13 Rental Units with a “Rinse and Repeat” Investing Method

This investor built a multimillion-dollar real estate portfolio with low-money-down loans and little cash-to-close. Thanks to his smart “rinse and repeat” strategy, he’s quickly scaled from zero to 13 rental units in just four years, all while collecting thousands of dollars of cash flow a month. He would have never been able to get to this place if he hadn’t followed a strategy many investors are too scared to try. Mike Johnson knew the best way to take bigger career risks was to have a backup plan. The ultimate passive income plan? Rental properties. But he didn’t want to put 20% to 25% down on each property he bought, so he started where many investors do—house hacking. Four years later, he’s continued his repeatable house hacking strategy, purchasing a new property every year, living in one unit, and renting out the others. This has allowed Mike to build a portfolio worth $3.4 million in just four years while buying in B+ or A-class neighborhoods and taking home a healthy amount of cash flow. But he has dealt with his fair share of headaches—squatters, non-paying tenants, and a lot of purple paint. Mike still says investing has been a massive win for him, and you can repeat his same strategy! In This Episode We Cover: How to start investing in real estate with little money using the house hacking strategy Why your primary residence IS an investment (and a phenomenal one at that) The biggest mistake Mike made that led to him buying a property with a squatter in the unit The new 5% down multifamily loan you can use to buy bigger, better, more expensive properties The cash flow AND appreciation market Mike is bullish on (and keeps investing in) When to self-manage vs. hire property management for your rentals And So Much More! Links from the Show Join BiggerPockets for FREE Let Us Know What You Thought of the Show! Ask Your Question on the BiggerPockets Forums BiggerPockets YouTube Apply to Be a BiggerPockets Podcast Guest! Mikes Instagram Mikes LinkedIn Maximize Your Real Estate Investing with a Self-Directed IRA from Equity Trust Save $100 on Real Estate’s Biggest Event of the Year, BPCon2025 Grab the Book “The House Hacking Strategy” Sign Up for the BiggerPockets Real Estate Newsletter Find Investor-Friendly Lenders Download the “Should I Buy Points” Resource Connect with Mike Connect with Dave (00:00) Intro (01:28) Investing to KEEP Working? (03:32) First Deal with $19K Down! (09:12) 3.5% Down 4 Unit! (13:27) Worst Tenant Ever (18:51) 3 More Units and Hiring Management (23:32) $1.5M Property for $38K Down! (23:41) SOCIAL - 38k cash for a $1.5m property (28:14) Your Primary is the BEST Investment Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/real-estate-1099 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected]. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Dave Meyer?

  This investor bought a property worth $1.5 million in a great neighborhood in a major US city with only $35,000 cash in 2024. It is actually possible.

• 0:18Dave Meyer?

  Hey friends, welcome back to the BiggerPockets Podcast. I'm Dave Meyer, Head of Real Estate Investing here at BiggerPockets. And today on the show, we're talking with Mike Johnson, an investor in Chicago. Mike started his investing journey with a $13,000 down payment on a duplex in 2021, and he has house hacked his way into 13 units in just four years. Now, he's living in one of Chicago's most desirable neighborhoods with thousands of dollars in monthly cash flow and the potential for millions in appreciation over the next couple of years. And Mike isn't doing anything that the vast majority of people can't do. He's found deals on the market. He's putting down as little as possible. He's done

• 0:59Dave Meyer?

  relatively hands-off renovation, and now he's sitting on this incredible portfolio just a couple of years later. Mike today is going to tell us how his deep analysis of investing options has led to real estate in the first place, how one of the more extreme problem tenants I've ever heard of led to a free rehab for him, and why he's a fan of the extremely long close. So here we go. This is me talking with investor Mike Johnson. Mike, welcome to the podcast. Thanks for being here.

• 1:31Speaker 01

  Nice to meet you, Dave. Thanks for having me. Excited to be here.

• 1:33Dave Meyer?

  Yeah, so give us a little bit of background. What were you doing when you first got into real estate? And how long ago was that?

• 1:40Speaker 01

  So I got into real estate four years ago during COVID in 2020, and I was a medical device sales rep that sold devices in the operating room. So, once COVID happened, we were restricted access to hospitals, which was a major part of my day. Ironically, this was about the same time where I had no student debt anymore, and I had this nest egg that was building. So naturally, I started looking at investment vehicles and where do I park my money for the best return long-term? And that's when I stumbled upon real estate and kind of started edging my way to my, my first deal.

• 2:11Dave Meyer?

  Great. Congrats on paying off your student debt, by the way. That's always a really good feeling and an important step on anyone's early retirement or financial freedom journey.

• 2:20Speaker 01

  Yeah.

• 2:20Dave Meyer?

  So tell me a little bit about the types of investments you're interested in because I think, you know, people get to this point where you have a little bit of capital. It's a great place to be. You could choose to go into flipping. You could do long-term rentals, short-term rentals. What appealed to you first about real estate?

• 2:37Speaker 01

  I know when some people invest in real estate, they use it as a means to an end to kind of get out of the daily grind, quit their W2 and kind of do this full-time. I have the kind of contrary approach to that where I enjoy my W2 job. So I am a long-term buy and hold investor. I've done four house hacks essentially at this point in my investment journey. So up to 13 units across four buildings. And, and for me, it's really just to build that passive income and it gives me security in my W2 job so that I can take more career risks with positions to get new experiences that may entail a pay cut. Whereas if I didn't have this as a fallback, maybe I would be less prone to taking those risks in my W2. Where long-term, I think that's going to pay dividends for higher level roles that

• 3:20Speaker 01

  require that you have some diversified experiences. And so it's actually helped progress me in my W2 career. And, and I just, it's a fun side hustle. It's your own business. It's yours and it's fun to see it grow.

• 3:32Dave Meyer?

  So set the scene. Where do you live and is that where you chose to invest as well?

• 3:37Speaker 01

  It is. So I was born and raised in Wisconsin, small town of 5,000 people, but I moved to Chicago about seven and a half years ago. So I've been here ever since I took the medical device sales job. But interestingly enough, my first deal was actually in Milwaukee. You know, we can kind of get into the reason why I chose Milwaukee Market, but, but then the other three deals have been in Chicago where I, where I currently reside.

• 3:58Dave Meyer?

  All right. Yeah, let's get into it. Cause I mean, if you listen to the show, you know, Henry has, I love the term he dubbed of lake effect cash flow, which is just that anywhere in the Great Lakes region, the Midwest, there is high potential for cash flow. I think Chicago falls into that, but Milwaukee is always kind of one of those standouts when you look at lists of places that do offer cash flow. Milwaukee's always up there. So is that why you targeted it?

• 4:23Speaker 01

  It is. So for me, actually, you know, once I got into the BiggerPockets podcast, the books, did the free webinars on how to underwrite. After I kind of took that in, I looked at the markets, right? A duplex, two to four unit in Chicago versus Milwaukee, dramatic difference in the cash that you need to invest. So for me, in my geography for my medical device sales job, I covered Milwaukee, a lot of rural Illinois and parts of Chicago. So I could technically move and live in Milwaukee and still do my day job, but I would have to invest far less cash. And so for me, Milwaukee is one of the most heavily concentrated duplex cities in the country. And so there's a lot of options. And so that's why I decided that if there's any fires that I have to put out in person for some reason, I could drive there and be there in an hour 20.

• 5:05Speaker 01

  So just having that comfort of my first investment property, that's kind of all the reasons why I chose Milwaukee.

• 5:11Dave Meyer?

  Oh, cool. And did you house hack? Like, did you actually live there?

• 5:15Speaker 01

  So I did a 10% down owner occupancy loan. And it's kind of funny. So right around when we closed, my geography changed from they took away all my Wisconsin and they gave me Iowa. So I called my lender, I called my lender and I said, hey, I gotta just be honest with you. Here's my geography and when it's shifting in the new fiscal year. I can't move to Milwaukee, but like, what do I do? And he just said, you know, as long as you change your insurance, he's like, you had intent when we closed to live there. We're okay with it, but obviously confirm with us, write us a letter telling us what happened. And I had the documentation, right? With my geography change, changes every year. And so I never ended up moving into that property, but I did do a 10% down owner occupancy loan.

• 5:54Speaker 01

  So that was November of 2020 and the duplex was 128,000 in Milwaukee, to give some context.

• 6:01Dave Meyer?

  All right, nice. 128 grand, you put 10% down. So I assume with closing costs and everything, somewhere around 17, 18, maybe up to 20 grand was kind of like what you needed to get into that deal?

• 6:12Speaker 01

  Yep, 19,000 is essentially, you know, what I put into the, into the deal itself. Had a 2.8% rate. So of course, we all know that the rates were very low at that point.

• 6:22Dave Meyer?

  Do you remember what it took to carry that? Like, what was your monthly expense all in?

• 6:26Speaker 01

  So my PITI, I mean, right now is it's 922. So principal, insurance, taxes and interest. The building's bringing in 1,700 a month.

• 6:35Dave Meyer?

  Wow, that's awesome.

• 6:36Speaker 01

  There's a nice spread on there and I've had the same tenants all four years.

• 6:39Dave Meyer?

  Wow.

• 6:40Speaker 01

  Zero vacancy. They're happy to live there. Um, you know, the units were recently redone when I bought the place. And so it's been, yeah, very low lift to kind of maintain that property.

• 6:49Dave Meyer?

  That's amazing. Well, very cool. I just want to reemphasize what Mike just said to everyone listening is that Mike was able to get into his first duplex for under $20,000 total. Of course, prices have changed, but this type of strategy where you're getting an owner occupant loan with 10% down, even if that went up to 250, you know, maybe it goes from 19 grand to 25 grand, but just demonstrates that these types of lower money down options are still available. I love hearing that your PITI is under a thousand dollars. Like that three digit monthly payment is a rare thing, probably pretty hard to find these days. Hold on to that for dear life.

• 7:28Speaker 01

  Yeah, nothing's really come close to that since that, but it was a great first step into real estate investing and, and you know, no regrets with the first property at all up to this point.

• 7:37Dave Meyer?

  Why do you think that you've had tenants for four years? Like, is there anything you did in the screening, anything that you looked for that you attribute that success to? Because as we, as we all know, vacancy kills seals.

• 7:49Speaker 01

  So for me, I just, you know, first and foremost, yes, I am the landlord, but I try to just be a human, right? So I have conversations with them. If there's any issues, I just say, just text me directly. They didn't have a very good property management company managing the building before. So, you know, I introduced myself and I just kind of talked to them and say, hey, you know, are there, is there anything that you basically want fixed right off the bat? Can we take care of that? And then anytime there's an issue, I get it taken care of right away. So they trust me. There's open communication. And so when it comes to resigning the lease, I've, I've increased rent two of the four years, but I always provide comps. I always give them under market rent and, but then they have justification of, all right, if I move, I'm going to pay more per month and then it's

• 8:30Speaker 01

  moving costs. And so they, they've just decided to stay every year. And so it's worked out. It's just funny because sometimes when you're looking at it into real estate investing, you think that there's all these special things you need to do. It's just, you do the same things again and again. You're just, you're a good person. You take care of issues when they occur. And most of the times, over time, the investment's going to work out just fine. Uh, you know.

• 8:52Dave Meyer?

  I love your approach to this because I feel kind of the same way. I'm just like, don't overthink this. Like just be good here being underwriting deals. It's going to work out. Be patient. I think patience is yeah, another, another big one that some people have a challenge with, but hopefully listening to this podcast preaching to you. Real estate's a long game. Just be patient. It's going to work out. All right. We do have to take a quick break, but we'll be back with Mike right after this. Do you ever notice how every passive investment somehow turns into a very active lifestyle? Active spreadsheets, active phone calls, active stress? Here's a better question. What if you could buy brand new construction homes 10% below market value in the best markets across the country without making

• 9:33Dave Meyer?

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• 10:12Dave Meyer?

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• 10:55Dave Meyer?

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• 11:02Dave Meyer?

  And get 50 free leads at www.probstream.com/bp. That's www.probstream.com/bp. I just booked a backpacking trip through Olympic National Park. Two nights out on the trail, no cell service, nothing to do but eat trail mix and stare at mountains. I'll never get tired of. That's the whole appeal. But while I'm off grid, my place doesn't need to sit empty. I can list my space on Airbnb and make a little extra income while I'm away. And with Airbnb's co-host network, I could partner with a vetted local co-host to help take care of the details. From guest communications to onsite support.

• 11:45Dave Meyer?

  So I can fully unplug and enjoy my time out in the backcountry. If you've got upcoming travel plans, you can find a co-host at Airbnb.com/host. Some listeners may wonder why their insurance quote only took 30 seconds. Some listeners may wonder why their insurance quote took 30 seconds. A better question is, how long will that policy actually hold up when you need it? At Enreg, the goal isn't just getting coverage in place. It's making sure your investment property is properly protected when a real claim happens. That's why they take time to evaluate each property's unique risks and build coverage design for the realities investors face.

• 12:27Dave Meyer?

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• 12:41Dave Meyer?

  Hey, everyone. Welcome back to the BiggerPockets Podcast. I'm here with investor Mike Johnson. All right. So that was your first deal. What came next for you?

• 12:49Speaker 01

  Actually, I closed on the next housing hack in Chicago and north side of the city. This was my FHA loan that I used, so three and a half percent down. It was a $750,000 four-unit brick building, which is great.

• 13:01Dave Meyer?

  Oh, wow.

• 13:02Speaker 01

  I got a 2.75% rate on this building and the cash I invested to acquire the building was only $27,000.

• 13:09Dave Meyer?

  Oh, okay. Cause I was, I was about to say that you really must have gone up in, in out of pocket expenses. Cause you went, paid 19 grand out of pocket for the first one.

• 13:20Speaker 01

  Yep.

• 13:20Dave Meyer?

  You know, if you put 25% down on a $750,000, you know, you're talking something closer to 200 grand. How did you pull that one off?

• 13:29Speaker 01

  Yeah, so this one, you know, inherently with the 3.5% down, you're not putting a lot of cash into the deal for a $750,000 for unit. But you know, I always try to maximize seller credits. So maybe they're willing to do the repairs beforehand. Sure, you're capped out. I believe for a two to four units, the 3% of the purchase price is how much seller credit you can do. So I always try to advise that. Try to maximize that. That can bring your cash to close as low as possible, and that helps push up your return metrics. So I always try to do that. I don't know if this is common in every state, but here in Illinois, we pay taxes in arrears for property tax. So if I close six months into the year, you get six months of the prorated

• 14:10Speaker 01

  tax amount at closing. So if you pay, you know, $20,000 in annual taxes, you're going to get $10,000 credit, and you don't actually feel that until you sell the building. So you get all the benefits of lower money down.

• 14:23Dave Meyer?

  Oh, that's awesome.

• 14:24Speaker 01

  Time value of money and getting a return on that money, all just because they haven't paid the current year's tax bill. And so you just address that. So that, all those things combined, you know, and it ended up me bringing only $27,000 to the table. And there's some very interesting stories with this building. And I had some rehabs I also did along the way. But yeah, all in all, it's performing well year to date.

• 14:44Dave Meyer?

  Is that one of the reasons you chose to invest in Chicago rather than Milwaukee? Or were you just living there? Why switch markets?

• 14:52Speaker 01

  So for me, it's comfortable with real estate investing at this point. I kind of got my feet wet in Milwaukee. I understand this. I've had some tenant interactions. It's not the first time anymore. And so now, you know, I think for me, I don't like to do out of state investing. I like to do it in my backyard, house hacking. Money is finite, right? So for me, I only have so much of it. So I want to maximize and extend my money. And even when I did the FHA loan, I always try to go to the maximum loan limit. So the building that I have, the units are huge. They're four bed, two bath, 1800 square feet.

• 15:23Dave Meyer?

  Cool.

• 15:23Speaker 01

  So a little bit harder to place tenants, but you can ration higher rents. And so for a four unit, you're maximizing the rental income, right? And the reason why I chose Chicago, or just the Midwest in general, is I always kind of use an analogy with the stock market. So you have the tech stocks. If you invest in Colorado, California, some of these maybe sexier states appreciation wise, I think of that as like a tech stock, right? You're going to get a lot of appreciation, but cash flow is hard. In the Midwest, I feel like it's a bit of both. It's like a dividend stock, a little bit of cash flow, maybe a lot, but it's Chicago. You're paying more for the property, but you get a mix. You get a little bit of appreciation. I've had cash flow in all my properties and so I've had success here and I live here. So if there's any issues, I have eyes on the property. I have all the contacts for, you know,

• 16:06Speaker 01

  maintenance repairs and it makes it a pretty seamless transition from one property to the next.

• 16:11Dave Meyer?

  What about tenants? Like have you had similar ability to retain tenants in the same way you did in Milwaukee?

• 16:18Speaker 01

  Interesting enough. So kind of ran into some issues at closing and this was a hard lesson learned. But essentially for this building, I did my final walkthrough the day before closing and the top floor tenants were all moving out, right? There's barely anything in the unit. The seller's agents there, again, I see them physically moving things out. I believe the best in people. Good to go. They did the repairs they said they were gonna do. Fast forward, I close the next day, I come back and the door is locked. Like, well, this is, this door shouldn't be locked. So I tried to open it and I see a piece of paper on the door and it's a signed eviction moratorium. So during COVID, you couldn't evict. And long story short, it wasn't even one of the tenants that was on the lease. It was a guy that was paying them a few bucks a month to crash on their couch. He's who ended up squatting in

• 17:03Speaker 01

  the unit.

• 17:04Dave Meyer?

  Oh.

• 17:04Speaker 01

  And it took me nine months to go through eviction court. I actually lost the case, by the way. Did everything by the books. I lost the case. Professional tenant.

• 17:13Dave Meyer?

  Oh, no.

• 17:14Speaker 01

  Moral story is he ended up vacating on his own accord. Thank the Lord. But he completely vandalized the unit. He painted everything purple. Hardwood floors, tiles, cabinets, appliances.

• 17:25Dave Meyer?

  What?

• 17:26Speaker 01

  Broken windows. Crazy vandalism. And at this point, I'm like, I'm just happy to give the unit back, but I haven't gotten the rental income for nine months. And now I see the whole unit's trash. And like I mentioned, this is a 1,800 square foot, four bed, two bath unit. So it's not, it's not like a two one rehab. It's everything. So that was a wonderful experience.

• 17:48Speaker 01

  It was covered by insurance.

• 17:49Dave Meyer?

  Oh, my God. Well, I'm sorry to hear that. I have a couple of questions because I do think when people think about investing in real estate and get nervous about it, it's exactly this that people get nervous about. So can you just tell us a little bit like how this happened? Like, did you interact with this person at any point and talk to them about what their intentions were? Or how did this whole unfortunate situation unfold?

• 18:15Speaker 01

  Yeah. So I mean, in retrospect, don't ever close unless you verify the tenants are out, right? That's a hard lesson learned. You know, in retrospect, it's 2020. But once we got to the point where somebody's living in the unit, I don't know who it is. At this point, I eventually reached out to the to the previous owner of the building. And I said, Hey, like, do you have any idea? Can you like, reach out to the tenants and see who's maybe still staying there? Do you have any insights? And it was through actually the seller and the seller's agent where I found out that it was somebody that was paying the previous tenants to crash there essentially. And so I found out his name, I got his contact information. And so I made contact, you know, and of course, you want to, you want to try to solve things without involving attorneys. So I tried, you know, offering

• 18:58Speaker 01

  him cash to move. I tried to find him subsidized housing. I talked to people in Chicago on is there any place that we can help kind of, you know, relocate him? I even offered money to the previous tenants to see if I could pay them to have them move in with them for a few months. He didn't, wasn't interested, you know, in any of this. And that's when I kind of decided that I'm gonna have to go the legal route.

• 19:16Dave Meyer?

  And so you were just going back and forth with him being like, what about this? What about this? And he was just like, no, I'm cool. I'm staying here.

• 19:23Speaker 01

  Yeah, like, I even offered to say, hey, you can't afford to live here alone, right? It's a four bed bedroom unit. But what can you afford? And so I even offered, I will place tenants in the other bedrooms so that you can stay there. You don't have to move. You can afford it. And then, you know, it's rented by the bedroom. I'm getting the full rental income. And I thought that was maybe a good solution. Just wasn't interested. He kind of, he led me along to make it seem like he was thinking about it. But, you know, I found out at the end of the day, this isn't the first time this guy's done this. It's funny how they can afford a really good attorney, but they can't, they can't afford any of the rent. So.

• 19:57Dave Meyer?

  From what I'm hearing, you were clearly sort of the victim in this situation. How did you lose that case?

• 20:03Speaker 01

  So accepting money was the first mistake. He said, Hey, I can afford to pay you partially right now. I accepted the partial payment. But the moment you accept money from him. It's no longer a squatter. He's a paid tenant, right? Regardless of if they're paid in full or not. Essentially, I did everything with serving him the notice, giving the court date, et cetera. Correct. Did everything correctly. The reason why I lost the case is because he had a good attorney that brought up case law.

• 20:27Dave Meyer?

  That is rough.

• 20:28Speaker 01

  Eventually, in my mind, I'm like, well, this is vandalism. It's not really covered under my policy. But since it was so bad, obviously, it was more than just wear and tear. So they ended up covering the entire rehab, which was around $55,000. Now, the unit, I pretty much replaced everything. So now I'm getting $750 more a month in rent. I get better tenants because it's completely rehabbed, and those tenants have been there for two years now. And so it was a crazy experience. It worked out in the end, but not knowing if it was going to work out, that was probably one of the most stressful times in my life, to be honest.

• 21:00Dave Meyer?

  Sorry to hear that. That's crazy. Well, I'm glad it worked out long term. You know, I always ask people this because inevitably, every real estate investor has, maybe not to this extreme, but a story where they lost money, something unfortunate happened, it was a pain in the butt. And oftentimes, it happens earlier in your career because you're still learning like this. So were you ever considering giving up or sort of throwing in the towel?

• 21:25Speaker 01

  It crossed my mind because once I lost the eviction case, that's where it kind of started us thinking that this could be another nine months. And with COVID, nobody really knew at this point what it was and how long it was going to last, how infectious things were. And so in my mind, I'm like, if this drags on another nine months, I mean, I'm paying out of pocket for stuff, you know? But retrospect, it's my most profitable building now at this point. You know, where the PITI, I think, is $5,300 a month, and it's bringing in $91.50 a month.

• 21:51Dave Meyer?

  Oh, my God. $91.50. Woo.

• 21:54Speaker 01

  Very nice spread.

• 21:55Dave Meyer?

  Okay, that's awesome.

• 21:56Speaker 01

  And I rehabbed one other unit where I put $50,000 into a unit. So one year, I didn't buy a property. And so I, you know, nothing penciled out. So I spent $50,000 on a rehab for one of the units. But now I have all newly rehabbed units, slow repairs, great tenants, and the spread is really nice.

• 22:13Dave Meyer?

  Okay, wow. Well, you, you mentioned at the beginning of the episode that you had four deals. We've talked about two, a duplex in Milwaukee, and next, we talked about your fourplex in Chicago. We do have to take a quick break, but I want to hear about what you've been up to more recently, right after this. For my wife's birthday, I wanted to make her a new website for her landscape design business. So I researched a lot of different options. I tried out a couple, but honestly, it was really overwhelming. It was pretty time consuming and still, the site wasn't coming out the way I wanted it to. Then I tried Hostinger and everything was super simple. I asked Hostinger's AI to build a clean site for her business and

• 22:56Dave Meyer?

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• 23:36Dave Meyer?

  out. Five days, first tracks every morning before the crowds show up, my knees reminding me I'm not 25 anymore by the second run, and an embarrassing number of overpriced burritos at the lodge. I don't even care. This is the trip I look forward to all year. But here's the part I actually appreciate. The practical side of my brain kicking in is that my place doesn't have to just sit there empty the whole time I'm away. I can list my space on Airbnb and bring in a little extra income while I'm out getting humbled on a mountain. And with the co-host network, I'm not the one handling all of it. You can partner with a vetted local co-host who can create your listing, manage reservations,

• 24:19Dave Meyer?

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• 25:04Dave Meyer?

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• 27:50Dave Meyer?

  Hey, everyone. Welcome back to the BiggerPockets Podcast. I'm here with investor Mike Johnson talking about his portfolio between Milwaukee and Chicago. Talked about two of the deals so far, but the third one, what did you do after that four-unit with the unfortunate squatter situation?

• 28:07Speaker 01

  So at this point, you know, I had the bug and, you know, I'm into real estate investing and want a house hack again. I'm starting to look at different neighborhoods. And so I end up landing on a three-unit property in a west side neighborhood of Chicago. So this one wasn't a brick building, but ultimately ended up doing a 10% down loan owner occupancy. I moved into the top floor unit and I got a 3.87% rate. So rates are starting to go up at this point, right? Still competitive market. And for this deal, I ended up putting about $51,000 into this deal.

• 28:36Dave Meyer?

  Okay.

• 28:36Speaker 01

  So by far the most, you know, I've put into a deal at this point, but you know, I better understand underwriting, kind of the little tricks you can do to minimize cash to close. And so that was deal number three.

• 28:45Dave Meyer?

  Nice, okay. And how's it worked out? Hopefully no squatters.

• 28:48Speaker 01

  No squatters, but I will tell you, there's been, there's been tenant issues.

• 28:51Dave Meyer?

  Oh, gosh.

• 28:52Speaker 01

  I had a litigious tenant, fake some injuries.

• 28:54Dave Meyer?

  Whoa.

• 28:55Speaker 01

  It was making threats. And so at that point, I said, I am not well equipped and suited for this. I don't want to make any errors. And so I just decided to hire a property management company that is well known in the Chicagoland area. Him and his team has done a great job and they have attorneys. They have people that are going to do things the correct way and document things. And so ever since they took over, the relationship is good, right? There's no issues, but I think they see a private landlord and they think that they kind of take advantage of the situation. And I was living in the unit, right? So they could gain access to me at any point they see me. And so, um, one thing that, yeah, I just wanted to do was to separate myself from the tenants. I don't want to interact and I don't want to say or do anything incorrectly. That's

• 29:37Speaker 01

  going to affect me in the court of law in Chicago. And so I can still self manage the other properties again, have good tenants, very low vacancy. And so it doesn't really require much work on my part, but very happy that I offloaded this one property.

• 29:51Dave Meyer?

  So the reason you're self managing the other ones, though, is because you're not living there and it's just like you have sort of that like physical separation from tenants that makes you better able to manage?

• 30:04Speaker 01

  Right. I, I'm not quite ready to forego the, uh, the seven, eight percent of gross income. And I've also, I used to do all the showings myself, but now I use an agent. So I don't pay property management, but I will pay an agent to do the showings for me. So my portfolio is honestly very, very hands off. Couple hours a month, maybe, you know, but I have contractors that I trust, plumbers, maintenance people. So that search is over, right? In the beginning, you're trying to find like a reliable person and that's stressful. But now that I have a team, it's very low stress, you know? And so I'm willing to pay a little bit more the cash flow. And so I'm happy to pay the price to be hands off and focus my attention elsewhere.

• 30:42Dave Meyer?

  That's great. I mean, I just want everyone to hear how this just methodical approach Mike is taking can build a portfolio that's super exciting. Like I mean no offense by this, Mike, but you're not doing anything super flashy. You know, it's like you bought a duplex, you placed great tenants, you have no vacancy. You bought a fourplex, you dealt with a lot of the headache. Now you're generating amazing cash. Cash flow. You had another one where you learn to adapt and rather than dealing with yourself, you're sort of offloading the stuff you don't want to do. And now that's going to cash flow. And this is over the course of what, three or four years at this point?

• 31:19Speaker 01

  Yeah, I mean, in less than four years, I acquired, I think it's valued at $3.4 million in properties. And yeah, I think it was in three years and like nine months. So it's not like this took me a long time to do. And to your point, it's rinse and repeat, the same house hacking method. And as you gain experience, you know, and rates go up, my most recent deals a few months ago and at a 6.5% rate.

• 31:39Dave Meyer?

  Yeah.

• 31:39Speaker 01

  But I still was able to close in an A-class neighborhood. And so it's just kind of funny following the investment journey, right? You know, it's like, okay, COVID interest rates, everything pencils. And then as rates go up, it's, I've still managed to make things work and I haven't done anything, to your point, really outside the box.

• 31:55Dave Meyer?

  I just want to point out to everyone that these types of deals that Mike's doing do still work today. Like, the numbers might be a little different. I don't know if you're going to make the same exact level of cash flow, but if you're trying to inherently just improve your financial position, these types of house hacking strategies where you move from one to the other, this is just a time-tested thing that works in pretty much every type of investment environment. Just a couple of weeks ago on the show, we were talking to an investor who started doing this in 2005 and did it through the 2010s during a totally different type of environment. This is just one of those types of approaches to real estate investing that works no matter where you're coming from. So just want to encourage people, even if you're thinking, hey, yeah, these were

• 32:39Dave Meyer?

  low interest rate environments, that this is still something that's possible. And it sounds like, Mike, you can tell us about how it's still possible with a deal you recently did within the last year or so?

• 32:49Speaker 01

  Yeah, within a few months ago. So I closed on this one in August of 2024. This deal was a little bit different. It's, this was a $1.5 million, four-unit brick building, three units in the front with a brick coach house in the back. But it's in Wicker Park, which if you know anything about Chicago, this is a very nice neighborhood. So it's an A-class neighborhood, very nice buildings, very walkable. And I used the new Fannie Friday 5% down loan. So very highly levered, but conventional loan. And so I got a 6.5% rate. But this one, I had to get very creative because I only ended up putting $38,000 into this $1.5 million building, which is kind of crazy when you think about that. That's less than I put in a building that I paid. 694, which was the three unit.

• 33:32Dave Meyer?

  Whoa.

• 33:33Speaker 01

  So for this one, again, with 5% down, of course, you know, you have that. Again, maximize seller credits. So 3% on about 1.5 is around $43,000 in seller credits I got. On top of that, I think this is another popular real estate strategy that people use, but I always close in the first or second of the month.

• 33:50Dave Meyer?

  Oh, I love this. Yes.

• 33:51Speaker 01

  Because this building brings in almost 13,000 a month in income. So if you have two months without a payment, you have a $26,000 cushion for future repairs, anything that maybe you need to do, and it's lower cash to close. And just the last thing was the tax proration, right? Expensive building, pay a lot of taxes, close the middle of the year. So I got all that tax credit as well that lowered my cash to close, which I only had to bring, I think, $12,000, I think, to the closing table. But my all-in with earnest money was 38 on this building.

• 34:21Dave Meyer?

  Wow. Unbelievable. That's super cool. I just wanted to explain the thing you said about doing the closing on the first or second of the month, because this is just such an easy way to build a cash reserve and lower your expenses. But basically, when you take out a traditional mortgage, let's say you close on May 1st. You're not going to pay for May. You're also not going to pay for June. Your first payment will be due July 1st. And that might not sound like a lot, but like Mike said, if he's generating 13 grand a month in May and June, that's $26,000 he has without his biggest expense. You're still going to have other expenses. You're just probably still have financing. And depending on the state of the building, you might have some turnover costs

• 35:06Dave Meyer?

  or upgrades that you want to make. But you're basically taking that profit that you're just sending to the bank and never going to see again, and you're pushing it off for two months. And of course, you're still going to have to pay that money back. That's how a loan works. But just the mechanics of running a business, this is a really fortunate way to do it. So anytime you have the option or some flexibility about when to close on a property, just do it as earliest in the month that you can. First is great. Second is good. Even the first week, you're really going to give yourself a big benefit there. Obviously, when you close, it's the same amount of capital, but you won't need to, for example, set as much aside for a cash reserve.

• 35:43Speaker 01

  And the tenants here are, you know, people that are like working professionals, good jobs, high income, and just no issues, right? I mean, so the tenant pool is great.

• 35:52Dave Meyer?

  I love it. You deserve it, man. After two rough ones with tenant situations that weren't really of your own making. Good to hear that you got a relatively calm one. But it sounds like, honestly, this kind of deal, you did a lot of creative stuff and kudos to you for doing your research. You learned the tricks. You learned some of the little hustles that you could do on each deal to sort of reduce the amount of money that you're putting into it. But realistically, like this kind of deal, you know, people could do this deal, right? Like this is, this I think serves as a model for people listening of a great deal that you could execute on today.

• 36:28Speaker 01

  A hundred percent. And there's two good things too. So with an FHA, you have the self-sufficiency test, which makes it really hard sometimes to have enough rental income to pass that test and even do an FHA loan. The nice thing about this 5% down Fannie Freddie loan is it's double the rate limit. So you can buy twice as expensive of a property and there's no self-sufficiency test. So all of a sudden you can afford to buy in these A-class neighborhoods like where I'm in, whereas an FHA loan would never pass here because the billings are just too expensive. So it actually opened up the neighborhoods that I was coming to because I think a lot of people don't want to house hack and they're like, I don't want to live in that neighborhood, which is very, it's valid, right? It's personal preference. But this new Fannie Freddie 5% down loan, it gets you into the A-class neighborhoods in most cities, right?

• 37:10Speaker 01

  And so, yeah, I was able to capitalize on that pretty much right as that loan package came out. So maybe not as common knowledge and there wasn't as many people utilizing it yet, but it's a great option.

• 37:19Dave Meyer?

  That's a great tip. Yeah, I didn't even realize that about that they don't have the self-sufficiency test. That's a really cool tip.

• 37:25Speaker 01

  Yeah, it's really nice.

• 37:25Dave Meyer?

  Awesome. So what's next for you, Mike? You, it seems like you're sort of doing this like methodically. Are you just going to keep trying to do these kind of small multifamilies every year, every two years?

• 37:34Speaker 01

  So the thing about my, uh, me maximizing my leverage on these properties is my DTI is pretty capped out right now.

• 37:40Dave Meyer?

  Yeah.

• 37:40Speaker 01

  So I may, I may need to cool it for, for a year or so, but so one of two things, I think I may do like the live and flip strategy where I buy like a condo, kind of buy the lake in Chicago and then, you know, I live there two to five years, do a rehab and then, you know, you can sell that within five and not pay taxes on it.

• 37:57Dave Meyer?

  Yep.

• 37:57Speaker 01

  So still kind of use the tax advantage method of real estate that I'm familiar with, or look into maybe just renting, you know, cause this unit that I'm in rents for more than what I'd be willing to live in myself. This is a three bed, two bath, so and I'm by myself.

• 38:09Dave Meyer?

  Yeah.

• 38:10Speaker 01

  So I'll probably like move into a smaller unit, rent this out and then I could maybe get into like a five plus multifamily and kind of start maybe scaling up a little bit, do, doing some larger deals.

• 38:20Dave Meyer?

  Awesome, man. Well, congratulations. And just want to reiterate, you know, this is the, the example I always give where people say like, is your primary residence an investment? Clearly you've shown us, Mike, that yes, it can be. You've managed to acquire millions of dollars worth of real estate just by using your primary residence. And even going forward, I love your thinking because yes, at some point in almost every investor's career, your debt to income ratio becomes a challenge. You have to cool off and that's okay. It's totally fine. I've gone years without buying deals for sure, but also Mike, thinking of good ways to do it too. Like I love that you're flexible enough to think about renting. I've also done that. When you do the math,

• 39:01Dave Meyer?

  sometimes it just makes sense to rent or do a live and flip. That's what I'm doing right now. It's just another good way to make money. All right. I think that's all we got for today. Mike, thanks so much for joining us. Congrats on all your success and for navigating some pretty tricky tenant situations. We appreciate you being here.

• 39:18Speaker 01

  Thanks for having me. This was fun.

• 39:19Dave Meyer?

  It really was. And Everett, remember we are always looking for more investors like Mike to feature on the show. If you'd like to tell your real estate story to the bigger pockets audience, you can apply at biggerpockets.com/guest. Thanks again for listening. We'll see you next