Stop Buying Rentals and Start Buying Rental Portfolios (Scale Much Faster)

Henry:
You want financial freedom faster, you need to stop buying rentals and start buying rental portfolios. Imagine if instead of buying two rental properties, you could buy 10 at a time. How quickly could you replace your income? Then Jose Martinez did it in just four years without any experience, special skills or creative financing using a special type of loan that only small banks provide. Jose was able to buy 28 units and only two deals with less than 5% down. Now he’s replaced his income and is full-time in real estate. He went from waiter who spoke no English to owning over 50 rental units, his source for deals, a mentor landlord who showed him the ropes and sold him the properties. Your path to scaling is probably closer than you think, and so is financial freedom. What’s going on everybody? I’m Henry Washington, and today on the podcast we have an investor story with Jose Martinez from Albany, Georgia. Jose is going to tell us how he went from waiting tables to owning more than 50 rental units in only four years. So let’s bring him on. Mr. Jose Martinez. How are you buddy?

Jose:
I’m doing good. How about you, Mr. Henry?

Henry:
Great, man. I appreciate you being here. I just wanted to start with a little bit about your background. So tell us how you got into this real estate thing.

Jose:
So I came from the Dominican Republic. That was probably 11 years ago. I used to play baseball, so that’s how I got to the States. I came here, no English, I didn’t know basically anybody. I came directly to a city where I live now, but I was always curious of learning and listening podcasts like this you guys put out there, which is gold for me and free on top of that. But anyway, so 2022 I bought my first plex and from there man, I just started going. What city are you in? So I’m actually in Albany, Georgia right now,

Henry:
Albany, Georgia. So you come from Dominican Republic to play baseball, you don’t know English.

Jose:
Correct.

Henry:
You play some baseball, you pick up the language and then you’re like, Hey, this real estate thing sounds interesting and you decide to start with a quadplex. So tell us about that deal. Where’d you just find

Jose:
A quadplex to pick up? Man, I was watching videos from you guys. That bug start going in your head. If you buy this many units, you have to make sure it’s a real cashflow. It’s not cashflow. But on my end, being a hundred percent honest, I didn’t know anything I was doing when I got at

Henry:
Qualex.

Jose:
I didn’t know anything about interest rate. I didn’t know anything about who was my tenant in there. I mean, I just got in it and my first experience doing an ambition was my first deal. So as soon as I got that deal, I had to do an ambition and I learned with that, that really when you put your hands on it, it’s really when you start learning. I mean you’ll never be ready if you wait. Really.

Henry:
Okay. So you bought this Quadplex, how much did you pay for it?

Jose:
So at the time it was around $330,000. The Quale needed some work, bought it without even having any contractors. I didn’t know anything about fixing or anything like that. That’s

Henry:
Correct. Okay. And how much money did you end up having to spend on fixing that thing up?

Jose:
I spent right around $20,000 fixing the quale, making it look better as far as appearance, getting the tenant out, getting the unit ready. It was around that much money I spent.

Henry:
So you paid three 30, you got about $20,000 into it, so you’re all in it three 50. How much were the

Jose:
Rents? So at the time the rents sold like 450, so I bought a value add without even knowing I had to value out. So really it’s crazy because so far that’s been one of my best deals.

Henry:
Okay. What’s it renting for?

Jose:
So right now it’s 1195 each unit.

Henry:
I mean, that’s pretty good. You’re all in for three 50. You’ve got $4,800 a month coming in. That sounds like positive cashflow to me. And you bought that deal on the market, albeit it was back in 2022, but still there’s still great deals on the market people can find today. Tell us how you financed that deal. What kind of loan did you get?

Jose:
So at the regular conventional loan I put, it was like 15% down. I think I got on that property. For me, it was like a lot of money at the time because I was like it really empty. I had to go to my bank accounting here, there, pull some money from everywhere, but I was able to buy it and it was 15%. Now

Henry:
You spent about 20 grand on a renovation. Now did you end up doing some of that work yourself or did you hire it out? How was the process of getting that renovated?

Jose:
I was there when my wife was helping me cleaning, so yeah, that was, yes. Then I got some friend of mine, I got some construction knowledge and Hey man, I need you here. I need to help me out to do this toilet. You just got to teach me. I want to learn how to do this. And it really was, like I said, it was a bless because I was able to get help from close people to actually do some things out. That’s why I ended up spending less

Henry:
Money. Okay. Yeah, I was going to say 20 grand seems like not a ton of money to renovate a four unit, but if you’re doing a lot of the work yourself and you’re calling in favors from friends and paying them in pizza and beer, I guess you can get it done a little bit faster, a little bit cheaper. Absolutely. Okay. Well it sounds like you went through the real estate investor ringer on your first deal, found something hustled, put in the sweat equity, put the money down. I mean, that’s a solid, I mean it sounds like a solid base hitter, a double, you’re making great cashflow right now. So how did you transition from that deal into your next deal?

Jose:
So from there, it took me a while because I bought real estate just for badging real estate. I was like, I say, oh, let me see what it is. So I wasn’t even counting on the money that was coming in from the properties. So I was just collecting rent, keeping a little cash flow and just paying the loan. But then like I say, everything happened for a reason. I remember I started going to the gym 5:00 AM for some reason. I said, you know what? I want to go to the gym early in the morning. And I remember at the sauna I met a guy, so this guy owns over 150 properties and we were just talking. I was like, man, that’s interesting. And the thing is that eventually I see some properties that come on the market. This guy is selling basically his whole portfolio and I call him, I be like, Hey, so are you selling properties right now? And he was like, yeah, yeah, and I want to buy a duplex. I told him, he said, no, you don’t need to buy a duplex. Buy 10 or 15 houses from me. And I’m like, there is no way I can do that. So basically he kind of walked me through, he wanted to sell, I wanted to buy, and he walked me through the process and man, I ended up buying 10 houses. That was my second deal. So I was at 14 doors.

Henry:
Okay, so you bought 10 doors from this guy. How did the process go? How much did you end up paying for him? And that’s a lot of money. So how did you finance 10 deals? So

Jose:
Basically when I got in the state, like I mentioned, I played baseball. I went to a school here, I left the school and then I opened a restaurant. So I started doing some restaurant business. So at the time I had two or three running, but I basically just started saving money. I mean, I didn’t know what to do with money, so I just started saving money, saving money. I didn’t buy the nice cars. I was just saving money, saving money, saving money, because eventually I knew something would come out, what I wanted to park it. The restaurant business was good, but I don’t think that was going to be where I would put my legacy.

Henry:
Okay. Post baseball, you opened a restaurant and it’s doing so well that you end up opening two more.

Jose:
Yes. So I start doing a couple of mores in the city. Yeah, that’s correct. I used to be a waiter, so I worked as a waiter in a Mexican restaurant for a while. So I learned a business in there. Then I opened, like I said, the first restaurant bar, kind of sports bar type of places, and I had three at the time and I just tried to save money and do real estate,

Henry:
Man. Well that’s impressive in itself because the restaurant business is a hard business to get into. It is. You got into the restaurant business and found success, which is tough to do. So you pivot this into real estate. So what did the finance structure look like? Did you buy them all individually or was it like, did you buy it with one loan as a package?

Jose:
Yeah, it was one loan, it was a package deal. The way how things went there, this guy, which I call it, he’s like my mentor in real estate, he introduced me to the bank. He was like, Hey, y’all need to meet this guy. He got something, y’all need to talk with him. So I had a meeting. I didn’t know banks were like that where you can sit on a table, talk with the president. Okay, tell me what you do here. So it feel like an interview to a point I was feeling like, oh my God, I’m not getting a job or getting along. They asked me a lot of questions and I figured that all they wanted to know was that I was serious about this and that I knew what I was doing at the

Henry:
Time. Okay, so what was the purchase price for the 10 properties?

Jose:
1.4 million, something like that.

Henry:
Okay, 1.4 million. You got a loan from the bank, how much down did they require?

Jose:
I put 20% down.

Henry:
That’s a big chunk of change. And you had all that saved up from the restaurant business

Jose:
And every time I put a percent down, it is like on zero I went back to zero. It’d be like, oh my gosh, back to zero. Back to zero.

Henry:
Okay. And did these properties need any work?

Jose:
No, they were all occupied. They didn’t have any property management company. It was the landlord running it himself, all these properties. So he took great care of it. And yeah, they were all rent. They were all bringing rent in and I just needed to raise rents to match the return that I was looking for.

Henry:
And at this point you had four units, but now all of a sudden you’re sitting at 14 units. Are these properties, were you managing them yourself? Did you have property management?

Jose:
I was managing them along with my wife. Yeah, we were back and forth, Hey, what this money that you spend you crazy. You spent years, we went through all that. Yes, we went through all that because in the beginning I wanted each property to look like my house. I was like, alright, we got to get in, we got to bring everybody. So then I start learning, I had to get this property. That doesn’t mean they had to be on bad shape, but there is rental materials that you buy based on, okay, which toilet should I get? Which life feature should I get? So yeah, I was spending a lot of money. I wasn’t making no cashflow at all in the beginning, but then I learned, okay, this is what I need to do. Like I said, I was handling then myself along with my wife and we end up learning about these rental softwares to actually manage them now. And yeah, I mean it makes my life easier to being able to collect rents through there.

Henry:
Are you self-managing still to this day?

Jose:
So I have some help now, but yeah, I’m on day-to-day basis. I’m still around. Yeah.

Henry:
Alright, I’ve got a couple more questions for Jose about the mentor relationship that brought him 10 doors. We’ll get to that right after the break. As a real estate investor, the last thing I want to do or have time for is to play accountant, banker and debt collector. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements and receipts, trying to sort it all out by property and figure out who’s late on rent. Then I found baseline and it takes all that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions. It matches receipts, it collects rent for every property. My tax prep’s done and my weekends are mine again. Plus I’m saving a ton of money on banking fees and apps. I don’t need anymore. Get a hundred dollars bonus when you sign up [email protected] slash bp. Alright, we’re back with Jose Martinez on the BiggerPockets podcast. Jose, so you have a mentor, he sells you 10 properties. What was next? Did you continue to buy more properties or did you continue to foster this mentor relationship or was it kind of a one deal and done thing?

Jose:
No, so we kept talking on my end. I was the lucky guy that he wanted to sell his properties to and help me through the process. So yeah, basically just got a lot of questions every day. Even today’s date I calling for a lot. So after that deal I bought 18 more properties. 18? That’s

Henry:
Correct. From the same guy, correct? Yes. He sold you 10 properties, you’re happy with those properties, but it wasn’t like he sold you 10 properties and fell off the face of the earth. You continued to foster a mentor mentee relationship, so you could call this guy for anything you needed help with and he was explaining to you and teaching you how to manage the properties and run a real estate business, it sounds like.

Jose:
Absolutely. Absolutely. The biggest thing I learned while I was doing that with he needs to run this as a business.

Henry:
He’s

Jose:
Not just buying oh one property, you get rents here or there. So understanding that this is a business just like a restaurant, sports bar business type. So understanding that he helped me put that mentality on me and then we put a deal package together again and I purchased a team more properties

Henry:
Before we jump into the 18 more properties. I do want to touch on that. It does sound like to the average person listening that maybe this guy just wanted to offload a bunch of properties to somebody who was new. But I want people to understand true mentorship relationships are the best when there is mutual benefit. I think a lot of new people want to find a mentor, but they don’t think they have anything of value to add or they just expect someone to pour into them and they don’t have to give anything in return and those aren’t true relationships. Now, occasionally you’ll find somebody who wants to give to you and you can just take, take, take, but a real relationship is give and take both ways. It sounds to me like in this relationship, yes, there was value for him because he sold you properties, right?
Correct. But there was a lot of value for you, not just because you were able to build your portfolio, but now you had a mentor you could call on for any questions you had. Absolutely. That’s a true relationship, and I’m not saying you got to go buy properties from someone for them to mentor you, but I do want people to think about what value can I bring to somebody? Maybe I can go do work for them, maybe you can babysit their kids. There’s a million things that you can do. It doesn’t have to be real estate related, but try to lead with value. That’s super cool, man. So how much time passed between when you bought the 10 units and when you were buying the 18?

Jose:
It went like a year or so after. So basically it took me a while because that was a big thing to, it’s a

Henry:
Big chunk of change,

Jose:
But remember, and this is when it comes, the mentor part, this guy sit down with me and say, look, when you bought these 10 properties from me, this is how much equity you got here. And was like, what is that all the money I have? Yes. So that mean that now I understood what type of deal I got because it wasn’t that he gave them away for me, but he could had charged me way more. And I realized that whenever I went in, we did some appraisals on these properties. So I was like, oh my goodness. Okay. So now I was able to buy my 18 houses a year after using my 10 houses that I purchased from him before. So I use cross collateralization.

Henry:
So to summarize, you bought the 10 units, but the guy didn’t try to take advantage of you. He sold you the units at a fair price that allowed you to walk into some equity on these properties. So when the opportunity arose to buy the package of 17 houses, you use what’s called cross collateralization. So for those of you who are listening, cross collateralization is where you pledge equity from existing properties and you use that equity as your down payment essentially for the other properties. So because the 17 properties had equity in them, the bank basically gave you a loan and you pledged some of that equity. In other words, they put a second mortgage on some of those other properties to allow you to have access to the funds that you would need as the down payment. So were you able to get into the 17 units without having to touch any of your own personal cash?

Jose:
I had to put really little amount. It was around $40,000, something like that. I had to put, again, we go back to badging it, right? We’re talking about a year after. It wasn’t even like 2, 3, 4, 5 years a year after we redo appraisals and this come to have no equity to buy these 18 more properties. And at the time I didn’t even know that I could do that, that I could actually use those properties to buy other properties. So this guy set me down and was like, Hey look, this how much money you have, keep growing and buy more properties even if it’s not from me, that’s what you say. You got to keep growing and growing and that’s how I did it.

Henry:
Yeah, cross collateralization is one of the cool tools that small local banks have at their disposal. Now, not every local community bank will utilize cross collateralization. You have to call community banks and talk to them and ask them, are you willing to cross collateralize or are you willing to let me pledge equity in an existing property? So this only works if you own real estate that only has a first mortgage on it. So if you’ve got real estate with equity, either it’s paid off or you have only one mortgage on it. If you’re interested in this, you can call local community banks. You want banks that have under 4 billion in assets. Those banks can be a lot more nimble than some of these big banks. But the key to this strategy is exactly what Jose said is you have to buy a good deal because you’re using leverage, you’re using borrowed money as a down payment. So if you use borrowed money and buy a bad deal, well now you’ve got a first and a second mortgage that you can’t pay back and it can put you in financial strain very quickly. So you only want to do this when you know you are buying phenomenal deals that also have a ton of equity in them.

Jose:
That’s correct, that’s correct. And also what you mentioned regarding the banks, I went to a lot of banks and they told me no too before a lot of banks told me they couldn’t do it. It was too much risk. But going to the right community bank will help you, your investor life a lot, every bank is a different business. Every bank have different regulations. So just get to know your community banks and that can change your life for good.

Henry:
Yeah, man, that’s a phenomenal point. You’re absolutely right. Sometimes you’ll talk to banks and it can be very discouraging when they tell you no. Sometimes it has to do with you. Maybe they don’t like you, your credit score or your current portfolio. Sometimes that has nothing to do with you, but it still sucks to hear. No. But some keys to being able to find a bank that does do what you want to do is first and foremost, ask the bank what kind of assets they like to lend on. Some local community banks love lending on large multifamily, some love lending on smaller single family. It’s really going to depend on the bank and where their focus is at the time. If you have a good deal in the asset class that they like to lend to, it’s a lot more likely that they’ll want to work with you.
B, warm introductions are always better than cold introductions, right? So Jose had a warm introduction, he had somebody who had a relationship at that bank, introduce him to the lender. That’s always going to help you in terms of favorability than just reaching out cold. A great tip, if you want a warm introduction to banks, is to go to your local Chamber of commerce or Rotary Club meetings. You can go to Rotary Clubs. I think as a guest, if you get someone there to bring you with them, it’s a member. Or you can go to the Chamber of Commerce meetings. I think you can go as a guest off the street if you want to. But typically bank community bank presidents and commercial lenders are members of local chambers of commerce. And so if you join the local Chamber of Commerce, just being a part of that chamber of commerce is your warm introduction. So those are some tips to help you start to find those relationships if you don’t have that mentor who can introduce you. Alright, we’ve got to take another short break. We’ll be right back talking with Jose Martinez about how he was able to purchase another 18 units right after the break.
All right, we’re back with Jose Martinez, man. Jose, what a great story of growing your business and your portfolio to go from a quadplex to then adding 10 units and then adding another 18 units and leveraging community banks and leveraging cross collateralization to help you get creative about the financing so that you were able to acquire these properties. Where has that led you? Where is your portfolio sitting right now? About how many units?

Jose:
So right now I have 51

Henry:
Units, 51 units. That’s incredible. So you started in 20, 22, 4 years ago, and now you’re sitting at 51 units, but you did transition away from a successful restaurant business into this real estate business. So now that you own 51 units, are you glad that you moved away? Has it been beneficial? Is the money similar?

Jose:
Well, a hundred percent. I can tell you I leave it strictly from real estate and my wife is happier because I don’t have to be one. That’s a win in itself. Yeah, definitely. I mean, it’s been a blessed, I have been able to be home and see my girls growing. I got two girls and that’s for me, it’s a win rider. Being able to stay here with the family and being able to see them every day and support my lifestyle. Of course,

Henry:
Man, congratulations. Restaurant industry now full-time real estate investor, and I like that you talked about how it’s afforded you the ability to spend more time with your wife and with your children. Maybe you could talk to us a little bit about what other benefits or what else is real estate allowed you to be able to do for your community?

Jose:
Man, it is a lot of deals out there still, and I’m doing my best to try to pull my knowledge into my community, which is the Spanish community that we really don’t understand how many opportunities are in the states right now. I tell everybody this is the best country of the world because there is a lot opportunities out there. So I’ve been blessed and to learn from things like you guys do, but now I’m putting that into them, translating that into them. And I have some people that have bought duplexes, plexes. So just for me, that’s a win too. I mean, being able to pull that into the people that I know and see them growing as well.

Henry:
Yeah, here’s what I love about this man. It’s kind of a full circle thing and you are doing this the right way. So I often tell people when you’re looking for a mentor, one of the best ways to attract a mentor is to try to find a way to be a mentor. I think a lot of people want a mentor and then maybe they find one and they get help. But I think our responsibility after you gain the information, you act on it and it starts to be beneficial for you, is to be willing to do that for somebody else. That’s what creates the best kind of symbiotic relationship in the investor community. And the investor community is just amazing already. We’ve talked about this a million times on the show, but real estate investing is one of the weirdest industries in terms of people will just help you.
They’ll just give you information. People don’t really hoard information. They’re not scared to create competition amongst themselves. People will share information and if we want real estate investor communities to continue to operate like that, we have to be willing to give once we get from somebody else. So I love that you’re taking what you’ve learned and now you’re helping people who probably just don’t have access to the information or don’t understand that this is something that they can do, and now you’re being a beacon for them to invest in being a blessing to your community, man. So that’s amazing, man. Thank you very much.

Jose:
I think also to add there, Henry is also being hungry and to actually go after that knowledge that you’re missing, understanding that, okay, if Jose Henry did it, what’s the line that I need to follow?

Henry:
You

Jose:
Don’t need to go exactly like you did or I did it, but it’s a lot of options out there. You guys put the best content every single week. I mean, you go through that and that allowing, that can definitely change your life for good for me, without any doubt, man. I mean, bigger pocket helped me a lot. I mean, this is more than half of my knowledge come from here on four years, and my other knowledge come from my mentor of course. But when I go and sit down and ask questions, it’s because you guys talk about, okay, community lending, how do you handle a situation? So I go, Hey, so I read about this, how does this work? And your mentor will also see you doing your own researches and being hungry about it. So for me, this podcast had changed a lot of life and I’m one of those too.

Henry:
Oh man, that’s great to hear, man. It’s always awesome to kind of see the impacts or the positive impacts you’re having on people. So we appreciate the kind words, but we also appreciate the value that you’re bringing to your community. And before we get out of here, Jose, is there any plans for the future? What’s next, man?

Jose:
So I’m doing flippings as well on the side. So I got a separate business from what I’m doing, so I’m want to more about developing too. So I’m really just, I’m in love with real estate. I mean, I start with one and I just kept going, kept going. And now, I mean, I really enjoy to fix a house, rent it, or sell it. So I really, I love it. I mean, this is life for me.

Henry:
I love it too, man. You got the bug. I do the same thing. I’m doing my first new development this year.

Jose:
Wow,

Henry:
Nice. Well, thank you so much, Jose, for joining us and sharing your inspiring story. Thank you so much to you, the listeners for tuning in. We hope you got some great value for this episode and we’ll see you on the next show of the BiggerPockets podcast. And if you found this story with Jose inspiring, go ahead and check out another episode of the BiggerPockets podcast, episode 1, 2, 3, 1. That’s my interview with investor Neil Whitney from just a few weeks ago. That’s episode 1231.