Changing His Family’s Future with 3 “Boring” Rentals and $2,500/Month Cash Flow

Summary

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Podcast Summary: Real Estate Rookie – “Changing His Family’s Future with 3 ‘Boring’ Rentals and $2,500/Month Cash Flow”

Hosts: Ashley Kehr & Tony J. Robinson
Guest: Kadeem Ali
Date: February 23, 2026
Theme: How a graduate student with no real estate background and a very modest budget used a straightforward approach to build a life-changing rental portfolio, generating $2,500/month in cash flow from “boring” properties.

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Episode Overview

This episode is an inside look into the journey of Kadeem Ali, who began his real estate investing career with less than $10,000 and a keen sense for stretching student loans. With no prior experience, Kadeem used common-sense strategies—primarily house hacking multifamily properties in Chicago—to build a rental portfolio totaling three properties, which now support paying his family’s own housing expenses and planning for his children’s future. The conversation highlights the accessibility of real estate investing for true beginners, the importance of starting “before you’re ready,” and the impact of persistence and basic math over “fancy strategies.”

“You don’t need to wait until everything is perfect to get started.”
— Tony J. Robinson (00:20)

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Key Discussion Points and Insights

1. Kadeem’s “Aha!” Moment: Breaking Free from Renting

• Transition from Campus to Renting (01:01-02:15)
  • Kadeem realized living off-campus with friends was drastically cheaper—especially when comparing a group house to overpriced campus apartments.
  • “…immediately like, okay, I’m never having a traditional apartment. I’ll just get a house and either rent it with friends or buy it and they pay me directly.” (Kadeem, 01:25)
• Discovery of ‘House Hacking’ (02:15–03:49)
  • Hadn’t heard the term but essentially invented the concept for himself: share a house, split the costs, and later, rent out rooms/apartments.

2. Leveraging Student Loans to Get Started

• Using Financial Aid Strategically (03:49–08:09)
  • Kadeem learned in grad school you could ask for additional loan money beyond tuition to cover living costs.
  • Rather than “blow” the refund like many, he planned to use it as a down payment for an FHA property.
  • “She said, sir, that’s just not how this works… If you give me a number, I’ll put that number in. Way too much pressure.” (Kadeem, 03:49)
• Choosing a Multifamily for Semi-Independent Living
  • Opted for a multifamily so he and his girlfriend (now wife) could live together but without “roommates” per se.

3. First Deal Details: Process and Hurdles

• Deal Structure and Loan Seasoning (08:09–10:45)
  • Used an FHA loan (3.5% down) for a $290K property; about $12K out of pocket.
  • Delay and ‘seasoning’ of funds required (money needed to sit in bank account for several months).
  • “Luckily enough, me and my wife had a shared bank account at the time. So all my money was her money on paper.” (Kadeem, 10:18)
• Finding and Selecting the Property (11:24–12:37)
  • Chose a recently renovated five-bedroom, two-bath apartment; preferred move-in quality over “meat on the bones” projects.
  • “We have never paid a housing expense out of pocket. 2018, that’s the last time…” (Kadeem, 09:39)
• Analyzing and Managing Risk
  • Did basic analysis: calculated rents, mortgage, utilities, and built in a “water bill buffer.”

4. Practical Lessons from the First Rental

• Unexpected Expenses & Delays

  • Closing took 6-7 months. Paid inspection and various loan-holding fees due to delays (16:12–17:42).
  • Private Mortgage Insurance (PMI) required due to low down payment: “It ended up being like $50 extra… we still pay it, oddly enough, because we have not refinanced out of the FHA loan…” (Kadeem, 17:53)

• FHA and Inspection Hurdles (20:03–24:18)

  • FHA loans impose many inspections and minor repairs—mostly for buyer protection (paint chips, safety rails, etc.).
  • Sellers tend to prefer conventional or cash over FHA because of extra hoops.

5. Landlording Lessons: Managing Tenants as an Owner-Occupant

• Self-Management Realities (24:18–27:07)

  • Early difficulties with inherited tenants, including Section 8 tenants who habitually shorted payment.
  • Boundary challenges: “I can remember calling my tenant and… I can hear her talking not only through the phone but through the floor because she was right under us...” (Kadeem, 24:52)
  • Allowed some late payments or missed portions: “A lot of things we ended up budging on because the deal still worked…” (Kadeem, 26:25)
  • Section 8 “guaranteed” rent isn’t always guaranteed—failed inspections can halt payments.

• Standardization and Turnover

  • After bad first experience, standardized renovations and unit designs for easier turnover and maintenance.

6. Scaling Up: Strategy and Financing for More Rentals

• Spousal Strategy for More FHA Loans (29:06–30:16)

  • Alternated names on loans—first in wife’s name, next in his (only one FHA loan per person at a time).
  • Third property is mentally “for daughter”—set on a 15-year mortgage to help fund her life milestones: car, college, etc.
  • “Three buildings, three of us.” (Kadeem, 30:16)

• Transition to Conventional Financing (30:33–38:01)

  • Third property: bought as a “two-flat” investment with 25% down (about $40k cash, all from portfolio profits).
  • “We do not contribute to the portfolio at all… it has been fully self sustained.” (Kadeem, 37:14)

• Discipline Against Lifestyle Creep

  • Kept real estate income entirely separate; no “reward vacations” or lifestyle boosts taken from rental income.

7. By the Numbers: Equity and Cash Flow

• Rapid Appreciation and Equity Gain (39:40–40:52)

  • Combined mortgages: $970,000; current value: $1.8 million (~$800k paper equity).
  • First property alone: bought for $290k, now worth ~$600k.

• Current Cash Flow

  • Gross rents: >$10k/month.
  • After reserves, maintenance, vacancy: ~$2,500/month net profit—covers the mortgage on their new primary residence.

  “We bring in… about $2,500. And that’s the mortgage on our primary house. So we’re still not paying out of pocket any housing related expenses.”
  — Kadeem Ali (31:01)

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Impact on Family and Community

• Generational Wealth Planning (42:10–44:05)
  • Real estate investing is setting up not only his children, but inspiring other family and friends.
  • Daughter (age 5) is learning concepts of ownership and passive income: “Once it’s paid off, I won’t need a job, I could just live there for free. And I’m like, you got the right mindset.” (Kadeem, 42:23)
  • Mom started her own portfolio using 401(k) after seeing Kadeem’s success.

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Strategic and Mindset Lessons

• Start Early and Don’t Over-Analyze (44:31–45:10)

  • “I didn’t start soon. I didn’t start in college. If I was really smart…” (Kadeem, 44:31)
  • Mistakes will happen; most are minor in the grand scheme when compared to waiting or not acting.

• Boring Works

  • No “fancy” methods or tricks—just house hacks, self-education, discipline, and buy-and-hold.
  • “You didn’t do anything sexy, you didn’t do anything earth shattering. You just showed up, put one foot in front of the other and it compounded over time.” — Tony (41:10)

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Notable Quotes & Memorable Moments

• “PMI… ended up being like $50 extra… we still pay it, oddly enough, because we have not refinanced out of the FHA loan…” — Kadeem (17:53)
• “This isn’t free money. You know, like I had grants, but I also had loans…” — Tony (07:04)
• “We say one [property] bought two. One and two bought three… One, two, and three brought our primary house.” — Kadeem (30:45)
• “From sitting in the financial aid office… to now being at a point where you’ve got three different investment properties, a new primary that you love, and all of this has been funded by your ability to execute…” — Tony (31:31)
• On what real estate means for his daughter: “If I started with that much seed money, oh, it would have been over. We would have been retired by now.” — Kadeem (42:23)

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Timestamps for Important Segments

• 00:00 — Introduction & why this is a great first-deal story
• 01:01 — Kadeem’s early housing experiences & invention of “house hacking”
• 03:49 — Leveraging student loans for first down payment
• 10:18 — Navigating loan seasoning and closing hurdles
• 12:37 — Analyzing the first multifamily deal (income/expenses)
• 16:12 — Closing costs, inspections, and surprise fees
• 17:53 — PMI explained; tips for getting it removed
• 20:03 — FHA hoops, inspection stories and common hurdles
• 24:18 — Self-managing as a new landlord and dealing with boundary issues
• 29:06 — “Alternating names” FHA strategy; setting up for children’s future
• 30:33 — Financing and executing on a conventional loan for a pure investment
• 31:01 — Exact cash flow numbers, equity, and portfolio performance
• 39:40 — Portfolio equity and appreciation stats
• 42:23 — Teaching next generation wealth; daughter’s perspective
• 44:31 — Biggest strategic mistakes and advice for rookies

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Final Takeaways

• You truly don’t need to be rich, special, or ultra-savvy. Kadeem’s disciplined, practical, and data-driven approach shows that “boring” rentals can change a family’s financial trajectory.
• Start sooner rather than later, and don’t wait for perfect conditions.
• Invest for the long haul—even “small” deals can snowball, setting you and your kids up for options and security.
• Lean on resources and communities like BiggerPockets and keep your strategy simple and repeatable.

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Connect with Kadeem:

• Instagram: @KadeemAli
• TikTok: @KadeemTheAli

Hosts: Ashley Kehr & Tony J. Robinson (BiggerPockets)

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Transcript

[Ashley Kerr]

What if I told you that someone bought their first rental property with about $10,000 in Chicago while still in grad school? Because today's guests did exactly that. And what I love about this story is how simple it started. No fancy strategy, no real estate background. Just asking one question. How do I stop paying rent?

[Tony J. Robinson]

Yeah. And this episode is such a good reminder that you don't need to wait until everything is perfect to get started. Kadeem didn't come from money, didn't have a massive income, and didn't know the term house hacking at the time. He just saw an opportunity and took action.

[Ashley Kerr]

This is the Real Estate Rookie Podcast. I'm Ashley Kerr.

[Tony J. Robinson]

And I'm Tony J. Robinson. And with that, let's give a big warm welcome to Kadeem. Kadeem, thanks for joining us today, brother.

[Kadeem Ali]

Thank you guys so much for having me excited.

[Ashley Kerr]

Kadeem, take us back to the very beginning. What was your life like before real estate? And what originally made you start thinking about housing differently?

[Kadeem Ali]

So it really started in undergraduate school. First two years you lived on campus, so you had not a care in the world. Things just kind of flew past you. And then junior year, we had to live off campus. And I can remember me and two buddies, we were paying 14, like, 1475, some crazy number that we'll just round to 1500 a piece for, like a 1000 square foot apartment. Now, this is my very first apartment. So, like, those numbers sounded okay to me. There was pretty much monopoly around Illinois State University, where you just pay what they said because you didn't have an option. And then my senior year, me and my fraternity brothers, we rented a house, and it ended up being like $400 a person. And so immediately like, okay, I'm never having a traditional apartment. I'll just get a house and either rent it with friends or buy it and they pay me directly. And then again, that idea of house hacking was born there. I was telling people I made something up, like, you'll never forget. Like, this is this new concept. I'm going to coin this phrase. I don't even remember what I called it, but it for sure wasn't house hacking. And I for sure hadn't heard it before. I just knew living with friends, living with a group of people to kind of combine to cover the bills made so much more sense.

[Ashley Kerr]

So you didn't even know that the term was house hacking. So how did the idea of buying a property instead of renting actually come to you because of the situation you were in?

[Kadeem Ali]

Well, I knew that the house that we were renting was significantly bigger than that thousand square foot apartment that I shared with two other people. It was three floors. It was massive compared to the $400 out of pocket it cost me. And so I thought, oh, I can just recreate this. I'll take a room. I'll find some friends to take some rooms, and we'll buy a big house. And if it's in my name or we renting it, it doesn't matter. Everyone's a little bit better off than going the fifteen hundred dollar for a small apartment route.

[Tony J. Robinson]

Fifteen hundred bucks for per person for an apartment is. That's wild.

[Kadeem Ali]

Crazy. $4,500 for 1,000 square this.

[Tony J. Robinson]

And what. What year is this, Kadeem?

[Kadeem Ali]

This was 2016, 2017.

[Tony J. Robinson]

Wow, man, that. That's. That's crazy high rent. So, okay, so you. You go through this experience, and that kind of opens your. Your eyes to say, and there's gotta be a better way to do this. And it's. It's funny, Kadeem, because we hear that so often. Like, you know, it could be the moment that someone's just, like, writing the rent check or, you know, submitting their rent payment online, and they kind of look around, they're like, man, there's like four units in here. And if all four of us are all paying the same amount, like, this landlord's making a killing, like, I can do this too. So it. It's a very common backstory that we hear about what folks think about that kind of motivates them into. Into getting started. So you didn't know that it was house hacking, but you have this idea. So once that seed is planted, what is your next move? Like, how do you actually turn that into something that it's worthwhile?

[Kadeem Ali]

Yep. So we'll skip back to, like, undergraduate. I remember watching people blow refund checks, and I don't know if all the listeners know, but if you get. Whether it be scholarship or any financial aid above the cost of school, they cut that in half. They give you half in the fall, half in the spring. So they would get those refund checks and say, here, rental provider, here's the rent for the year. So when I went off to graduate school, I remember being in the financial aid office, and the lady was like, how much do you want? And I thought, like, maybe she misspoke. That's not really how it goes. I'm an expert on borrowing money. I know how to borrow money for school. I'm like, well, what exactly? Give me the exact number for tuition. Like, for the cost, and then I'll do my own math, adding in housing expenses. And she sat me down. It was a much older woman. And she said, sir, that's just not how this works. A lot of your classmates are. I know you, you're a traditional student, but a lot of your classmates are full fledged adults. I wasn't quite the adult yet. And they have kids and they have mortgages and they have cars, and they are in this program that did not allow us to work. It was full time. We had a full time in school, internship practicum. You didn't work. They're supplementing their lives off of this loan. If you give me a number, I'll put that number in. Way too much pressure. I think I was 21 and you're telling me, I'll write you a blank check. That's just way too much pressure. And normally when I tell the story, I say, I hung up on her and I called her back the next day. It was about a week later. And I didn't hang up. I was polite. I don't have an answer for you today, but I can come back and in a week's time again without bigger pockets as what ended up being my biggest information source. But before bigger pockets, I was like, I just created a new thing.

[Tony J. Robinson]

Kadeem, I just want to understand that, that it sounds like there was some, maybe some fear and some, like, shock in that moment. But, but why was that? Was it because you were, you were worried about having that much money and not, not spending it the right way or like, like where, like, why were you nervous? Why couldn't you give her a number in that moment?

[Kadeem Ali]

So the goal was just to take enough money for school and then I'll scrape by whatever everything else looks like. But when she said no, you have, you know, basically you have an opportunity to cover your housing expense. I wasn't going into that conversation thinking that that was the math I needed to do. So not only was she in my mind saying, what? Just what? How much money do you want me to give you? Plain and simple. It was also that I just wasn't prepared for anything above to agreeing for the exact tuition amount.

[Tony J. Robinson]

Now, Kadim, I got to give you some credit because, you know, my first year in college, like, like many students, I got a refund above, above and beyond my tuition for financial aid. And I was 18 years old. You know, I'd never seen, I don't even think like a four figure check in my life at that point. So the very first refund that I got for financial aid. I went straight to AT&T. And I bought not one, but two iPhones, one for me and one for my girlfriend, who later became my wife. So I guess it worked out. But that was like the most irresponsible thing that an 18 year old could have done.

[Kadeem Ali]

There was a lot of PlayStation Fours floating around ISC campus around disbursement time. Everyone was buying their game systems, buying shoes, whatever.

[Tony J. Robinson]

And luckily as I got older, I started to realize that this isn't free money. You know, like I had grants, but I also had loans associated with that as well. So then it started, you know, then it was my rent money and that's what I use it for. So.

[Kadeem Ali]

So thank God in undergrad they actually have a cap. They won't let you just do whatever you want there. But in graduate school, that cap was lifted. And when I called her back week later, I had in my mind, okay, 3.5% down. I know roughly with Google how much things are selling for. We had went beyond the idea of buying a house because I was with my girlfriend at the time, who's now my wife. Does she want a roommate? Probably not. So how about we buy an apartment building where all of the apartments are super small and that's the same as a roommate, we just have our own separate kitchens. You know, that's really the only big difference. And that ended up being 10,500. That's 3.5% down on the $300,000 building. So I went call her, hey, I need a 10,500 refund, track disbursement. And because they split it into two the fall, in the spring, I had to ask for double that. And then when I got the second one, I just gave her it back. Nope, didn't need that one. Just needed the first one.

[Ashley Kerr]

Interesting. Okay, so you're planning ahead. You're getting that 10,000 upfront, but you asked for 20. And then in the spring, you're just paying 10 of that back. So in this week period of her telling you you can get whatever until you call her back, is that where you're actually going and looking up deals and analyzing?

[Kadeem Ali]

That's the first time any of this really like, went beyond just like, oh, I shouldn't pay rent no more, right? Like, this is when we're looking it up. And I can remember my wife, again, my girlfriend at the time, found the property we had in this week. We had a realtor, we had a lender, we had all of this and explaining the situation. They're like, okay, this is how we got to do it. We had a lawyer. Everyone's kind of pro bono because they know the money's coming on the end. So everyone's like, I'll give you whatever you need. It sounds like you guys are truly dedicated. You, you're doing your research. We got the disbursement and we had to let it, what's it called, Season. Because I didn't have a job. I didn't have a job. They weren't loaning to me regardless of how. Unless I had enough money to buy the building outright, it couldn't be in my name. So we had to let the building the money season. We bought it fha in my wife's name again. Girlfriend at the time. I keep making that distinction because then we got married in the second building we bought in my name. We kind of flip flop there. It was 290,000 I think all in. We had to pay 12,000 out of pocket. And that was with closing costs and all that good stuff. That's roughly 4% altogether. And we have never paid a housing expense out of pocket. 2018, that's the last time we've come out of the pocket for housing expense.

[Ashley Kerr]

I want to clarify the seasoning piece because that is like a very important like rule regulation with you know, getting a loan. Like a lot of people know, like you're going to get a loan, don't go out and buy furniture and finance it while you're waiting for your house to close, don't go out and buy a car. But also when you're going to get pre approved for the loan, they're especially when it's your primary residence, they're going to want to know where the funds came from. So if you're buying it in your wife's names, the funds need to come from her. So what was that process like getting this? The funds actually seasoned so they showed into her account. What was the time frame they had to sit in her account for?

[Kadeem Ali]

So I don't remember off the top of my head, but I think it's like three months or so. It ended up being a lot longer than that. But I think the minimum was because they only asked for like 3 months check stubs and they're like, we don't care what, what happened prior to the check stub that you provide for us with the bank statements. Prior. Luckily enough, me and my wife had a shared bank account at the time. So all my money was her money on paper. It was really easy there. We just had to wait Enough times to where when we submitted documentation, they didn't have to ask the question of where this money came from.

[Ashley Kerr]

And then was there any questioning about that? It was where the. I guess you didn't have this because you waited the seasoning period. But do you think there, if you wouldn't have waited and you would have gone ahead, do you think they would have denied you? Because technically that was borrowing funds from the loan, from the student loans?

[Kadeem Ali]

I think so. And in my mind, if I'm a bank, right, Knowing what I know about banks now, I would say I'm loaning to you on the fact that clearly you're a good steward with money and you've saved this. But if you just got it all in one lump sum, maybe you aren't a good. Like, you haven't proven yourself to be someone worthy of me loaning to. So I think that that question will have come up.

[Ashley Kerr]

Okay, so tell us about that first property that you found. And you're looking at properties. You get your 10k secured while you're waiting for the funds to season. Are the same properties still available or are you pulling up other properties and putting offers in?

[Kadeem Ali]

They're not. We hadn't started looking until, like, things were seasoned. The bank wanted to, like, there was no point in looking without an actual pre approval, so we had to wait a little bit. I think we saw maybe five properties. And the one that we happened to pick was one that my wife found. And what, what sold her and what sold to us is the fact that the unit that we moved into was so well upgraded that even by today's standards, you'd say, oh, they recently upgraded this unit. Like, it still looks really, really, really nice. So my wife is like, hey, this is the one. We're moving into all of the other properties with all of the meat on the bones that you keep talking about, like, no, I don't want to live there. I don't want to live in that situation.

[Ashley Kerr]

But.

[Kadeem Ali]

But this one, at the very least looks nice enough. It's comfortable enough. Mind you, it was a five bedroom, two bath apartment. It's two of us. We didn't have children. It's just, I'm like, why do we even need five bedrooms? It was massive. But it was also upgraded to the point where she felt comfortable, so pretty much sold us there.

[Tony J. Robinson]

And just from an underwriting and, like, analyzing perspective, Kadeem, what did that part look like? Or was it really just, hey, we first want to prioritize us having a clean, safe space to live, right so

[Kadeem Ali]

because it took a long time from like refund check to purchase, I learned all I need to know, right? The, the learning is exponential. Once you hit about 80% understanding you'll gain a little bit over time, but you have the bulk of it. So I'm like, okay, rents, not just minus mortgage, but I'll pay utilities. Like my mom's a homeowner. So it's like, mom, what are you paying for? Tell me everything you pay for so that I can start roping that into my math. The rents were the first floor. We lived on the second floor. The first floor was 1100. The basement was, it was a legal basement apartment was 700. The mortgage was 1550. I had no idea what the water bill would go for. My mom's like, I know what my house is water bill, but I have no idea what a multi unit water bill. Well, it couldn't be $700. We're good. All of the wiring was set to where everyone paid their own utilities, excluding the water bill. So I'm like, as long as the water bill isn't $700 a month, we don't have rent anymore. We don't come out of pocket. And it ended up being like $125 a month. We pay every other month cash flow. From the beginning, we made tow every mistake known to man. But because the deal was so good on paper, 18 coming in, 14 going out, all those mistakes just kind of got wrapped into it. We were perfectly fine.

[Ashley Kerr]

Well, I want to hear more about this deal and your next deal, but let's take a short break and when we come back, we'll get in to more of the numbers on this deal. We'll be right back.

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[Ashley Kerr]

So, to recap, you had told us you used an FHA loan on this 3 1/2% down. You had 10,000 for a down payment. During the loan process, were there any other fees or expenses or maybe even during the due diligence and inspection of this property that came up that might have surprised you?

[Kadeem Ali]

Not surprised me, because again, bigger pockets had had me by then. So I pretty much knew the costs. I didn't know, I think it was $1,000 or roughly that for the actual. Was it not. Not the appraisal, but the guy who's on our team. I figured the appraiser is on the team of the bank inspector.

[Tony J. Robinson]

Like your property inspector. Okay.

[Kadeem Ali]

Yeah. The inspector came. He was a nice old man. He said, I'm not doing this twice, so come with me, Come to every room with me and I'll talk out loud. So you should be able to do this next time. Can I do it now? No. But he walked us through exactly what was wrong. And he was like, look, it's a lot wrong on paper, but it's perfectly fit for what it is you're trying to do. You know, there's some concrete, not level, but as long as no one trips, you're fine. It's not that bad. Um, that was a cost. I think we had to pay a few times, whatever the fee is to like, keep the loan rolling because of how long this process took. I think it took maybe like six or seven months to close. It was ridiculous. And we had our own apartments, so we were still. Still paying rents. And we're like, hey, we need to move in. We'll never pay rent again. But we were kind of on the timeline of not just ourselves, but the deal in of itself.

[Ashley Kerr]

You know, it's one thing we have not mentioned in probably a year on this podcast, is pmi. So did you pay PMI with this loan? And can you explain what it is?

[Kadeem Ali]

Yep. So private mortgage insurance, because we didn't have 20% equity, we didn't put 20% down. It's almost like insurance on the loan itself. I think it ended up being like $50 extra. Again, that's in that 1450 total. Piti, I guess PMI. Add that in there as well. That doesn't roll off the tongue as well as piti, but that, that additional property. Property. Oh, shoot, I just lost it. The loan insurance essentially, right. Was about $50. So, yeah, we paid that. We still pay that, oddly enough, because we have not refinanced out of the FHA loan because it's a 4.2. I mean, let's keep it there. No, no need to disturb the interest rate. But yeah, so we still pay it. We'll address that down the line.

[Tony J. Robinson]

Two. Two quick things, Kadimon, on the pmi. Well, first, I actually just learned this past year that you can get denied pmi. So PMI is, Is a form of insurance. And there are only so many companies in the United States that offer pmi, and there are certain properties that they'll underwrite themselves and they won't approve for private mortgage insurance. So that was something new to me. So just know as you're shopping for pmi, like, there's an opportunity that someone

[Ashley Kerr]

could say no, Tony, I have a question on that. Does that mean the lender wouldn't lend to you then?

[Tony J. Robinson]

Yeah, the lender wouldn't close.

[Ashley Kerr]

Yeah, yeah, yeah.

[Tony J. Robinson]

Without. Or unless you. Unless you went up to at least 20 down. Right. But without the PMI, they wouldn't close on it. And it was actually, it was. It was an investor that I knew that was working with the lender that I knew. And that's kind of how I got wrapped into it. But, but the second part of pmi, and Kareem, this is more so for you, is that even if you don't refinance if the, like, you know, if the appraised value of the home has increased where when you compare that to your current loan balance, you've got at least that 20 margin now, a lot of lenders will still remove that PMI even without refinancing. So, yeah. To go call. Because it's been a while since you guys purchased that.

[Kadeem Ali]

Yeah, we recently went to go sell. So we have on the books an official appraisal where they should have taken it off if that's the case.

[Tony J. Robinson]

Yeah, yeah. So go back and show that to them. You know that that could be a way to maybe get the PMI removed. But you mentioned fha, and I've got two questions around that. A lot of folks are. Are worried about FHA because of the. The kind of hoops you have to jump through during the purchase process and more specifically around the inspection, like the FHA inspection. And you mentioned you were there for it. Were there any hurdles specifically related to the fact that this was an FHA loan that you can call out for Ricky listeners? So they know what to kind of look out for as they go through this process.

[Kadeem Ali]

So not on the buying end. Again, we tried to sell the property and we were selling it to someone with an FHA loan. And so I kind of saw it firsthand the other side. But if I was to look, it's a whole bunch of little stuff. The paint on the brick outside can't have any chipping. Like a whole bunch of little things that as a buyer, if I'm. If I'm advising the buyer, you should be happy because these are safeguards for you. Yes, it's a lot of hoops, but it's a lot of hoops to make sure that you're buying something that has good bones, that's going to work for you. The bank is on your side. If you, if you get messed up, they get messed up. So they're putting these extra hurdles for your advancement for you to make sure that you're purchasing something that's really good.

[Tony J. Robinson]

Yeah. And I think that's where a lot of folks also have hesitation is when they are the seller. And if they've got two offers, one's fha, one's conventional or cash, the FHA usually kind of gets bumped down a few rungs. Another loan product that's really common, but then also kind of has its hurdles is the VA loan. Ash, have you ever worked with the VA loan in that way?

[Ashley Kerr]

Yeah. So Darrell's a veteran and he's doing his first VA loan right now. And from what came back from the inspection, it's more like safety issues, I guess. Instead of actual repairs like this, there's two sump pumps in the basement, and they needed covers on them. Some electrical outlets didn't have outlet covers on it. There was two stairwells that lead into the basement, and one didn't have a handrail. So it needs a handrail. So, like, those are pretty easy things to do. And then the other thing is there's an exterior shed that has some rotting wood and paint chipping. And they want the rotting wood replaced and the chipping paint it repainted. The problem is, is it's zero degrees right now. Paint is not going to stick. So Saturday is our day to actually go there. The seller already took care of the sump pumps, the outlet covers, so we just have to do the handrail. And then we're like, we have to figure out what to do with this shed. And so I think we're either going to take some, like, metal siding, like from a Morton building, and just tack it on there, like, oh, it's got brand new siding. Or we're going to just have to, like, rip out pieces of the wood and just put it up and maybe paint it inside and let it dry, then put it up. I don't know. We're going to assess more, but that's what at least our list was. And I've only so sold a house to maybe one person that used an FHA loan. And it was kind of a similar thing. More like they. They're wanting it to comply with like, code enforcement laws and stuff, which, you

[Tony J. Robinson]

know, in the grand scheme of things isn't all that terrible. But for a seller who wants convenience during the sales transaction, a lot of times they'll. They'll just want the person who's going to, you know, overlook those things or maybe take care of it themselves.

[Ashley Kerr]

And this is holding up the loan, too, because you have to. You have the appraiser come, and then they tell you the things, and then they have to come back and inspect. I have to schedule with the seller. When can we go and do this stuff or if they're gonna do it? So it's like, it's a lot of back and forth also. And one thing too that delayed the loan was like, they. We've got the appraisal, but we want to make sure that we have loan commitment. So don't go and do the repair. So, like, you know, we could have started a couple weeks ago, but then we had to wait for commitment. Then it's like, okay, now go. But everybody else is ready to close.

[Tony J. Robinson]

So yeah, yeah. And then in New York everything takes long anyways. You add this on top and actually might close in like two years. You know, it'll be 20, 30 by the time.

[Ashley Kerr]

Let's say that. Because that did happen to be on the property I'm sitting in right now at two years.

[Tony J. Robinson]

Two years to close. Well, Kadima, I think one last question for me on the first, on the first house hack and I think this is the question that a lot of people ask is you're even if you have your own separate space, you're still somewhat living close to your own tenants. And we're how was the experience for you self managing for the first time and what guardrails or kind of boundaries were you able to set with your tenants to make sure that even though they were your neighbors, you still had some level of privacy?

[Kadeem Ali]

It was terrible. Just to sum it up, that first round of tenants, I can remember calling my tenant and like I can hear her talking not only through the phone but through the floor because she was right under us and she had been there for like 10 years. So from her perspective, and this was her argument, you're the new guy. What do you mean? How are you going to come here? I'm like, but I own the building, I get to set some rules. And she knew we owned the building. And so it just wasn't, it wasn't as professional as we would want it to have been. When we were finally kind of turned over our units and had new people come in then we can put some guardrails up. Right now it's a little bit more professional. But those first tenants for whom they saw us walk through the property. So I'm like, I know you're the owner. You were here seven months ago, you were here and now you're upstairs. Like I know you're the owner. And now I can pull on heartstrings and it's like I'm not bargaining at the Walmart checkout line for prices because I know that the person who I'm talking to don't set the them. And when you're talking to the person who has full control over setting some of the parameters of your agreement, you try for that. So it was definitely difficult until we got new tenants in Kadim.

[Tony J. Robinson]

One follow up to that is what tactics or I guess what experiences did you have where they were trying to maybe negotiate with you and how did you navigate that like, did you find yourself kind of not falling victim? I think that's a wrong phrase. But did you find yourself kind of having empathy for them in that situation and maybe bending the rules? Or was it you were able to kind of stick to the guns of what the lease said?

[Kadeem Ali]

So let's paint the picture. I was a full time graduate student. I had a full time internship. I had a full time job and was a full time landlord. All rolling. And These were Section 8 tenants. And I asked my wife, like, what were the rents back then? And she told me, she was like, but remember, we never got their portion. I think it was like 700. And then she was supposed to pay 100. Not in the year she lived there did she pay her 100? And it was like, I can fight this lady over $100, but I got school or I got to go to work, or like a lot of things, we ended up budging on because the deal still worked to where? Okay, if it keeps the piece of the building, keep it. And then we'll just make sure that things are in place when. Whenever you're no longer our tenant.

[Ashley Kerr]

Did you guys end up evicting her or terminating the lease or how did she ended up moving out?

[Kadeem Ali]

Oddly enough, and this is our discomfort with, like, Section 8, is that it works perfect for normal, you know, moral people, but if you are immoral, you can take full advantage of it. And we failed an inspection because they were like mouse droppings. And then we had someone come back spray do all this stuff. We had all the receipts for the company who came and did all of the abatement, but the lady never swept the mousetrap. And I'm like, I'm not going in your apartment to sweep this up. But she knew if they were still there, we would fail again. So even though we paid for the exterminator, we failed again. We went like three months without getting rent from Section 8, which everyone considers like, oh, it's guaranteed. If everyone's moral, it's guaranteed. But there are definitely people who know the system enough to where they can use that against you. And eventually it was like, hey, lady, if you don't want to be here, we'll cut it. We'll give you a great review, the section 8, and then you can just go somewhere else. And that's what ended up happening.

[Ashley Kerr]

So a blessing in disguise, I guess,

[Kadeem Ali]

minus the three months we missed that on.

[Ashley Kerr]

But yeah, yeah, yeah. But an eviction probably would have been just as costly and more of a headache and more time consuming. For you to be able to do that. So once the tenant left, did you go and renovate this unit at all or was it already pretty turnkey besides cleaning up the mouse drop things?

[Kadeem Ali]

It was pretty turnkey. It was, it was super minor. One thing that we have across all of our units is it's all the exact color paint, all the exact cabinets. So with that unit, we established the, like, this is what every single unit moving forward will look like. The next turnover. We just repainted everything to that. So it wasn't a lot for that particular unit, but that unit was super important because it set the standard for what we would use for every other unit moving forward. And I lived there, so I was doing all the work.

[Ashley Kerr]

So one thing before we go to break, I want to touch on is you had mentioned that you and your wife kind of put a strategy together where this first property was in her name, and then you went on to get the second property in your name. Can you explain why you decided on this strategy?

[Kadeem Ali]

Because we had to. Right. But I know you can only fa. You can only have one FHA loan in your name at a time. And with that assistance with the down payment, that 3.5% down, that was the only way we were able to do it. So we asked ourselves, okay, well, I can't do it in your name. We can refi out. It didn't really make sense for us at that time. So the second one would be in my name. And then I know we talk about a third deal. The third building we bought mentally with our daughter in mind. And so it's not in her name, but it's her building. So we put it on the 15 year mortgage, thinking that, oh, this is your first birthday present. By the time you're old enough to need a car, your building will buy your car. And then when you go to college, your building will pay for your college. And then that'll be the seed money. And so that's kind of why after the third building, my wife was like, I'm done. We're getting the house. You know, like we're not doing. We're not moving around anymore. It's only three of us. We have three buildings.

[Tony J. Robinson]

That's enough, Kadima. I guess just, you know, we're kind of going through this quickly. But you went from 1 to 2 to 3 in what sounds like a relatively short period of time. The first one, fha. The second one was FHA in. In your name. And what about the third one? How did you finance that one?

[Kadeem Ali]

The Third one was conventional. We had to put 25% down.

[Tony J. Robinson]

That was just you being able to save all that money from not having living expenses.

[Kadeem Ali]

Yep. So we say one bought two.

[Tony J. Robinson]

Yeah.

[Kadeem Ali]

One and two bought three. And then one, two and three brought our primary house that we were able to build from the ground up two years ago.

[Tony J. Robinson]

That is fantastic. Let me ask one last question. Across the portfolio right now, just like ballpark, what's your cash flow across all those units?

[Kadeem Ali]

So we do not have to ballpark because I took notes, we collect a little over $10,000 a month in rent. We bring in, we save about 25% for like maintenance capex vacancy because I do the management. There's a little bit of savings there. So profit for the month is about $2,500. And that's the mortgage on our primary house. So we kind of say we're still not paying out of pocket any housing related expenses.

[Tony J. Robinson]

Kadeem, congratulations, man. Because to go from sitting in the financial aid office to all started right to now being at a point where you've got three different investment properties, a new primary that you love, and all of this has been funded by your ability to execute as a real estate investor is, I think, such an inspiration to everyone that's listening. Because a lot of times we think about the end goal of real estate investing and, you know, different people have different goals before. A lot of people it's like, oh, I want to quit my job or I want to do this or I want to do that. But there, there are so many other ways that real estate can change your life for the better. And something as simple as I don't have to worry about paying my mortgage every month because I've got three other properties that are paying it. For me, there is a peace of mind that comes with that that would be hard to get elsewhere. So, man, I love your story. Congratulations, brother. So we're going to take a short break, but when we come back, we're going to dig into how Kadeem's story has evolved and how his investing strategies evolve. We'll be right back after this.

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[Tony J. Robinson]

So, Kadeem, we just heard before the break about how you scaled up the portfolio. And again, congratulations on that. Now you, you briefly mentioned that, you know, you kind of the first bought the second, the first and second bought the third. The third and the first, second and third helped you pay for the fourth. I, I want to talk a little bit more about the, the third property because I know that one required a little bit more money down. What was slightly different? You said that one wasn't fha. So just kind of walk us through how that deal was different than the first two.

[Kadeem Ali]

It was a lot less expensive as far as like the purchase price of the building because we had to come up with 25 down. So it wasn't a three flat like the others. It was a two flat which is a two unit building. I know it's flats being different things, different places, but it really wasn't that far off. It was a lot quicker. We didn't have to jump through like the hoops of fha, but we also didn't have the guide rails of fha. So all of that due diligence of making sure that it would make sense that it was safe, foundation, all that good stuff was on me and my wife to make sure that this was the deal that we wanted. But I tell everybody, like, it's just math. The math makes sense. We got a nice little spreadsheet that we use and here's what the expenses will be. Include all of them, right? Don't cheat yourself. Include all of those expenses. Here's what you likely get, which is just like as a renter, if you know how to find out what an apartment would rent for, then you can just do that backwards and find out what you would rent an apartment for. So this is how much they would rent for, this is how much it would cost, this is what the mortgage would be. There's a million mortgage calculators out there. It was really easy to say, this makes sense on paper. And then we pulled the trigger.

[Ashley Kerr]

So this property was a two flat, two unit. And so you were going to move into one or this was purely investment.

[Kadeem Ali]

Purely investment. So it was 160,000 and we put $40,000 down. Which still blows my mind to say, to even think that like we had $40,000 cash. Even though we talk about the portfolio paying our mortgage, we actually do not contribute to the portfolio at all. And we never have. Since the initial $12,000, which you can argue is also not us personally contributing to it, it has been fully self sustained. And once we realize, oh, we shouldn't pay ourselves rent per 10, we should literally make a second bank account and pay ourselves rent and have the rent once we cut ties with the business altogether, we've not intermingled our money at all. And we looked up and said, oh, we have enough for another purchase.

[Ashley Kerr]

I think that is a really hard portion of being that diligent to just let that money grow and to not touch it and to say, oh, let's go on a vacation, like, we've got 10 grand extra, we don't need it. And being able to, when you have that income creep that, you know, and not having that lifestyle creep with it actually does take a lot of, you know, diligence to stay motivated as to why you invested in real estate in the first place. And not only real estate, if you got a, a big bonus or you got a pay raise or something like that, it's very, very easy for somebody to have that lifestyle creep that goes up with, you know, your increase in income. So congratulations on being, you know, strict with yourself to, to not touch that. And when you did touch it, you continue to invest.

[Kadeem Ali]

We still fall victim to that within our personal lives. But like our income creep, our lifestyle creep is strictly based on like our nine to fives. My wife's a nurse practitioner, I'm a child psychologist. So it's like if you want more, you got to do more in your primary job. But this is just separate.

[Ashley Kerr]

Let's look at the numbers on this real quick. So how many years since the purchase of that first property did it take you to accumulate that $40,000 in there?

[Kadeem Ali]

So we bought it in 2018. We bought the second property in 2020. I know that you only have to live in the unit for one year. Took us two years. New management issues, learning curves, and then one year after that. So in three in a three year span, we bought two buildings.

[Ashley Kerr]

And then how much equity has accumulated in those properties since you bought the first one?

[Kadeem Ali]

Yep. So we include our primary residence, given that it was bought by the real estate as well. We have about $970,000 in outstanding mortgages, but $1.8 million in total value. So $800,000 in equity.

[Ashley Kerr]

That's incredible.

[Kadeem Ali]

Yeah, it's hard to say.

[Ashley Kerr]

How else are you going to find $800,000 that you can tap in over that many years.

[Kadeem Ali]

We tried to last year sell the first property because we bought it for 290, we have about 240 left on it. We started at 3.5% so it's taken a very long time to start paying down that mortgage. But it's valued at 600. So just eight years of waiting with it being 100% self sufficient is roughly $350,000 in equity. And if we could have sold it, we would have 1031 exchanged it into a larger building and then I would maybe taken up that whole, maybe I'll be a property manager to benefit from the real estate professional and then just do this full time. That's still on the books if that ends up happening. If not, I have a four month old daughter who's in need of a building by her first birthday. So either we're 1031 exchanging or we're just going to buy another 2, 3 flat for her first birthday as well.

[Tony J. Robinson]

There's this, I love the, this theory of like compounding because I think people don't realize just how, and I'm not talking about compounding in the sense of like the, the stock market and you know, interest and all that stuff. I mean the, the compounding of your portfolio because it, it took you all this time to kind of get that first deal together. But then the first deal fed into the second deal and the first and second fed into the third. The first, second and third fed into the fourth. The first through fourth will feed into the fifth and the time between each deal starts to get shorter and shorter because this machine that you've built gets stronger and stronger and like we talk about all the time. But it's like if someone were just to invest in a very boring fashion for the better part of a decade, for most people, they could probably put themselves in a position to at least be somewhat job optional and maybe have options around working less or maybe taking a lower paying job that they enjoy more if they really just like focused in for 10 years. And we've seen this story over and over and over from so many amazing guests. And Kadeem, I mean your, your story is one that I hope really, really resonates with people because you didn't do anything sexy, you didn't do anything earth shattering. You just showed up, put one foot in front of the other and it compounded over time. So man, I love your story.

[Ashley Kerr]

So I guess before we wrap up here, one thing that you talked about was buying A property for. For your daughter. But how has real estate really changed the outlook on your kids future compared to how you grew up?

[Kadeem Ali]

So single parent household, that's not necessarily real estate related, but just like looking at the what's to come for my daughter, we bring her to the properties all the time. She's five years old. But she does understand that like, oh, this is my. And she'll say like, no, no, no, that's my property. You did all that work. Yes, but you did that for my property. And she kind of understands the idea of ownership, that we rent it out or we loan it to people and they pay us. And she was like, oh, well, once it's paid off. And mind you, this is a five year old talking. Once it's paid off, I won't need a job. I could just live there for free. And I'm like, you got the right mindset. Right. That's not how it's going to pan out. But that's the thought process. You have something that you own that you can live in yourself, you can sell. Whatever it looks like will guide her through that. But I know if I started with that much seed money, oh, it would have been over. We would have been retired by now. It would have been, it would have been an entirely different story. And we've been able to, not just for my daughter setting her future up, but when this made sense on paper. We told everybody we knew. Everybody with an ear, earshot. I'm yelling like, this makes sense. This makes sense. When it made sense to my mom, she said, oh, okay, cool. Went to her 401k, borrowed my own. My mom owns so much more real estate than we do and started after we started because she had more capital to employ. But I have friends who bought it and used me as resources. Like, hey, you have a plumber. I don't because they're transient. But I can help you find one. Like the, the community that we've built within my immediate family, my immediate friend group, everyone's kind of planning out for their futures. And this is not what I grew up with. This is not the community I grew up in.

[Tony J. Robinson]

Kadeem, all the more reason I love your story even more, man. Aside from all the success though, you mentioned some challenges along the way. We've hit some of them, but I guess if you could kind of zoom out. 30,000 foot view. Are there any maybe larger mistakes, strategic kind of mistakes maybe that you feel that you've made that Ricky should think about as they get ready to jump into their first deal.

[Kadeem Ali]

I didn't start soon. I didn't start in college. If I was really smart, I would have come up with this and instead of renting a house, I would have bought that house that my friends and I'd still have a property in a college town. I think this just works so well. I didn't make this up. You guys didn't make this up. This math is one plus one is always equal to before we knew it was, it did. Real estate has always worked so well that even when you overpay, because I've overpaid for so many things in the grand scheme of things, just do it. Like, even the mistakes that you can come up with are so small at that 30,000 foot view that once I look up from that vantage point, I don't even see mistakes. They're just little blips.

[Ashley Kerr]

Kadim, I have to ask, that college house, have you ever gone back and looked at like, what it's valued at now or what people are paying for right now?

[Kadeem Ali]

I looked at what the mortgage was when we lived there and we were paying maybe like $2,000 combined with the five people paying $400. And I think the mortgage should have been like $1,000. And I again resonated this idea that like, don't tell anyone. And I guess we can't do this on the podcast. But my plan is still to go back and buy a house in my college town where I still know people from my fraternity and say, you guys can live here. Don't mess it up. But knowing that you have a constant recycling of potential tenants, all of whom are paying with refund checks, who don't have a grasp of money yet, and they're like, here, here, here it is the whole year. And one like that's still a plan.

[Ashley Kerr]

Well, anyone listening that knows the best flooring that makes beer spills less sticky, reach out to Kadeem wherever his his frat house is going to purchase there. Well, thank you so much for coming on the podcast today. We really appreciated you taking the time to share your story and also all of the knowledge that you've obtained since you bought that first property. Where can people reach out to you and find out more information?

[Kadeem Ali]

Because I'm not a realtor or anything like that. You can follow me on Instagram. I document almost everything we do. I'm really bad at it, so don't, don't be surprised, but I'm trying to get a little bit better on Instagram. I'm Kadeem Ali. So K a D E e M A L I, which is just my middle name. And then TikTok is Kadeem the Ali because I started the TikTok a long time ago, forgot about the password and couldn't keep my original name. So Kadeem Ali on Instagram and Kadeem the Ali on TikTok.

[Ashley Kerr]

Well, thank you guys so much for listening today. I'm Ashley, he's Tony, and we'll see you guys on the next episode.

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[Tony J. Robinson]

Hey rookies, if you're watching this, we want you to apply to be a guest on the Real Estate Rookie Podcast. That's right. Ashley and I are looking for amazing stories just like yours to be a part of our Real Estate Rookie Podcast. Now look, you don't need to be an expert. You don't need to have done thousands of deals. Even if you've done one deal, your story could help inspire the next listener

[Ashley Kerr]

as a rookie investor. Especially if you just got your first deal. It is all fresh in your minds and you are the best person to tell your story. Give your experience on how you got it done to help someone else get their first deal.

[Tony J. Robinson]

So head over to biggerpockets.com guest if you want to be a part of our show. Again. That's biggerpockets.com guest and we'd love to have you on.