One Duplex to 116 Units in Two Years

[Matthew Watson]

I just wanted to share my story with you all in hopes that you can find some motivation in it and to encourage everyone to put in the work to make your dreams a reality. Like many, if I had educated myself and had the courage to take action when I first started dabbling in real estate my story would be 100x what it is today. The fact that you are on Bigger Pockets right now reading this post and learning, already puts you ahead of where I was 3 years into my first rental.

Lesson #1: Get educated and take action.

First I am going to start with a little back story.

My brother, John, was in the marines and in 2007 he was getting close to finishing up his third and hopefully last tour in Iraq and needed somewhere to live when he got out. While still deployed, he purchased a single family foreclosure with a 0% down VA loan. He didn't have any extra money to pay someone to fix the place up, so my sister, brother James and I worked on the place to get it ready for him. After living there for a few years while he finished undergrad, he applied for and was accepted into law school in Lincoln, NE. As a result, he needed to move. He listed the house for sale on the market when everything was crashing in 2010 and was unsuccessful. His next course of action was to just rent it out so that is what he did. Many accidental landlords were created during this time and perhaps this is ultimately what led to our path exploring real estate years later.

My start in real estate was in 2013. I had almost no money and knew absolutely nothing about real estate. I was living in Fremont, NE working as a firefighter and renting a small 1 bedroom house for $500/month. My Lieutenant at the fire department had several single family rentals and I picked his brain about it every once in a while.  He was pretty reluctant to go into any details but reading between the lines, it was evident that it was working out pretty well for him. Looking back now, I think this is what initially sparked my interest in buying a rental. That, coupled with my brother’s extensive landlording expertise, John and I decided that we wanted to buy a rental house together. We briefly thought about multifamily but the idea of that scared the **** out of us and we just didn't think there was any possible way we would be able to tap into that space. I had saved up a whopping $10,000 and was eager to get going. We looked at a few houses in Omaha and Fremont before we ended up finding a Fannie Mae foreclosure which we bought for $85,000 in July 2013. We used HomePath financing so that we only had to put 10% down. We did all of the work ourselves fixing it up, spending around $8,500 on the improvements and then rented it for $1,150/month. Our goal was to buy a couple of houses every year, similar to this one, but goals without education and action rarely amount to anything. We had spent almost everything that we had saved on the first rental. I also wanted to save money so that I could afford a house of my own and quit renting. 

In 2014, I moved back to Omaha to start a new job with the Papillion Fire Department and John started a new job in Omaha as an attorney. We still scoured the MLS and the HomePath website for additional deals, but simply were ignorant of other means of finding and funding deals. Looking back there were probably good deals all over the place, we just didn't know what to look for. We thought the only way to do it was to save our pennies every month, search the MLS and pray to find a good deal. We continued to save everything that we could but eventually got tired of searching the MLS for single family rentals and wanted to try our hand at flipping houses. We also hoped that this would help us grow our cash stockpile quicker so that we could eventually purchase more rentals.

Lesson #2: Be smart but get in the game. Your first few deals don’t have to be perfect. Just do something. 

We did our first flip in early 2017 using all of the cash we had saved (around $85k) and a seller carry of $27k which we had to pay back after 3 months. That one worked out well so we flipped a few more here and there and just kept building up the cash. We finally decided to buy another rental in December when a run down conversion duplex that we were familiar with came on the market for $117k in a prime location in Dundee. We got into a bidding war within hours of it being listed but came out on top, paying $22k above asking price. We knew the potential this property had so we were happy to do so. In fact, I was at work when it got listed so I never even got to see it before we bought it. We paid cash and closed in two weeks, fixed up both units and then got a commercial loan on it to recoup most of our money. We had never worked with a commercial lender before so I googled "commercial lenders" and then sent emails to several different ones around town with a questionnaire. Reading that email now, it screamed newby that didn’t know what he was doing. One lender in particular though responded quickly and answered all of my questions thoroughly without judgement. Needless to say this is the one we used and they have been an invaluable asset to our success ever since. Without them, we would not be where we are today.

Lesson #3: Find great lenders and treat them like gold.

It was about this same time that I started reading real estate books and listening heavily to the Bigger Pockets podcast. Eventually, I started listening to Wheelbarrow Profits with Jake and Gino, Lifetime Cashflow with Rod Khleiff and Apartment Building Investing with Michael Blank. That is when my eyes were opened and my obsession with multi-family investing really started. It was no longer a scary thing but something I felt like I needed to figure out. There were many people who had come from almost nothing and built generational wealth and that is what I truly wanted. I wanted to build something up that was my own and that would continue to provide an abundant life for my family forever. I knew that in order to do this, I needed to find a good enough deal that would allow me to refinance all of my money back out after about 6 months. I didn’t have a lot of money and could not afford to get any of it stuck for very long. We tried doing some mailing and speaking with commercial brokers with little success. I don't remember which podcast it was, but one of them they were talking about finding multi-family properties through cold calling so I figured I would give that a try. I built an excel spreadsheet and started adding properties, looking up the owners and their phone numbers. I would DFD for properties I wanted to buy and also spent countless hours combing over the assessor website and using google street view to collect my list of properties. Right now, my cold call list has over 15,000 units on it with many that I follow up with regularly.

Lesson #4: Find people who have what you want and learn everything you possibly can from them.

My first cold call took place in January of 2018. As you can imagine, it did not go well. I have always been an introvert so the idea of calling random people was certainly not natural for me. On top of that, most people were not very receptive and many were angry that I had called them. I refused to give up and in April of 2018, I finally got ahold of a person with a duplex that said they would be open to selling at a price that I thought could work. He was not quite ready to paper anything up yet so I kept in constant communication with him. We also decided that, no matter what, we were going to figure this multifamily stuff out. We wanted to have more cash on hand for when we found the right deal so we sold the single family rental in September 2018 and never looked back. Eventually we got the duplex under contract and closed April 2019. If I had given up on this one and not continued to follow up then someone else definitely would have beat me to it. This was the proof of concept for me, and although it was not a home run, it was a pretty good deal and gave me even more motivation to keep at it. 

The same day we closed on that deal, I sat down for another session of cold calling and got ahold of the owner of a sweet 20 unit complex in Dundee. The seller initially told me that he was not interested in selling. After a little persistence on my end, he told me that he had sold some of his rental houses via seller financing and that at one time he had considered selling this property too but never tried. BOOM! That was my in. I asked him if he would be interested in selling this one via seller financing as well. He was open to the idea so I immediately set up a showing with him, toured the common areas and a couple of the units. It was a little dated but overall well maintained and a no brainer with the seller open to financing. We ended up getting the property under contract with 90% seller financing on a 30 year note at 5% for $1.1M, which was great at the time. This **** works. Those are my first two examples of how a lot of hard work and persistence can really pay off in real estate. Put the time in and the rewards will come. Over the next year or so, we continued to hit the marketing and closed on several other properties with the vast majority coming from the cheapest but often most discouraging form of marketing you can do: Cold Calling. If I can do it, then truly anyone can. You just have to have the will to keep pushing forward no matter what happens. The largest complex to date we have purchased through cold calling is 48 units and we have several others in the 50-200 unit range that we regularly keep in contact with.

Lesson #5: Perseverance will always win. If you never give up, you will never fail.

As I write this, we are now up to 116 units, 109 between my brother and I and the other 7 with another partner. 

This post is already way longer than I initially intended but I will finish it with a brief timeline of how things progressed on the rental side of things. It is amazing what can be done if you are willing to put in the time and energy necessary to get there. So far, we have been able to close on everything ourselves and plan to purchase at least another 100 units this year. We will also be exploring syndication in the near future once the need arises.

-July 2013: Purchased our first single family rental for $85,000

-December 2017: Purchased conversion Underwood Duplex on market for $139,000, put $25,000 into it, sold May 2020 for $255,000 and 1031’d the proceeds to help purchase the Bellevue 48

-January 2018: Started cold calling

-September 2018: We decided that we wanted to jump all in into multifamily so we sold our single family rental leaving us with just the Underwood Duplex

-April 2019: First cold call success: 25th St Duplex purchased for $140,000, put $50,000 into it, sold June 2020 for $255,000 to free up cash for other opportunities

-May 2019: Purchased Wakeley Duplex from referral for $185,000, put $20,000 into it, worth $295,000 now

-June 2019: Purchased Cass Duplex from mailer for $160,000, put $25,000 into it, sold October 2020 for $265,000 and 1031’d the proceeds to purchase the Maple 10 unit

-June 2019: Purchased Davenport 7 unit on market for $200,000 (needed heavy rehab)

-August 2019: Purchased Wakeley 20 unit from cold calling for $1.1M, seller financing of 90% on a 30 year note, now worth $1.5M

-December 2019: Purchased Virginia duplex from mailer for $160,000, put $20,000 into it, worth $250,000 now

-January 2020: Purchased Marshal 4 Plex from mailer for $200,000, put $0 in, sold October 2020 for $275,000 and 1031’d the proceeds to purchase the Miami 18 Unit

-April 2020: Purchased Ralston 6 Unit from cold calling for $280,000, put in $25k, worth $450,000 now

-July 2020: Purchased Bellevue 48 unit from cold calling for $1,925,000, putting $400,000 into it and will be worth $3.3M

-October 2020: Purchased Maple 10 unit mixed use from cold calling for $405,000, putting in $50k and will be worth $575k

-November 2020: Purchased Miami 18 unit through a broker for $765,000, putting $70,000 into it, will be worth around $1.1M