How One Realtor Turned Tenants Into Cash Flow Machines

Wayne Paprocki (00:00)
They stayed there 17 years. Dylan, they bought me a house. They paid off the mortgage. I took all those tax deductions. They were happy to be in that house while their kids went to all the schools and they moved out of state. It’s almost like I should give them some money when they were moving, buying this house for me.

Dylan Silver (01:51)
Hey folks, welcome back to the show. Today’s guest is a realtor and trainer based out of Chicago who leads seminars and training sessions to help real estate professionals sharpen their skills and grow their business. And also he’s an investor himself as well. Please welcome Wayne Paprocki. Wayne, welcome to the show.

Wayne Paprocki (02:10)
Hello, Dylan. Glad to be here.

Dylan Silver (02:12)
It’s great to have

you. It’s great to have you. And I always like to start off at the top, you know, by asking folks how they got into the real estate space. How’d you get into real estate, Wayne?

Wayne Paprocki (02:23)
I was doing corporate training for Fortune 500 companies, Pepsi, General Electric, Kraft, and ⁓ fellow speakers suggested I take a look at doing some GRI seminars many years ago when they were one week long. So you travel around the country in a circuit. And I got excited about that, enjoyed training real tours, then all of a sudden people suggested I get a real estate license, got the real estate license, then opportunities for training came up, and real estate investing was always a passion.

and I just tied all of them together so I kind of lessened my corporate training which I still have but increased my real estate training basically on real estate investing for agents, wealth building and negotiations as well as luxury marketing. Those are my major focuses.

Dylan Silver (03:09)
Now I’m a real estate agent in Dallas, but I tell everybody this, I’m really more passionate about being an investor and kind of the real estate license I felt like was just a way to kind of lend credibility to what I was doing. But I think a lot of people are maybe on the other side of the street when it comes to that they may be a realtor and they may be thinking, well, how do I get into the investing side of things? And you probably encounter so many situations like that.

Do you think that there’s enough people both in real estate and then outside of real estate who are involved in real estate investing? Do you think there can be more people? Do you think real estate investing is for everybody or is it really only for a certain kind of niche, a certain kind of mentality?

Wayne Paprocki (03:55)
I have been passionate for my 40 years of doing this to suggest to every realtor I meet, every time I speak, that every realtor should buy at least two income producing properties a year while they’re a realtor as an exit strategy, as a tax benefit, and as a way to be into the marketplace. So I’m passionate about agents not having enough real estate.

Dylan Silver (04:17)
It’s- it’s-

Wayne Paprocki (04:24)
because they sell it, why don’t they buy it for themselves? And many of have no exit strategy. And I’m big on cash flow.

Dylan Silver (04:29)
Yeah, none at all.

It’s a difficult thing, right? Because I think a lot of people might say, well, how am going to make this work? I’m in a commission based job. What happens if the market shifts? Now I have these properties and I’d like to tell people it’s all risky. It’s there’s risk everywhere. I mean, you could be working for, you know, a government job and then your job gets defunded and there’s so many different things that could happen. And I think if you’re involved in the real estate space and I’m I echo

your sentiment, Wayne, with the passion. Because if you’re involved in the real estate space and you’re not taking part in the investing side, then how do you kind of get off the hamster wheel? How do you get out of the rat race? Well, you really don’t. You either have to scale and grow such a large stock portfolio or something along these lines. But if you’re in the real estate space, you may have an inside knowledge where the good deals are. may…

have connections that other people wouldn’t have, you might as well utilize those connections. And like you said, if you could get two deals a year, that would be tremendous for I’d say a lot of people.

Wayne Paprocki (06:25)
I totally agree. mean, I was looking at the MLS just yesterday and looked at two houses that I’m thinking, why are those still on the market? Some agent should have bought those. I’m looking at a positive cash flow before taxes based on the price and knowing what rents I can get in that market area. I’m not interested in buying. I’m more thinking of selling now. As I said, my portfolio has drastically gone down to 22 properties. But boy.

They’re just sitting there waiting for somebody to pick them up as income properties. I don’t understand it.

Dylan Silver (06:59)
A

lot of people, think, ⁓ they need to kind of see the proof in the pudding or they need to see someone they know do it before jumping into it themselves. this is where really the strength of networking comes into play. And you can probably attest to this because so many people, if it’s not, you know, one degree of separation, it can be very frightening, even as a realtor, to get involved in the investing side, because there might not be anyone at arm’s length

who’s an investor that you know, even as a realtor who you can text at any given time and say, hey, how do I do this? What do I do here? How do I do this creatively? How do I get this financed and funded? What type of partnerships do I need to make? And so I’m curious, Wayne, when you’re advising maybe realtors who are starting out or maybe at some length through their career, but might not have such a massive portfolio where they’re already acquiring lots of properties.

Wayne Paprocki (07:51)
Thank

Dylan Silver (07:57)
and they’re kind of expressing some of these concerns, you how do I get started? Where do I make the connections? How do I get the funding for this? You know, I don’t want to have all these loans out and so on and so forth. Would your advice generally be to them to start with looking for the deal or would it be to start looking for kind of the connections along the way to facilitate the deal?

Wayne Paprocki (08:20)
Well, there’s no doubt connections are powerful and relationships allow for all kinds of benefits. mean, that’s to me common sense. But more importantly, I think a lot of agents just for whatever reason don’t have a strong guts gauge, as I call it, to get started. They throw in some fears and they confuse. ⁓

accomplishment ⁓ instead of goals. And obviously to get started, think financing is always, I don’t have enough money, I can’t do that. I got, we have DSCR loans, we have this 5 % down owner occupied thing with, from investors. And those are just two that are sitting out. Plus, as an agent looks at avoiding taxes like poison, as I feel, all the benefits of real estate don’t seem to be.

Dylan Silver (09:00)
Yeah.

Wayne Paprocki (09:10)
anywhere in any other kind of investment. are five major things real estate portfolios benefit from that very few if any other investments of any kind in this economy do, plus you’re building cash flow. So it’s just common sense to me. And I read a book many years ago as I started this journey. Carnegie. He said, 90 % of the self-made millionaires in this country

back then made their money in real estate and owning businesses. I’m a young kid thinking, why rediscover the wheel? I got to own businesses and I to own real estate. And so I actually was renting my own place to live in while I was buying rental property. I owned more rental property before I bought a house because I wanted cash flow.

Dylan Silver (09:48)
That’s it.

Wayne Paprocki (10:35)
So I mean, it was just a passion and I think it gets progressively easier after the first deal.

second deal, third deal, 10th deal, 50th deal, whatever. But that first one is always the drawback and a lot of times it’s financing. So I’ve been giving agents some plans on how to build ⁓ eight units up in two years through some of these 5 % down loans and DSCR loans. It’s very simple process.

Dylan Silver (11:00)
think a lot of people would be shocked to hear this. was just talking about this ⁓ with another guest here today, actually. That oftentimes people who are looking at getting their first property, they may have an easier time getting a multi-unit. Maybe an easier time getting a duplex, a triplex, a quadplex, than they may have with a single family. Have you found that to be true in a lot of cases?

Wayne Paprocki (11:26)
Interesting

you say that Dylan, that’s exactly how I started. I went into college towns and found older homes that I converted into two and three flats and bringing housing choice voucher people into them. So I had my guaranteed rents and I had a good capitalization rate. So I owned a lot of older homes I was converting. That’s how I started in the process because I could see what needs to be done. I could put home warranties on them to cover the major problems down the road.

and automatically I create a portfolio. think now especially this loan that came out last year, 5 % down, owner occupied, buy a four flat, rent out three, live in one. And you can borrow up to $1.6 million. So you can buy some very nice properties and then stay there a year, move out of that, put somebody in the fourth unit, buy another one, live in that one, do the same thing and in two years you got eight units.

Dylan Silver (12:09)
Huge.

Wayne Paprocki (12:23)
that are going to start to be cash flowing for you. It’s just a simple process but it’s based on being a bit gutsy and yes you could always worry about what if, what if I haven’t have a tenant but I do like the idea of multi units and I’m at the lower end of multi units but my fellow colleague and great friend Grant Cardone buys nothing in 32 units. He’s big time in terms of his minimum purchase of 32 units. I’ll buy a two, a three, or a four or single family.

and use those for rent or multi-unit small six flats etc. And I’ve done no commercial and never knew if I should have or not should have but I’ve been totally residential in my entire career.

Dylan Silver (13:03)
Now, I think there’s a lot of people who may look at the idea of scaling, right? And they say, well, at what point should I scale? And then you mentioned, you you have been in residential and you’ve stayed in the residential area and you have great success there. Do you think there’s anything to be said for staying in one vertical for a long sustained period of time as opposed to what I think is kind of a, I don’t want to say a tendency because it’s not a negative thing, but

this kind of shiny object syndrome where people feel like they’ve gotten all that they can get out of the squeeze in whatever vertical that they’re in and they go on to what they think is the next big thing but there’s also a lot of leverage there that they expose themselves to and potential liability

Wayne Paprocki (13:48)
You know, I can look at that several ways but my main focus was as I was starting to sell real estate I had a captive audience because I had tenants in every single one of my properties other than multi units but a single house Every tenant always got a rent with option to buy Because I’d like them to buy a house for me eventually if this one or some other one But that was the best way to keep my rents high have

tenants take better care of their properties and many of them buy it and or move out to someplace else with me as their agent. So that’s why I concentrated on residential because I I wanted a base of people that would be buying houses from either my properties with the rent to option or they go out and look for some other property. I’m dealing with a couple right now been in one of my rentals for 13 years. It’s beautiful five bedroom house. Their kids are graduating from school they’re going to downsize. We’re to look at houses.

Dylan Silver (14:42)
That’s an amazing strategy. I have not heard this one before. You would think that I would have heard this one quite a few times, but to be able to have the properties, tenants want to become homeowners. They’re saving the nest egg down payment while they’re the tenants. They know that, you know, the landlord is a real estate agent when they

have saved up

Hey, let me go buy a house. And then you find the next person and it’s a win-win because they know that if they get evicted, it’s not going to bode well for them on their

process of buying a house. then also they know, hey, look, there’s kind of like a relationship that I’m cultivating here. got this rental that I’m staying in, but then also I know that at the end game here, I have

realtor that I can go to to help me find a house and help me through that process.

Wayne Paprocki (16:09)
Can I share another strategy you may not have heard?

Dylan Silver (16:11)
Go ahead.

Wayne Paprocki (16:14)
in my office, when a person came in to look for a rental, nobody wanted to deal with them. my God, no money in that, blah, blah, blah. So they say, Wayne, you got anything available? And I take these people on, start talking to them, found out what they want. School districts are a big thing for a lot of people. And so I’d say, okay, I’m gonna give you some houses to look at this Sunday. And I pull up three open houses in a price range I thought might work for me buying it. And they would say to me, no, no, no, we don’t wanna buy.

We just want to rent. said, I want you to look at those houses. Tell me which one you like, school district, layout. And if you like it, I will see if I can buy it and I’ll rent it to you with an option to buy it. So I’ve had people, I actually have a house right now, it’s now on a tear down street, which is amazing, that a person bought, I told them I got good news and bad news. I can buy the house. We agreed on a price.

Dylan Silver (16:54)
Wow.

Wayne Paprocki (17:11)
but it will have to raise your rent 50%. And I said, the reason I’m saying that is you know you’ve been renting at a very, very low rent because your landlord never raised rents. But you know when looking around, this is the market rent in this area. But don’t do it if you can’t. So they said we would.

I gave them an 8 year lease with an option for another 7. If you had 8 and 7, that’s 15. Took out a 15 year loan.

they stayed there 17 years. Dylan, they bought me a house. They paid off the mortgage. I took all those tax deductions. They were happy to be in that house while their kids went to all the schools and they moved out of state. It’s almost like I should give them some money when they were moving, buying this house for me.

Dylan Silver (18:01)
Thank you for the house, right? And they were probably happy too because they didn’t have to leave.

Wayne Paprocki (18:05)
It was a win-win.

Exactly. So I mean, those two strategies have got me into a lot of single family houses that I would turn into a multi unit or do that way, among other different

Dylan Silver (18:10)
Now

I

think there’s a lot of realtors who are probably listening to this and their ears are perking up because they’re thinking, well, yeah, I mean, I’m always involved working with potential tenants or potential buyers and I work with sellers, but how about I become the landlord? How about I use that to help me find other properties? And also now,

my tenants can potentially buy the place you talk about lease option by the place that they’re in once it’s already paid off, right? I mean, you talk about these long leases. So there’s so many different strategies and you can sort of kind of pick and choose because you, hold in lot of ways you hold all the cards, you know, you’re the realtor, you have the property and then you have the tenants. You’ve got all three pieces of the deal. The only thing we haven’t talked about is like being the hard money lender, which that may be a business you’re not involved in, but

i could see a lot of investors thinking well now i’m just gonna start loaning money ⁓ but we are we are coming up on on time here when working folks go if they’d maybe like to learn a little bit more about your business or i know you’re in the chicago area if they want to reach out to you’re getting contact with you

Wayne Paprocki (19:31)
Yeah, my email is Wayne at WaynePaprocki.com. Be glad to respond to all that. ⁓ Bottom line is that’s the best way, easiest way, and surest way to make sure we respond rather than a phone call or going on a website or something. I just like the email process to start and go from there.

Dylan Silver (19:49)
Wayne, thank you so much for coming on the show here today.

Wayne Paprocki (19:53)
My pleasure, Dylan.