Turning a $25,000 Rental Property into a $5,000/Month Rental Portfolio

Dave:
This investor bought his first property for only 25 grand right in his hometown. Now, his cashflow from real estate averages $5,000 every single month. He was able to accumulate 20 units in seven years, all while working a day job by maximizing his own strengths, understanding his local area, and adapting as the real estate market has changed. If you want to repeat his journey, keep watching to find out how. Hey everyone. I’m Dave Meyer, head of Real Estate investing in BiggerPockets, and on this show we teach you how to achieve financial freedom through real estate. Our guest on the show today is Investor Dustin Cardenas from Western Illinois. Dustin didn’t start in real estate with any sort of built-in advantages. He calls himself an everyman and has worked a series of very regular jobs including bug exterminator and car salesman. But Dustin also saw an opportunity right in his backyard, low priced homes that could be worth much more if someone just took the time to fix them up and maximize their value. So he thought, why not me? And bought his first property for only 25 grand. That was seven years ago, and today Dustin has a cash flowing portfolio that’s allowed him to cut back his hours at work and dream of a retirement that otherwise might not be possible. Let’s bring on Dustin and hear about this amazing investor journey. Dustin, welcome to the BiggerPockets podcast. Thanks for being here.

Dustin:
Thanks for having me. Huge fan of the show.

Dave:
Oh, it’s great to hear. We love to hear that. What was your background? How long ago did you get into real estate and what had you been doing prior to that?

Dustin:
It’s funny you asked that. I just had to think about the age that I started investing in real estate and I actually wrote it down, so I was actually 35 years old when I started investing in real estate and I’m currently 42 before real estate. I had my W2, which I still have at this point. I’m a car salesman here at the local dealership in town, and I’ve been here for nine years. Previously to that, I was a pest control manager for about four years, and previous to that I was a juvenile detention officer for almost six years, and my wife is currently a nurse practitioner here at a hospital in town.

Dave:
Nice. Wow. You’ve done a little bit of everything. It sounds

Dustin:
Like a little bit of everything. Yes.

Dave:
Just a very varied career. Yeah. So why did you decide to get into real estate at 35?

Dustin:
There was a handful of investors around here in town and one guy I went to school with and he was kind of born into it, and I was at a local establishment one night and he told me, he said, you could do this. There’s room for everybody in this field. And he said, Hey, I know you got a good job. I know your wife has a great job. You guys have good credit. He said, there’s more than enough to get around, and what he said to me stuck with me and lit the fire right there, and I still, I never forgot it. What he said was, you know what I want to do with my life? I want to do whatever I want to do whenever I want to do it, and I want to get paid for it, and real estate does that for me. So right then at that moment, I just started reading every sort of book material I could get my hands on and it was on and going from there.

Dave:
Oh, that’s super cool. I love that story and I love the mentality of this guy. You met your friend or mentor, if you will. What was your instinct at that point? Where did you want to go with your investing career and how did you start thinking about doing your first deal?

Dustin:
But the first deal I hunted down, it was a great deal with my realtor and she’s still my realtor to this day. I was selling a vehicle and I had to take the vehicle back to the real estate office. So I went in and had a conversation with her and she was probably eight years younger than me, but she actually broke everything down to me and said, you can do this. So just to piggyback on the helping each other.

Dave:
So

Dustin:
She said, you can do this. And so we instantly started looking at houses then, and I had a lot of different realtors kind of shy away from me because I was looking for the smaller deals. I wasn’t looking for a hundred thousand, $200,000 houses, anything like that. I was in the range of 20 to $40,000 houses. So the first deal that we found it was they had a list of $41,000 and it was a move-in ready house in this area, right place, right time. The people had moved to California and the house had already been redone, move in ready. I ended up low balling them and I got the house for $25,000.

Dave:
Oh my God.

Dustin:
Wow. And I still own that house to this day, and that house right now with equity is probably worth 70,000 because I bought it in 2018, but that first deal was the one that sparked it, that I said, okay, I can do this, and after that deal, then the snowball happens and you just start going from there.

Dave:
Wow. I mean, hearing those numbers about the price of houses is crazy to just imagine that you could buy a house for 25 grand where most people would be probably pretty happy to find a house for 10 times that amount if you could find something for two 50, but what is your market like? Is it rural?

Dustin:
Our town is currently about 35,000 people, so we’re in a perfect area. We’re right in the middle of two higher volume areas. 45 minutes north of us is, it’s called the Quad Cities, and it is probably about a hundred, 120,045 minutes east to us is called Peoria, Illinois, which is also about a hundred, 1500 20,000 people. So we’re right in the middle, which is a great area. I love listening to the podcast all the time too. You guys talk about the Midwest and it’s by far, I don’t want to give all our secrets away, but it’s by far the top spot to invest in the whole country.

Dave:
That’s what I’m saying, man. I agree,

Dustin:
And that’s true, and I have the numbers to prove it.

Dave:
Yeah, it sounds really cool. When you buy a house for $25,000, you said it was move and ready, what can you rent that for

Dustin:
Originally? I rent that house now for $700 a month, and that is a two bedroom house. It’s two and a half bedroom, maybe a little small office. There’s no closet. It also has two bathrooms in it, so I rent that house for 700. Currently I was renting it for six 50, but with time it just goes up and I have long-term renters there that they take care of the home.

Dave:
That’s

Dustin:
Great. They love the home, and not only that, the lot is huge, so it’s a great house.

Dave:
That’s unreal.

Dustin:
It is completely unreal. I figured you guys would be somewhat shocked with these numbers that I tell you here

Dave:
I am. I mean, people are saying you can’t get the 1% rule. You have nearly 3% rule right now

Dustin:
On multiple properties, Dave.

Dave:
Wow, that’s awesome. Well, just for everyone who knows, there’s this thing called the 1% rule that got really popular maybe like 10 years ago, and basically the idea is that if you can find a property where your monthly rent is 1% of the purchase price, you’re probably going to have pretty strong cash cashflow. And in the last couple of years it’s been harder and harder to find that, especially outside of the Midwest, but you find deals that are 0.7 0.8, which you could still cashflow, but a 1% is like a solid deal, but people rightfully are saying it’s hard to find those, but apparently Dustin’s finding two and 3% real deals, which is pretty incredible. I could see why this has snowballed for you because that’s an incredible first deal. Congratulations on figuring that out. Once you did that, were you just ready to go for the next one immediately?

Dustin:
So 2018, that was August of 2018 is when I bought the first one, so I let that roll for a couple months. Then November came back around and I found another home, which I still own to this day, two bedroom, two bath. Once again, the same scenario, people were moving out of it. I ended up getting that house for $30,000 and is moving ready. The same tenant still lives there to this day. Going onto the third one, I bought a third one, three houses in 2018. The third one was in November, same exact scenario. I ended up buying that house for $18,000 and that was also semi moving ready, but I had to do very few cosmetic stuff to it and I added Central Air to the home. But the scenario behind that one and elderly gentleman had moved to a nursing home. I was driving by one day and his brother was mowing the yard and I just stopped and talked to him.
He showed me the house immediately and he said, Hey, we’re getting ready to list it for 28,000. And I said, okay. And I said, well, would you guys take 18,000? He took my information and within one week I had it rolling to purchase that home. Oh my gosh. On the third deal, just to kind of back up on that, on the third deal, the financer, the bank was said, Hey, we usually like to wait about a year or so before we give you any more money. We want to see how it works. And I kind of just was direct and forward. I said, Hey, I have this business plan and it’s going to work. I said, me and my wife both have the finances to back this up, but I’m going to start this business and put it in an LLC, and either you guys are going to give me the money or I’m going to go down the street to another bank and they’re going to finance this immediately. Once I put the business plan out there, they accepted it. They knew that it was going to work because I had everything in play and from then on out, now I have a business line of credit through them. I don’t even have to go through there. I don’t have to run credit.

Dave:
Do you think this is a strategy or approach that is repeatable by the average investor? If you live in a small town, do you think this is just something that anyone can do? I

Dustin:
Really do, and I definitely think a hundred percent of it is a demographic. I really do believe that anybody can do this, but I think there’s just a fear around investing in real estate. A lot of people are pessimistic about it instead of being optimistic about it. Me personally, I think that you’re doing yourself a disfavor if you’re not investing in real estate. That’s just my opinion, because the bank needs people like us. They need us to pay our interest rate, they want to give us money so they can loan our money out to different people for different houses, cars, whatever it may be. But I definitely believe that it is easily possible, especially in the Midwest.

Dave:
Yeah, for sure. Yeah, I mean I think in the Midwest it’s definitely something that is more achievable, especially from the affordability standpoint. But we talk a lot about markets on this show and in BiggerPockets in general, and there are some great markets across the US all sorts. But I think your story is just reinforcing the idea that you really can make almost any kind of market work if you have the right approach and the right strategy. And it sounds like what you’re doing, Dustin is just working with what you know this market really well, who wants to live there, who’s selling properties, you know what the tenant base is going to be like, and you’re using that very effectively to your advantage. That’s awesome. I love that. Well, this is a very cool story and I want to hear more about how your investing career has progressed, but we do have to take a quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with investor Dustin Cardenas talking about how he has scaled his portfolio very effectively with very affordable properties. Tell me, Dustin, what happened during COVID in your market? Most places in the country started going crazy price wise. You were starting at a pretty low entry point. What has changed and what happened in COVID?

Dustin:
I’m very glad that you asked that question because COVID, for me, 2020 was kind of a breakout year. So even in my W2, the car industry was great. We sold a lot of cars
And I bought a lot of houses. I actually bought five units, one duplex, and the rest were single family homes in 2020. One of them was a duplex in a less desirable neighborhood, but it’s all about finding those deals too. I listen to Henry Washington a lot. It’s all about finding those deals. So I ended up finding a duplex on the less than stellar side of town behind a liquor store. I know it sounds cliche, but it’s actually true, and it actually was just placed on Facebook marketplace, and my sister messaged me and well, she tagged me in the post, and so my wife actually went and looked at it first and I got off of work, and I remember to this day, I walk upstairs and she’s sitting on the couch just glaring at me and she says, I want it. And it was a very nice house. It might’ve looked kind of like, it still looks like crap on the outside with old shingles, but it was actually owned by a maintenance man upstairs and downstairs, do blacks separate utilities,

Dave:
Love that

Dustin:
Furnace, separate furnace, separate water heaters, locked down like a fortress. And I bought that house for $24,000. Unreal. And I still own that house to this day, and I have long-term tenants there as well. So that was a beautiful home. So I had absolutely no problem in COVID.

Dave:
What are the conditions of these properties? I’m trying to just wrap my head around what a $7,500 or $10,000 property looks like. I mean, I paid more to resurface my driveway than that property.

Dustin:
The $10,000 house I have, it was pretty nice. It wasn’t bad. I rented it for approximately two or three years, a couple different tenants, and then the floor started sagging. So I ended up going in there just to make a quick repair. But of course when we got into it, I ended up rehabbing the whole house. So I rehabbed that whole house for about 11 grand. I wanted to spend 5,000, but it’s such a small square footage,

Dave:
I just don’t even understand how does that happen? How do you do a new kitchen?

Dustin:
I did everything in that house. It was such a,

Dave:
How do you do a kitchen for 11 grand?

Dustin:
The bedrooms were fine. It was two bedrooms on one side of the house and a bathroom in the middle. On the other side of the house is an open living room that goes into your kitchen that is separated by an island. So I tore it down to the rafters, completed all brand new wood rafters, all the wood, everything. And then I bought stainless steel appliances, but I buy a lot of stuff secondhand. And then I have a plumbing and heating company that went in there and they redid the whole house for about $700 for plumbing. But you got to think about the square footage is so minimal, there’s not a huge area that they’re going

Dave:
That’s fair.

Dustin:
But it was very cost efficient.

Dave:
And if you were to go and sell that property today, how much do you think you could get for it?

Dustin:
My realtors already offered me about 30 for it. I think if I put that house on the market, I could probably sell it. 35,000, 40,000 I think I could get out of it.

Dave:
Okay. So you put 15 grand into this thing and you could probably double that. And what would it rent for?

Dustin:
I rent that house for $500 a month.

Dave:
All right. Still a good deal. I want to hear how your portfolio looks today, what you’re buying, what your goals are, but we do have to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. Me and Dustin are going over his incredible portfolio that he’s building. Honestly, I didn’t even know that how this price point even exists anymore, but it seems like Dustin, you are making a career out of this. So let’s fast forward to now where we sit in 2025. What does your portfolio look like today?

Dustin:
Currently in 2025, I own 20 units, five duplexes and the rest are single family homes and one of my favorite homes that I bought too. And I ventured out into a different field in real estate. I bought a house in Peoria, Illinois, once again, a private deal through a friend who was a realtor. The same family owned this house since the seventies, and their daughter lived there. They lived there, a central part of town. I ended up buying a house for $30,000. They wanted 45,000 for it. I ended up getting it for 30, and they left everything in there, move in ready house. So I sold all of the possessions in there, and then I just basically gave the house a facelift. All new paint, of course, all cosmetic, nothing. I put a new water heater in it. But that current house, I tried Airbnb for a while and Airbnb was not for me.
It was not for me just because I was 45 minutes away, the high turnover rate, the cleaning. So I switched from that to Furnish Finder, which has been absolutely phenomenal there. I get long-term tenants and there’s two hospitals located there. So that home I currently can rent for almost $2,000 a month, and that’s absolutely everything included, of course. But my power, water insurance, everything like that is very minuscule compared to the profit margin that I make off of that home. And I’ll tell you, traveling furnish finder is an amazing thing because all nurses really care about is cleanliness, a place to sleep, wifi and air conditioning, and a nice comfortable bed. And we provide all of that and I’m more than happy to do it.

Dave:
Awesome. So right now you own 20 units. Are you still self-managing them all?

Dustin:
One guy, me. So I self-manage every single one. I listen to you guys every single week when I mow yards. So I mow about 10 to 15 yards, and I’ll add that into the rent too, which I listened to your podcast for about listen to your podcast for about five years. And I know what role I fall into. I’m definitely an active landlord, so I like to keep my eyes on the property. I have no problem mowing the yards. I actually educate myself while I’m mowing these yards. And I hear your podcast every single week, which is definitely interesting. I’ve learned so much off of it. But I completely manage every single thing, all Google Sheets, and that all came with time because when I first started, I’m writing stuff down on a piece of paper, I’m doing this, I’m doing that. Before, I was actually paying a lot of money into taxes before I learned about tax write off and tax code and everything like that. So I have everything on Google Sheets, everything backed up, and I absolutely love it at this point, think I want to continue to self-manage. But then I also hear you guys, as I told my buddy today, I said, man, now I know what they mean by you get a lot of units and you’re self managing it, and it does wear on you. It really does.

Dave:
Yeah, it takes time and you’re still working.

Dustin:
I work. So I was going to leave the auto industry altogether after I bought my maybe 18th house. I just said, Hey, thanks for the opportunity. I worked for a phenomenal place. I’ve only worked at one dealership my whole entire career. And I said, I really appreciate the opportunity, but it’s time for me to move on. I just can’t be here 50, 60 hours a week. And they gave me a great opportunity. They said, Hey, will you stay on part-time and we’d like to keep you here and you can travel. Do as you please, go as you please and work your customer base. And even when I started investing, they were nothing but supportive. They said, oh, hey, he’s going to start buying houses. You should do that. I, so I couldn’t ask for a better place to work, and I honestly don’t plan on going anywhere unless they fire me.

Dave:
That’s awesome. I mean, it sounds like the best of both worlds.

Dustin:
It really is.

Dave:
I think so many people focus on retiring, but mean if you have a little bit of each, have some income coming in from the car dealership, more money for you to invest, more things that you can use to pay your lifestyle and hopefully scale your portfolio,

Dustin:
You are absolutely correct. You hit it right on the button.

Dave:
Your portfolio level today, how much cashflow, if you don’t mind me asking, is it thrown?

Dustin:
Sure. I’ll break the numbers down to you. Exactly.

Dave:
Yeah, let’s do it.

Dustin:
Well, first of all, do not live beyond my means. So

Dave:
Good for you.

Dustin:
I’m very frugal, if that makes sense. But every single month I bring in $13,700 in rent.

Dave:
Is that rent? Okay,

Dustin:
That is what I bring in rent. So the yearly gross is $164,000, $164,400. Now, the monthly mortgage I pay is $3,600. That’s what I pay for 20 units total. Total $3,600, 3000, kidding. 605 to be exact,

Dave:
Yes. Well, I have some payments less than that, but man, that is wild for your entire portfolio.

Dustin:
Now, of course, that does not include, as we both know, it does not include my property taxes, and it does not include my insurance. So with my insurance and taxes, I pay $41,340 a year just for insurance and taxes.

Dave:
Okay, so you’re still at what, 1 23 before repairs and maintenance and vacancy and all

Dustin:
That? So total yearly, net 1 21, 1 40, take home every month. Everything broken down, everything paid for, excluding maintenance, of course not if it’s when it’s going to happen, is $6,650 take home. After all the bills are paid every single month.

Dave:
Wow, that’s awesome. And do you have an average of repair? That kind of expense

Dustin:
This year has been the hardest so far. And I was speaking with my buddy though, and I’m like, man, this has been my most expensive year. And he said, well, this is also the year that you have the most properties.

Dave:
Well, that’s true too. Yeah.

Dustin:
As of this year, I’m currently about 25,000 to $27,000 with maintenance fees this year alone.

Dave:
So you’re still making, I mean, net net, you’re still making four or five grand a month

Dustin:
Easily.

Dave:
That’s awesome. That’s incredible. And is that enough to support your lifestyle?

Dustin:
Oh, 100%. As mentioned, I don’t live beyond my means. So the average door broken down from Google Sheets, of course and everything, and the average door, I make $332 and 50 cents is the average price on if I was to break them down by 20. But as far as living my lifestyle, I’m also a big credit guy, so I do all the, I travel for free. I don’t spend money on hotels. I don’t spend money on traveling. Airplanes are free, rental cars are free, and I do all of that by playing the credit card game.

Dave:
Oh, I play the credit card game so hard, man. I love it. It’s the best. I’m so addicted.

Dustin:
I don’t remember the last time I paid for a hotel or flight or anything like that.

Dave:
Honestly, if you buy rental properties, it’s such a good game to get into. If you can pay off your, I’m not saying put things on your credit card that you can’t pay off, but if you’re going to buy stuff, buy it on a credit card, especially if you have an LLC for every one of your properties, which is something that I personally do. You open a new business card in every single name, and they’re always giving you these a hundred thousand point bonuses or whatever. If you spend three grand in the first six months and it’s a rental property investor, usually you spend three grand in the first six months, and so you’re just, it’s like a thousand, 1500 bucks worth of travel credit if you’re just going to buy it anyway. It’s the best game.

Dustin:
Yeah, so why would you not? Yeah,

Dave:
Exactly. I love

Dustin:
It. I was listening to your podcast the other day, and I was actually in the middle of doing what exactly what you and Henry said. I was like, well, okay, I’m going to rehab this house, so I’m going to use this Amex card that’s going to give me $20,000 interest free for a year, so I’m going to go ahead and I just gave it to my contractor. I said, here, just take this card. Buy what you got to buy. You know what I like? I’m always on a budget. I’m cheap. I know that you find great bargains. Here’s this credit card. Let me know when you’re done.

Dave:
If you could do that, if you trust your contractor, I love that. But just so everyone knows that if you didn’t listen to that episode, Henry and I were saying that you can do this if you have the money to pay off the credit card immediately. If you’re going to buy it, you might as well put it on the credit card because that’s an interest free loan. If you do it on a new credit card that has an interest free period. Or you could just do it to get the credit card points, which can offer you anywhere between one to 3% discount or cash back. Essentially on these things. You got to use credit cards responsibly. You can’t let your credit card debt rack up. Having that interest sit, there can be a huge financial trap. Do not do that. What we were just saying is if you had 20 grand in your bank account and you needed to go spend 20 grand on a property, you might as well put it on the credit card, get the point, get some interest free period, and then just use the 20 grand to pay it off later.
I know it might not sound like a lot, but if you do this over a long enough period of time, it really does add up to a lot of credit card points and money saved over a long period of time.

Dustin:
How else I use utilize credit cards too is I’ll pay the utilities for my houses, so I’ll include it with the rent or they’ll pay me back. But nonetheless, I’ll pay $3,000 in utilities every month on a credit card and then immediately pay it off after collecting rent.

Dave:
Yep, exactly. That makes a lot of sense. Well, Dustin, this is super exciting. Congratulations on your success. It’s incredible. Very cool. Unique portfolio. You’re building there. What’s next for you? Do you have any goals that you’re pursuing right now?

Dustin:
Currently in the middle of a flip right now. I’m almost done with it, and I’m hoping to make a substantial amount of money with this home just to put it and reinvest into another home. As far as the rental properties, I’m not actively looking, but if something comes along that I can’t pass up, then I’ll buy it. But 20 units right now, I’m doing okay. It’s rolling. Great tenants. I’m just going to stick with that. But the next step I want to go into flipping, but also as we mentioned earlier, I’m not opposed to finding another furnish finder house because I think you get the most bang for your buck off of the short-term rentals. You really do. It really pays off if you can do it right.

Dave:
Well, Dustin, thank you so much for joining us. Congratulations to you and your wife and working really hard to be able to achieve such an impressive portfolio in just about seven years. It’s really cool story that you got there. We really appreciate you being here.

Dustin:
I appreciate being here and anyone out there listening. It’s possible, especially listening to podcasts like this. You got to start somewhere. I started with one single family home, and I remember people doubted me, but when they doubt you, you’re the one that’s out there doing the work. It’s not them. It is possible, and especially with a good group of support, it’s possible to get in the door of real estate.

Dave:
Awesome. Well, I love that message and couldn’t agree more. That is absolutely possible. Just work on getting your foot in the door and you can find success just like Dustin has. So thank you all so much for listening to this episode of the BiggerPockets podcast. We appreciate you being here, and we’ll see you next time.