11 Rentals in 4 Years with SMALL, Affordable Multifamily Properties

Summary

BiggerPockets Real Estate Podcast Summary Episode: 11 Rentals in 4 Years with SMALL, Affordable Multifamily Properties
Release Date: April 28, 2025
Host: Henry Washington (Guest Host)
Guest: Jesse Walters

1. Introduction

In this engaging episode of the BiggerPockets Real Estate Podcast, guest host Henry Washington sits down with Jesse Walters, a dedicated real estate investor from Columbia, Missouri. Jesse shares his inspiring journey from owning a coffee wholesale business to amassing an impressive portfolio of 11 rental units within four years. This conversation delves into practical strategies for navigating the current real estate market, leveraging relationships with local banks, and the transition into house flipping.

2. Jesse’s Background: From Coffee to Real Estate

Jesse Walters began his professional journey as a coffee roaster, running a wholesale business that supplied cafes, restaurants, and grocery stores. During his seven-year tenure, Jesse witnessed the volatile nature of the commodity market firsthand.

Jesse Walters [02:03]: "We ran through Covid through all that too, and, like, coffee prices, like, doubled during that time. And it was just... a lot of sleepless nights in that business, for sure."

The turning point came when Jesse's wife, Megan, became a licensed real estate agent. Observing Megan's success and commissions sparked Jesse's interest in real estate investing.

Jesse Walters [03:07]: "I started seeing her commission checks and like, what I was bringing in, you know, I'm selling a three dollar cup of coffee. I'm like, you know, what am I doing with my life? I need to figure this out."

In 2021, Jesse and Megan seized an opportunity to purchase their first rental property, marking the beginning of their real estate investment journey.

3. First Investments: Single-Family Homes

Jesse's initial foray into real estate involved buying single-family homes listed on the MLS (Multiple Listing Service). With a straightforward strategy—putting 20% down on a property that cash flows positively—they successfully managed to generate monthly income despite prevailing interest rates.

Jesse Walters [03:26]: "We bought our first rental property. It was on MLS. We put 20% down. There was nothing crazy about it. And the thing, cash flowed."

His first property featured a mortgage, taxes, and insurance totaling approximately $850 per month, while rental income was around $1,600, ensuring a positive cash flow.

4. Scaling Up: Multifamily Properties and Cross Collateralization

Building on their initial success, Jesse expanded their portfolio by acquiring small multifamily properties. A pivotal moment came with the purchase of a fourplex in 2023, utilizing a strategy known as cross collateralization. By leveraging equity from existing properties, Jesse was able to secure additional financing without significant out-of-pocket expenses.

Henry Washington [08:09]: "You said you were able to do something that a strategy I like to use. Essentially it's called cross collateralization... Was this a local bank that you used or what kind of, what kind of lender was this?"

Jesse Walters [08:41]: "Yeah, correct. It's a small local bank here in my area. They offered it to me like, hey, you should do this... explain this one more time how this works."

This approach not only facilitated the acquisition of multifamily units but also set the stage for sustainable business growth by maintaining positive cash flows across the portfolio.

5. Relationship Banking and Leveraging Equity

Jesse emphasizes the importance of building strong relationships with local community banks. Unlike larger banks that often sell off loans, community banks retain them, fostering trust and collaboration with local investors.

Henry Washington [09:02]: "That's the power of relationship banking... If you have a relationship... these banks just bring you these ideas and really help you grow."

This relationship banking strategy enabled Jesse to access lines of credit and other financial tools that significantly aided in scaling his real estate investments.

6. Transition to House Flipping

In addition to rental properties, Jesse ventured into house flipping—a move that was initially unintended but proved financially rewarding. His first flip involved purchasing a condo below market value, making strategic renovations, and selling it for a substantial profit.

Jesse Walters [21:23]: "I kind of flipped my first house on accident... It turned out she needed to go to a nursing home... we can rent this thing out... but it's not really going to cash flow much."

By renovating the property with minimal investment, Jesse successfully increased its market value, showcasing the versatility of his investment strategies.

7. Flipping Strategy and Execution

Jesse's flipping strategy centers on purchasing properties below market value, conducting essential cosmetic updates, and selling them at a premium. His honest and empathetic approach during transactions, especially with tenants, sets him apart in the competitive flipping market.

Henry Washington [22:00]: "I often tell people that real estate is not a real estate business. It's a people business that transacts in real estate... Being of service to people is the best way for me to grow my business."

This people-centric approach not only facilitates smoother transactions but also builds a positive reputation, leading to more opportunities through referrals and repeat business.

8. Current Investment Strategy and Future Plans

Presently, Jesse manages a balanced portfolio of single-family homes, multifamily units, and flipped properties. Looking ahead, he plans to continue leveraging his relationship with local banks and expand into new construction projects, such as building a triplex on a newly acquired vacant lot.

Jesse Walters [27:43]: "A big change we're making this year... All those proceeds, we're 1031-ing it into a vacant lot a block over. We are going to build a brand new triplex on that."

By adhering to the 1% rule—where monthly rent equals or exceeds 1% of the property's purchase price—Jesse ensures that his investments remain profitable even with minimal initial expenditures.

9. Advice for New Investors

Jesse offers invaluable advice for aspiring real estate investors:

Join a Like-Minded Community: Being part of a supportive group provides confidence and collective problem-solving.

Jesse Walters [31:18]: "Get in with a group of like-minded people. It gave me so much more confidence."
Leverage Professional Relationships: Having an experienced real estate agent or broker, like his wife Megan, can provide critical insights and data-driven decisions.
Understand Local Markets: Real estate is highly local. Jesse advises investors to identify and exploit niche opportunities within their specific markets.
Be Service-Oriented: Prioritizing the needs of clients and tenants fosters trust and long-term business success.

10. Conclusion

Jesse Walters' journey from a coffee wholesaler to a successful real estate investor encapsulates the essence of strategic investment and relationship-building. His multifaceted approach—balancing rental properties, multifamily units, and house flipping—demonstrates adaptability and keen market insight. For those contemplating entering the real estate market or looking to expand their investment portfolios, Jesse's story serves as an inspiring blueprint for achieving financial freedom through thoughtful and principled investing.

Notable Quotes:

Henry Washington [00:00]: "Guess what, folks? You can still buy real estate today and build an investment portfolio that cash flows monthly and build wealth long term."
Jesse Walters [03:07]: "I started seeing her commission checks and like, what I was bringing in, you know, I'm selling a three dollar cup of coffee. I'm like, you know, what am I doing with my life? I need to figure this out."
Jesse Walters [08:41]: "It's a small local bank here in my area. They offered it to me like, hey, you should do this... explain this one more time how this works."
Henry Washington [22:00]: "I often tell people that real estate is not a real estate business. It's a people business that transacts in real estate... Being of service to people is the best way for me to grow my business."
Jesse Walters [31:18]: "Get in with a group of like-minded people. It gave me so much more confidence."

This comprehensive summary captures the essence of Jesse Walters' real estate investment strategies, his transition from a different industry, and the valuable insights he shares for both novice and seasoned investors.