How Does it Feel Owning 100 Rental Units

0:00When you need to build up your team to handle the growing chaos at work, use Indeed Sponsored Jobs. It gives your job post the boost it needs to be seen and helps reach people with the right skills, certifications, and more. Spend less time searching and more time actually interviewing candidates who check all your boxes. Listeners of this show will get a $75 sponsor job credit at Indeed.com slash podcast. That's Indeed.com slash podcast, terms and conditions apply. Need a hiring hero? This is a job for Indeed Sponsored Jobs. So you want to own real estate. Perhaps you want to own hundreds of rental properties. You know what we're going to do today? Cody Davis and I are going to talk about what it actually feels like owning over 100 units. We will talk about the good, the bad, the ugly. We will talk about the pros and cons of getting to 100 units. Cody, I saw that you put out this amazing video on your channel. I need to check that out. But I thought it'd be fun for you and I both to talk about what owning 100 plus rentals

1:02feels like. Where do you want to start? Well, let's start out and say there's a whole lot of good, right? For people that are trying to get on this journey, it starts with one rental and then you get it out of there. And one day you may wake up and have 100 units. If you end up making it there, there is a whole lot of good. The scalability is nice. I have personally found it's easier to manage. And the wealth building, it starts to compound. The numbers I broke down in my video were, let's say you have 100 units at 100 grand of door. It's a $10 million portfolio. Three percent appreciation is $300,000, which is incredible. If you figure you're making probably $100 to $150 a door, that's 10 to 15 grand a month. If you raise around $100, it's an extra 10 grand a month of revenue, which most of goes to the bottom line. So I have found that if we're just starting on the pros, that is a beautiful piece of

2:03having a portfolio that size. Yeah, if you want to go to the pros, again, I like starting here, we'll definitely get into the negatives because there are plenty of those as well. The other thing that having over 100 units is you can also, if you choose, you can really in my case, outsource some of the tasks that you hate. Now I know you've done self-management here recently, which is awesome, makes total sense for you. You live in the area. Dude, I'm not even in the same state anymore as my portfolio. So having that allows me to spend six figures plus on property management. We spend that and more every year. But it buys us peace of mind. I'm not dealing with 10 issues. I get daily reports and things of that nature. The other thing you're absolutely right is scalability. Some people choose to never tap equity, but that wasn't our case. When I look at my portfolio today of tens of millions of dollars, we have zero of our own

3:05capital in the portfolio because we've extracted it via cash out refives, things of that nature. So just think about a portfolio of that size with zero of your own money. Obviously it doesn't start there. We were like everybody else putting 25% down in the beginning. But when you're in the game for a decade or more as you were continually building, you can do some spectacular things. Have this 100-unit plus portfolio with zero of your own dollars in, which is an infinite return. You talked about that 3% growth on 10 million, 300 grand, but that 300 grand on zero of your own money. That's really cool. That's an infinite return right there. With the scalability, I've found it's easier to get better debt products. It's easier to get lower labor costs. The reason behind that is if you have a one-off contractor job, they have to charge for their time, you figure they have a cost to acquire leads, so them getting your business costs them money.

4:06With 100 units, you're always going to have something going on. There's consistently projects for them to work on, and so that cost actually goes down to have the same project completed. I've been able to actually increase my cash flow with lower rents because of the scalability. The other thing that I saw in our portfolio is obviously when you're building a portfolio, you're always reserving money for every property. You're putting away 10, 15, 20%, whatever the number is for you. When you start to get to three-digit rental units, that number becomes so large that you can really cap it. Again, I've been doing this for 20 plus years, and we no longer reserve for every property. We just have a flat number that we keep, and when an emergency happens, we use it, and then we refill it back up. When you get these kind of numbers, all of that extra money above that reserve limit

5:08for us is 50 grand. We can use for our daily life, and we live pretty good on that. The last thing I'll share is a pro before I go into cons, because there's a large list of cons for having a portfolio like that. I'd say it's really easy to get liquid. If I bump rents up $100 on 100 units, I can reasonably borrow another million dollars. I can service that payment if I pull a million bucks out. If I'm in a tight spot, which grant, you never want to be there, but if I'm in a tight spot in the market, I can raise around $100 on my units that I've kept low. I can go back to the bank and say, hey, look, I have an additional $108,000 a year of net income off of this new 10 grand a month. My expenses didn't really go up. I can borrow against the newfound equity and use that new 108 to service the payment. I can tap a million bucks, and that can buy me out of probably any situation.

6:11Pretty much anything. I'll give you two pros together, and we'll get into it. I'll throw it back to you, and we can talk about some of the cons. One of the pros is when you have a large enough portfolio like this, you can take on what I'll call charitable, I'm not what else to call them, situations. We've had situations where we've given rental units away for a year to someone who was in a very bad spot. We've donated to, I paid for food at the Fresno's Food Pantry for a month, which was a big number. There's just lots of more ways to be charitable, either with dollars or with units. Giving away one unit or even two units is not going to really move the needle in this kind of portfolio, but you really can help out people in bad situations. The second thing I will say, at least in my portfolio, because we saw a good mix of resin and commercial, I have nearly unlimited ways to tap equity. I have a few assets free and clear that if oh shit happens, I could sell for 70 cents

7:13on the dollar and get liquid very quickly. We've got commercial units with great values that we could refi. There's just lots of levers that could pull for liquidity. Again, owning those kinds of units does bring options, but it also brings a bunch of headaches in cons. Let's talk about some of those. Well, the main thing is you have to learn all your assets. You can't just buy something and not understand how it works or where the main components are. A big piece of my story where it was difficult is I scaled to multiple hundreds of units within a couple of years. You have to learn where the shutoffs, what is going to be the CAPEX schedule, because there are things you have to do. Even if you don't want to do it, I just had to re-plum a whole building, all the drain lines. You have to budget for that and you don't know how to budget for it until you learn the building. I think it takes four to five years just to really learn and understand your property,

8:13because there's going to be things that you just don't know about or how it works. As an example, I have a 12-plex and one of my units has turned over more times than the rest of the property over six years. I had more turnovers in one specific unit. Why is that? It's probably not insulated properly. That unit can probably hear everybody else, whereas the other units may not in the building may hear all these other tenants. So it makes people want to move. There's things like that you can't really understand right away. If you scale that to hundreds or hundreds of units, there's a whole lot of learning. If a whole bunch of mistakes happen all at once, that's a really painful pill to swallow. Yeah, I can definitely feel that. My story goes, we were just buying residential units up until 2006. We had eight units, six houses in a duplex, so eight units. I go to an event, California crash is coming.

9:13I tend 31 out of eight units into 80. I move all the money into multi-family and boy, on paper, it looks like a genius move, great timing, huge wealth building, but it sucked for two years. I had no idea how to manage apartments. They weren't houses. The turnover was different. The parking was different. Electricity, just the amount of things that I did not know. I signed up for two years of just pure pain. Plus, rental units were doing move-in specials in one month free because everybody was buying a home. Again, in hindsight, I looked like a genius, but boy, when we were going through those two years of suck, every day sucked. A phone call here, a phone call there, a 1,000 there, a 2,000 there. It was eye-opening to see the difference between owning 80 units, verse 8. I think in my eight units, I had two turnovers, and one of them was my eviction, which is my first unit. It's like only one other turn in three years.

10:15Now I'm doing three turns a month, four turns a month in these apartment buildings, and it was stressful. Let's just say that because I didn't know what I had. Yeah, it is stressful. Depending on how you build the business of 100 units, it's going to determine your stress, too. Another con is there's three main paths, I'd say, you can take. One is you do the math of lumberjack landlord, that strategy where you have over 100 units, but you have a bajillion properties. In my mind, I'm like, okay, that avoids some of the cons. That is where as you have fixed rate debt, which you don't get when you start to really scaling the portfolio. Right. It will only be fixed for a certain amount of time. He has fixed rate debt. He avoided that con of really scaling. Now he has a bajillion properties that he has to oversee. They're not all right necessarily next to each other. Then you have in the middle where you have a handful of mid-size buildings. You still got multiple properties. You could have 10-10 flexes.

11:16But you're not fixed for 30 years. There are very few programs that are going to be advantageous rates for either fixed. That's for small dollar value. Yeah. There's that con. Then there's the other con of you just have one building. It's on the complete other side of the spectrum, one 100 unit building. Now all your eggs are in one basket for a retirement portfolio. That's probably not the best way either. You got to figure out which side of the coin you want to be on. Do you want to be on the edge of the coin? Do you want to be on the outside edge? They're going to come with different problems. Yeah. The other one I'll give you is again, you still have roofs. You still have parking. You still have plumbing. You still got to replace electrical panels. I don't know what it is last year, but last year, three of my buildings, I had to replace the electrical panel because they had the wrong one. It was proven to be a fire hazard. Those were between 8 and 20 grand. I think 22 grand, replacing the panels depending on the sides of the building. If you didn't have the reserves, that could get you.

12:18We did a roof on a large apartment building that's all one story. It was just a massive roof. It looked like a big J. It was kind of like that. I think that was 45 grand or something like that. Again, you have these expenses, but they can be massive in comparison to a single family home. Yeah, my biggest roof job that I've had to do thus far was like 120 grand. There you go. I mean, it was ridiculous. It can be really expensive. You do have the budget for it. That's the other thing. You have to have your cat back schedule. People think that managing rentals is just like your property manager. You're managing the tenants. That is a fallacy. It is managing your cash flow statement. It is managing your cat back schedule. When do these things get fixed? Not only when do they have to. When can I afford to do it? Yes. Sometimes you can't afford to do it, but you have to do it. In that situation, you figure it out or you get sued because you have health and safety.

13:19Exactly. Or they drop you as an insurance carrier, which they were doing on those electrical panels. I had all wanted to do three of those in six months. That was not in my plan. Yeah. Well, I've talked about this with you before over a year ago. I bought a 15 unit and insurance said, you're good. You know what panels you have? Well, they bound insurance and then right after they sent an inspector, they got photos of what I said I had and they're like, oh, you got to change this. Or we're dropping you. I got to write a check for about $40,000 to read you all the panels. Not only did I have 15 unit panels, I had all the disconnect panels for the water years. There's way more into it than people realize. It gets expensive. You get to write a check or you get to go into debt. Those are your options and that's the option. It's got to happen. Yeah. Yeah. So let's get back to lots of pros, lots of cons. Again, I don't think most people should go for a hundred. I think our boy, Deon's got the kind of right answer, you know, 10.

14:19I think it's great if you just get to four. Like I've always said. Yeah. But again, some people out there will eventually get to a hundred or they have the desire to get to a hundred. There's, you know, I would argue there's more good than bad, but you do not need. You do not have to go to a hundred. Is that fair? The way I ended my video was by sharing that it is absolutely financially worth it. The reward is better than most people think. However, it will take you longer. I talked about the financial fire. Fire fighter. I got to a hundred units. I was not chilling. I was working because in the process, you still have to let the assets mature. Yes. The victory is not getting the unit count of a hundred. The victory is getting it, keeping it, optimizing it, and then letting the debt decrease in value relative to the asset. Yeah. You still need time to season. I mean, that's what people get. They think hundreds of magical number. That just means more work, at least in the short term.

15:21Yeah. And now the benefits are amazing. I'm almost at 300 rounds right now. I'm at two 70 something. And I will say the best assets that I have are the ones I've owned the longest, regardless of size. Agreed. I agree 100%. So I will say that too. Yeah. You could have a duplex that outperforms a 10 unit. There's someone that I just met. Met him from Facebook, a little Facebook group. They have a duplex that's paid off in Oregon. It's worth a million, too. Damn. Are you kidding me? That is better than having a 12plex, like mine, that's worth a million for, at 70% leverage. That's significantly better. Oh, agreed. But they didn't buy it for a million, too. They bought it for whatever 400 grand way long ago, paid it off with the rent over an extended period of time. It had to mature. Now one day my 12plex will outperform them, but it's going to stay time. And that's the thing people forget. Yeah. I wish, I mean, we're going to do a second video together where there's a creator saying

16:21you can get free in three years, which is nonsense. We'll talk about that in another video. But I just want to keep people remember that it's time. Right? Step three of the wealth formulas, it takes a decade. If you do the work required, whether it's 10 units or 100 units or nearly 300 units, if you can hold those for a decade and manage them and not lose them, your chances of getting wealthier, astronomical. Yeah. Now you have to be able to hold it. That's the bottom line. It doesn't matter if you have 100 units, 1000 units, we see goofballs on the internet that have 14,000 units and they have losses because they didn't build a business to be able to afford it. They built on fees and the fees stopped and they start losing assets exactly. If they could have held it for a decade, they would have had no issues. Correct. That's not how short term debt works. No. Cody, you're amazing. Somebody want to go check out the original video, which is over 12,000 views now. Pretty strong.

17:21Where do they go? Cody Davis Business Adventures. Go check them out. Send them a note, leave a comment, be good people. Thank you Cody. Take care. See ya. For a limited time, you can get a big Mac meal for just $8. That's a burger, fries and a drink. They don't call it an extra value meal for nothing. Get a big Mac meal only at Mac Donald's. Price and participation may vary. Promotion pricing may be lower than meal pricing.