DJ and his wife are a real estate investing team, and they’re just getting started. They have purchased and sold a four unit multifamily building, as well as bought a couple of other deals and are currently holding those. Hear how they got started with little cash to invest, and how they plan on continuing their real estate investing careers. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
Best Ever Tweet:
“Don’t do it yourself, know what you’re good at, and find yourself a team” – DJ Cummins
DJ Cummins Real Estate Backgrounds:
- Started in 2015, have purchased 3 properties/6 units, now have approximately $85k in equity, monthly cash flow of roughly $700 per month, with an initial investment of only $10k
- Based in Bethalto, IL
- Say hi to them at their new real estate blog http://www.ragstonicerrags.com/
- Best Ever Book: The Book on No and Low Money Down by Brandon Turner
If you’re a passive investor wanting to learn more about questions to ask sponsors in order to qualify the opportunities, sponsors, and the markets opportunities are in, visit BestEverPassiveInvestor.com.
We created this site just for passive investors to have a free resource providing the questions to ask and things to think through. BestEverPassiveInvestor.com
TRANSCRIPTION
Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, DJ Cummins. How are you doing, DJ?
DJ Cummins: I’m great, thanks for having me.
Joe Fairless: My pleasure, nice to have you on the show. A little bit about DJ – he started investing in 2015, and has purchased three properties, a total of six units, and has now approximately $85,000 in equity in those properties, with a current monthly cashflow or roughly $700/month, and all with an initial investment of $10,000. Based in Bethalto, Illinois. With that being said, DJ, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?
DJ Cummins: Sure. In 1998 I was in high school and I’ve heard a lot of people on your show talk about the Carlton Sheets program.
Joe Fairless: Yup.
DJ Cummins: As a junior in high school I got the cassette tapes and I listened to them, I thought he was crazy, and that was the end of that. And then I guess about six years ago my cousin and I were on a fishing trip, and he was talking about real estate, and him and his wife had a few apartment buildings. They’re about my age, and they were talking about possibly retiring early. It all seemed crazy, and it got my interest sparked again… So what was less than a year from then, even my wife and I started investing.
Joe Fairless: What was the first step you took?
DJ Cummins: Well, we did a lot of research, because at the time we didn’t have a lot of extra money. The $10,000 we started with was about every penny we could scrounge up. We started a partnership with my wife’s cousin and his wife, and the four of us bought a fourplex in 2015. Then we bought two more single-family houses after that.
Our market just isn’t great for multifamily. There’s not a lot of choices in the good areas, and we’ve found a lot more success with the single-families since then.
Joe Fairless: Do you have a full-time job?
DJ Cummins: I do. I’ve been in the mortgage industry for 10-12 years now. I’ve been a loan officer, an underwriter, an appraisal analyst… Now I’m kind of an operations support, in the background of a mortgage company, and then Erin does the purchasing for a steel [unintelligible [00:02:51].17] So she’s good at finding deals and buying stuff.
Joe Fairless: Erin, your wife?
DJ Cummins: Yeah, Erin is my wife, yeah.
Joe Fairless: Okay, cool. Well, that’s good, your background especially… And Erin’s too, but you’ve been in real estate as a W-2 employee or as a professional for a while before you started investing.
Your initial investment was $10,000, and that was with your wife’s cousin and his wife. That was the fourplex that you still have?
DJ Cummins: We actually sold that about a month ago. It’s the first time we’ve sold anything.
Joe Fairless: Should I say congratulations?
DJ Cummins: Sure. We’re kind of adjusting what we have going on, and we did good on it, and we’re looking forward to the next purchase coming down the pipe.
Joe Fairless: Great. What did you buy it for initially?
DJ Cummins: We bought it for 95k. Two units were vacant at the time, but the rents would have been $1,700. Then we sold it for 118.5k four years later. It was bringing in roughly $2,000/month. We raised the rents and we made some money out of it, and decided the partnership – we were gonna kind of go different ways. Erin and I have some money now to invest on our own in something.
Joe Fairless: Okay. So it was more the partnership structure was driving the sale, and less the property profitability. It was profitable, clearly, but it was more you wanted to go your separate ways.
DJ Cummins: Yeah. The property was cash-flowing $400-$500/month, so it was doing well, especially for a $95,000 investment… But we were just gonna go different ways with the partnership. A partnership is great when you get started, because there’s someone there to cut your back on stuff… But it can also turn a great deal into an okay deal when you’re just cutting that equity in half and you’re cutting the cashflow in half, so… It was time to go our own way.
Joe Fairless: How much did you net from that transaction that you’re able to now put into something else?
DJ Cummins: I think ours was a little over 19k-20k.
Joe Fairless: Okay. So you put in 10k initially, so you doubled your money in four years?
DJ Cummins: Yeah, we doubled our money in four years. Plus, we had the cashflow in between that.
Joe Fairless: Sure. Well, that’s a pretty darn good return.
DJ Cummins: I would do it again, yeah.
Joe Fairless: Yeah. Not including the cashflow, that’s 25% return, just on the profits from the sale. Okay, and your two single-family homes – what were the purchase prices for each of those?
DJ Cummins: One had been on the market too, and we’re gonna try and take some money from that one once we sell it… But that one we purchased for $43,000, and… These were all in a good area where we’re from here; so it was purchased at 43k, it was renting at $850/month, and we only had about 8k to 10k into it as far as fixing up the property.
Right now we owe about 29k on it, and we actually had an offer last week for 64k that we were gonna take, and then the offer fell through, so… Roughly, we should walk away with another 30k or so from that one.
Joe Fairless: And thanks for mentioning how much you’ve put into it; I should have asked on the fourplex how much you’ve put into it… Did you put much into it, since two units were vacant?
DJ Cummins: We pretty much redid all the flooring, all the paint, several new refrigerators, a couple of air conditioners… So we’ve put in quite a bit of things. Two of the apartments were completely redone, were gutted and started over on. So we’ve put in a lot, and then the cashflow did some of that work for us.
Joe Fairless: Okay. And how much all-in would you say you put into it? You bought it for 95k, and then how much on top?
DJ Cummins: We’ve probably put 15k-20k in it. We had one tenant that tore up a little bit on us, and that cost us 9k just on a 500 sqft. apartment rehab.
Joe Fairless: Dang! After you did the renovation?
DJ Cummins: Yeah, we had done some renovations, and then we pretty much had to start all over. We were getting ready to do an eviction, so he didn’t want us to go on the property, and he had a water leak in his bathroom and he had a pair of [unintelligible [00:06:40].20] and I guess it busted, and he never told us… So there were some mold issues in two of the three rooms… It was pretty bad.
Joe Fairless: That’s gut-wrenching. That makes me sick for you. When you came across that, what was the process to resolve the issue?
DJ Cummins: Well, we had some [unintelligible [00:06:59].24] and luckily the mold hadn’t sat there for a long time, so we had to cut out some pieces of wall, but we got it fixed pretty quick. We found some great contractors along the way, that have been with us [unintelligible [00:07:08].13] They got it turned around, and it still took longer than a month… But still, when it rents out for $500 and then you have to spend 9k to fix it up, it’s kind of gut-wrenching, like you said…
Joe Fairless: Yeah. The money from the rent go to these fixes that you did, or did you have to come out of pocket for anything?
DJ Cummins: That one we came out of pocket some on, just so we didn’t drain our business bank account, and then we kind of paid ourselves back over time. And after the sale of the property we got some back, but… Technically, the company paid for part of it, our LLC, and then we’ve put in a little bit out of our pockets too, just so we didn’t drain the bank account [unintelligible [00:07:44].22]
Joe Fairless: Of your two single-family homes, you said you bought one for $43,000, and you’re all in for around 54k… What about the other one?
DJ Cummins: The other one is a little bit larger, and that’s probably my favorite one that we have. We bought it for 55k, but we got a $3,500 closing cost assistance. We had to put some work into the place. I think we’ve put 12k into it, and that was more than we had planned on, because the inspector missed something on the foundation, and we had to have the addition jacked up in the air about six inches. They just put the foundation on cinder blocks, on the dirt. The kitchen was just slowly settling down into the ground, and we had to pour some footers in…
That wasn’t gonna be a huge rehab. It was gonna be a paint job and flooring and it was good to go, but then we had to jack the floor up, so that was kind of a scary thing. Now we’re into that for about 62k-63k, and it’s worth around 80k.
Joe Fairless: Okay. What’s it rent for?
DJ Cummins: It rents for $950.
Joe Fairless: $950. How come you’re selling the other single-family home?
DJ Cummins: That one was also in a partnership.
Joe Fairless: Okay. And the 63k one was not?
DJ Cummins: That one was just my wife and I.
Joe Fairless: Hallelujah! You’ve gotta keep one.
DJ Cummins: Yeah, we don’t have to start all the way over. We’ve paid our dues and we’ve learned what we’re doing; we’ve got a team, we’ve got some ideas about what we wanna do in the future, and we’re looking at some — I call those chameleons, because we’re up for anything. We’ve looked at car washes, storage facilities, laundromats – which terrified me, looking at the laundromats – apartment buildings… We’re chameleons, we’re up to change to do whatever we have to do to make the money. That’s why we’re selling off the two in the partnership, just so we’ve got a little bit more freedom to do what we want, and not have to run it by anybody else, or anything like that.
Joe Fairless: Did you do the renovations yourself when you had to get the units ready?
DJ Cummins: Well, that was one of our big mistakes. At first we were trying to do it ourselves, and… Anybody can paint. When I say anybody, I mean anybody but me… [laughs]
Joe Fairless: And me.
DJ Cummins: So we did okay, but it takes so long to do it yourself… I’m working 40-50 hours/week and I’ve got a 10 to 15-hour commute, and then trying to put in a floor at nighttime, or fix a toilet here and there… We did a lot of it ourselves at first, and we had an eye-opening experience. The apartment we turned over a couple years ago – we did it ourselves, and it took us 4 months to do; we saved on labor costs with the contractor, but the contractor could have finished that job in probably 1,5 to 2 weeks.
Joe Fairless: Oh, my gosh.
DJ Cummins: Yeah, so we saved $1,000 and lost $2,000 at the same time, pretty much… So we learned our best asset is not doing things ourselves. We’ve figured that out pretty quick.
Joe Fairless: What took so long? And by the way, if I was doing it, it would have taken six months. You got it done four months faster than I personally would have been able to do. But looking at it, now that you’re reviewing the process, what was taking you all longer than a contractor?
DJ Cummins: Well, a few years ago I had to google the difference between a flat-head and a Phillips screwdriver.
Joe Fairless: [laughs] Okay, I’m past that, at least…
DJ Cummins: [unintelligible [00:10:51].00] but it’s just a learning process if you’re working on cabinets. Or the painting was a pain, and the guy was a smoker, and it was like a four paint job type of place. And we got the cheap paint to be cost-effective, and that stuff didn’t work at all. It was like putting white out on the walls. We took 4-5 different colors to get it on there, so we’ve learned not to use the cheap paint.
It’s a learning process, so… I guess we weren’t in that big of a hurry to get it turned over, though we should have been. At that point we were treating it more as a hobby than as a business, and then we realized we were hurting ourselves in the long run financially, and it was hurting my back. I was down there doing all kinds of stuff.
Joe Fairless: And you wrote a book about landlord life. In fact, it’s called “Landlord Life: a Diary of a New Real Estate Investor.” What’s in the book?
DJ Cummins: Well, we did a lot of research before we got started, and I’ve read a whole lot of books, and tons of blog posts, and different websites and podcasts…. And podcasts are awesome these days. But I just thought I wasn’t getting [unintelligible [00:11:51].07] for what being a landlord was gonna be like. Some books are great, some books are not so great, and I thought what I was most curious about was what the day-to-day was gonna be like, and what actually it was like to be a landlord. You find a lot of books on how to sign deals and do deals, but what do you do once you got that deal?
[unintelligible [00:12:09].00] writing the book… It was six months before we bought our first property, so I kind of jumped the gun on the book a little bit. But anytime we did something with the business, it’s in the book. It’s literally like a diary. There’s no chapters, it’s literally — anytime we did something with the business, there’s a diary post, and we laid it into a book.
Joe Fairless: Huh. It’s not only helpful for others to see the play-by-play, but it’s helpful for you as you’re going about the process… I keep a daily journal, and I’ve been doing it for 3-4 years, and it’s just eye-opening to read what I was working on a year ago today, two years ago, three years ago, and thoughts…
Have you kept up a journal or a diary since publishing the book?
DJ Cummins: I still catch myself writing stuff down, even though I’m not writing a book anymore, yeah. It did help. I had several times, like around tax time, that we forgot this and that, and what was this money for, and which LLC was this receipt for… And we were able to just pull up that Word document, and there it was; I wrote about it in the book, so we could figure out where it was coming from. Even if someone’s not writing a book, it’s not a bad idea to keep a journal with what’s going on on a day-to-day basis.
Joe Fairless: For real estate investors who are starting out, what’s your best real estate investing advice ever?
DJ Cummins: Well, like I said, don’t do it yourself. Know what you’re good at and find yourself a team. You don’t have to start off with 1,000 units; get yourself one house if you have to, and find the people that are gonna be good at what they do. We’ve got an HVAC guy, we’ve got a painter, we’ve got carpenters… We’ve got a little bit of everything to help us now. Now we can keep on keeping on, and not have to worry about anything else. Knowing what you’re good at is the biggest thing to me, and avoiding what you’re not.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
DJ Cummins: Yeah, sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Break: [00:13:59].18] to [00:14:42].01]
Joe Fairless: Best ever book you’ve recently read?
DJ Cummins: Well, the copout answer would be my book, or one of your books, so I don’t wanna give the copout answer…
Joe Fairless: I want the real answer.
DJ Cummins: [laughs] Well, it wouldn’t be fair to come on here when no one knows who I am and say my book’s the best one in the world… Two that I really like – I have to mix in two… The Book on Investing In Real Estate with No (and Low) Money Down, from Brandon Turner. In my opinion, that book was kind of like Rich Dad, Poor Dad was. A lot of people talk about how Rich Dad, Poor Dad changed their mindset… Well, Brandon’s book kind of took it a step further and did specific examples on “Hey, this is how you can do this without having a ton of money”, and I thought that was a fantastic book.
Then Mark Ferguson, “Build a rental property empire.” I’m not sure that I wanna have my own empire, I don’t wanna have 40 or 50 houses; we’ve had three properties the last few years and I’ve had a few extra grey hairs pop up… But just seeing how he’s done it — it’s just kind of an eye-opening book. It’s possible to put your mind to it. It’s a great book.
Joe Fairless: Best ever deal you’ve done out of the three?
DJ Cummins: All three deals we’ve done – they all pretty much have similar cash-on-cash returns, and all that kind of stuff. I really have decided that I like the single-families more, so the most recent one that we just bought a couple years ago (2017 is when we bought it), it cash-flows $300/month, we’ve got about 20k of our own cash into it, give or take a few dollars, and we’ve got 20k to 30k extra equity built into the property already.
Joe Fairless: What’s a mistake you’ve made on a transaction that we have not talked about already?
DJ Cummins: The biggest mistake — one for us is not having a property manager. Someone that has a full day to dedicate to [unintelligible [00:16:19].09] and someone that’s okay to be the bad guy; I am not very good at being the bad guy. We found that out. So that was a big mistake for us, not having a property manager.
We’ve got good tenants where we’re at now, and I think we’re okay with who we’ve got, but anything going forward is gonna be under property management for us.
Joe Fairless: Best ever way you like to give back?
DJ Cummins: We’re both volunteering at our church, we’re both on a couple of boards at the church; I’m on the financial board, for example, and… A passion of ours is helping out with the church.
Joe Fairless: And how can the Best Ever listeners learn more about what you’ve been doing?
DJ Cummins: Well, anyone’s free to reach out to me on Facebook or LinkedIn under DJ Cummins. And I actually started a blog a couple of weeks ago, www.ragstonicerrags.com.
Joe Fairless: [laughs]
DJ Cummins: I’m not a rags to riches kind of guy; I just wanna have nicer rags… So that’s kind of where I’m at [unintelligible [00:17:10].10] But I feel like I’ve learned a lot in the last few years, and I wrote a 400-page book, so I feel like I know a thing or two about a thing or two now… And I wanted to share it. I’m not on there to sell anything to anybody. It’s kind of a way to get the word out from what we’ve learned.
Joe Fairless: Well, DJ, thank you for sharing what you’ve learned, and the experiences from your first three deals. The lessons from the renovation process, taking it over versus bringing in a property management company or contractor, to partnerships, and the challenges that you can come across with tenants who just go berserk, and qualifications for screening tenants – all that stuff. And also, as you’re building your portfolio, where your focus is going.
Thank you very much for being on the show. I enjoyed our conversation, and I’m sure a lot of the Best Ever listeners who are looking to get into real estate or just get going got a lot of value from this conversation, so I really appreciate it. I hope you have a best ever day, and congrats on the book, and we’ll talk to you soon.
DJ Cummins: Okay, thanks so much, and thanks for all that you do for everyone out here.
