In 2010, Mike Henkel dropped out of college after only two years at Central Michigan University.
“It was always in the back of my mind that I never wanted to work for anyone else,” he explains. “I was going to college and doing what everyone else was doing, and one day I stopped.”
Henkel got his real estate licence in only eight days and, two weeks later, he started looking for properties to buy with the $US10,000 in his bank account saved from years of summer jobs.
At 20 years old, he bought a five-bedroom condo for about $US60,000 near the college campus, and rented the four spare bedrooms to friends for $US300 a month.
The income provided him with a free place to live while he spent his time replenishing his bank account by holding three jobs: a morning position as a realtor, an afternoon gig as a leasing agent at an apartment complex, and another night and weekend job working at a combination bowling alley/golf course.
In the spring of 2011, the opportunity arose to buy two more five-bedroom units in the same area. “I had saved barely enough to put down a down payment, and I didn’t have enough money to close,” Henkel remembers. “I have three credit cards, and I took out three cash advances and went to a payday loans place and bought five $US800 loans. As soon as I closed, I used every dime I got to pay off those little loans.” He estimates it took him about 2-3 months to eliminate about $US6,000 of debt, and that fall, he bought another unit.
Henkel turned his attention to making the units easier to rent to local college students. “The units were five bedrooms, two bathrooms, 1,700 square feet, near the university — it was strange they weren’t renting out well. I went in there and said ‘Ok, if i was going to live here — and I did live there! — what would I want done?'”
He ended up spending about $US5,000 per unit (“I put it on the credit card and then paid that off as soon as I could”) to replace the flooring with laminate and new carpet, coat the walls in fresh paint, and bring in new appliances.
Over the next few years, Henkel kept acquiring new properties near campus. In 2012, he got a deal to buy six new places for only 5% down, which ended up costing him about $US14,000. That year, he bought a total of eight units.
“At that point, every time I bought something, my bank account would go to zero or pretty close, and then I would build it up and do it again,” he remembers. “I know it was risky, but I was 21 and 22 and I wanted to just go.”
He admits that taking on so much risk made him uneasy. “It used to really get to me,” he says. “I’d get really stressed. With the first couple of units I was taking a leap of faith. I would puke every other day, and I wouldn’t sleep. But I think there’s something about working in the business and doing it, you get to the point where stressing out isn’t going to do anything about it. Now I feel like I react. Like I told a friend: If someone chucks a ball at you, you’re not going to freak out about that ball coming — you’re going to get the hell out of the way. Worrying about the ball won’t stop it from coming.”
In 2013, he bought another 15 (14 of which he purchased with a partner), and in 2015, another group of 15. The units now sell for closer to $US80,000, and he puts about $US8,000 into renovating each one before renting them to local students for about $US300 per bedroom each month. He slowly phased out his three jobs, and now devotes his full time to managing his properties out of his three-bedroom apartment in one of the bigger buildings, which he turns into a leasing office in the afternoons.
Renting to college students comes with its own set of challenges. Henkel says he’s seen his properties completely trashed, and makes a point of doing joint leases that make every roommate responsible for the unit.
He estimates he has to take one out of every 10 groups of renters to small claims court for unpaid rent, and he sends damages to collections. However, he explains, so far he’s been able to work out payment plans with errant tenants and not had to go so far in the process that their delinquency appears on their credit reports.
“When I was 19 or 20, so many people I looked at that did what I was doing — pinching pennies and trying to save and spend this much — that wasn’t for me,” he shares. “I want more in life. I don’t want to be tied down to a job. If my units are filled, I want to get to the point where I can hire other people, so if I want to go to Vegas next week, I can go. If I have kids someday, I can go places with them without worrying about work.”
Henkel now owns a total of 42 units (177 rentable bedrooms) worth about $US4 million. “My goal is to get enough units to where I can have a team,” he continues. He explains that his strengths are filling the rooms and figuring out what’s needed to attract tenants, but says he struggles with remaining organised. “My first employee will be someone really organised so I can worry about filing the units, then I’ll get another person to rent the units and slowly take myself out of the equation.”