Tailwind Talks

Why I Just Bought 3 Duplexes — Even at 6.75% Rates | Real Estate Market Is Shifting

• Cole Baltz • Season 1 • Episode 33

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Ever wondered when the real estate market would finally shift in favor of buyers? That moment has arrived, and I'm seizing the opportunities.

Despite mortgage rates hovering around 6.75%, I've purchased more properties in recent months than I had in years. This past week alone, I closed on three duplexes (six units total) - including a remarkably clean $100,000 property generating $1,800 monthly in rental income. These "set it and forget it" buildings with new roofs, gutters, and minimal maintenance requirements represent my current acquisition strategy.

But the rental property landscape faces significant challenges. Insurance costs have more than doubled on my older buildings, with premiums on properties from the late 1800s/early 1900s jumping from under $1,000 annually to nearly $5,600 combined. This dramatic increase has prompted me to strategically rotate out of aging properties into newer 1950s-60s constructions with lower maintenance burdens. Property taxes have skyrocketed, renovation expenses continue climbing, and lending costs remain substantially higher than historical averages. While rents have increased, they haven't kept pace with these mounting expenses.

For aspiring investors, I offer this critical advice: be extraordinarily careful with your first few acquisitions, as they establish the foundation for your entire investment journey. Equally important - maintain your full-time employment while building your portfolio. Even with 87 units and approaching 100 by year-end, I'm nowhere near considering leaving my airline and military careers. Lenders strongly prefer employed investors because they demonstrate additional income capacity if properties underperform.

The security of stable employment provides both financial protection and enhanced borrowing power. Many new investors mistakenly believe a small portfolio can immediately replace employment income, when successful financial independence through real estate typically requires years of consistent growth and management experience.

What's your approach to building wealth through real estate while balancing other career commitments? I'd love to hear your thoughts and questions in the comments!

Speaker 0:

What is up everybody? My name's Cole. I'm a part-time real estate investor, a full-time legacy airline pilot and a part-time military instructor pilot. Today I'm talking about what's happened in the last week. It's been a full week since I posted, maybe even a couple days over that it wasn't because I didn't wanna post, it's just the timing of everything and what was going on was not really conducive to me posting, as you, a whole lot lately. But I've been working on a lot of the real estate stuff. I've been focused really closely in on all that because there's a lot going on. This week alone we've had three properties purchased. Six units total, all duplexes, kind of two separate deals. I'm gonna include pictures of all of them, give you an idea of what they look like so that you guys can get an idea of what I'm buying right now.

Speaker 0:

But I've personally felt a huge shift in the market as far as a buyer versus seller who's got the advantage right. I feel like it's really starting to become a buyer's market and it takes a while for that to happen. But I've bought more deals in the last couple of months than I bought for the last couple of years and for me that's a big indication. Now looking back, even after this week, is like saying, okay, what is it that's causing me to want to buy right now? Because rates really haven't changed a whole lot. Right Rates right now. The last quote I got for the big package that you guys might know I'm working on, that rate was 6.75. Originally it was quoted at 6.5. Now it's back to 6.75. Why am I buying stuff if the rates really haven't changed in the last couple of years? It's been in that range but I wasn't buying anything. Right now I'm seeing a lot of people that are feeling the pressure to sell a little bit more than I've seen in the past. With the deals that I bought, there wasn't a ton of pressure, necessarily, but I was able to negotiate a price that I thought was reasonable.

Speaker 0:

In the case of yesterday's duplex that closed, I bought it for $100,000 and it should rent for about $900 a month on either unit, so $1,800 a month gross against $100,000 purchase price. And it was a super, super clean building New roof, new gutters, new siding. The garage was recently sided, everything on it was clean. The lower unit was vacant and totally rent ready and the upper unit was occupied or is occupied right now, and I just spoke to the tenant yesterday. To me, like a property like that is like just a set it and forget it type property, like I don't have to do a whole lot of upfront maintenance to bring it up to modern day standard so I can just get it going and then forget I own it for five or six or seven years.

Speaker 0:

The other two duplexes are the same. They're all able to increase the rents probably about 30% per unit and I'm not going to do that overnight and I don't want to get rid of tenants that are otherwise really great. But there is the additional rent potential of about $300 a month per unit. That's a sizable amount of money every year. When you multiply out over 12 months, right, if you're raising rent $300 a month, let's say in a unit, people might not think right off the bat that's a lot of money. But if you multiply that out I always use 10 months just to get the numbers rolling because I'm an idiot so that brings me to 3000. Then you add an additional 600 for the other two months. That's 3600 a year just in a $300 a month rent increase. And in the case of these properties, all four of those units and those two duplexes in the separate deal could have a rent increase of about that much per you. Multiply that out by four units, that's a sizable amount of additional rent income.

Speaker 0:

Long story short all pretty clean buildings, not a lot of maintenance needed, and that's something that I'm starting to shift to. I'm starting to rotate out of some of my older properties into some newer stuff that is a little bit lower on the maintenance side, the CapEx side. That's what I've been looking at personally. Funny enough, two of my duplexes that I'm actually going to be selling here soon shout out if anybody wants to buy them, let me know. Two of the duplexes I'm going to be selling here soon were recently non-renewed for insurance. So I use the same insurance company for everything, or I was up until recently, and now I'm rotating out of that old insurance company because they were non-renewed and I've got a new insurance company and the premiums for them jumped up over double per property.

Speaker 0:

I was thinking I was paying less than a thousand a year in insurance for each of the properties and now combined I think it's like $5,600 or something absolutely crazy. And it's because of the age of the properties. One of them was built in like the late 1800s. The other one was built in the early 1900s no, not getting any newer right, it's 2025. So I'm starting to look at that stuff in the portfolio as a little bit more of a risk and rotate out of those in favor of things that are newer 1950s, 60s builds and onward. That's something interesting that I noticed, though, because I was seeing a big change in insurance costs for the multifamily side of things, but I hadn't seen that for single families duplexes but now I'm starting to see that I've gotten on renewals for the first time. So insurance is starting to become a little bit more of a challenging topic, and for those of you who are looking at getting into rental properties in general, there's a lot of variables to think about right now. I'm thinking about them. Any investor that has a sizable portfolio, or even just one property, is probably thinking about the same thing.

Speaker 0:

Property taxes for me, have gone up a ton in the last couple of years. Insurance is starting to go up, and I'm starting to notice it in the properties that were recently harbored from that type of a increase. Now they're the ones at the forefront of it, so I'm starting to get a little concerned about that. So I got property taxes. I got insurance. Lending costs obviously are a lot higher than they were in the years past. A lot of the loans that% range on interest rates they're going to be rolling over into 6.75. Right now. We're getting hit from every angle and obviously the cost to do things as far as repairing the properties go, have also gone up. So everything has gone up right and at the same time rents have also gone up. So some of it is offset, but I don't think rents have increased fast enough to make up for all of these ancillary expenses that an investment owner has to pay for. But we've also seen equity really grow in a lot of these properties because of inflation and just the buyer's market or the seller's market. That had been going on for the longest time, but now that's starting to shift into a buyer's market.

Speaker 0:

I'm curious to see what happens with the properties that we've had for the last four or five years. So for me, I'm starting to look at that stuff and saying, okay, maybe I need to rotate out of some of this stuff and move into newer things, and that's what I'm doing right now. So I'm literally gonna be listing two of my duplexes here soon that we've had since maybe 2021. And they come due next year on their loan and I just don't wanna hold on to them because 5,700 a year in insurance plus the property tax increases and we haven't really raised the rent on them too much since I bought them Maybe a hundred dollars a unit, if that like. We've left them alone because the tenants are really good and I don't want to screw them, but I also need to cover my expenses. So it's this weird middle ground that you're in. So we didn't really mess with the tenants too much on those ones, but now it's okay. Maybe we need to get out of them because they're also old. The expenses to upkeep these properties continues to get higher and higher.

Speaker 0:

Right, you eventually start looking at roofs and siding and big major renovations on the interior, not to mention the foundations back in those days were built differently and they don't always stand up as well as some of the newer stuff. So there's just a lot of things to think about with that stuff. If you're a new, if you're somebody that's looking at getting into a rental property ownership, really be careful with the first couple of deals that you buy. If you've watched any of my videos, you've heard me say this a million times, but the first two, three, four deals that you buy is really going to set the foundation for everything else that you do within the space. And I'm not, I'm a nobody, right. I don't have I don't have a endless amount of properties. I'm not a multi, multi, multimillionaire, I don't have 10,000 units, but I've been able to build something from zero to at the end of August, maybe 87 units, trying to get to 100 by the end of the year, and then we'll see where it goes from there.

Speaker 0:

I've had some limited amount of success in this and I think the biggest thing I would say is that you have to be really careful at the beginning, because you can't really stomach a major loss or a major mistake at the beginning, and if you do experience one of those, this is going to delay the process of everything, because time is what everything is predicated on Rent increases, debt, paying down debt, equity growth, inflation, like all these things are predicated on having time, and the shorter your time horizon, the worse off you're going to be. And that brings me to another point that I wanted to talk about, that if you find somebody that you're learning from in the space, whoever it may be. Who knows, maybe it's me. Something to think about is that your time horizon and my time horizon and somebody else's is different as far as the investments go. So what makes sense to me in a 30-year time horizon, it doesn't make sense to some people that are looking at it through a 10 or 15 or five-year time horizon. So some of the people that I've learned a lot from in real estate are operating in a different way because they also are at a different point in their life. They might be in their 40s, 50s, 60s, and meanwhile I'm still in my 20s. So what I'm looking at as an interesting deal to me may not be the same as theirs, because I'm looking at it in a much longer lens than they are. So take everything that you learn from somebody anybody with a grain of salt, because everybody's looking at it through a different lens and different life experiences and whatnot. But I just want to bring that up because sometimes I even get influenced by what people are telling me and I'm like I have to keep in mind that, like, what I'm doing is a little bit different. I have a full time job, I have two full time jobs. In some way I have all this stuff going on. So what makes sense to me isn't always what makes sense to somebody else. And I've trusted my gut so far and it's worked out OK. So I'm just going to continue to do that Right, for better or for worse. It may lead me to bankruptcy, but I'm going to continue to do what's been working for me. And that leads me to another thing I wanted to talk about In my closing of the first two duplexes earlier this week the lender that I'm using.

Speaker 0:

Super awesome people. They're very easy to work with. Very simple. I was talking to them and I was asking them like hey, is there anything that came up in the underwriting process for this loan that I need to look out for in the future? And the reason I asked that is because I want to know hey, is there something I can do better? Is there something I can clean up on my personal finances? Maybe I can get rid of a little bit of the debt that I'm carrying or I can find a way to restructure things. That way it's more appetizing to the bank, right? So I just asked him like hey, like what do you guys see in me and in the stuff that I'm doing that you like or don't like, and so for those of you starting out, there's a lot of people that tell me that quit my job and do this full-time, because I really do love it and I think I have a knack for just doing some of the stuff that's involved in buying and refinancing and doing the whole property thing. But having my full-time job is something that I think has really helped me get these loans right, because when you're starting out, you don't have a track record.

Speaker 0:

At point two, if you have a job, though, you can say hey, if the property doesn't perform well, if I mismanage it, if I end up with nobody paying rent, I can still cover this with my own job, or I can at least cover a portion of it. I'm good for it, I still work, I still have a job, I can pay for it, and I think that's taken me a long way with the regional airline that I was flying with, and I was maybe making $10,000 with the guard, and I don't even know if I was making that much maybe $30,000 with the regional airline. So, combined, maybe $40,000, $50,000 a year after taxes and everything. You're really not making a whole lot. But then, as time has gone on, I went to flying private jets. I was making maybe 75, and then I was a captain there, so I was making six figures. And then I went to American Airlines and then I went back down and then I came back up and maintain the job, though Even just if it was a small amount of supplemental income was something that a lot of lenders really like to see, and I think it made my underwriting process a lot easier.

Speaker 0:

So if you're looking at this, trying to get into it, and you're like I just want to quit my job, no-transcript. If you buy two duplexes and that's your full-time gig, you're going to make almost no money, like you're going to make a little bit of money, but it's not gonna be enough to save for retirement, it's not gonna be enough to take your kids on a vacation, it's not gonna be enough to do the things that you want to do more than likely. So I would really take a pause because, yes, in the longterm, will those duplexes make money, because you're paying down the debt and blah, blah, blah. People buy properties for sure. But is it going to outpace what you could do by having a job? Probably not, and I think everyone's chasing this goal of I'm not going to work for anybody. I'm going to live at home, I'm going to kick up my feet and it's all going to be great.

Speaker 0:

But I would really caution you to take a pause before you do any of that stuff, because having a full-time income is a superpower in this business, just like having partners is right. I always tell people now I would rather be the 50% partner of this than the 100% partner of this. So having partnerships is great. If your partners also work, that's even better. You have a job, they have a job. The lenders love to see that stuff because you look like somebody that could actually pay back the debt if something went wrong.

Speaker 0:

So just take a pause if you're really considering quitting your job, and use me as an example. Use me as an example. Use me as an example. I'll have 87 units as a majority partner by the end of August and I'm not even like remotely close to thinking about quitting my job. Not even it's not even in my mind at all. It's not even close to being able to be possible.

Speaker 0:

Granted, my job pays a little bit differently than some others, but to me, the risk far outweighs the reward of quitting my job. Right now, I could easily see how expenses start to pile up, property taxes start to go up and I can't cover it, and now I'm losing what has taken me 10 years to start and build, and I think I'm just getting started. So I would really be careful about that, because going to a nine to five isn't always great. I have what I believe is a kind of a fun nine to five, and sometimes it's still not fun to go to right. Ripping around in a Blackhawk is something that a lot of people would pay money to do, and sometimes I don't really feel like doing that either. So I can definitely empathize with that, and my job isn't really nearly as boring as most people's, so I can appreciate that too. But I would just really think about it before you make that plunge, because sometimes that can cause irreversible damage and the little portfolio that you might have built could easily evaporate. People bigger than me, people bigger than a lot of people, have lost it all because of things like that. And until you have something that's self-sustaining and you really understand the business and you've got some years under your belt, I would highly advise to just maintain your nine to five and just know that every day you're there is just working towards the ultimate goal, which is to do this thing full time and to build it really big, which is exactly what I think about every time I'm in the jet. That's kind of my thoughts.

Speaker 0:

Like I said, I apologize for being gone. I was trying to average two videos a day for a year and I'm still going to try to do that. Obviously, I have a whole year to try to bring it back up to the average, but it's just tough sometimes to do with my full-time jobs, with the real estate stuff. I'm trying to stay on top of it, but there's a lot going on, obviously. So bear with me. This is a hobby and just talking about stuff. I don't make any income off this, obviously, which is no big deal. It's just I have to prioritize the things sometimes that make me money over the things that just cost me time and money. Obviously, I had to pay for all this stuff, but I really enjoy doing it. It's just I can't always get to it when I would like to.

Speaker 0:

I appreciate everybody that's watched this, these videos, this video in particular. Subscribe, whatever it really means the world to me. These are just my random thoughts on our what is it Thursday afternoon, appreciate it. I'm going to be gone for a couple of weeks doing some military training, so I don't know what kind of videos I'm going to be able to make. If any, I'll try to do some like layover talk type ones which is off my phone, just off the cuff type stuff. But I'll continue to try to do the best I can. When I get back I'll do a lot more videos about the deals that are coming up Right now.

Speaker 0:

I've got the 10 property deal under contract. We're still negotiating some of the finer terms on it. But I walked all those units on last Friday. It was awesome, 9.30 to 2 pm, went through every unit, got to see everything Super awesome shape for the most part. There's a couple of duds in there, but for the most part they're pretty good, pretty excited about that deal. And I've also got a duplex in my first commercial building that I'll be buying. So it's like a 5,000 square foot commercial space which is just basically like storage more or less, with a 10 foot garage door, which is sweet, and then a three bedroom upper and then a really nice duplex in a really nice area in Milwaukee. So super pumped about those. That'll round out all of August and then we'll see what happens from there.

Speaker 0:

I've got some duplexes that I'm selling, like I mentioned, so the thought is to use those in like a 1031 exchange. There's a lot of different things that we can do, but right now I'm just focused on getting these deals done, because I don't want to bite off more than I can chew and in a way I think I might have already done that. So we're just going to lay low, keep working, go fly the Blackhawk for a while and then get back to it when I get home Appreciate it again. Like I said, everybody watching and supporting Leave a comment Really appreciate the comments. I love interacting in those. If you have anything to say about this or thoughts, I'm happy to answer any questions or try to give you some advice. I don't know if I can say advice legally, give you some thoughts of mine with your specific circumstance. Talk to you guys soon, see ya.