The Repeatable “Stack” Method to Buy Rentals Faster (and with Less Money)

Summary

Summary of "BiggerPockets Real Estate Podcast" Episode: "The Repeatable 'Stack' Method to Buy Rentals Faster (and with Less Money)"

Release Date: February 3, 2025

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Introduction

In this episode of the BiggerPockets Real Estate Podcast, host Dave Meyer welcomes Connor Andersen, a former BiggerPockets employee turned successful real estate investor. Andersen shares his journey of building a robust rental portfolio in Michigan using the repeatable "Stack" method, demonstrating how to acquire properties efficiently with minimal initial investment.

Connor Andersen's Entry into Real Estate Investing

Motivation to Invest

Connor Andersen's interest in real estate began during his college years. Reflecting on his time as a tenant, he was inspired to emulate his landlord's model of collecting rent to build wealth.

Connor Andersen [02:04]: "I want to be doing that someday and, you know, just padding my pattern, my wealth that way."

Initial Steps and Sacrifices

Post-graduation, Andersen moved to Denver and secured a job at BiggerPockets. Determined to invest, he adopted stringent saving strategies, including renting out his car and minimizing living expenses, to accumulate the necessary funds for his first property purchase.

Connor Andersen [03:32]: "I did everything that is advised for new investors to get started, and I cut my expenses to as low as I possibly could to save as much money."

First Investment: House Hacking a Townhouse in Denver

Acquiring the Property

With an FHA mortgage pre-approval of around $250,000 to $280,000, Andersen purchased a two-bedroom townhouse in Denver for $250,000. He lived in the basement while renting out the upstairs bedrooms, effectively living rent-free.

Connor Andersen [07:18]: "I was living for free."

Renovations and Tenant Management

Andersen undertook minor renovations, handling tasks like painting and trim while outsourcing more complex work. This balance allowed him to create a comfortable living space while maintaining his investment.

Connor Andersen [07:53]: "I handled, you know, some of the paint and the trim, but I hired out the drywall and the electrical and the carpet."

Transition to Michigan: Expanding the Portfolio

Move Back and First Michigan Property

After a year in Denver, Andersen relocated to Grand Rapids, Michigan, motivated by the city's growth and affordability. In May 2020, amidst the COVID-19 pandemic, he purchased a single-family home without physically touring it, relying on online research and intuition.

Connor Andersen [09:00]: "I just knew that's where I want to be."

Becoming a Real Estate Agent

To further his investment goals, Andersen became a real estate agent in Grand Rapids. This dual role not only provided him with additional income but also deepened his market knowledge, enabling him to handle approximately 150 property transactions over five years.

Connor Andersen [10:59]: "I've sold about 150 properties since then."

Second Investment: Acquiring a Duplex

Finding the Deal

Facing low inventory in Grand Rapids, Andersen turned to off-market properties by reaching out to owners of expired or canceled listings. This proactive approach led him to purchase a duplex, subsequently building a strong relationship with the seller.

Connor Andersen [19:22]: "I created my own inventory. I went and basically scoured every single expired listing."

Renovations and Cash Flow

The duplex required significant renovations due to poor initial conditions. Andersen financed these improvements through a Home Equity Line of Credit (HELOC) and managed to rent out each side for approximately $2,000 per month, resulting in a steady cash flow.

Connor Andersen [24:52]: "The cash flow is 2 to $300 a month."

Third Investment: Purchasing a Four-Unit Property

Strategic Acquisition

In December 2024, Andersen expanded his portfolio by acquiring a four-unit property listed at $630,000. Recognizing the inflated price, he negotiated down to $580,000 using his expertise as a real estate agent.

Connor Andersen [30:32]: "I use 5% down conventional financing to buy this with the owner occupant for $580,000."

Turnkey Renovations

The property was largely turnkey, requiring only minor cosmetic updates. This streamlined the renovation process, allowing Andersen to focus on occupancy and rental management without significant additional investments.

Connor Andersen [31:12]: "It's really just going to be paint and maybe carpet whenever tenants move out."

Future Plans and Strategies

Short-Term Rentals Exploration

Looking ahead, Andersen plans to delve into the short-term rental market. This move aims to diversify his investment portfolio and capitalize on the demand for flexible living arrangements in various regions.

Connor Andersen [32:06]: "I just want to have second homes in different parts of the country that I can take advantage of."

Financial Strategies for Cash Flow

To ensure consistent cash flow, Andersen focuses on maintaining a healthy spread between rental income and mortgage payments. He employs strategies like interest rate buy-downs to optimize financing and enhance profitability.

Connor Andersen [33:54]: "I just look for is just build a nice spread between rent and the monthly payment."

Market Analysis: Why Invest in Grand Rapids and the Midwest

Affordability and Demand

Andersen emphasizes Grand Rapids' affordability compared to national averages, fostering high demand for housing. The city's average sales price of around $380,000 makes it an attractive market for both renters and investors.

Connor Andersen [36:27]: "The average price point in the city of Grand Rapids is about $380,000, which is below the average sales price in the country."

Supply Shortage

A significant shortage of housing units in Kent County, Grand Rapids' core area, drives continuous rental demand. Andersen cites a local study indicating the need for 35,000 additional housing units over the next five years against an annual addition of only 2,000 to 3,000 units.

Connor Andersen [36:27]: "There's not a ton of supply...we need 35,000 more units of housing in Kent county to meet the demand."

Long-Term Growth Potential

With strong fundamentals like increasing population, economic growth, and limited housing supply, Grand Rapids presents a promising long-term investment landscape. Andersen is confident in the area's ability to sustain rent increases and property value appreciation.

Connor Andersen [36:27]: "There's a lot of demand for housing in Grand Rapids in the Midwest because it's affordable...prices will go up, rents will go up."

Conclusion

Connor Andersen's journey exemplifies the effectiveness of the "Stack" method in real estate investing. By strategically acquiring and managing properties, leveraging his role as a real estate agent, and focusing on high-demand markets like Grand Rapids, Andersen has built a sustainable and growing rental portfolio. His insights offer valuable lessons for both novice and experienced investors aiming to achieve financial freedom through real estate.

Connor Andersen [35:52]: "I think the Midwest is a fantastic place to invest."

Key Takeaways

• Start Small and Scale: Begin with affordable properties like townhouses and progressively move to multi-unit investments.

• Leverage Professional Roles: Being a real estate agent can provide unique market insights and networking opportunities beneficial for investing.

• Focus on Market Fundamentals: Invest in areas with high demand, affordability, and limited supply to ensure rental income and property appreciation.

• Creative Financing: Utilize strategies like HELOCs and interest rate buy-downs to optimize financing and enhance cash flow.

• Diversify Investments: Explore different property types, including short-term rentals, to diversify income streams and mitigate risks.

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Note: All quotes are attributed to the speaker with corresponding timestamps for reference.

Transcript

[Connor Andersen]

Foreign.

[Dave Meyer]

You could still hustle your way.

[Host]

Into a cash flowing real estate portfolio with upside despite today's market challenges. You hear me say it over and over.

[Dave Meyer]

I am long on the Midwest and I think house hacking is the best.

[Host]

Way to start investing. And if you haven't heard of the.

[Dave Meyer]

Stack method, it still works to exponentially.

[Host]

Scale with within just a few years.

[Dave Meyer]

And today we're speaking with an investor who is living proof that all of.

[Host]

These strategies can be huge winners in today's investing climate.

[Dave Meyer]

Connor Anderson used to work here at Biggerpockets and has since left to build.

[Host]

An impressive portfolio in Michigan. Using the stack method, he's progressed from a condo to a single family home.

[Dave Meyer]

And he's now onto multi unit properties.

[Host]

And is finding both cash flow and future upside despite today's market conditions.

[Dave Meyer]

If you're not familiar with the stack.

[Host]

Method or you're still not convinced about the Great Lakes region, I think this conversation will give you a lot to think about and to consider for your own portfolio.

[Dave Meyer]

Let's bring on Conor.

[Host]

Connor Andersen, welcome to the BiggerPockets podcast.

[Connor Andersen]

Thanks for having me, Dave. I'm excited to be here.

[Host]

I'm excited too. You are joining a growing tradition of former Biggerpockets employees who have become successful real estate investors and come back to join the show and update us on your life. It's great.

[Connor Andersen]

I know there's a couple other people that have done the same thing. I want to share my story with everyone here.

[Dave Meyer]

Great.

[Host]

Well, we'll get to what you're up to today, but let's just start with sort of the reasons that you got into investing in the first place. When was that?

[Connor Andersen]

I remember thinking specifically I was sitting in my, you know, six bedroom house that I was renting with my friends in college. And the landlord, they were just, you know, kind of a mom and pop. They'd show up, you know, once a month, collect checks from us, and they didn't seem like they were all that, you know, special. And I'm like, why do this? And I'm like thinking like, all right, you know, they're collecting 500 bucks per person here. I want to be doing that someday and, you know, just padding my pattern, my wealth that way.

[Host]

Yeah, it's a very good thought. I really cringe thinking about how poorly I treated the rental properties. I left now as a rant like, yeah, oh my God, how, how irresponsible was I?

[Connor Andersen]

It's funny, I've seen those properties that I lived in pop up for sale and my Brother's like, you, we should buy one of these. And I just think back to how poorly we treated them, and I'm like, absolutely not. I do not want to be on the other side of that.

[Host]

I know the problems in that property because I created the. Yeah, we're avoiding those. Okay, so you're in college, and then how did you go from listening to the podcast, interested in real estate, to actually investing?

[Connor Andersen]

Yeah. So graduated college, moved out to Denver, and that's, you know, when I ended up with a job at Biggerpockets, because I was a big fan of them prior. Just kind of connected with Scott Trench and Craig Kerlop, and, you know, landed a job there doing advertising sales. But truth be told, I did everything that is advised for new investors to get started, and I cut my expenses to as low as I possibly could to save as much money. So I was renting out my car on Touro and then biking 10 miles to work every single day. I was keeping my grocery expenses super duper low. Make me spend, like 50 bucks a week on groceries. I even use PTO to take a day off of work at Bigger Pockets, still kind of collect my salary, and then work for my friend's tent rental company to save up extra cash.

[Host]

So double dipping on Bigger Pockets. Yes. You're allowed to.

[Connor Andersen]

Yeah. So I was doing anything and everything I could to scrape together enough money to, you know, buy that first property and house hack with an FHA mortgage. So that's what I did from probably six to eight months of just absolutely grinding it out, saving to. Yeah. By that first house hack.

[Host]

I feel like I need to ask you to share the story about living in Craig's house, because I know you were. You were saving up a lot of money. Can you tell us about your. Your living arrangement with Craig Kurlop, who, if you don't know him, he's been on the show many times. He wrote a book on house hacking for Biggerpockets.

[Connor Andersen]

Yeah. So it's a funny story, but Craig and I were good friends, and we came up with the arrangement that incentivized me to buy property as quickly as possible, but also saved me money. So I moved in with Craig into a second house hack and was paying him $400 a month in rent, but my rent went up $50 a month until I bought a house. So basically, he was trying to get me out of there, you know, out of there and into investing as quickly as possible. So it was a fun arrangement that we. We put together, and I think I was There for like maybe six or so months.

[Host]

That's hilarious. A tough love situation. You started at 400 but you're paying 700amonth. That must be very motivating. I would like. That's pretty high pace of inflation. It's like 10% a month.

[Connor Andersen]

Yeah. I have never heard of anyone. Right. Going up 50 hours a month. It's maybe 50 hours a year. So yeah, I was motivated to get.

[Host]

Out of there, but it worked.

[Connor Andersen]

Yeah.

[Host]

Can you tell us a little bit more the numbers about what target price you were looking at for your first deal and how much you needed to save up?

[Connor Andersen]

Yeah, so I was pre approved for around like 250 to $280,000. And this was back in late 2018. So with an FHA mortgage, I think I ended up all in tools, spending about $15,000 out of pocket for the down payment and closing costs on that purchase. And I remember closing on the property. I showed up to the closing table with my mattress strapped to the top of my car. I got made fun of by my real estate agent and my lender who and I was so excited. I want to move into the house. But I had like maybe fifteen hundred dollars, two grand to my name after that closing. But I was, I was excited to move in.

[Host]

That's unbelievable. I have never heard of or seen someone showing up ready to move to a closing table. But I love the enthusiasm.

[Connor Andersen]

Yeah.

[Host]

So you also mentioned something that I want to call out, which is that it sounds like you got pre approved for your mortgage like pretty early on, which is a step I think a lot of people skip when they first get started and spend this time wondering what they'll qualify for or how much money that they need to save up. But just wanted to recommend to everyone to do what Conor has done. If you're trying to get your first deal because he knew exactly what he was pre qualified for, you can build a buy box around that and you can set a savings target and sort of back into how long it's going to take you to buy a goal. So great, great work there.

[Dave Meyer]

When you were trying to look for.

[Host]

This first deal, did you have a long term strategy or were you just trying to buy anything that you could afford and sort of make work?

[Connor Andersen]

Yeah, so I was really just trying to buy anything that I could afford because you know, Denver was expensive. My income wasn't crazy high yet. So that $260,000 range is basically all I could afford. And in Denver that basically meant I could buy a townhouse. So I Found a, a townhouse that was two bedrooms, two and a half bathrooms with an unfinished basement. Knowing that I could finish out that basement, I lived in the basement bedroom. And then I rented out the upstairs bedrooms for about $800 a month. And I accomplished goal. I was living for free.

[Host]

Awesome.

[Connor Andersen]

So, yeah, took that pre approval, worked with what I had, and found a property that made sense.

[Host]

Were the roommates that you had random people you just met, you found tenants or are they people you knew?

[Connor Andersen]

No, they were friends. One of them was a friend from college who also moved to Denver and the other was a. From the gym, but.

[Dave Meyer]

Awesome.

[Connor Andersen]

Yeah, I think that's the best way to get started is, you know, find some friends that are looking to rent.

[Host]

Yeah, it's a, it's such a good way to do it. It makes a lot of sense. So you wound up doing a little bit of value add to that deal though too. You finished out the basement. Did you do it yourself or pay someone to do it?

[Connor Andersen]

A little bit of each. I handled, you know, some of the paint and the trim, but I hired out the drywall and the electrical and the carpet.

[Host]

Okay, so that was your condo. You house hacked it. How long did you live there?

[Connor Andersen]

I was there for about a year and then I moved back to Michigan from Denver to be closer to family friends, and that's when I bought my next property. But I still own that property today. I've had some long term tenants there and it still cash flows a couple hundred dollars a month to this day and it's gone up quite a bit in value. So that's been a great first deal for me.

[Host]

All right, so you left Denver, you moved to Michigan where you're from. What, what did you do when you got there?

[Connor Andersen]

I lived with family and then bought my property in Grand Rapids. And I never actually lived in Grand Rapids, but I just knew that it's second biggest market in Michigan, it's quickly growing, it attracts a lot of young people. So I just knew that's where I wanted to be. So this was the midst of COVID when I was buying this property. I couldn't actually tour it until I got under contract. So I just, you know, one day looked on Zillow, drove by six houses that I thought were interesting to me and ended up writing an offer on one of them. And it's been a fantastic property.

[Host]

You just drove by it and wrote an offer? Yeah.

[Connor Andersen]

Drove by it, wrote an offer. Yeah.

[Host]

That's awesome. In a city that you barely knew.

[Connor Andersen]

Yeah, I had spent some time There maybe for a day or an afternoon, stuff like that. But I never actually lived there, but I knew it's just where I want to be.

[Dave Meyer]

Yeah.

[Host]

And great fundamentals in the market. So that totally makes sense. And how did you afford that? Because sounds like you sort of did the hustle thing for the first deal. How did you finance the second one?

[Connor Andersen]

So finance the second one with a 5% down conventional mortgage. But since I was house hacking for a year, it was very easy to save up that cash. I didn't have to rent out my car and never eat out for an entire year. I was able to kind of enjoy some luxuries, drove to work. Yeah, it was a lot easier to save up for that second property because my living expenses were so low from house hacking the first time around. So that's why you get into this, that's why you house act, because it allows you to slowly build up and save money pretty easily.

[Dave Meyer]

Awesome.

[Host]

So you found that you moved into it and then just, I assume for a little while focused on building out your agent business.

[Connor Andersen]

Yeah. So when I was living in that single family house, I did have roommates for a period of time, but thankfully the mortgage on it so low it was like, you know, $1400. So with roommates paying five, $600, you know, that cover the vast majority of the cost. But that's when I really started hitting the ground running as a real estate agent in Grand Rapids. So this was May of 2020 that I bought that property for, you know, $225,000, gone up quite a bit in value, and right now rents for about $2,400 in cash flows pretty well. But awesome. In those four and a half, five years since then, I've become a very successful real estate agent, focusing with investors. Have sold about 150 properties since then. And the main people that I work with are investors just like myself, many of them house hackers, some of them out of state investors or insane investors, along with, you know, helping my family and friends buy their properties as well.

[Host]

That's great. I'm curious and congratulations on building such a great business. But now that you've been an agent there for a long time and you know the market so well, did you make a good buy on the. On the single family?

[Connor Andersen]

I did. I completely lucked out. I didn't know really much about the market other than like, hey, this seems like a good spot. But I absolutely love that property. I think about in the perfect location. I don't think I could build a house within a different block. Like I, that's just where really I would like to be long term. So no, I really lucked out.

[Host]

It's so funny because I know I'm like the data person, but intuition goes a long way with these types of things. Even if you're just driving around, you just get a gut feel of where you want to live because you will get a sense for which places are growing and which ways are most aligned with your strategy. So good job on that.

[Connor Andersen]

Yeah, thank you.

[Host]

All right, so you bought your condo, you bought your single family. You're building an agency business. I want to hear what comes next, but first we got to take a quick break.

[Dave Meyer]

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[Host]

We're back with Connor Andersen talking about how he went from house hacking and hu having a growing and successful portfolio.

[Dave Meyer]

Connor, we talked about your deal in.

[Host]

Denver, your single family home as your first property in Grand Rapids. What did you do after that one?

[Connor Andersen]

Yeah, so I bought that property, the single family house, in May of 2020 and then became a real estate agent and during that time quit my job at BiggerPockets and went from W2 to 1099. And unfortunately I had to wait a couple of years until I was able to buy that next property because financing was no longer easy for me as a 1099 employee without any sort of track record.

[Host]

Yeah, you know, I'm sure you hear on the podcast too, people are always talking about whether they should become a real estate agent in this decision and there's no right or wrong answer, I think, to this. But the very important component of this is that getting loans as a 1099 employee, whether you're an agent or any other type of 1099 employee is a lot harder. You could do DSCR loans, but those are more expensive. But so it's just something to take.

[Connor Andersen]

In consideration basically that the lender just needs to see that you have strong steady income coming in from being a 1099 employee. In my case, I kind of had like a half a year my first taxes, and then I had two full years, you know, after that before I was able to buy my next property.

[Host]

And what did you buy?

[Connor Andersen]

It was 2023, so there was not a ton on the market at the time. Listings were pretty low. So I created my own inventory. I went and basically scoured every single expired listing, withdrawn listing or canceled listing in the area that I wanted to live that was a duplex or two to four unit property and reached out to every single one of those sellers that had a property that I thought was attractive. Got one callback from a guy who had 13 or 14 properties that he was looking to offload. So I picked my favorite one, closed on that with an FHA mortgage. Use my commission to cover the vast majority of my down payment. It's actually kind of funny. I collected a check at this closing table. Wait, how so? 3% of my commission covered 3% of the down payment? Yeah, I had $5,000 in closing costs that I had the seller pay for because there was some work that needed to be done. I closed strategically on like the first or second day of the month. So I got all of the rent for that month plus their tenant security deposit, which is, it's not my money, it's the tenant's money, but still is money that was credited to me. And then of course I had my earnest money deposit that I paid up front, but I think all in told my cash out of pocket to close on that property was like five grand. But I collected a check at the time.

[Host]

That's unbelievable.

[Connor Andersen]

It was, it was very weird experience. The lenders were confused. They didn't know what to do.

[Host]

Yeah, I was going to say you've been a part of. You just said 150 transactions since. Have you ever seen any other buyer get a check?

[Connor Andersen]

No. No buyers ever pull that off.

[Host]

Anyone listening? If you've had this happen, please let me know. I'm very curious if this is a once in a lifetime thing. So let's dig into this one because obviously 2020, 2023, big shift in market conditions. First of all, like, you know, if you had looked at an on market deal Was there anything attractive or was going off market and sort of grinding it out the only way to find something that really made sense?

[Connor Andersen]

Yeah, just the inventory has been a struggle for the last five, six, seven years. Like, it just is an issue, especially here in Grand Rapids. So there was just not many deals to pick from. There was maybe 10 to 12 listings for multifamily properties on the market. Compared to right now, we're seeing like 40 to 50. So it was slim pickings. So I had to kind of go off market to even find something that I would want to live in.

[Host]

Yeah. How much time did that take you?

[Connor Andersen]

I'd say I might have gotten lucky, but it did not take terribly long. Like I mentioned, I kind of, you know, went through all these expired listings, canceled listings, and reached out to probably 20 or so people and got a response within a week.

[Host]

Okay, so 20 people in a week.

[Dave Meyer]

Yeah.

[Connor Andersen]

But I found the right guy because I bought that property and then built a relationship with him, built some trust with him, and he decided to offload his entire portfolio with me that year. So not only did I buy one of his properties off market, I sold another 11 properties for him that year, which was. It was about 4 to 5 million dollars worth of real estate that I sold for him that year.

[Host]

Four to five, not 45, right?

[Connor Andersen]

Yeah, 425.

[Host]

Yeah.

[Dave Meyer]

Okay.

[Host]

I was gonna say. Wow. So we talked a little bit about one of the initial drawbacks of becoming an agent of 1099, but it sounds like this is one of the real benefits that you've experienced by being an agent. Do you think you could have pulled this off if you weren't an agent yourself? This type of off market deal finding?

[Connor Andersen]

I think I could have found the deal, yes. But I definitely would not have been able to build the relationship with that owner and be like, hey, I want to sell your properties for you if I was not licensed. And I don't necessarily recommend everyone get licensed if they're going to be a real estate investor or not. So I kind of don't recommend you get your real estate license if you're just going to be an investor.

[Host]

Agreed.

[Connor Andersen]

But vice versa, if you are a real estate agent and you're not investing in real estate, you need to start considering that.

[Host]

My advice to people is usually that to be an investor, you just need income. You know, it's like you need a job, I believe. And if being an agent is going to get you a lot of income that you can use to invest, great. If you have another job, that's going to make you more money. Probably just stay there and invest the money that you have there. But she said there's obviously trade off.

[Connor Andersen]

Yeah, absolutely.

[Host]

So it's interesting about your story, Connor, is that you sort of have gone in this, like slowly escalating path. Right. You started with a townhouse that you went to a single family home. Did you purposely then go to a duplex to try and like start to get some scale in terms of number of units?

[Connor Andersen]

Yeah, I just kind of took the cars that I was dealt and you know what? I was looking to buy opportunities that I thought would make sense. And you know, when I first started investing, all I could really afford was a townhouse. When I bought the second property, there wasn't really any duplexes available. This next time around, you know, was able to find a multifamily property that made sense and for the fourth deal, you know, was able to buy something even bigger. So I've just kind of been taking advantage of what was out there in front of me and available at any given time.

[Host]

Well, I want to talk about the bigger thing too in just a minute, but I want to call out that, you know, Brandon Turner, former host of this podcast, has this concept of the stack method where he advises people to buy, you know, in your first year buy a single family, and then in your second year or your second deal, even if it takes you more than another year, go buy a duplex, then the following year do a fourplex. And you've sort of embodied that. I think it's a great strategy. I personally like getting to that 4 Plex 6 Flex Apex. You don't necessarily need to get into these like huge multifamily in my opinion. But I really think for people starting it is a good mindset to have. And it sounds like you just did that sort of naturally.

[Connor Andersen]

Yeah, absolutely.

[Host]

All right, so tell us about the duplex. You got paid to buy this duplex. Somehow I assume you moved into it and house hacked and then was it cash flowing? Did you have to do any work to it?

[Connor Andersen]

Yeah. So this duplex is a three bed, two bath each side. And there's not very many side by side 3 bed, 2 bath duplexes in this portion of town. So I knew it was a very rare opportunity that I want to take advantage of. One side was pretty nice, has some great tenants in there. The other side was gross. Had just kind of some guys that, you know, worked at bars late nights. One was a drummer and there was just, you know, always empty beer cans and Cigarettes being smoked on the front porch. So when I got in there, I had to do a ton of renovations. Basically I did everything but take it down to the stud. So I did all brand new electrical because there was knob and tube in there. Did all new plumbing because there's lots of galvanized plumbing in there. All new flooring, all new paint. The kitchen we ripped out because the cabinets were so gross and stained from their cooking or whatever. They just, they just cannot be salvaged. And then, you know, the bathrooms had to reglaze the showers because they were just moldy beyond belief and, you know, could not be cleaned up. So did everything to that property that you basically can. And the way that I paid for that was with a HELOC that I took out of my old primary residence, that single family house before I moved out of it.

[Host]

Oh, nice.

[Connor Andersen]

I took a HELOC on that and use that for the, the renovation cost on the duplex.

[Host]

How much did you budget for the renovation? Did you hit the target?

[Connor Andersen]

I was budgeting like 40 to $45,000. I think it came in at about $50,000. Had like one hiccup with the city. The city made me basically reinstall the electrical service because it was too close to a set of stairs. So that was annoying. That cost me about three grand. And then it added air conditioning as well in the summer months. And that, you know, boosted up the budget a little bit, but made it a heck of a lot nicer to live in.

[Host]

Okay, great. And then when you leased it up, were you able to get the rents that you were expecting?

[Connor Andersen]

Yeah, I got a little bit higher rents the first go around. So I've had a couple different tenants now on that property and been getting between 1900 and 20, $100 a month in rent for the the each each side. So it is renting for at or just above the 1% rule, because I bought for 410.

[Host]

Oh, that's amazing. Okay, so 410, but you had a total of like 460 in it by the end.

[Connor Andersen]

Yep.

[Dave Meyer]

All right, great.

[Host]

And now is it cash flowing?

[Connor Andersen]

It does cash flow. The, the mortgage payment, including the HELOC, is about $3,200 a month. And then getting rents of, you know, 2 grand each side is, you know, 4 grand a month. So tossing about $300, $400 aside for vacancy and repairs, the cash flow is 2 to $300 a month.

[Dave Meyer]

That's awesome.

[Host]

That's great. And sounds like a really good deal. I assume it's in a Good part of town and that you think it's like got some long term potential.

[Connor Andersen]

Yeah, it's in a neighborhood called Heritage Hill in Grand Rapids and it's super close to the wealthy street district, which has all the coffee shops, the restaurants, the cocktail bar. It's just the places that, you know, young professionals oftentimes want to be.

[Host]

And so what was the experience like doing your first, sort of sounds like a big renovation project.

[Connor Andersen]

It was somewhat stressful because I was doing this, I mean, while living in the property, sometimes during the renovations, I was actually living there. So, you know, living in a construction zone is that fun. I hired out a good portion of the work, so all the electrical, all the plumbing, refinishing the floors and the carpet, I hired out. But I was doing all the painting my dad and I did, you know, installed the kitchen. So I was there basically, you know, every single day with some help from my family, putting together this property while also selling a number of properties and getting constant phone calls from my buyers, my sellers. It was a lot of work. Took about three months to do the renovation and I'm very happy that I did it.

[Host]

Cool. Well, that sounds great. You alluded earlier to buying a even bigger property, which I want to hear about. But first we got to take a quick break. Stick with us.

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[Host]

BiggerPockets podcast talking about how he has built a successful portfolio starting before the pandemic, but has continued to grow even in the higher interest rate era. He bought a duplex, renovated It Connor, what'd you do after that?

[Connor Andersen]

Yeah, so was in that duplex for about a year and a half and then just recently bought a four unit property that I'm also house hacking.

[Host]

So four house hacks in a row, right? Yeah, over five or six years.

[Connor Andersen]

Started in December 2018. And yeah, this last one was purchased December of 2024. So yeah, six years to buy four properties.

[Dave Meyer]

Awesome. Great.

[Host]

So tell us a little bit about the deal. What, what did it look like? How'd you finance it?

[Connor Andersen]

Yep. So this deal was, it was listed on the market. It was a four unit about a mile to the hospitals here in Grand Rapids. And it was originally listed at $630,000, which I just thought was a very high price. You know, I'm paying attention to the market all day, every day for myself and for my clients and I'm like, that's just too high. So waited for probably 30 to 40 days on market before I kind of finally wrote an offer on it and use 5% down conventional financing to buy this with the owner occupant for $580,000.

[Dave Meyer]

Wow.

[Host]

Okay, that's great. Are you doing another big renovation or how's the condition of the property right now?

[Connor Andersen]

Yep, so they're all two bedroom, one bath units. And thankfully the previous owner did a fantastic job of renovating the property to the point where it's completely turnkey. The only thing I plan on doing to the property is, you know, when tenants turn over, just getting going from green paint to some other nice color. But yeah, it's really just going to be paint and maybe carpet whenever tenants move out. But it says turnkey as it can get.

[Host]

Oh, that's awesome. So you're up to eight units now, Correct?

[Dave Meyer]

That's great.

[Host]

And do you have a strategy for where you want to take your portfolio from here?

[Connor Andersen]

I think I just want to continue to slowly grow. And thankfully, you know, since I have been able to build up a sizable portfolio and you know, make an income as a real estate agent, I think, you know, can of have that more exponential type growth. But my next property, I, I want to start trying the short term rental space.

[Host]

Oh, nice.

[Connor Andersen]

Mainly because I just want to have second homes in different parts of the country that I can take advantage of.

[Host]

Of course you do. I mean it's awesome.

[Connor Andersen]

That sounds fantastic.

[Host]

Yeah.

[Connor Andersen]

But no, I closed on this property less than two months ago. I haven't had my first mortgage payment, so I don't have a dialed in plan of exactly what's going to be next to when, but I think I might dabble in the short term rental space next.

[Host]

You know, we've interviewed a lot of people on this show who started before the pandemic and things have definitely changed. I'm curious, what gives you the confidence and the ability to find deals and keep wanting to invest even in a different era of real estate investing?

[Connor Andersen]

Yeah, I think, I mean there's just two things that I pay attention to when analyzing a deal and that's how much will it rent for and what's my mortgage payment. And as long as I can have a healthy enough spread between those two numbers, I think it's going to be a good long term deal. So for this, this four unit that I bought, I know that hey, market rents are going to be about fifteen hundred dollars per unit. So that's six thousand dollars of rent coming in and the mortgage payment on it is right around 4, 800 to 5 grand. So I have like a thousand dollars of spread there that I can kind of make sure that I am afloat on that property for a very, very long period of time. You know, there might be some years where $800 of that difference is going towards vacancy and repairs and only 200 of it is cash flow on a monthly basis. But there'll be other years where, you know, maybe it's the opposite and only 200 of expenses I average on a monthly basis and 800 is cash flow. So that's really all I look for is just build a nice spread between rent and the monthly payment.

[Host]

And you've done this by entirely house hacking. And people who listen to the show know that I am, I'm long on the Midwest. I think affordability is a really good, important metric. Is it possible to generate cash flow in Grand Rapids or in other markets in Michigan where you, where you operate? If you're not house hacking right now.

[Connor Andersen]

There definitely is the ability to create cash flow. Is it as good as the cash flow that we saw in years where the interest rates are 3, 4 or 5%? No. But I think with getting, you know, creative and also especially if you're managing your own property, yes, it is definitely possible to cash flow rental properties. One way that I have gotten creative is I did a 2:1 interest rate buy down on this property, which I'm not sure if you've talked about in this show, but basically I got the seller to pay upfront concessions to where my interest rate on the property for the first year is 2% lower than the current interest rate, the next year is 1%. Lower. And then after that it's, you know, the seven half percent interest rate that I got on the mortgage. But that allows me to kind of do two things and it's increase rents over that period of time and also maybe pull off a refinance if rates do come down. So I think that is another potential option for people out there that are looking to, you know, create their own cash flow in this market.

[Host]

Could I ask you what it costs to do that to on?

[Connor Andersen]

It's about two and a half percent seller paid concessions.

[Host]

And what was the purchase price?

[Connor Andersen]

$580,000.

[Host]

So it was like 11 grand or something?

[Connor Andersen]

Yeah, something like that, yeah.

[Host]

Well, Connor, congrats on building this successful portfolio. It sounds like you've, you've done well, both as an investor and as an agent, which is great to see for our former employees at Biggerpockets. We appreciate it. Is there anything else you think, you know, either as an investor or an agent, you think our audience should know maybe about investing in the Midwest right now? Because we do get a lot of questions about that.

[Connor Andersen]

Yeah, I think the Midwest is a fantastic place to invest. And, you know, I don't know everything there is to know about, you know, other cities in the Midwest, but I know a lot about Grand Rapids specifically. The two biggest things that I look at are, you know, supply and demand. I know you're always talking about this, Dave, but there is a lot of demand for housing in Grand Rapids in the Midwest because it's affordable. The average price point in the city of grand rapids is about $380,000, which is below the average sales price in the country. So it's an affordable place to live. And because of it's an affordable place to live, there's lots of demand.

[Dave Meyer]

Yeah.

[Connor Andersen]

On the inverse, there's not a ton of supply. In my county. Here in West Michigan, they do a study and the study showed that we need 35,000 more units of housing in Kent county to meet the demand that there is over the next five years. And last year they built like two or three thousand units of housing in Kent County. So, like, there's still going to be a continuous of shortage of housing in Grand Rapids and Kent county specifically. So I feel pretty confident that with those two metrics, prices will go up, rents will go up, and it'll be a great place to invest.

[Host]

Yeah, that's a great analysis and I just want everyone to, to think about that because I obviously, I say the Midwest is a very big area. Not everywhere in the Midwest is a good place to invest. In fact, most places probably aren't. But I just think there are cities like what what Connor is mentioning here that have really strong fundamentals and are relatively affordable. Doing that type of analysis, whether it's in the Midwest or anywhere else, is exactly what you should be thinking about figuring out if there's going to be sufficient demand to fill your rental properties, if there is going to be a good balance between supply and demand so that prices and rents keep moving up modestly. They don't have to be amazing, but moving up near the pace of inflation, doing something a little bit better than that, that's what we need to be looking for as investors. So Connor, again, congrats, man. It's great to see you and thanks so much for joining us today.

[Connor Andersen]

Thank you, Dave.

[Host]

And thank you all so much for listening to this episode of the BiggerPockets podcast. We'll see you soon.

[Dave Meyer]

Thank you all for listening to the BiggerPockets Real Estate Podcast. Make sure you get all our new episodes by subscribing on YouTube, Apple, Spotify, or any other podcast platform. Our new episodes come out Monday, Wednesday and Friday. I'm the host and executive producer of the show, Dave Meyer. The show is produced by Ian K. Copywriting is by Calico, content and editing is by Exodus Media. If you'd like to learn more about real estate investing or to sign up for our free newsletter, please visit www.biggerpockets.com. the content of this podcast is for informational purposes only. All host and participant opinions are their own. Investment in any asset, real estate included, involves risk, so use your best judgment and consult with qualified advisors before investing. You should only risk capital you can afford to lose, and remember, past performance is not indicative of future results. Biggerpockets LLC disclaims all liability for direct, indirect, consequential or other damages arising from a reliance on information presented in this podcast.