He’s Making Over $100K/Year Cash Flow with Small, Affordable Rental Properties

Nathan Nicholson was the top salesperson at his company but had very little to show for it. His retirement fund? It wasn’t doing anything for him today, so he did something most would call “crazy”: he cashed it out. And it was the best move he could’ve made, as it’s helped him buy 23 rental properties and generate well over $100,000 a year in true cash flow! Nathan’s using an investing strategy that any investor can copy: buy small (and affordable) properties, fix them up, and rent them out. It’s simple, it’s boring, and it’s exactly how he’s making six figures in annual cash flow. But there’s another wrinkle to Nathan’s story: he only lives on his W-2 income, which means 100% of his rental cash flow gets reinvested back into his business. Now, he’s focused on optimizing his properties for even more cash flow, and in this episode, he shares the four levers he’s pulling to do just that. Whether you’re looking to scale your real estate portfolio or stabilize the properties you already own, Nathan’s slow, patient, conservative approach to real estate investing is a winning formula in 2026! In This Episode We Cover Why Nathan won’t retire (yet), despite reaching financial freedom The repeatable strategy Nathan used to scale to 23 rental properties Four ways to increase cash flow across your rental portfolio (without more units!) The “new one-percent rule” to use when analyzing rental properties When to start paying off your mortgages versus buying more properties And So Much More! Check out more resources from this show on ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠BiggerPockets.com⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ and ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠ ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠h⁠⁠t⁠t⁠ps://www⁠.biggerpockets.com/blog/real-estate-1312. 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?

  When Nathan Nicholson cashed in his 401k to start buying real estate, people told him he would fail. They said he'd lose everything. But today, he owns 23 rental properties, generating more than $100,000 in annual cash flow. Nathan was 33 and the top salesperson at his company, but years of top performance still left him with only $30,000 in his savings account, hardly enough to dream about retirement. So Nathan liquidated his retirement fund and he started buying rental properties in his hometown of Louisville, Kentucky. They were little brick houses, most of them under 100 grand. That was 13 years ago.

• 0:42Dave Meyer?

  Now Nathan generates six figures every year after all his bills are paid and his financial future is secure. It's a simple formula. Buy the smallest house possible, fix it up, and watch the monthly rent checks roll in. Nathan's approach is so boring that he actually calls himself the tortoise. But don't let that confuse you. This strategy absolutely works. And today he's sharing his exact repeatable formula. The one rule he never breaks, how he's managed to pay off 10 properties even as he scales, and how he's pivoted his strategy for 2026.

• 1:25Dave Meyer?

  What's up everyone? I'm Dave Meyer, Chief Investment Officer at BiggerPockets. Thank you all for being here. We got a great show for you today. We're bringing on Nathan Nicholson, who is one of the most popular BiggerPockets guests in 2025. You can hear his full story by going back and listening to episode 1132 from last June. But today he's back with an update, what he's been up to, how he's pivoting to make the most of current market conditions. So let's bring on Nathan. Nathan, welcome back to the BiggerPockets Podcast. Great to have you here.

• 1:59Speaker 01

  Yeah, thank you for having me.

• 2:00Dave Meyer?

  Some of our audience may not have listened to your first appearance here on the show. So maybe just give us a little bit of background about yourself and your investing career.

• 2:08Speaker 01

  Yeah, my investing career, I mean, from the prior podcast, it was how to basically make money with $100,000 or less rentals, in all honesty with you. And so realistically, my, my, my beginnings kind of happened with me really just realizing I have to do something different at the age of 33, been a top salesperson and only having about 30 grand in my checking account. Going, man, if I'm really good at sales, why don't I only got $30,000 in my checking account and going, what can I do? And I had a couple of friends of mine basically talk about real estate investing and what they were doing. And so I sold my 401k off, took every penny I had, had a, had a dream to say the least, and put all my money into real estate at that time and just kind of been doing it ever since. So that's been about 13 to 14 years at this point.

• 2:52Dave Meyer?

  Tell us a little bit about what your portfolio looks like here today.

• 2:56Speaker 01

  Yeah, I mean, from the last time we spoke, it's grown a little bit. I'm sitting at 23 properties, all single family residence at this point. And about to pay off my 11th house, so I've got 10 free and clear. And I just, I literally sent the wire on Friday, so I'm paying off a little two bedroom house that'll net me about 600 a month. But beyond that, I mean, as far as my breakdown, my rents have gone up. My total cash flow has been going up because I've been trying to surefire my, my, my property business. But my rents are at about 311,000 right now, total cash flow. That's total in is 143. And my true net, which is what I go by, I don't say cash flow, I'll go by true net. True net is $112,000 right now. And I think the last time we spoke, it was about 100.

• 3:39Dave Meyer?

  Is it fair to say then, then you reinvest 100% of your cash flow back into some sort of business, even if it's not for acquisition of your next rental?

• 3:49Speaker 01

  100%, yeah.

• 3:51Dave Meyer?

  Is that hard for you? Do you, do you ever get tempted to just live off of it or you're still in growth mode?

• 3:58Speaker 01

  I mean, it's, you know, I'm the tortoise investor, right? I'm very conservative. So to your point, I've thought about it. I'm 46 years old. I would love to retire at 55. I mean, I could probably retire now, but at the same time, it's one of those things where it's like, I haven't really accomplished really what I want to do yet. I think most investors will tell you the same thing. It's like, I have not reached that, that, that spot. And, and that spot is coming, but yes, that's what I'm going towards. But at 55, I think I'll be there. I really want to be at 30 doors and have about 20 of them paid off before I really go full on real estate. And that's at about 55 for me.

• 4:34Dave Meyer?

  Okay, I love the goal. It seems very achievable and you're well on your way. Maybe before we talk about just what you've been up to recently, you can remind everyone how you got here. Cause this is where most people want to get to. 10 paid off rentals, incredible. Nine grand a month in cash flow. Amazing. What was the primary strategy you used to get your portfolio to this size?

• 4:57Speaker 01

  Being really safe is the best way to put it. I took a little bit of leverage in the very beginning. Took quite a bit of risk. I cashed out my 401k. A lot of people will tell you not to do it, but if you don't have any money, it's the only thing that you could use. You might as well do it because this, I mean, it's the only thing you got available. And that's what I did. And it was very risky and a lot of people told me that I would fail. I mean, it's, it's weird how your friends and people around you will say, you're going to fail, you're going to lose everything. But in situations like this, if you believe in yourself, it really does help. And I mean, 13 years, 14 years ago, that was the catalyst. It was a dream and that, and me cashing that 401k out and just playing it very conservative. I mean, I'm a tortoise. I mean, you'll hear people use this terminology, turtle over the hare.

• 5:39Speaker 01

  I literally will not move forward unless I have cash flow to cover my expenses. And so I've really stayed true to that. And so that goes back to the first property. If you only make 300 a month, well, that's 3,600 a year. What do I do with that? And you leverage it to 7,200 to 11,000 to 12,000 to 15,000. You keep slowly pushing that forward and that's very beneficial. But that's why I've been able to do this at the rate that I have and actually have 10 to 11 paid off properties is because of following that same process.

• 6:08Dave Meyer?

  I love the philosophy. Subscribe to the same one myself. You know, it sounds patient and slow and you're talking, you're saying all the things I agree with, that you should be slow and just take your time with it. But it's really not that slow. Like you said, you've been doing this for 13 or 14 years. Going from where you were, which sounds like not necessarily terrible place financially, but not where you wanted to be. And not having the level of savings that you wanted, not having the nest egg that you wanted, to being pretty darn close to financially free, if you kind of wanted to go in that direction in 12, 13 years. That's incredible. It takes most people

• 6:49Speaker 01

  That's very fast, actually.

• 6:50Dave Meyer?

  40 years plus to do that, if you do it at all. So many people never accomplish that. So I think what we're saying is patient in real estate is still faster than almost any other avenue to pursue this kind of financial security.

• 7:06Speaker 01

  Agreed fully.

• 7:07Dave Meyer?

  Nate, tell us a little bit about how you did the financing. Cause you said you started with 401k, you know, you cashed that out. You can't buy 22 properties in that. So were you just saving in between acquisitions and reinvesting cash flow? Was there something more you were doing?

• 7:21Speaker 01

  The 401k, I started buying the houses with cash upfront because my concept was a domino effect. I wanted the dominos to fall in a way that made me more money. And also like a cat with a laser pointer, I wanted to have a toy to play with because I didn't know what I was doing. You know, I literally did not know. And so the best, the best course of action was to pay off my first house. And it was an estate sell for about $40,000, give or take 38. And I paid it off cash and it was livable. And then, once I started running out of that cash, I started putting 20% down. I was doing renovation loans. Those are 203ks in the mortgage world. A lot of people use those. And that helped me out with a couple of them at the very beginning. But then what I realized real quick was, you know, I wanted to have a better kind of loan set.

• 8:04Speaker 01

  And so I started doing single family residence and using my personal credit and putting 20% down. So I'm, I'm a staunch proponent of 20% down. It's, it's almost one of the only ways you could cash flow a property properly right now is with 20% unless you get a really good deal on a bird deal that you're doing.

• 8:21Dave Meyer?

  You've never like gone and raised outside capital. You've just figured out a way to do it with a W2 income.

• 8:29Speaker 01

  Correct.

• 8:30Dave Meyer?

  Saving and relationships with banks. Like you were able to just over 13 years, build a very impressive portfolio, sort of the old fashioned way?

• 8:40Speaker 01

  The old fashioned way. Yeah, correct. And I know a lot of people that do raise capital. And that's a very good way to go about it, right? That's your lending structure. What I, what I figured out is you have to be a cash buyer to get these houses these days. And so my whole motivation, once I figured that out, was to pay my properties off as fast as I could. Because, you know, unlike a HELOC or a line of credit on a personal house, you know, you could put it on your home and use it to buy houses, right? And have that liquid, but you could also get business lines of credit. And that's kind of my focus of what I've done. So every time I pay a property off, I refinance it and put it on my line. It has zero money on it, but my line of credit might increase like this property I'm about to pay off.

• 9:23Speaker 01

  I'll get another extra $100,000 on my line of credit. And then I have a million dollars in a line of credit on 10 properties individually in the line. And I could use that to buy, buy houses as my own bank, technically. That's how I got around crowdfunding is literally doing it that way, slow and steady. But you can absolutely do that if you just take your time.

• 9:44Dave Meyer?

  We got to take a quick break, but when we come back, Nathan, I'd love to talk to you more about what you're up to today and how you're making deals and your portfolio grow, even during these challenging market conditions. Stick with us. We'll be right back.

• 9:58Henry Washington?

  Here's a strategy that most W2 employees have never heard of. Normally, if you want to write off a rental property against your regular income, you need real estate professional status. That means tracking hundreds of hours a year. Rent to Retirement just launched a program that skips all of that. It's called the STR loophole tenant placement program. Here's how it works. You buy one of Rent to Retirement's Class A new construction investment properties. You set up an Airbnb listing and self-manage it for the remainder of the year. Rent to Retirement then rents the home as a short-term rental to establish it as an STR for the year, no furnishing required, making this the easy button to save five or six figures in taxes this year.

• 10:40Henry Washington?

  And because you're the sole manager, there's no hourly minimum to meet. That lets you use a cost segregation study to accelerate the depreciation and potentially write off over $100,000 against your income, even on your first rental. Add in cash back up to 13% of the home price, which exceeds $60,000 on some properties. With this massive cash back incentives, investors are seeing total returns up to 126%. New construction, A-class properties, and inventory is limited. Learn more at biggerpockets.com/retirement or text REI to 33777. Again, text REI to 33777.

• 11:22Dave Meyer?

  Most investors only think about insurance when something goes wrong. A tenant injury, storm damage, loss of rent. Then suddenly, the cheapest policy doesn't feel like the best one anymore. That's why a lot of BiggerPockets investors use steadily for landlord insurance designed specifically for rental properties. Whether you own one property or a growing portfolio, they make it simple to get covered properly. And BiggerPockets Pro members get an extra 5% off their landlord insurance premiums. Visit biggerpockets.com/landlordinsurance to get a quote today.

• 11:55Henry Washington?

  Quick word about a new pro perk you'll want to know about. Aven. If you're a homeowner, there's a good chance you're sitting on equity that you're not using. The problem is tapping into that usually means a cash-out refi, a traditional second mortgage, or weeks of paperwork just to get approved. Aven built something different. It's a credit card, but it's backed by your home equity. So you get a lot of the rate benefits of a HELOC with the flexibility of a card you can use anywhere. Rates are typically well below a standard credit card. Approval is fast and mostly online, and you can use it for anything. A renovation, paying down high-interest debt, or just have more breathing room in your budget. And if you're a BiggerPockets Pro member, there's an extra reason to check it out. Get approved for the Aven card, and you'll get a $400 statement credit after spending

• 12:40Henry Washington?

  $400 on your Aven card. Enough to cover your entire annual Pro membership. Head over to aven.com/biggerpockets to see if you qualify. Aven Financial, NMLS #2042345. Cards issued per 20 license from Visa USA, Inc. by Coastal Community Bank. NMLS #462289. Member FDIC, equal housing lender, subject to approval. Terms apply. Visit aven.com for details.

• 12:59Speaker 03

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• 13:28Dave Meyer?

  Welcome back to the BiggerPockets Podcast. I'm here with investor Nathan Nicholson, talking about his impressive career he's built in Louisville, Kentucky, over the last 13, 14 years. Now, we've alluded to it a few times. Everyone here listening to it knows it. The market has changed. It's different. And so tell us a little bit about your approach here in 2026.

• 13:51Speaker 01

  The first thing I would tell you is I only really focus on a 1.3 DSCR now.

• 13:55Dave Meyer?

  Okay.

• 13:55Speaker 01

  And that is the very true number. That is kind of your new 1% rule, is the best way to put it. A 1% is usually break even. 1.3, you're going to make a couple hundred dollars off of it a month.

• 14:06Dave Meyer?

  And for everyone listening, if you're not familiar with the acronym, DSCR stands for debt service coverage ratio. It measures your debt service, basically what you're paying to your loan company every month versus your income. Different investors have different targets, but it sounds like Nate, yours is a 1.3. Some banks will lend on different ratios, 1.1 sometimes, 1.2. Nate looks for 1.3. If you're interested in getting a DSCR loan, there's all sorts of benefits to it. You don't have the same level of underwriting. Sometimes it can be a lot quicker. If you don't have a W2 income, you don't have necessarily the credit that most banks are looking for. These are loans that are underwritten like commercial loans, but are specifically designed for people like us, right?

• 14:50Dave Meyer?

  They are, these are loan products created for our kinds of investors. If you are a Pro member, we do have discounts on DSCR loans. You can go check those out from Kavi at biggerpockets.com/pro. Go check those out. But so Nate, 1.3, right? So that's your number. That's getting you cash flow in Louisville. You finding 1.3 deals in Louisville right now?

• 15:16Speaker 01

  Not really.

• 15:16Dave Meyer?

  Even though you're not finding it, you're holding the line at 1.3.

• 15:19Speaker 01

  That's correct.

• 15:20Dave Meyer?

  So you're not buying it still unless it's the 1.3. That's the way you got to do it.

• 15:23Speaker 01

  Yeah, you don't want to lose money. And so a lot of people will tell you appreciation isn't approaching. It is, it really is. I mean, you could get a 1% rule house, break even on it. It could have, you know, low capex because it has new features, right? If you're doing a burr or whatever that you're doing, you know, new floors, whatever. But at the same time, if you're barely making it and you have a, you know, I had a house, a rat house, I call it the rat house. It cost me $27,000 to repair this house. So a normal person wouldn't be able to absorb that. You know, that's a huge hit. And without cash flow, I would have been hurt or anyone else would have been hurt. So yeah, the 1.3 rule is really steadfast in my mind because that's what's gotten me here. I've really followed this approach from day one. But the other thing is the creative finance angle is, you know, some people like sub 2.

• 16:07Speaker 01

  I personally am not a sub 2 person. I know a lot of people that have a lot of, a lot of positive things that have happened to them by doing sub 2. I personally like owner financing on free and clear properties. I like doing the tricks that I just gave you with commercial financing. I like these little tricks because I'm in control. That is the one thing, at sub 2, you don't always have control. The ways that I'm telling you, you have control. Your name's on the personal guarantee. You own the property, stuff of that nature.

• 16:34Dave Meyer?

  This makes sense to me. First of all, your affinity to seller financing over sub 2 makes sense to me, given you're just, what you've told me a little bit about your risk tolerance.

• 16:44Speaker 01

  Conservative, yeah.

• 16:45Dave Meyer?

  Yeah, exactly. Like, I'm not a sub 2 expert, but there is some gray areas in sub 2 that add risk. And it might be right for some people, presuming that's done ethically and legally. There still are some gray areas, and those are things that you need to consider.

• 17:02Speaker 01

  That is correct.

• 17:03Dave Meyer?

  When you do seller finance, if someone owns a property outright and they're writing you a loan, like that is very low risk, very high upside, in my opinion. And although they're not the easiest to find, they're out there. Like, I hear investors doing them all the time. So are you just acquiring those the same way you would do a wholesale? You're just, you're doing direct-to-seller marketing. You're sending postcards, you're building websites. And that's why, as you said, getting in front of the deal, you're trying to eliminate all the middlemen, is essentially what you're saying.

• 17:35Speaker 01

  Correct.

• 17:35Dave Meyer?

  Because I've worked with wholesalers, I have nothing against wholesalers, but they're charging a fee for their service, as they should. It's a business. And I'm paying that fee. So I don't get the best possible price on that property because me, Dave Meyer, I am not willing to do the direct-to-seller marketing. I just don't do it. But you are saying by doing this direct-to-seller marketing, you're getting 10 grand off every single deal, which is hugely appealing. So maybe, you know, Henry talks about it a lot on the show, but like, what, what amount of effort does it take you to do this direct-to-seller marketing? And what amount of money does it take you to do this direct-to-seller marketing?

• 18:14Speaker 01

  You know, I don't spend a lot on the marketing. It's more for material like postcards, you know, getting lists created, stuff like that, AI to generate lists. And a lot of that stuff you could do very semi-cheaply. I mean, postcards, I just put an order in for 500 postcards, and they're very niche, very specific. I designed them myself. I do a lot of the work myself, actually, is the answer. And so I design my postcards. I put all the effort into it. I make the calls, I mail them out, I pay for the stamps. But, but in regard, though, only other effort that's there is disposition. It's really just getting the information, calling the lead, having them call you, introduce yourself, and then handing them off to a partner that could do disposition. So really, my focus is on

• 18:58Speaker 01

  Less external effort because I'm a growth manager for a large company and I'm very busy doing that. And also the fact of risk flipping would make more money, but it's risky currently and wholesaling is actually less risky than flipping currently.

• 19:10Dave Meyer?

  It is.

• 19:11Speaker 01

  And it also gives me the time with my kids because I have two very small kids that are in travel sports. And if anyone knows anything about travel sports, oh my God.

• 19:20Dave Meyer?

  Take it all your time.

• 19:22Speaker 01

  That's right.

• 19:22Dave Meyer?

  So just to prove that, I mean, Nathan's telling us that this is possible. Like if you want to go out and get the best possible prices, these are things that you can absolutely do. We're not going to get too much into the tactics here today, but we have tons of great episodes. Nathan obviously has some good advice. We had a recent episode with Andy Gill, who was talking about this. Henry talks about it all the time, but this is just a way that you can absolutely get good deals right now in this current market. It's absolutely something that you should consider.

• 19:50Speaker 01

  Absolutely.

• 19:51Dave Meyer?

  Nathan, one last question on this. Have you bought anything recently?

• 19:54Speaker 01

  Yeah, yeah. So there's two deals. One of them was a property that I got in late fall and it was the property I was referring to a little bit earlier. It was a four bedroom house. Roto was trying to sell it $125,000. Already had the drive by done on this property and I purchased it and anyway to praise for about $170,000, $175,000, which allowed me to immediately.

• 20:17Dave Meyer?

  Oh my God.

• 20:17Speaker 01

  I purchased it with no money out of pocket, you know?

• 20:20Dave Meyer?

  So you're just walking into like 50 grand in equity on that?

• 20:23Speaker 01

  Yeah, yeah. Like almost 25,000. Yeah. Right out the gate and it didn't make any money due to the current rent with the tenant, but in the last six months, I have raised the rent twice. That's, that's very not normal, right? But I had to start making money on this property. I was losing about a hundred dollars a month and he was paying 800 and now he's at $1,400. So now I'm making about $400 net a month after expenses in a period of six months with no money out of pocket.

• 20:48Dave Meyer?

  Is that 1,400, like what market rent should be?

• 20:51Speaker 01

  So actually it's lower than market rent and I'm trying to help the family out. I met them when I walked the house and everything and they're good people and they maintain the house. So I told them 1,400 was 200 less than what he would spend anywhere else and he agreed. And so I left them there and I didn't want to lose them. He's a good, hard working guy and I didn't want to disrupt his family, but I did let him know that, you know, obviously this is the pro in the con being an investor. I let him know I have to make money and this is where I needed to be. And he was, he was, he was able to do that. So it worked out.

• 21:19Dave Meyer?

  So clearly you figured this out and these are repeatable things. These are things that really everyone listening to this podcast can go out there and do. Now, Nathan, you mentioned you're not just looking for new deals. You're also trying to optimize your business and to make more out of what you already have, which is the name of the game right now. I mean, I always want to go out and buy more, but there's so many things going on in the market that make it increasingly important to pay attention to your operations. What are some of the strategies and tactics you're using to better your performance of the stuff you already got?

• 21:57Speaker 01

  Sure enough, the business is, is I would say one of the top priorities that I had this year and, and on my board behind me is, is making sure that my business is running efficiently and that I can maximize cash flow because again, I'm trying to find ways to scale and build. So to your point, I mean, if my rents are $311,000 right now and my net cash flow is 112, well, the math that I did based on these four things that I'm going to tell you that I'm doing to kind of shore up my business will increase my cash flow by almost 30 to $40,000. That's not a small number. I mean, that's, that's a lot of money.

• 22:31Dave Meyer?

  I mean, like if you think of it that way, that's the equivalent of buying, you know, five, eight more houses, right? Like.

• 22:37Speaker 01

  Absolutely.

• 22:38Dave Meyer?

  Everyone's focused on acquisitions. Like, ah, you know, just make your existing stuff do better and you don't have to take on as much work or figure out the financing or go out and find the deals. So I see the motivation there. 30, 40.

• 22:50Speaker 01

  Yeah.

• 22:51Dave Meyer?

  I get it. How are you doing it?

• 22:53Speaker 01

  You know, there's four things that I've really been trying to focus on right now. And it was property management, right? Trying to figure out a way to get my costs lower, which at the time I was paying 12%.

• 23:03Dave Meyer?

  Oh, that's high.

• 23:04Speaker 01

  But you know, I did move property managers and I saved 4%. So that, you know, right now I'm paying eight on my portfolio and I feel like that's fair compared to everyone in the Louisville marketplace. And so I saved 4% on $300,000 of rents, right? I mean, that's a huge amount of money.

• 23:20Dave Meyer?

  How did that conversation go?

• 23:22Speaker 01

  It is a hard discussion in general, uh, because it was very hard moving my properties. Let's be real. It was a major ordeal. And so it, so I, I earned that extra 4% is the best way to put it.

• 23:34Dave Meyer?

  But that will pay dividends for years. That's 12 grand a year. That'll compound for, for indefinitely.

• 23:39Speaker 01

  That's right.

• 23:40Dave Meyer?

  You know, in most things, real estate, I talk about this a lot on the show. You get what you pay for. How has the quality of your property management changed, if it has, since moving to a less expensive provider?

• 23:54Speaker 01

  So, you know, some things have changed, some things haven't. Uh, I actually feel like they're doing a really good job at 8%. Uh, he's a local gentleman, has 250 to 300 doors. They're on top of it. So actually I feel like I'm getting a lot for my money at this time. Uh, there are some different costs that I'm paying currently, but I think they're doing a really good job. And honestly, and yeah, I do got to do some things outside of it, but at 8%, it's worth it to me. And I'll honestly.

• 24:19Dave Meyer?

  Yeah, absolutely. Yeah, exactly. It's like, is that worth 12 grand a year? That little bit of doing stuff? And it sounds like the answer is yes. So.

• 24:26Speaker 01

  Yes.

• 24:27Dave Meyer?

  That kind of sounds like a no brainer to me. Uh, so I mean.

• 24:29Speaker 01

  Yeah, I agree.

• 24:30Dave Meyer?

  That's a great thing for people to do. Just for our audience listening, audit what you're paying for property management, you know, shop around comparison shop with everything you do these days from contractors to insurance to property managers. Henry and I talk about this, the spread between quotes is astronomical these days. It's insane. That's a 50% difference in property management fee from eight to 12%, right? You were paying 50% above market rate and that's market rate. It's not like you'd even go into like a low cost provider. That happens all across the business.

• 25:04Speaker 01

  Yeah.

• 25:04Dave Meyer?

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• 29:56Dave Meyer?

  Welcome back to the BiggerPockets Podcast. I am here with Nathan Nicholson, who's telling us about the portfolio he's built in Louisville, Kentucky. Talked about deal finding strategies and how he got started, but you said you've really turned your focus to just optimizing and making the most out of your existing portfolio. So you said you were doing four things. Sounds like number one is you changed property manager. What was the next thing you did?

• 30:18Speaker 01

  The second thing is, is that even in a market, and so Louisville's kind of been depressed in rents. And I think other markets may have this scenario happen as well. There's just less people renting these houses. It's kind of wild, but Louisville's one of those markets. So I still had a rent increase of 3%. So on, you know, 23 houses at 3%, that raised me up another, you know, $8,000 a year right there. We've executed on, I think, 14 of them. And the others have leases and we're going to be executing on those in the fall. And they're still all under rented to the market. So the good news is I'm not above the market. I'm below it. And that will actually give me quite a bit of extra equity and capital as well per year. And so if people aren't raising rents or they feel like they're under, I always keep

• 31:01Speaker 01

  mine a little bit under, but you know, the route of the situation is try to look to raise because rents have to go up. I mean, taxes are going up, insurance is going up, liability's going up. People are destroying houses at a much higher rate now for some reason. I don't know why, but they were destroying your houses. So you have to ask for those rent increases every year and be very stout about it.

• 31:21Dave Meyer?

  Raising rents, obviously if the market will bear it and it's needed for your business, it's something to consider. But like, sometimes the market won't bear it. You know, you can't just say like, oh, my expenses went up 3%, so I'm raising rents 3%. If there's competition in the market and someone can find an equivalent property without that rent increase, they might go do that. So like, it sounds like though, you've been able to do that without issue?

• 31:49Speaker 01

  Pretty much all of them, except for one house is rented at this point. No one moved. The rat house is what I call the one that was destroyed. We put a lot of money into it. I tried to rent it at 1150 for a two bedroom, 800 square foot in Louisville. And it's not taken right now. There's a lot of competition and the house is updated, fully updated. And so I've got it at 1,050 and it's still not going. So that's a $100 drop in this market on two beds in the last, I'd say, four months. And so yeah, the market, the market is not bearing it at this point. Rents are dropping in this marketplace. So I'm being very cognizant of that when I'm asking for these rents. But if a tenant does come back to me and they negotiate, right? I'm more than willing to negotiate in between. And I generally

• 32:32Speaker 01

  do that. But we haven't had anyone really leave due to that because either, either it's too much and they say, hey, look, if you could take $50 off of the 100 that you're raising it, I'll stay and we'll just accept it. You know, so that's, that's something that we've, we've been doing to, to keep people in there.

• 32:47Dave Meyer?

  I think it's something for our audience to keep in mind. You have to weigh in this market, the risk of vacancy with the need to keep up with expenses because inflation is pushing up everything. Repairs, maintenance, taxes, insurance, everything, right?

• 33:03Speaker 01

  I agree.

• 33:04Dave Meyer?

  And as a business person, you have to keep pace with that. At the same time, tenants don't have to pay. They don't care what your business, right? Like they don't care that your prices are going up. They have a budget, what they can afford, what they value your property at. And that's why you just can't be overly aggressive. You have to find the sweet spot. 3% seems very reasonable to me. Like that's basically the pace of inflation. So it's not like crazy. But I sometimes hear people say things like, oh, my prices went up 10%, so I have to raise rents 10%. You don't have to. And first of all, you probably can't. You know, like there is a limit to what you're able to do. So you need to really think about how much the market can bear. And that can be through conversations with

• 33:49Dave Meyer?

  your tenants, talking to other investors, talking to property managers in your area. But this isn't just something like, oh, you know, I should go raise rents because I want to. There, there is a consideration there. And I think you're doing a very reasonable job with it, Nathan, and what I would recommend for the majority of investors out there.

• 34:07Speaker 01

  Absolutely.

• 34:08Dave Meyer?

  All right. So those are the first two. What's the third thing you've done to help your business perform better?

• 34:14Speaker 01

  So I've been focused on paying houses off to increase my, my capital that I could use to buy houses off market. And wholesaling and stuff of that nature, you obviously have to be prepared to have cash. And so obviously the third thing is trying to find ways to pay off rentals quicker. And so what I've been doing right now, I actually wired $56,000 to the bank and I'm paying off a property on Lee's Lane that will net me about $600 a month. So if you do the math on that, that's another $7,200 to $8,000 a year right there to just pay a property off. And generally what I do is I target the, the ones with the highest mortgage with the lowest cost to actually pay off. And so when I do the math on paying off Lee's Lane, it's going to return right around 10%, which is a really

• 34:57Speaker 01

  good return. And that's why I'm paying that one off. So that's the third thing that I've been really focused on.

• 35:02Dave Meyer?

  Tell me a little bit about just the strategy here, because what you're saying makes sense. Like I agree with this approach entirely. But at the same time, you've also talked a little bit about how you want to maximize the money you have for investing, right? And so where's this philosophy shift? Is it just market conditions? Like you're not seeing enough that you want to buy? So you have a little bit of extra capital and you're like, where do I get the best return right now?

• 35:27Speaker 01

  So the reason why this makes a lot of sense for also helping me in investing, say wholesaling or having cash to do that, is because when I pay this house off, immediately I'm going to add it to my line of credit. So not only do I get a paid off house that saves me $600 a month, but I'm also going to put it on my line of credit and get an extra $100,000 in capital added to my line of credit, which would be right around a million dollars at this point, once I add that. So it gives me twofold. It allows me more purchasing power to not have to crowdfund and just self-fund this myself. But it also allows me leverage to make money while it sits there as well. So it's twofold.

• 36:06Dave Meyer?

  Makes a lot of sense. And you can always refinance it later if you want to either use a HELOC or whatever.

• 36:11Speaker 01

  Or sell it.

• 36:11Dave Meyer?

  Exactly. So that's three out of the four. We talked about your PM costs, raising rents appropriately and paying off some rentals. What's the fourth thing you've done?

• 36:22Speaker 01

  My main focus this year is to wait for rates to drop into five and a half range on, on either commercial or traditional financing or DSCR. Like Kiavi is a great place. I've, I mean, Kiavi is a really good company. They do a really good job. And, and you could use companies like that as well. But the thing is, if you could refinance your houses, say 23 houses, 10 of them are paid off, and I could actually refinance 10 of them. And I have so much equity from the appreciation that's been happening that I could take that appreciation, pay off another two or three that are free and clear, and still net an extra 100 to $500 a month in cash flow with doing that. That is a huge proponent to what I'm trying to do right now. And if I do that and I do it smart, I should be able to pay

• 37:05Speaker 01

  off two houses and also save probably about $1,000 a month on that refinance. And I think that we'll be in a position to do that.

• 37:12Dave Meyer?

  Even if the rate's higher?

• 37:14Speaker 01

  Yeah, even if the rate's higher, for, for instance. Yeah, exactly. I think the rates will be in the five and a half to six and a quarter range. But if you buy it down a point, you should be in the, in the realm that you need it, which is about 5.75, give or take to six.

• 37:26Dave Meyer?

  All right. Well, yeah, if you could buy it down, you're more optimistic than I am about the rates getting to the thins. I'm not, I'm not so sure about that. I hope you're right. I hope I'm wrong.

• 37:37Speaker 01

  I hope we can get there. We'll see with the market. I mean, there's a lot of things that are causing issues in the marketplace right now. But you know, the goal, the goal that I've heard was a one and a half percent Fed rate. And so we're at a 3.625. And I'm into mortgage industry. So this is what I know very well. And, and so if we're at a 3.625 and we need it at one and a half, I mean, if the rest of the world is at one and a half, we have to find a way to get that Fed rate down. And so they're really focused on that. So I am really, you know, leveraging my gambling hand here to stay within the next, hopefully 12 to 18 months, right? That's conservative. To your point, if we could hit six, I think you would see a huge amount of people trying to refinance their properties. And I think that would be very smart for them to do that, in all honesty with you.

• 38:20Dave Meyer?

  Yeah. I mean, if we get to that rate, that makes a lot of sense to me. We'll just have to see if we can get to that rate. Maybe 12 to 18 months. I'm, I'm, I'm not as optimistic this year about 2026 at least.

• 38:30Speaker 01

  Yeah, this year's rough.

• 38:32Dave Meyer?

  Well, Nathan, this has been a lot of fun. Thank you so much for catching us up here. People want to connect with you. Where should they do that?

• 38:39Speaker 01

  Yeah. I mean, obviously you could find me online. It's Real Estate Nate. Buy, Sell, Rent Coaching is, is my business in Louisville, Kentucky. You can find me on social media too, under the same exact search term. So I'm on social media, I'm on LinkedIn, I'm on everything that you could possibly think of, and also on Google search and stuff of that nature.

• 38:57Dave Meyer?

  Awesome. Well, thanks so much for being here, Nathan. We really appreciate you. And thank you all for listening. Again, if you want to check out DSCR loans, some of the things Nathan was talking about, and you're a BiggerPockets Pro member, go to biggerpockets.com/pro and check out the discounted rates we have for you. And we've negotiated for you through Kiavi. Also, if you want to learn more from people like Nathan, make sure to subscribe to the BiggerPockets Podcast or follow us on YouTube so you never miss an episode. Thanks again for watching. I'm Dave Meyer and I'll see you guys next time.

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