WEBVTT

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The inspiring interviews with today is Top
Landlords, This is the Rental Income Podcast

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and now, damnly David, what
do you think the greatest part of owning

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rental properties is being able to have
incremental increases in rent which add up to

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a lot over time. Can you
give me an example of how you've been

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able to raise rent and it's really
made a big difference for you. Sure,

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we had our first purchase of a
twelve unit building where all the apartments

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were going four one thousand dollars a
month. We raised them each year,

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and now they're producing twenty five hundred
dollars a month across the board, and

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that really adds up. That's a
huge difference. That's a building that was

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producing twelve thousand dollars a month in
rental income and after a number of years

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and after a number of rent increases, it's now producing thirty thousand dollars a

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month in rental income. Rental properties
really are the ultimate get rich slow plan.

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And on the show today, we're
going to talk about how David has

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built a lot of wealth by just
making sure he raises rent just a little

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bit every single year. On the
podcast today, we're going to talk about

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how he does it, how he
figures out how much he's going to increase

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rent. We'll talk about how he
talks to his tenants about it, and

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how he avoids turnover. Turnover doesn't
seem to be a big issue for David.

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It's something that I think about a
lot that I'm always maybe a little

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bit cautious with raising rent because I
don't want to lose a tenant, because

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if a tenant leaves, it's going
to cost me money to turn over the

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property and I'm probably going to have
some vacancy. And I wouldn't say I'm

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afraid, but a lot of times
I'm cautious about raising rent. But I

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might be leaving a lot of money
on the table by thinking that way.

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So on the show today, we're
going to talk about how David is doing

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this and how he has increased his
rental income by just raising rent every year.

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Joining us on the show today from
Boston is David mar we'll take a

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break to thank our sponsors. We'll
come right back and we'll talk to David.

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I've had tenants that have either broken
their leases or stop paying rent,

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and I'm sure you know that this
can be very expensive it's very easy for

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the cost to exceed the amount of
money that you're holding for a security deposit,

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and because of this risk, I
started using the Guarantors to guarantee my

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leases. The guaranturs protect your rental
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lease breaks, holdovers, and more. And this is all at no cost

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to you. Your tenants pay for
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learn more about their platform, check
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twenty twenty two. It's titled is
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dot Com. Again, that's the
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work to find a really good rental
property, and when you actually find that

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property, you want to make sure
you're working with a lender that can get

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that loan closed. The lender that
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Lending Group. She's a nationwide lender
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properties. She has a ton of
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to you for your situation. If
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ready to get started today, just
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our Idge Lendinggroup dot com. N
MLS four two zero five six Rental Income

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Podcast, David, let's start off
talking about your portfolio. What does your

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portfolio look like? So I have
a joint portfolio with my brother and we

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have about two hundred and twenty residential
units consisting of a lot of two families,

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three families, and six families.
And then of course some buildings in

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the Boston area and kind of the
greater Boston area. What are the neighborhoods

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like? The neighborhoods are probably top
notch. They're all located near public transportation

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in the Boston area and near some
universities and hospitals and biotech firms as well.

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So a lot of like condos that
are also located near these properties.

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But youthful twenty five to thirty five
year old neighborhoods that you know people probably

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an average income of one hundred thousand
plus. So these sound like they're a

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class neighborhoods. They are definitely eight
class neighborhoods I would consider. Yeah,

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and then for the inside are you
going with like top end finishes, granted

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countertop, stainless steal appliances. We
are we've back in the day we kind

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of we're just getting it rented and
doing the basic thing is coming in and

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doing you know, the floors over
putting new windows in and then painting the

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place. Now our focus has kind
of shifted over the last eight to ten

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years where we're putting the kind of
condo quality finishes into apartments and we're seeing

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those returns of the demand for people
wanting to rent them. And are you

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doing this full time? Doing it
full time? Okay? Awesome? And

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your brother is too, he is, yep, we're both in an office

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together. How is that working out? Like that family dynamic where your family

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and you're investing together. Is everything
going? Okay, it's fantastic. My

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brother and I have a great relationship. We see eye to eye. We

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discuss certain properties and if we want
to make a purchase on one, we

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run the numbers. So it's kind
of like clockwork now, which is nice.

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That's great, awesome. Now,
I always hear on the show that

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you know people say that you're going
to get the highest return on like a

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C class property or maybe like a
B minus type property where maybe the neighborhood

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isn't quite as nice. But obviously
you guys are doing really well with A

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class neighborhoods. Why do you think
people think that you can't make money with

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an A class property? Maybe because
they think you need to spend a lot

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of money to make that money,
which it depends on everyone's situation in their

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real estate portfolio, how long they've
been doing it. But what we've learned

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is that the higher quality apartments you
tend to get, the higher quality tenants

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who become less less of a problem
that you know down the road. They're

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just it's they're focused on their careers, but they want a nice, comfortable

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place to live. And for us, it's turned into less maintenance, believe

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or not. Over the years,
you know, some of these lower class

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apartments that we've had just constantly,
you know, being called to go over

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there and fix stuff up. And
we realize that once you kind of upgrade

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plumbing and electrical that that things kind
of run smoothly by themselves. So trying

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to get maybe a little bit higher
return for maybe a cheaper property that's maybe

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gonna be a little bit more hassle, like that's something that doesn't interest you

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at all, correct, Yeah,
And there's a market for that, and

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I get it, and I get
where people own property in different states.

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They don't really even drive by the
property and everything. We're more focused on

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being able to get access to a
property if we need to and kind of

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more of a hand on service.
Yeah. Yeah. So and the other

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thing too. I think, you
know, if you're looking at a property

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they say in a class property versus
a C class property, your cash flow

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on the C class property is probably
going to go up a little bit over

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time, But I think you're going
to get way bigger increases within a class

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property because you're your tenants are more
affluent, they have more money, They're

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going to be able to pay those
higher rents. That's just my impression.

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Is that true? That is what
we have seen. Yes, you know,

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we have a lot of twenty five
to thirty five year olds who three

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roommates will live in an apartment together, but they'll pay fifteen hundred dollars a

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bedroom for that. Wow, they're
able to you know, it checks their

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box because they're able to, you
know, they don't have to pay twenty

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five to twenty eight hundred for maybe
a one bed, But so they're able

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to save some money with their great
incomes. But yeah, and less maintenance,

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and it's just more of a focus
for that particular type of tenant where

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they do want to hire end it
yet and the increases tend to in rent

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tend to keep going up a little
bit faster than those C class ones.

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Now, I want to figure out
how you're pushing the rent and I think

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that's made a huge impact on your
your bottom line. So when you're looking

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at raising rent every year, is
there a certain dollar amount that you're pushing

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for or do you just look at
the market and see what you think you

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can get for a property. Yeah, so the rule of thumb would be

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around you know, five to six
percent, okay, and based on the

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rent you can kind of do the
numbers that way. You know, some

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of these places are trying to bring
in potential rent control, which if they

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do that, that number is still
around five percent increase. That's kind of

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what you're the maximum what you're allowed
to charge for us. It kind of

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depends on we have some so we
don't we have probably you know, between

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two hundred and twenty units so you
have a number of people that just move

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on every year. You know,
we're we're kind of a stepping stone to

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home ownership, and we get that. So that allows us in some of

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these properties where if a rent to
a certain level, that we can contact

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our realtors who show up and say, this is what your comps are in

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the area. You could probably be
charging this, And if people who are

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naturally moving out, we can just
raise the rents to that that new market

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level. If we at tenant is
interested in staying, we tend to just

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raise them, you know, that
five percent charge, and they're pretty comfortable

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with that, and that that allows
us to you know, kind of keep

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a certain amount of tenants that we
don't want to stay a couple of years,

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maybe longer than they than they planned. All right, So you'll get

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five percent if a person is going
to stay, but you'll get an even

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bigger increase if you're going to turn
the property over. Yes, And and

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the nice thing is it's not even
you might have to go in and you

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don't have to do a complete renovation
of the product of the of the apartment,

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but you know, a clean up
and everything like that will sometimes produce

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you know, the ten, ten
to fifteen percent more in return a year,

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which is really nice. Yeah,
not in every case. But the

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important thing is, and I hope
you know everyone out there who's listening,

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you know you do have to raise
rents. I think a five percent is

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a good way to explain tottendance that
this is. You know, spences are

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going up, we have to raise
rents and in some cases, you know,

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you really should be bringing rents to
market level, but you want to

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be fair to fair to tenants,
and you know they're going through stuff as

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well, so it's kind of a
give and take. Yeah, I mean,

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you know, I'm just kind of
thinking through my head here. You

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get a five percent increase on your
rent, like that's significantly adding to your

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your cash flow. But then when
you compound that over a five year period

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or a ten year period, I
mean that that really become a significant amount

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of money just getting those those increases
every year. Oh absolutely. I mean,

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if you know you have an apartment
that's one thousand dollars for a one

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bedroom, you know, you know
raising it, you know, fifty bucks

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for five percent, then you know
in ten years you're at fifteen hundred now,

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right, right, And so all
of a sudden, and think about

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that, how compounding you could do
that over all of your portfolio. And

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yeah, so yeah, I mean
with two hundred and twenty rentals like that,

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that's a lot of money. But
even for someone that has one or

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two properties, I mean, that
really is a significant difference in in your

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cash flow. There's no doubt about
it. And you start to notice it.

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And and you know, don't be
afraid if a tenant says they're going

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to leave, and you know,
you know, you have your channels,

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have some good realtors that know the
market that come in take a look.

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Maybe they can give suggestions, and
you never know, sometimes it's a blessing

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when somebody leaves because you're bringing stuff
back up to market rent. And I

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get it. We have relationships with
tenants that over the years. And you

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know, so the key is to
be fair and you want, you want

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to you know, cater to them, but you also have to you know,

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it's kind of you want to get
as close to market rent as you

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can, right, right, So
when someone first moves in, do you

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tell them, hey, that the
rent is probably going to increase in year

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number two, or do you have
that conversation as that the lease is coming

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up. Yeah, so there's I've
seen you know, landlords in the past

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kind of put it into the lease
itself, saying we are going to raise

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this five percent a year just based
on you know, expenses and market stuff.

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We kind of do it. As
the lease is coming to expire.

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We kind of say, you know, what are your plans for housing next

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year? Are you thinking of staying
or going? And everybody is different by

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case by case, and you know, at that point, if they decide

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to stay, say well, we
do have to raise the rent by about

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a hundred dollars a month or whatever
it is. And that tends to you

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know, people seem to be satisfied
with that. I like that. So

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that that's more of a conversation that
you're having with them versus them just getting

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a letter in the mail saying,
hey, your your rent is going up

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by a hundred bucks. Yeah.
It's it's less robotic, and it's it's

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kind of giving them the option because
again, usually the question is, oh,

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how much is the rent going to
go up? And you know,

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so we kind of give them there
they're based on our numbers we're running it.

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But yeah, it's a case by
case, and I think it's important

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to have that conversation with tenants because
it's just less abrasive, but it gives

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you the option still to say,
hey, you know, this is what

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we're thinking. So you know,
you put the ball back in their court.

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And when do you have that kind
conversation. Is there a certain days

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before the lease expires that that you
you have that conversation. Yeah, it's

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usually about ninety days. We kind
of put that into the claw onto the

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lease, kind of say, you
know, tenants should notify us ninety days

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if they want to stay or go. They rarely do because life happens.

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We get it. But we have
a system where, you know, each

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month, we'll have different leases expiring
in different months, and you know,

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so my brother and I go down
and kind of go through the list and

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say, okay, this is what
this is, how long this person's been

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here, this is what they've been
paying. You know, let's find out

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if we want to stay or go
and then kind of adjust our numbers accordingly.

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Now, one thing that I always
look at when when I'm renewing a

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lease is I always want to keep
that tenant because when I look at my

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expenses, the turnover costs are always
it's really my biggest expense. When you

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look at you you're probably going to
have some vacancy, you might have to

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do some touch up, paint,
some cleaning. So I always tend to

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to not push the rent if I
have a good tenant that's paying on time.

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Do you think I'm maybe leaving a
lot of money on the table by

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not going for those rent increases every
year? I do think so. I

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think. I mean, if your
place is in pretty good shape, you

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are going to have to get like
a cleaning service there during turnovers. And

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maybe you know, we kind of
use it's funny, we kind of use

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the same paint color everywhere, and
then we kind of have so we have

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a whole network of you know,
cleaning cleaners and painters that we can kind

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of send in and we kind of
know the cost going in and for us,

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you know, incurring you know,
one hundred and fifty dollars cleaning charge

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and maybe you know, not a
whole paint job in our apartment. But

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depending on the situation, you know, for us to spend one thousand dollars,

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you know, if you're not doing
any major renovations or anything like that.

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That's to us, it's well worth
it because you're you're you're kind of

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freshening up the place. Someone now
moves in and say you were getting one

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thousand dollars, Now you can probably
get twelve hundred for it. Right,

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You kind of go there and now
they stay, and then you start increasing

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them slowly based on expenses and stuff. And I get I get good tenants.

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We've had tenants who are you know, fifteen to twenty years. But

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I'd say my biggest advice would be
to get a decent realtor. And on

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Boston has a very strong rental market
for brokers and realtors, and they kind

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of know the market very well,
and they hungry because in Massachusetts, the

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tenant pays the broker fee to the
broker. Oh so it's not costing you

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anything. No, do that okay? Fact? Yeah, and so it's

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there, you know, they would
they they obviously call us even six months

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out of I'm before leasa's end and
say, you know, do you have

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any idea what's happening? So they
want their inventory and when we're kind of

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question and we say, oh,
I don't know, what do you think,

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is this apartment we could get for
this, and we bring them in

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and then they give us the comps
and oftentimes the number is a little higher

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than we even expected. Right,
Yeah, that makes a lot of sense.

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And so so for the way that
your management is set up, your

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realtor is leasing the property, doing
the marketing for doing the showings, and

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then when they find someone that's qualified
and able to or wants to rent the

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property, is that when you and
your brother would step in to get the

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lead signed. Yeah, So they
send over the paperwork and we look at

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the application, we look at the
credit check, and then we kind of

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give the approval or not approval.
Most of the times it's it's it's good

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to go. I like using the
realtor. And maybe every state is different

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in America, but I like using
the realtors that it kind of takes you

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out of it and it's more business
when they use people go through a realtor.

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And it also people feel comfortable going
through a realtor because it kind of

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holds them accountable because say on moving
day, the place is just a disaster,

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and they say, what's going on
here? I paid you that,

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right, you know, So it
kind of forces us that we can concentrate

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on getting the apartment turned over,
getting it ready satisfactory, and a lot

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of times when people come in,
they you know, it's better than they

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looked because they kind of looked at
an apartment that was maybe a little messy

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and stuff like that. But it
kind of allows us to focus on what

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we need to do. And then
more the business side, the realtor takes

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care of and so it brings a
third person in and people, actually,

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you're pretty comfortable with that. Yeah, I mean that that's a great way

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to do it, and especially you
know, with the tenants paying for the

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realtor, I mean that that there's
no reason not to do that. So

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let's take a look at one of
your deals, and you know, maybe

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we could look at your very first
deal. What was that? What what

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kind of property got you started?
Sure, it was a it was a

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three family and the purchase price was
three hundred thousand. Worked all summer,

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fixed that up, rented it and
the rents. I actually lived on the

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first floor, had a couple of
roommates, so I got the first floor.

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I was I was collecting fifteen hundred
dollars on the second floor. I

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was collecting fifteen hundred dollars, which
was a two bedroom, and on the

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top floor was a three bedroom.
I was collecting twenty four hundred dollars and

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my mortgage was about twelve to fifty
a month. Wow. Okay, And

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so you were living in one of
the bedrooms in your unit and then renting

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out the other two bedrooms. Yeah, so exactly. So for me,

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I didn't want to live at home. I said, I'm gonna live one

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of the bedrooms and I'm going to
rent out two of the bedrooms. And

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I think they were like grad students
who went to Harvard University, which is

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down the road. So yeah,
so that's kind of that was my route.

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Wow. I mean so that that
property was was very profitable right from

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the start. It was. Yeah, it was. It was you could

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get not a lot of people,
I feel like, but there was a

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lot of course, you know,
landlords, but to have like the suggestion

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of my father to you know,
live in one of the better rooms,

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rent out the other two, and
then rent the other Yeah, there was

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just a demand there. And I
don't know if it started turning you know,

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the late nineties into two thousand,
but you know, that was certainly

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certainly a home run, and it
was able to kind of springboard me and

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it's kind of teamed up with my
brother. We had some other assets that

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my father had as well. He
was he was with us as well,

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so you know, kind of an
interesting journey. All right. So you're

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living in that property and you're you've
got fifty four hundred dollars a month in

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rent and how much was your mortgage
payment? Sure it was twelve fifty,

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well fifty, okay, so you've
got profit of like four thousand a month

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on that property. So what were
you doing with that money? Saving a

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00:22:10.880 --> 00:22:14.319
certain serve for more properties to buy
that I would kind of go in jointly

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with my brother and my father who
was around at the time. Yeah,

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I mean, what a what a
great start. I mean, that's that's

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awesome. Now, Yeah, I'm
sure you've been raising the rents on that

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like we've been talking about here,
how much are you getting? What's the

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total rent for that building today?
So in hindsight to the building, the

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three family did go over a kind
of a major renovation rather recently. It

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was kind of you're talking you know, plumbing and electrical that the house was

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00:22:48.119 --> 00:22:53.559
probably built in nineteen fifty and so
it was time to kind of renovate.

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00:22:53.640 --> 00:22:57.000
So I did renovate it, and
I did spend some money to redo that

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house. But the current rents now
is forty five hundred a floor, so

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around you know a little over thirteen
thousand. Wow. So that that building

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went for making fifty four hundred a
month to thirteen thousand a month in about

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twenty four years. Wow. Incredible. Now what about appreciation. I know

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there's been a lot of appreciation in
the last twenty four years. How much

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has that that property appreciated? So
it went from about three hundred thousand now

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00:23:30.920 --> 00:23:34.799
it's worth about one point eight wow. Wow. And the reason it's head

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00:23:34.880 --> 00:23:38.720
high is that, you know,
the rents are supporting that, the rent

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of right, and so someone who
was interested wanted to buy that, they'd

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00:23:44.559 --> 00:23:48.240
say, okay, what's the rent
roll been, and yeah, that does

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00:23:48.319 --> 00:23:51.240
support it? Well wow, And
how much did you spend on the rehab?

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About five hundred thousand? Okay,
okay, so all right, so

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you you you're all in five hundred
thousand for the rehab, three hundred thousand

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00:24:03.799 --> 00:24:07.880
for the purchase, so about eight
hundred thousand, and it's worth one point

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00:24:07.920 --> 00:24:11.359
eight. So this property is appreciated
a million dollars. Yeah, and then

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00:24:11.400 --> 00:24:15.200
they're still spitting out you know,
yeah, right, thirteen thousand a month.

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00:24:15.640 --> 00:24:22.319
Incredible, Yeah, it's yeah,
it's been a good, good formula.

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Yeah, yeah. So do you
see any endgame in this? I

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00:24:26.599 --> 00:24:30.440
feel like you've got such a great
system going on, Like do you see

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00:24:30.480 --> 00:24:37.440
yourself buying more properties or are you
you happy with your portfolio right now at

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00:24:37.480 --> 00:24:40.920
the current moment, We're certainly happy
where we are. We still have a

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00:24:41.039 --> 00:24:47.240
number of properties that again now they're
looking like since we've actually like done any

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00:24:47.359 --> 00:24:52.920
type of upgrade, you're talking fifteen
twenty years. So again, fully rented

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00:24:53.160 --> 00:24:56.400
people will take that. Those rents
tend to be a little lower if we

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00:24:56.480 --> 00:25:00.200
want to go in and sometimes we
don't have to renovate the entire house and

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00:25:00.240 --> 00:25:04.839
spend five hundred thousand. Sometimes we
may just be putting in central air and

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00:25:04.920 --> 00:25:08.640
heat, and then you know,
putting in additional bathroom or something, and

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00:25:08.920 --> 00:25:15.400
you might spend eighty thousands and that
can transform a property. So for us,

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00:25:15.480 --> 00:25:19.440
I think we're comfortable now keeping where
we are and redoing some of our

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00:25:19.559 --> 00:25:25.240
older houses that we own, and
we'll see down the road if we want

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to expand a little bit more.
It really is mind boggling how much money

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you can make with rental properties.
I mean to think that every single month

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for the last twenty four years,
this property has produced cash flow, and

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00:25:37.559 --> 00:25:41.759
now it's appreciated a million dollars.
I mean that is that is really incredible.

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It really makes me want to go
out there and buy more rentals.

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If you're on the fence about buying
your next property, hopefully this inspired you

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00:25:51.720 --> 00:25:56.039
and if anybody wants to reach out
to David, I've got his contact information

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00:25:56.200 --> 00:26:00.640
on the website. You can find
it at Rental Income Podcast dot com slash

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00:26:00.720 --> 00:26:07.240
episode four fifty seven. I'd also
like to thank our longtime sponsor Chayley Ridge

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00:26:07.359 --> 00:26:11.839
for sponsoring today's episode. If you're
looking to buy a rental property, whether

347
00:26:11.920 --> 00:26:15.559
you're just getting started or you want
to add to your portfolio, reach out

348
00:26:15.599 --> 00:26:19.920
to Chailey. She's a nationwide lender
and I know she'll take great care of

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00:26:21.039 --> 00:26:25.759
you. You can find out more
at Ridge Lendinggroup dot com. That's our

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00:26:25.920 --> 00:26:32.720
Idge Lendinggroup dot com. NMLS four
two zero five six. Thank you so

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00:26:32.880 --> 00:26:36.319
much for checking out the podcast today. Make sure you follow the show.

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00:26:36.960 --> 00:26:41.359
I put out a new interview every
single Tuesday, and if you're following this

353
00:26:41.440 --> 00:26:45.960
show, you'll get notified every time
an episode comes out. My name is

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00:26:45.160 --> 00:26:48.920
Dan Lane and this has been the
Rental Income podcast