RE: Real Estate Podcast

Clint C. Galliano (00:00)
Real estate YouTube says you need 10 rental properties by next year. Meanwhile, the quiet millionaires in your community got there by never selling a house they moved out of. Today, we talk about the actual path from one property to five. The boring, decades long, wildly effective version. This is Built to Own.

Ben Harang (00:39)
Hello, everybody, and welcome to another episode of the RE Real Estate Podcast. I'm Ben Harang, and with me as usual is my co-host, Clint Galliano How are doing today, Clint?

Clint C. Galliano (00:54)
I'm

doing wonderful, Ben. How you doing?

Ben Harang (00:57)
I'm doing terrific. Dodging rain showers, thunderstorms, and in the heat of summer, but that's life in South Louisiana, and we just deal with it. So.

Clint C. Galliano (01:10)
Yeah,

I'm thinking that we're probably not going to have sound effects today, but I'm not going to guarantee it.

Ben Harang (01:17)
If you don't like the weather in South Louisiana, wait 15 minutes. It'll change. So what are we talking about today?

Clint C. Galliano (01:27)
All right, last week we talked about the five engines of property wealth. Today, the natural next question, what if I want to run those engines on more than one property? And that's portfolio building. And it's the act three closer for built to own.

Portfolio building for working families almost never looks like real estate, YouTube says it does. It usually looks like never selling the houses you move out of plus one or two intentional purchases along the way across 20 to 30 years of adult life.

reality check on the guru fantasy versus the real path and then the four realistic on ramps to property number two then a 20-year composite story showing how a family goes from one property to five without ever setting out to build a It's not for everyone. Owning multiple rental properties requires temperament

operational capacity and willingness to be a landlord.

If any of those aren't you, the last episode's five engines are already doing plenty of work on your one home. That's a complete strategy on its own. All right, disclaimer time.

Before we go any further, nothing in this episode is tax, legal, financial, or lending advice. Portfolio building involves financing mechanics, tax implications, insurance considerations, and landlord-tenant law that all vary by situation and change over time. Every action item today routes to a professional. For financing questions, talk to a lender. For tax questions, talk to a CPA. For landlord-tenant law and property management questions,

Talk to a Louisiana real estate attorney or a licensed property manager. We're here to put the framework in front of you. All right, Ben, take it away.

Ben Harang (03:35)
Does that mean we ain't responsible for nuttin'?

Clint C. Galliano (03:39)
We're responsible for anything in this series. We're just providing

the framework for the listeners.

Ben Harang (03:45)
Okay, okay, I get it. I get it. All right, here we go. The portfolio reality check. The guru fantasy. On real estate YouTube and TikTok, everybody owns 47 properties at age 28, all bought with creative financing, all cash flowing, thousands per month, all managed from a laptop on a beach in Bali.

It's compelling content. It's mostly not real.

Clint C. Galliano (04:18)
Yeah, based on some of those numbers, you know, I kind of question how they're calculating cash flow. The math of 10 doors and 10 months usually requires ignoring the down payments because they didn't have the cash. They use partner money or hard money loans at painful interest rates. The reserves, they're one bad month away from a forced sale and the operational reality. Managing 10 properties is a full-time job, not a side hustle.

Ben Harang (04:47)
No doubt about that. The reason this content dominates the algorithm, portfolio scaling looks glamorous. There's a coaching and course industry monetizing the fantasy. The actual course customers who mostly don't build real portfolios or the product being sold to, that would be you.

Clint C. Galliano (05:10)
That is exactly right. The people put up these things, a lot of them are not really doing that. They're renting Lambos to take pictures of, they're doing tours or maybe paying $500 to go do a photo shoot at a fancy property, when in reality, their business is selling consumers on their courses.

Ultimately, it's a sham. It's a scam. It's fake. The realistic path is quieter, slower, and less shareable, which is why it doesn't dominate the algorithm, even though it's how most real portfolios in this region actually get built.

Ben Harang (06:00)
So here's the real path. The people who actually own three to five rental properties in our community, and there are a lot of them, almost never get there through a scaling playbook. They got there by never selling the houses they moved out of, plus one, maybe two intentional purchases along the way.

Clint C. Galliano (06:23)
pattern

is you buy a first home, live in it five to ten years, you buy a second home and keep the first one as a rental, and then you repeat. Across 20 to 30 years of adult life, that's three to five properties without ever doing anything dramatic. That's the quiet millionaire pattern.

Ben Harang (06:44)
And this is why so many working family landlords were surprised when they hit their 60s and realized they're worth more than they ever expected. The compounding happened while they were focused on jobs, kids, and life.

Clint C. Galliano (07:01)
Just to be clear, there's nothing wrong with intentional scaling for people who want it and can handle it. But if the goal is to be worth a couple of million dollars at retirement, the slow and organic path gets there for most families without any of the risks that comes with rapid scaling.

Ben Harang (07:20)
so how do you do it? How do you go about acquiring the property? There's four onramps to do it. The first one is house hacking.

House hacking is buying a two, three, or four unit property as your primary residence, living in a unit, and renting the others. Because it's your primary residence, you can use FHA VA or conventional owner financing with low down payments, even though most of the property is generating rental income.

Clint C. Galliano (07:55)
Yeah, so there's a variation on this too for a single family or single unit property where you rent it out by the room. Either way, it's being a landlord sharing your property and the FHA, VA and conventional require that the owner live in one of the units or want to live in the property. But the math is powerful.

On a $300,000 fourplex with FHA 3.5 % down, you're putting $10,500 down. Three units renting at $1,000 each is $3,000 in monthly rental income. Even after the mortgage taxes, insurance, and reserves, you're often living in your unit at a negative or minimal out-of-pocket cost.

Ben Harang (08:49)
But the trade-off is real. You're a landlord in your own building from day one. Tenant issues become neighbor issues. It is not for everybody. But for a first-time buyer who wants to accelerate portfolio building, house hacking is arguably the highest leverage move available.

Clint C. Galliano (09:12)
Now, in the Bayou region, two to four unit properties are less common than in dense urban markets, but they do exist, especially in older neighborhoods in Houma and Thibodeau. A duplex is often easier to find than people tend to assume. Talk to a real estate agent who understands small multifamily inventory specifically.

Ben Harang (09:37)
Alright, let's go to on ramp number two. Move and keep. Move and keep is exactly what it sounds like. You outgrow your first house, you buy a second, but instead of selling the first one, you keep it and you rent it out. This is the single most common way accidental landlords get made in this community.

Clint C. Galliano (10:01)
Now there's a variation to this where you maybe buy a home with the intention of rehabbing it or refurbishing it. And it's labeled as a slow flip because you're actually living in the home while you're making upgrades and repairs. So it can be buying a ready to move in, already completed.

and refurbished property, or you can buy something that's in need of a little bit of work where your money actually goes a little further and you're increasing the value on that. So the financing math often works surprisingly well. You bought the first house at whatever rate you had at the time. If that rate is materially better than current rates, which is true for many people who bought during the low rate years,

Keeping that mortgage is holding onto a generally valuable financial asset.

Ben Harang (11:05)
And the transition matters. Some lenders will require you to prove the rental income is real before they'll approve you for a new mortgage. Others will treat the first property as a liability against your debt to income. Talk to your lender about how they'll underwrite the move and keep scenario before you shop for your new house.

Clint C. Galliano (11:30)
So here's a Louisiana specific tip. As soon as you convert a primary residence to a rental, the insurance changes. You need a dwelling policy, not a homeowner policy. The homestead property tax exemption may go away. The landlord tenant law applies. Do these updates before the first tenant moves in, not after, because then you're creating risk for yourself.

Ben Harang (11:56)
And the homestead exemption does go away when you only have one. Whether you keep it in the first house or the second house, you only have it once.

Clint C. Galliano (12:05)
and it has to be where the property you're occupying.

Ben Harang (12:10)
Yeah, the one you declare as your domicile. All right. On ramp number three out of four, direct investment purchase. A direct investment purchase means you buy a rental property intentionally using investor financing without living in it. This is the intentional buy an investment property path, the one most people picture when they think about landlording.

Clint C. Galliano (12:38)
The financing differs significantly from owner-occupied. Down payments are typically 20 % 25 % minimum, and interest rates become higher, usually by half a percent to a full percent. Reserve requirements are stricter. DSCR loans, Debt Service Coverage Ratio, let you qualify based on the property's rental income rather than your W-2 income,

which opens options for self-employed borrowers.

Ben Harang (13:09)
Okay, the cash flow math has to work up front. Rule of thumb, after the mortgage taxes, insurance, property management, maintenance, reserves, and vacancy allowance, does the property produce positive cash flow at conservative rental assumptions? If not, you're betting on appreciation to bail you out. That's a valid strategy, but a different one.

Clint C. Galliano (13:38)
Yeah, because appreciation is not a guarantee. There's too many black swan things happening and it really depends on your market. It's something else to take into account too. While we don't have the wild fluctuations like the coast has and the major metros, our appreciation is fairly steady, even though it does have dips and peaks.

Again,

talk to a real estate professional about this. So in this market, direct investment purchases require patience for the right deal. The Bayou region isn't overheated and deals with genuine positive cash flow exists, but they don't announce themselves as investment deals in the MLS. Work with an agent who can identify potential investment properties from the residential inventory.

Ben Harang (14:34)
All right. The fourth option is to extract the equity. Equity extraction means using the equity in your existing property to fund the acquisition of another one. Two main methods are cash out refinance and HELOC, a home equity line of credit.

Clint C. Galliano (14:59)
So cash out refinance replaces your current mortgage with a new larger one. You pocket the difference in cash and use it as a down payment on the next property. The cost, you may lose a favorable rate, your closing costs add up, and your monthly payment on the primary residence goes up. But that being said, there's a whole strategy called BRRR. B-R-R-R. That's buy rehab.

rent and refinance. and there's another R, repeat. So that's continual equity extraction from the properties. And another note is that the money that you get back on a refinance, that's tax-free money to fund your further investments.

Ben Harang (15:53)
That's true. That's true. So HELOC is simply a second lien or mortgage. Your primary mortgage stays in place, but you get access to a credit line secured by the equity. You draw only what you need. Rates are typically variable. So this option is more sensitive to rate movements than a cash out refi.

Clint C. Galliano (16:19)
Extracting equity is a tool, not a strategy. Use it wisely. And buying a cash flowing rental with the extracted equity, it accelerates portfolio building. Use poorly. Funding lifestyle purchases, it undermines the wealth you built in the first place. This is where a CPA or a financial planner is worth their fee.

It's kind of like I always go back to something Robert Kiyosaki said. He's the author of Rich Dad Poor Dad.

If an investment is an asset, that means it provides you with cash flow. If it doesn't provide you cash flow, then it's just a doodad. It's basically a lifestyle purchase.

Ben Harang (17:05)
Right, right. Okay, let's talk about a mythical family and see how all this comes together. It started in 2005. Two working adults combined household income around $75,000 at the start, growing to about $115,000 over 20 years. Not high earners, solidly middle income throughout their working years.

Clint C. Galliano (17:35)
They're not real estate people. They didn't set out to build a portfolio. They had a life happen. Marriage, kids, career changes, needing a bigger house. It made a series of housing decisions along the way that turned into a portfolio without a single one being a portfolio decision at the time.

Ben Harang (17:57)
What we're talking about is exactly the accidental landlord pattern from segment number one. No scaling playbook, no hard money, no coaching program, just move and keep. Done three times across 20 years. Plus one intentional purchase at the end.

Clint C. Galliano (18:23)
So here's the path for that. 2005, the family buys home number one for $200,000. FHA financing, 3.5 % down, and $7,000 at closing. Standard 30-year mortgage. They lived there for eight years.

Ben Harang (18:45)
In 2013, baby number two comes along. They outgrow the starter home. They buy home number two for $280,000 with a 5 % conventional down payment. That's $14,000. Instead of selling home number one, they rent it out.

Rent covers the old mortgage plus a small monthly positive cash flow. The portfolio now consists of one primary residence and one rental.

Clint C. Galliano (19:18)
2018. Career change requires a move across town. They buy home number three for $340,000 with a 10 % conventional down payment. That's $34,000. Home number two becomes rental number two. The portfolio is now one primary residence, two rentals. Home number one has been rented for five years and generating cumulative cash flow.

Ben Harang (19:45)
And then in 2023, they made a direct investment purchase. Home number one is nearly paid off in generating strong cash flow. Its appreciation has funded most of the down payment on a small duplex. They buy it for $250,000 with a DSCR loan, 25 % down. Portfolio is now one primary residence.

two single family rentals and one duplex equals five doors.

Clint C. Galliano (20:22)
2025, the family sells nothing. All the properties are still owned. They sit down and review the portfolio for the first time and realize they built something they never set out to build. Every decision along the way was made for lifestyle reasons. The wealth was a byproduct.

Ben Harang (20:43)
So here are the numbers at 20 years. Combined portfolio value in 2025 was roughly 1.4 to $1.6 million in real estate assets. Combined mortgage debt is roughly $700,000 to $800,000. Net equity, roughly $700,000 to $900,000.

Clint C. Galliano (21:18)
The monthly cash flow across all the rentals, roughly $2,000 to $3,000 net of expenses. So that's $24,000 to $36,000 per year in rental income on top of primary job earnings. And it grows every year as rents inflate faster than the fixed rate mortgages.

Ben Harang (21:38)
So what's the takeaway? This family didn't scale a portfolio. They lived their lives, made reasonable housing decisions, and never sold anything. That's the pattern most quiet millionaires in our community actually follow. And it's replicable for anyone who understands the framework and is willing to be patient.

Clint C. Galliano (22:07)
All

right, guess what time it is.

Ben Harang (22:10)
I'm not doing it Clint, I'm not gonna do it.

Clint C. Galliano (22:14)
That's all right, you don't have to. But I recommend that our listeners do. All right, again, we've got homework for you.

This is two part homework, whether the listener already owns a home or is still a non-owner. Both parts produce concrete pieces of information that the listener didn't have before.

So first, if you already own your home, find out what it would rent for today. Look up comparable rentals in your neighborhood on Zillow or the local MLS rental section. Get a number. That's your if I ever move and keep this house baseline. Even if you never plan to move, knowing the number changes how you think about the asset. It's not just where you live. It's a rental property with a person currently living in it.

Second, if you don't own yet, browse two to four unit properties in your target area. Just look, see what exists. Duplexes, triplexes, fourplexes, filter for owner occupied financing if you can. It's not necessarily always an option to search for, but it's a good thing to check into.

That's the house hacking option that most first time home buyers never even know is on the menu. If none of them fit, that's fine. Just knowing they exist changes the frame. In both cases, anything beyond information gathering, the professionals to talk to a lender for financing, a CPA for tax implications, and a property manager for operational reality. This episode is a framework, not a plan.

Now, in addition to that, also consider on the second part of the homework, looking for houses with what's commonly referred to as a mother-in-law suite. Official terminology is ADU, or accessory dwelling unit. This is a non-conventional approach to having property to rent out.

where you can live in the house and rent out the ADU, or you could live in the ADU and rent out the house and collect higher rent and potentially even live for free. So those are all things to check out and keep in mind.

Ben Harang (24:47)
All right, Clint. So wrapping it up, that's that's episode eight of built to own. And that closes out act three, two episodes on wealth building the five engines and the four on ramps to portfolio to a portfolio if you want one. Next week, we open act four, financial freedom, which turns to the question of protecting what you've built and passing it on.

If you've got property in your life or in your family, do not miss it.

Clint C. Galliano (25:24)
share this episode with somebody that's been talked out of the possibility of a portfolio because they were comparing themselves to the YouTube version. Them damn YouTubers. The real path is quieter and slower and available to more working families than currently attempted. We'd appreciate it if you subscribe wherever you get your podcasts so that the next week's episode lands automatically.

Ben Harang (25:52)
You gotta watch those YouTubers with a face for radio too. So every episode is available at rerealestatepodcast.com. You can listen to the audio version. You can see what two guys that have faces for radio look like on YouTube. It's the same audio, whichever way you rather consume your podcasting content. We try to make it as easy as we can as rerealestatepodcast.com.

Alright Clint, I think we got another one in a can.

Clint C. Galliano (26:28)
Yes indeed. We'll see you next week.

Ben Harang (26:31)
Have a good one.