at the end of the day, long story short, he left me out, um,$3 ,000, a broken window and that, uh, place infested with fleas after like I had done, I had done a lot for, I had even bought him.

25:13This is, this is just bad on me, but I had even bought him a cheap car to like get to work and back when his car was out. and so yeah total it was like three thousand you might be like the nicest landlord that we've had on the podcast to like but but also there's like a maybe like a business entrance for you to like hey i'm gonna give you this car so you can get to work and pay me my rent so i like that i like that approach as well but it was both yeah both right after those experiences because you said now you've got nothing but amazing tenants what did you change in your process to go from that tenant pool to where you are today?

25:49Yeah, I absolutely have systems I don't deviate from now. It's so important. So I do background checks through, I personally use, and there's a lot of good resources out there. Apartments.com, they'll require a background check if you ask them to. I call previous landlords. I don't call the one they're with now because in case that landlord is like, hey, yeah, get him out of my place. And they're like, they're amazing. I just don't call the the current landlord I call previous ones that have no incentive to lie to me or embellish. And then I look at, you know, their income and everything like that, credit score and stuff like that.

26:29And I just bought a new place where I had two not fit applicants apply. And they all also both tried to manipulate me into renting to them anyway. And I literally said back, I said, I have systems I don't deviate from. And now I have, he's, he's moving in January 1st, but he's, he's a great, he's going to be a great tenant, solid job. I know people that actually personally know him just by chance that are like, he's great, like really good, respectful, hardworking guy. And if I would have given into one of those other two tenants that applied for my new place, you know, it definitely wouldn't have gone well.

27:08So I'm glad I stuck to my systems and didn't let my empathy or compassion like get the best of me because it was kind of tearing me apart when they were asking for it for a shot but I'm glad that I I chose my I chose myself compassion for myself this time so there's a scam that actually tried to happen to me was with fake pay stubs during this the screening process so like you know their their credit score is decent and they submit their pay stub as proof of income. But I was just like, just something felt off to me. So I'm searching, you know, the address on the pay stub and it's like a payroll company.

27:48And then I'm, you know, I'm doing all this research as to, you know, did the addresses match up? And then I asked for the contact person for the manager. And then I'm Googling who they say the manager is, the company name, the phone number to see if they all match up. And like, none of it did. But it was like a really good like Photoshop job of an actual pay stub. But it ended up that like it wasn't like the phone number was to must have been a friend or something like that who is going to pretend to be the manager to verify their income. But yeah, having those like. New fear unlocked. Yeah. So I want to like pivot a little bit besides just your residential tenants.