Despite what you might think, I was not born knowing how to invest in real estate.
I know, I know. Shocking, right?
Of course, no one knows how to invest in real estate innately! They must learn.
Now, if you’ve been around the real estate investing industry for any length of time, no doubt you’ve heard the term “mentor” before.
No, I’m not talking about some paid coach or guru course.
I’m talking about real-life, local individuals who can help a new investor on their journey toward success.
A mentor can show you what’s working for them, what is not working for them, share the lessons and mistakes they’ve made, make introductions to others in the real estate market, and provide real-time feedback.
Having a mentor can truly be life-changing — and today I want to introduce you to one of mine.
Kyle is an airline pilot who started investing in real estate almost by accident. Over the years, he’s acquired a number of properties and made a lot of money from real estate.
In this video interview, Kyle and I talk about how he got started (almost on accident!), how he transitioned from flipping to rental properties, and why he decided to help out a young, dumb kid named Brandon. 🙂
If you are a fan of the BiggerPockets Podcast, I think you’ll love this interview and will learn a lot.
So without further ado, here’s my interview with Kyle:
How to Purchase Real Estate With No (or Low) Money!
One of the biggest struggles that many new investors have is in coming up with the money to purchase their first real estate properties. Well, BiggerPockets can help with that too. The Book on Investing in Real Estate with No (and Low) Money Down can give you the tools you need to get started in real estate, even if you don’t have tons of cash lying around.
Brandon: Alright, hey everyone. My name is Brandon from BiggerPockets.com, and today, I am bringing you guys a special treat. In fact, I am doing an interview, my very first video interview in the same room as somebody, with a guy that I’ve looked up to for a decade, who is largely instrumental, if not the number one instrumental force, in everything that I’ve done so far in real estate. This is Kyle. I like to say my mentor. How are you doing Kyle?
Kyle: I’m doing well, Brandon. It’s nice to be here.
Brandon: Thank you. Thank you. Also joining us today here is Charlie Barkin. My dog Charlie. He is hanging out with us here today as well. Today, we’re pretty much talking about how Kyle here got started in real estate, what he’s doing to do that and kind of get into a little bit of our story of how we met, how we started working together a little bit. Hopefully at the end of the interview or throughout the interview, you’ll come away with some good tips for how you can build your own real estate business, how you can work with other people, and hopefully learn some good stuff from Kyle. Are you ready?
Brandon: Alright, so why don’t we start out with the question that we start out BiggerPockets podcasts with — how did you get started with real estate?
Kyle: You know, it’s just as easy as just saying, you know, on this particular day, I started to do this. It — I have to say, it’s a bit of a process, and it was unexpected at the time. My wife and I, when we moved out of the area and when we moved back to the area, we decided to buy a particular house. This house came with property. For all intents and purposes, we ended up buying the house, and on the property, our vision, I guess our dream was to build a house on this property adjacent to it. We progressed down that road, and at the end of the day, we ended up having two houses on this property, one being a manufactured home, the other being a stick-built home that we built so guess what, instantly I was a landlord. I had a place to rent.
Kyle: That’s how it kind of started. Not really having did — I never really did the math and sat down and figured out how what advantage would this be for me and my wife, but you know, it wasn’t something that was really significant. You know, the mobile home? What did it rent for? I think at the time, it was probably only renting for $350 a month, but that was $350 a month that I wasn’t getting before, and that went directly towards my mortgage. That was initially the first “aha” moment, if you want to use that term. That’s when I realized that this is — this could be something very significant if I could grow it.
Brandon: Nice. I use this term a lot, I don’t know if you’ve heard me, but I call it house hacking, it’s this using your primary residence as investment as well. There are a few ways you can do that. Obviously, you’re doing it right now even still. Doing it well, I’m not doing it as much here anymore, but this idea of you know maybe buying a duplex or for you is building that extra house. You are an accidental house hacker.
Kyle: Absolutely. I would agree — I would agree.
Brandon: Very cool, so you started out this accidental house hack, you became a landlord. How did it trigger to I want to do more of this? You know, like a lot of people end up with one property whether it’s by accident or they can’t sell a property, whatever, but how did you say I want to buy more and do this over and over again?
Kyle: Honestly, it boils down to dollars, when you sit down and you look at how somebody else by happenstance, and for me, you know the house hacking scenario that you just mentioned, somebody else was helping me pay for where I live, and I was thinking, how can I make this grow or make it bigger, or in simple terms, how do I get more money out of it? At the time, there wasn’t a good answer. I didn’t know. I mean, we were — I was new in my job, which you know, I worked for the airlines at that time.
Brandon: As a pilot, right?
Kyle: As a pilot. Yes, and I was working for a commuter airline, so we didn’t have a lot. We didn’t have a lot. We were starting out. We were a young couple, not unlike you and Heather when I first met you guys. I really didn’t know where to go from it, but we did know at some point, we wanted to grow it. I think the next step for us was, we were living in this new house that we had built, and one day we had a knock at the door, unexpected knock. We hadn’t even been in the house a year. In fact, I didn’t have all the trim up on the walls yet because I did a lot of the work myself.
Kyle: It was a Realtor, and basically, they asked us the question, “Is your house for sale?” I’d always learned, you know, I was a kid trying to sell anything and everything, and I’d sell my toys when I was done with them. I said, “Yes, absolutely, everything is for sale. What are you willing to pay?” Of course, the Realtor wouldn’t tell me that, but they did ask, they said, “Well, we have somebody who might be interested in your home, and if you guys would be agreeable, we would like to drive them by and let them see if they indeed are interested.”
It would be a one-time, I didn’t know the term, a one-time showing, I didn’t know what that meant. They had to explain it to me, but anyway, so we agreed. Actually, at the end of that they day, they called and said, “Can we come by tomorrow?” They brought this couple with a family by, and they liked the house and then we had to come up with a number. We came up with what we thought was an astronomical number. They looked at it. Later that day, they made us a full price offer.
Kyle: In essence, I just sold our house from underneath of us.
Brandon: Now you are homeless.
Kyle: Now we are going to be homeless in three months.
Kyle: That was what I think was the real catapult that got us into the property. Looking for the property again because now, it put me in the market because I had a timeline. I had to find something out there and that — I guess does that answer your kind of your question?
Brandon: Yes, definitely. I mean like to hear the beginning of how people kind of got that mindset, you know. Because it’s just — like how you said, I love how you phrased that — it’s not just a one-time event, like I read a book and then I became a real estate investor. You know, it’s like it developed over time with like this worked, then this worked, then I sold this property and I realized this, and then you start putting together these pieces in your head, and it leads you to there. So how did you get from that point then to owning a lot of properties?
Kyle: Actually, it’s not magic, as you know, there’s not a one stop you can learn it all. I still learn today. I mean, learn from people like you. I learn from others. I have to admit, I don’t read as much as I used to, but that’s for — I — I’ve gotten busier, but what happened is, we were in the house hunting market, and we ended up finding a house that we really liked that was in the town that we wanted to live in, and it turned out it had a mother-in-law house.
Brandon: Another house hack.
Kyle: Another house hacking. Again, I am looking at like, OK, OK, I knew what this did for my previous property, it’s already built in, and I get more house, more property and I get a second house.
Kyle: Guess what, they pay for part of my mortgage.
Kyle: We ended up executing going on this, so now I have my first, and this was actually a house. You know, the first one was a manufactured home.
Brandon: OK, yes.
Kyle: This was a real stick-built house, and it seemed to me it meant more. Well, hello there. It meant more to me at that point.
Kyle: Fast forwarding ahead a little bit now, now I see the true value. That’s when the second time, stick-built house property. I’m thinking, property, that’s an interesting concept because the house that I’d bought with the mother-in-law house on was sitting on five acres. A friend of mine talked about subdividing. I’ve never done that before, so I went down to the county, and I started asking questions. You know, everybody wants to help the guy that doesn’t know anything.
Brandon: Yes, that is so true.
Kyle: You go in there, you know, you’re humble, and you don’t act like you know it all because that can become insulting because they know you don’t know anything. I just start asking questions. It’s amazing the people that want to help you, or they’ll point you in a direction, and that’s where I learned that this property was sub-dividable.
Brandon: For people that don’t know what sub-dividable, what does that mean?
Kyle: It’s when you take a piece of property, and it’s actually large enough that you can cut it into other pieces, so smaller parcels, and you could, typically the purpose of building another property on it.
Kyle: Of course, I didn’t have the money. You know, I didn’t have any money at the time because this was when we were still getting started. We were very, very young family, and I didn’t have any money to build a house, so I wasn’t thinking about buying or building anything because I just bought this other house, and so in essence, we were tapped out. How could I extract money from what I already had, and the key for me was, I can take this land that I already own and I can cut it up. Typically, when you cut up a piece of property, it builds in value that you didn’t — a five-acre parcel might be worth x amount of dollars. It might be worth, I don’t know, let’s just use $100,000, but now if you cut it up into five pieces, each of those pieces might be worth $50,000. Of course, I couldn’t sell my house again, my wife wouldn’t have it, so what we ended up doing is, I was able to cut my five acre parcel into three parcels. The minimum parcel size or lots size, those one acre in the area I was in. In essence, I had three or I had two one-care parcels, and then I kept the other three, which my house and the mother-in-law house sat on.
Kyle: Now I have three lots.
Kyle: Or three pieces of property, one which I have to keep because that’s my home.
Kyle: I decide, well, it’s time to sell those lots. I ended up putting the lots on the market, and I was able to sell both of them to one individual who wanted to put one big house right in the middle.
Kyle: They did. They paid me, actually, they paid my asking price.
Kyle: Not playing — not disclosing all of the numbers because you know it really doesn’t really matter at this point, but it ended up paying over half of my mortgage from my house.
Brandon: Wow. That’s awesome.
Kyle: You know, now just selling those two pieces of property, which, it would have been nice to keep the five acres, yes, but is three acres almost as good? Yes, especially when it’s half the price, and that’s in essence what we did, so now I have a house that has a very low mortgage on it, and I have a rental, which is paying rent and is paying for two thirds of my mortgage.
Brandon: That’s cool, so tell me this, how did it work when you, you know, you originally bought the property, five acres with one loan? You got a loan on it, right? You didn’t pay cash?
Kyle: Correct, I got a loan on it.
Brandon: Alright, so you have this loan, and then you want to subdivide it. It seems to me a bank would be like, “Ah, you know, you’re getting rid of half of the, you know, a good chunk of our collateral.” Did they yell at you? Did they make you refinance it? How did that work?
Kyle: Yes, very, very good question. That’s exactly what they wanted to do. What we were able to do is we could — I bought the house — you’ve heard me say this, I bought it right in my mind. I bought it for — the house wasn’t pristine when we bought it. It needed work, and so I was able to buy a house that needed some rehab work done, not a lot, but enough that I could raise the value of it. What happened is even carving off those two one acre lots, I was able to get a new appraisal on it and a new loan to support the value, plus I had — now I had rental income because in the time it took me to do the subdivision or the parcel it off.
Kyle: I actually had it — was able to find a tenant and sign a lease.
Kyle: That lease is worth its weight in gold because they see, you know, you’re bringing in $600 a month on that particular house.
Brandon: Sure. That’s cool. I like that so you went from — you went from, you know, just getting started, you bought that house with the trailer, the trailer house, and built one, you sold that, bought the other one, house hack it a couple times, from there now, like kind of fast forwarding to today’s world. You’ve got numerous properties now. I don’t know how many do you have or are you, like — I should say units.
Kyle: Four — I think we have 45 doors or so.
Brandon: Yes, so I mean, that’s a bit of a stretch, you didn’t just buy them all at one time, right? You just built them over time?
Brandon: Now, when you say “we,” what do you mean by “we”?
Kyle: Well, initially, it was me, my wife and I, and we created an LLC, just because, that’s again, inexperience, didn’t know any better, but I’d heard that that’s the way to do it.
Brandon: Yes, that’s the number one question I get, number one of every question to a real estate is, “Do I need an LLC right now?” People think that like they stop and they won’t invest, they won’t do anything until they have that LLC because that’s — it’s like the gate or something, I don’t know.
Kyle: I started without the LLC.
Kyle: I didn’t have an LLC, and then, but I ended up going in and doing it because I felt as our family was expanding and growing, that I had to protect. It was for me — for me, it was a protection thing. I just, in my mind, whether or not it’s a valid concern or not, I felt that if I could keep my properties in a different entity, it would protect the livelihood of — of the family.
Kyle: Because ultimately, that’s, you know, that’s why we do this.
Brandon: Yes, right. I think it is a good idea for most people probably, of course we’re not CPAs and taught years of CPA, or a lawyer or whatever, but you know, I still use LLCs, and I’m guessing you still use some kind of corporate structure.
Kyle: I do. We do LLCs as well.
Brandon: OK, so yes, there’s definitely reasons for it, but obviously, my CPA, my lawyer told me what I should be doing based on my income, based on my location, based on all those things and yours said the same, I’m sure, for you.
Brandon: It’s different for everybody, but typically speaking, most people I know have their LLCs today to hold their properties in so. You started out with just you and your wife and then later you added some more people in, right?
Brandon: Why was that?
Kyle: Well, you know as — it’s interesting because, believe or not, folks, this isn’t scripted.
Kyle: We’re sitting here just chatting, and as I think through it, you know, I mean no one has sat here and asked me the questions you are asking for a long time, and I’m thinking, there was a — there was the beginning, which we’ve talked about.
Kyle: There was a middle, and then where we were to where we are today. The middle was a time that I decided that OK, I’m still after buying these, you know, the mobile home with the property, building the house, selling it, making some money on it and then using that money to build — to buy the second home subdividing, selling the lots, getting more money.
Kyle: To pay down the house and not having a rental with rental income, I still didn’t have any — I didn’t have any money in the bank.
Kyle: I mean, it lowered my payment, but it wasn’t like I had, you know, $100,000 in the bank to go invest and buy things.
Kyle: I dabbled in the market of flipping.
Kyle: I had a flipping moment.
Brandon: OK, I don’t think I knew that.
Kyle: Yes, well, again, I don’t know if you’ve ever asked.
Kyle: It’s never been a secret so I — the first house I flipped, it turned out — it was a bank repo, and a friend of mine, he was a contractor. He brought in the expertise. I’m a handyman type of guy. I can fix just about anything, but I needed somebody with the confidence. I needed somebody to say, hey, you know, his name was Doug, “Doug, what do we do here?”
Kyle: What should we do here, and having the construction background, he was more confident in his decisions and so we’re — he had the — he probably had more experience and more confidence, and that’s what I needed at that point because you know, it was still hard to sign that paper that now I, you know, even though at the time, now it doesn’t seem like a lot of money, but at the time, it was a lifetime’s worth of money for me.
Kyle: I find this little house, it’s a bank repo, and the folks that had left, they left angry.
Kyle: They were disgruntled, and so they did some damage to the home, but it wasn’t — nothing to the structure. It was — I was — you know, having done a lot of tinkering, I knew that it wasn’t anything that we couldn’t fix.
Kyle: I was able to borrow money. I had — I think we had a little bit of savings, and then we — and then Doug had a little bit, and then I think I was able to borrow the little bit on like a line of credit. We went in and we rehabbed the house.
Brandon: Did you just do a partnership then?
Kyle: It was a partnership. Absolutely. We went in, and it was supposed to be a 50/50 deal. It turned out it was more 70/30, but again, that’s lessons learned. I — but that was OK.
Kyle: Because without him, I wouldn’t have done it.
Kyle: I wouldn’t have been able to take the next step, so anyways, long story long, we ended up — we rehabbed it, we were able to sell it.
Kyle: We ended up making, you know, I don’t remember the numbers, let’s just — I’ll throw out, we probably made $60,000.
Kyle: We split it, now, guess what, first time ever, I got money. I’ve got real money. I’ve got $30,000 in my hands that I never had before, so I’m thinking, it worked once, let’s do it again. I started looking again, it turns out that, you know, I say looking, how did I look? Well, I live where you know I live. We live in a very — I don’t know, I would say, specific or eccentric, not eccentric, just a different — an area, an area that we’re comfortable with.
Kyle: You know, I was born and raised in this area, I know the good areas, I know the bad areas, and I learned over time just looking at the — in the newspaper, online, real estate ads, kind of what things should be valued at, what they rent for. I learned my market.
Brandon: Yes. That’s important.
Kyle: Yes, critical. It’s critical.
Brandon: People try to come into our market sometimes, flip or buy rentals, and we just laugh at them because we’re like, they don’t understand that that side of the street is not is not where you want to buy and that one you do.
Brandon: They just don’t get that. It’s just the importance of knowing your market.
Kyle: Know your, know your market.
Kyle: It’s key because not only a good — what may appear is a good deal isn’t a good deal.
Kyle: There’s a reason why you and I haven’t bought it.
Brandon: Yes, that’s very true. Yes, a lot of time they will send me deals in my area and they’ll say, “What do you think of this deal over here?” I’m like, “That’s been on the market for four months. There’s a reason that’s been on the market for four months that I didn’t buy it.” And you didn’t buy it because there’s a reason for it. Now maybe there’s still a reason, maybe it’s an overcome-able reason, maybe we just don’t like it because it’s not our style, but still, like, there’s a reason. It’s not like there’s secret properties that I never knew that was listed. You know, we know what’s on the market.
Kyle: Yes, we gravitate towards our favorites too, I mean you get to a point — I mean, go to a point where, I mean, you’ll do anything in that you can make money on, at least I would.
Kyle: Now I’m picky. You know, that one, I really don’t feel like doing any foundation work, so Steve, this other guy I know that invests, he likes foundation work, we’ll just let him scoop it.
Kyle: We just — know and there’s a group of us. I mean, you learn the people who are your competition within your area, and you kind of know what they look for as well, and typically, I know you, Brandon and myself, we have a lot of the same tastes and interests.
Kyle: We — the same type of properties, we don’t typically compete because one will find it before the other so we have a mutual respect.
Kyle: I know that if Brandon is looking at something, I don’t — I’m not even going to be interested in it because he’s interested in it. If he bows out then I might be.
Kyle: There’s times when I see something that I’m not interested in, but or I like, but I just — the timing’s not right, I’ll pick up the phone and call Brandon and say, “Hey, you might want to take a look at this. It’s a good deal.”
Brandon: Yes ,and I think, a lot of times in real estate that you’re just — you have these competitors and you’re fighting against them, and it’s very like this, but I’ve never really found that in our area. Like almost everybody I know, we like, we talk about real estate, we talk about good deals. We say, “Oh, you got that deal? Oh, was bidding on that one, too.” It’s almost like a fun competitive versus like a head-to-head competitive, and I think that’s probably likely across a lot of areas.
Kyle: I would hope so, yes, because and the other thing is, we can either help or hurt each other. Working together, we can help establish the comps in the area.
Kyle: Doing so, it really supports both of our businesses and our livelihoods.
Kyle: It’s a good thing to know who you’re working with and try to, I guess, nurture that relationship because it is important. It’s all about relationships.
Kyle: Very much so, but anyhow as far as the flipping thing.
Kyle: Now I have my own money so I figured, well, I haven’t split it with Doug the last time because I needed his expertise and I needed some of the money. Well, now I’ve got enough money to go in and maybe do this by myself so I started looking and I would drive around. We would just drive around look for “for sale” signs, look for houses that look vacant.
Kyle: With maybe 8½ by 11 piece of paper in the door.
Kyle: Which usually means that they’re bank owned and do a little research from the county, or from a title office and start making some phone calls, and I picked up my second one.
Brandon: Nice. That — so we call that right, called like driving for dollars a lot and I — it’s probably the number one thing I recommend people do. If you have now money at and you’re like I really want to buy a deal and I don’t have time to send out direct mail letters and the MLS is too competitive. I’m like, well, get in your car, put your kids in the back seat, you know, put on a Barney video for them and just go drive up and down the streets and look for something like you did.
Brandon: It works.
Brandon: It works, and typically, I find that when you’re not looking is when you find them.
Kyle: Yes. You know, it’s just — you’ll be going out to dinner with your wife. You’re just like, “Hey, let’s cruise over here because we’re 15 minutes early. All of the sudden you go, hey look at that.” Then you’re late for your reservations.
Brandon: Yes. That’s very true.
Kyle: Because, yes, so anyways, second one we ended up doing on our own and again, the market was relatively good at the time, and we were able to fix it, flip it, I mean we’re talking not a lot of stuff. Typically, for me when I first started out, I mean if it needed, you know, a couple new doors, some trims, some paint, maybe windows, and then floor covering, and then you’ve got a house that is far better than it was when I drove up that first day.
Kyle: What does that mean? That means, sometimes $25-$50,000.
Kyle: Now, we sell the second one. Guess what? We make, like, I don’t know, $40-$50,000, you put with that the $30,000 that I originally had, now I’m up to $80,000.
Kyle: Now, I can either get one bigger one or bigger project or I can do two.
Kyle: Well, that to be said, I ended up flipping one, two, three, four, houses, so.
Brandon: Okay, why did you stop then?
Kyle: I don’t know. I honestly, I don’t know. That’s a good question, but I don’t know because I think I got tired of always doing the work.
Kyle: Because I was — when I started out, I did as much as I could. If that wall needed painting and it would cost me $50 to have someone come in and paint it, but I was capable of doing it, you know, and I was working a full time job at the time too, so this was evenings and weekends, and it got to be such a draw, a lot of draw in the family, but starting out you had to do it.
Kyle: I would go, I would go do that work. Well, after the fourth one, I was getting tired, and I just and the time element so I figured OK, well, what if I were to buy one now because now I have enough money? I might just be able to buy a house.
Kyle: Something, nothing fancy, but let’s say I can buy it for cash for you know, $85,000 to a $100,000, and now I can rent it for $700.
Kyle: OK. Now it’s paid for, so now I get $700 a month coming in, and that’s how I bought my first house. I got tired of working on stuff.
Brandon: That’s pretty, I mean, it’s pretty common to, like, people start out flipping houses, and everyone tends — it seems like they navigate into rental properties eventually because they get tired of working, you know, dollar per hour sort of thing, you know, you go show up, you work, you make money. If you stop showing up, you stop working, you stop making money.
Brandon: People get very tired of that because what they figure out very quickly is that flipping is a job. It’s a business, I mean, it’s a great business, it’s a great job if you like that kind of a thing, but at the end of the day, it’s just like everything else. It’s just like selling Tupperware or going door-to-door selling vacuum cleaners or whatever. It’s a business that you put time in and you can make a good profit. You know, so still do a little flipping, but not as much either, and I’d rather put all the effort into getting the long term benefit rather than just, you know, make the money now and do that, so yes, I’m going to do some more.
Kyle: The flipping was a big part of education, though.
Kyle: I think it was yours as well.
Kyle: Because that’s what got us underneath the houses on the roofs, you know, and doing the things that maybe we didn’t want to do, but it’s stretched our knowledge base so when we went and looked for that house to buy, maybe called a buy and hold. We were buying something better.
Kyle: Something that required less.
Kyle: It was a good thing.
Brandon: A really good thing. I think both of us end, like, we both like the idea of fixer upper rental properties. Almost every property I’ve ever bought, most of the ones I think you’ve probably bought needed work done to them, they had some problem with it, needed new roof or whatever because you can get better deal on those ones, and our flipping experience, it helped us to be able to do that as a renter as well. Just like you said, the education you go through.
Brandon: Yes, and I like how you said also like when you’re — you said this earlier, when you’re starting out, like, you have to do those things. You have to sacrifice your nights and weekends, and you’re struggling and, like, we all do that. Like I — you’ve been under houses, and I’ve been under houses, and it’s not always fun, but it’s almost like the tuition you got to pay and —
Brandon: It’s not a bad thing. I mean, that — when you don’t have a lot of money, especially you have hustle and that’s what you have. You have to use that.
Kyle: Yes. You have your hustle, and you have your time.
Kyle: If you — if you’re willing to sacrifice now, it will pay dividends later.
Kyle: It truly will, but that goes to say for everything. I mean.
Kyle: It is a commitment. It is a commitment. It’s not — the people who say it’s easy. It’s not easy.
Brandon: No. No.
Kyle: It’s not easy, but the reward is significant, and it’s somewhat instant because once you finish the project, you can sit there and go wow, I did that.
Kyle: Then when you sell it, you go, “Wow! It really was worth it.”
Brandon: Yes, yes, that’s true.
Kyle: Does that?
Kyle: That was my middle stage.
Brandon: Yes, so it was the middle, OK, so we have a beginning, middle, now what’s the end out of it?
Kyle: The end was my realization that single-family dwellings were great, but if you wanted to make a sustainable, a business that would support something more than just kind of an added income or a part time income, you had to go bigger.
Kyle: Bigger for me was in the form of multifamily dwellings so with larger properties, it usually requires larger investments. I have a couple close friends who had always — they had seen my business grow from, you know, living in a piece of property and selling it and sub-dividing it and then flipping houses to going and buying a couple single family dwellings and some multifamily, and they’d always joked that they wanted to get into this, and I said, “OK.” At one point, I just finally said, “OK, fine. Now is the time.” You know, it’s time to put up or shut up and they — to my surprise, they put and now we started looking at properties. They — again, like everybody else, they’d seen the shows on TV, the little infomercials, and they’ve seen some of the books that hey, you know, this is the get rich quick thing.
Kyle: I sat them down and said, “No, guys, it’s not like that. This is — that’s the World of Oz, this is the World of Iz.”
Kyle: The “World of Iz” is it takes work or it takes money. You can have one of two things. You can either work really hard or you can have a whole bunch of money.
Brandon: Yes, that’s true.
Kyle: If you have a whole bunch of money, then don’t do the work, you can — it takes money to make money. You’ve heard me say that a million times.
Kyle: We started looking around and we found a six-plex. You know it well, Brandon.
Brandon: I do know it well.
Kyle: Because Brandon and Heather, they were instrumental in helping us with it because there were times when I was away and I needed, “Hey, I need you to look at something because I’m not in town.” Brandon, because of the relationship that we had built and I knew what his experience level was because Brandon had helped me on the projects that worked on. If I were underneath the house and I needed an extra set of hands, Brandon was there to help me, and so we helped each other, and so when I needed somebody that I could trust, I would call him, and he would at least be the eyes on the ground because sometimes, I didn’t have the eyes on the ground because my partners — partners come in many different forms. Partners — what do they offer? They offer support, financial backing. With the financial backing, it helps distribute the risk.
Kyle: Defer the risk. As I went into and we started looking at properties and going into things that cost more money, I was keen to that idea.
Kyle: We went in initially just thinking, OK, well, we’re going to test this out because with partners, they can, sometimes, they don’t go so well and you really don’t know what you’re going to have until you actually — it’s unfortunate, you almost have to jump into the pool before you actually know if you’re going to get wet.
Kyle: Luckily, for us, this is our — this partnership has been ongoing now for five years, and in the five year period, we have grown significantly to the point where — I mean, it was beyond our expectations and dreams, and so now we have — we have compiled, oh, I think over ten properties.
Kyle: Somewhere over the neighborhood of over about 30 doors.
Kyle: That being said, you know that’s where we are with it, but now, the fact is, is I’m not here all the time, like I said earlier in this interview, I do have a full time job.
Kyle: I had an opportunity to move out of the area and moving out of the area actually presented us with a whole different — a batch of challenges.
Kyle: Because I think what we did is we kind of figured out what our strong points are. For me, I was always, I at least, I feel my gift is finding the properties and then evaluating the properties, determining if they’re viable.
Kyle: Then I was kind of always the operations guy because again, look at my background, I was the guy underneath the house with you, but now, and then my other partner — he’s an attorney.
Kyle: We have built in legal advice.
Brandon: Yes, that’s great.
Kyle: Then the third partner is a financial advisor, financial planner, and so he’s kind of the money guy.
Kyle: We kind of broke up our roles, but when I found myself doing a lot of it because operations take a lot more time because when does legal really have to take, you know, take ahold of anything? It’s usually when there’s an eviction involved or something along those lines, so when it happens, you really do need, but operations happens everyday, 24/7.
Kyle: 365 days a year.
Brandon: The tenants were calling you every time.
Kyle: Yes, I took.
Brandon: They have your number.
Kyle: Yes, I took all the calls. I did a majority of the maintenance or I coordinated maintenance.
Kyle: With a full time job, it can be — when you start getting into the numbers that we were getting, it took too much time.
Kyle: It was kind of a blessing in disguise when I had this opportunity at work to move out of the area. We’re talking like from the West coast to the, you know, to the central America.
Kyle: Central US, and so I was a long ways away, what did that require? It required that we have some processes in place.
Kyle: It’s hard to find good people.
Brandon: Yes, it is.
Kyle: It’s hard to find good people who you can trust and that understand kind of what your business model is and what you’re goals is and what you’re level of expectation is as well.
Kyle: Fortunately, you know, you and Heather helped us along the way. You were part of us building, you know, what we have today because you were somebody we could trust, but again, you know, you started doing your own thing. You know, you started buying your own properties, and it took a lot of your time, and you started to be presented with the same struggles that we were presented with.
Brandon: Yes, we were both kind of having the same issues at the same time.
Brandon: It was fun to talk about those and try to brainstorm, “How do we get out of that?”
Kyle: Yes, and we still haven’t come up with the perfect idea. We’ve discussed some things that we think might work, and I think we’ll probably travel down that road, but we haven’t implemented everything that we need to, but what we — what I have done thus far and with my partners is we had found a couple good people to help take care of the properties for me. I needed to be off-loaded; I couldn’t take the calls anymore. I couldn’t physically go out and do the maintenance anymore, so we needed a handyman type of an individual and someone to just take the calls.
Kyle: It took basically two people, but one guy’s retired and the other guy has a full time job, but he has enough flexibility in his schedule to allow him to go and address some of the issues that need addressed at times.
Kyle: With the help of them, so again, it takes good people.
Kyle: It doesn’t take just, well, good people or money.
Kyle: You can always throw money. Money fixes just about everything.
Brandon: That’s true.
Kyle: That’s where we are today, so now I’m kind of an absentee partner, yet I’m on the phone a lot because I am still the guy that when an issue comes up with the advancements in technology, i.e., you know, we have FaceTime and all these things. It’s like me being there and I can make the big decisions that need to be made, but as far as like if a ten — a unit becomes vacant, you can ask me right now, “Kyle, do you have any vacancies?” The answer is, “I don’t know.”
Kyle: If you were to ask me, “Kyle do you have any roofs being put on?” I can say with confidence, “No, we don’t, but I’m putting a roof on in the spring, and I have another one that needs to be, you know, this, this, I know the big things, but I’ve shied away now from the little things because the little things take as much time as the big things.”
Kyle: You have to focus.
Brandon: Yes, I feel like I’m in the exact same spot. I have no idea how many vacancies I have right now, you know, I can ask my wife who’s around the house somewhere, but she’ll know exactly when they’re vacant and what the status is, but because that’s her part of it. That’s just part of running a larger business is you start outsourcing those pieces to different people, and it could be your family, it could be somebody you hire, it could be a friend, but you hire those things out. It enables you to be able to survive and not just, you know, freak out of being busy all of the time. I want to transition back a little bit, you mentioned, you know, you and I got to know each, you mentioned that we helped you out a little bit and you also helped me out a lot.
I mean, significantly. I want to go back and tell that story real quick just so people know where this whole thing started with me and Kyle, I actually met Kyle because he was the landlord of my best friend. My best friend’s name is Adam, and me and Adam had been friends a while and he started doing some work for you. I think he was going to paint a house of him, and, I mean, we were 21, somewhere around 21 years old.
Kyle: Yes, I think something like that.
Brandon: Yes, we were painting this house, and Adam was and then Adam called me and said, “I need help. This is a big project. I can’t do it alone. Can you come help?” I went over to the house.
At the time, you owned three single families houses, you still do I think, three single family houses in a row so we were painting the middle one and doing all the work to paint it. You were over there, there was a vacancy at the other house, so you were over there just checking you on it, so I went over. I had bought a first couple properties, I think I had two at the time, and I had flipped a house, I think, one or two houses at the time.
I wanted to talk you because I knew you were a real estate guy, and I didn’t know anybody else that was involved in real estate the entire — like our entire county. I didn’t know anybody, and so what I did is I, you know, I left my friend out to paint, and I went in and I think we talked for like, I don’t know, an hour and a half that first time sitting in the kitchen, just about real estate, so I guess I’ll formally say right now, thank you for the help and the wisdom and the — just the advice over the years that you’ve given. Like, I honestly believe I would not be where I am today, even close to where I am today, without your help and all that, so thank you.
Kyle: Well, you’re welcome, but I don’t feel as if I did anything. I really don’t, I mean. If I had an impact and it was positive, thank you.
Brandon: Yes, you did. Definitely, so let’s talk about that a little bit because this is an area a lot of people struggle. They were in my shoes back when I was you know, ten years ago, and I was just getting started. I was excited about real estate, and I wanted to find somebody that knew what they were doing or at least pretended they knew what they were doing, and so, like, I mean, you were — you were buying all these properties and apparently you had been flipping houses. That must have been around the transition between flipping and buying the more rentals, I’m guessing, because you had the three.
Kyle: Yes, I think that was the transition. I moved from flipping to that little yellow house.
Brandon: OK, yes.
Kyle: That was the first one, and that was the big step.
Brandon: OK, yes, so that’s — so I want to know, like, what — I’ll put you on the spot here, but, like, what attracted you to me in terms of, like, a lot of people probably ask for advice and they want free things, they want help or to — why did you help me? Like, why did you take an hour and half to talk with me? A lot of people out there that are watching this are probably like, well, if I went and asked a landlord to sit down and talk for an hour, like, what do I bring to the table? Why did you help me, I guess, at the beginning?
Kyle: It’s a good question, and you know I didn’t — now and at the time, I didn’t really give it a lot of thought, but now, you forcing by asking me the question. You know, I guess there’s a couple things that I look for, and this isn’t — this has nothing to do with real estate. This has to do with people.
Kyle: I think it’s the same thing that draws you to anybody. First of all, you want to find something that is common between you.
Kyle: You want to have that feeling that is somebody who is genuine, someone who maybe is even trustworthy, I don’t know if you can figure that out in the first time you meet somebody, but Brandon, obviously there was something there that I saw, but I can say maybe not at that first particular day that we met, but certainly within the second or third time. You know, there’s so many people that just talk. You know, it’s basically, you know talk is cheap.
Kyle: You know action, for me, action means something. You know if you want to impress me personally, sorry about that. If you want to impress me personally, don’t tell me everything that you’re going to do. Show me.
Kyle: I think that’s what really got my attention with is you, you had a strong desire, you know, you were self admitted, you were the one that went in there and said, “I don’t know this. If you could help me, I would accept that.”
Brandon: It’s kind of like you said earlier, that when you were trying that property, you went in to the county.
Brandon: You were just like, I don’t know what I’m doing here. Can somebody help me? People like to help people who are sincere about asking for help.
Kyle: It’s human nature. You want to help, but the thing is too, we want to see that they truly want to work. I mean, everyone thinks that you watch — like I mentioned, you watch on television and you go to these seminars, everybody makes it sound so simple.
Kyle: When you came to me, you knew that it wasn’t as easy as the book that you had read because I know — you know, at the time, you were reading a lot of books.
Brandon: Yes, I was like in my — I think I read a hundred books in over a summer. That was a lot of reading.
Kyle: Yes, but the thing is you took the things of value from it, and then you knew the rest — some of it was garbage, you know, and fluff ,and you kind of, you were able to sift through that. When you came to me, you were asking legitimate questions, you had an idea of where you wanted to go and be. Whether I could help you get there or not, I don’t know, I mean, you know, I don’t — I can’t tell you what to do. I can tell you what worked for me.
Kyle: I think that I — the best part of it, I think you took the things that you felt just like when you read the book of — you saw the pieces that worked for me, and you tried to replicate them, and you probably had some success, and other things maybe didn’t work for you, but I think your motivation, your drive, your sincerity, and the fact that you were willing to walk the walk and not just talk about it. Because if I talk to everybody who just wanted to talk about real estate, and I’ve talked to — I don’t make it a common practice to sit there because again, you know my wife, I try to keep it somewhat private.
Kyle: It just wastes a lot of time, and that’s one thing that you know ,why do we do this? Why didn’t I want to crawl underneath houses anymore? Why didn’t I want to flip houses anymore? My time is valuable.
Kyle: If you can value from my time, I will give it to you.
Brandon: If you’re just going to sit there and go, “Ooh, that’s great, hahahaha, yes, I thought it was easy.” Or oK, I’ll you know when I have you know a little bit of money because again, we all know, it does take money. People that says you can do it with zero down.
Kyle: Yes, maybe one of a thousand people can.
Kyle: I couldn’t.
Kyle: If you have something to give or something to contribute to your effort, then step right up.
Brandon: Yes. I’m your biggest fan. At the time, I didn’t have, you know, like, I didn’t have anything to offer you. I felt like and so one of the very first things we ever did is after that painting job, we had painted the first house, you said, “Hey, Brandon, are you interested in painting in another one?” Remember the blue houses?
Brandon: I went and painted the blue house, you offered — I think you asked me. This was your — you taught me negotiation. You taught me a lot about negotiation. You said, “How much do you think you can do this house for?” Ah, Ruby’s jealous.
Kyle: That’s nice, $200.
Brandon: You didn’t whittle me down that time. I don’t think, but, you know, so I — for $300 bucks, I would paint an entire house, which today, I’m thinking, that’s absurd. Like, why are you taking advantage of poor 21 year old?
Kyle: Wait, wait a second.
Brandon: No, I know. I did it in one day. I did in 20 — it was like half of one day. The next morning, I went back, and I finished it. I painted the entire house in a day, and I made, I think I figured it out — it was a total of ten hours. I made $30 an hour and for a guy that had never made more than eight bucks an hour, in my entire life. I was floored at how much money that was, but today, I’m thinking I wish I could find somebody to paint the house for $300 bucks, but.
Kyle: Brandon, I did — did I? Again what was important?
Kyle: I said.
Brandon: You asked me.
Kyle: What would you do it for?
Brandon: Exactly, yes, and I do that same trick today now. I mean not trick, that’s so smart, I do that all the time now. I ask people what they can do if for because I am the one that said that number. I couldn’t be mad at you. I couldn’t.
Kyle: Why should you negotiate against yourself?
Brandon: Yes, yes, it’s very true.
Kyle: The thing is, you know, I said well, I think there was a little bit more to the story though. I said you have to look — I said — because I remember asking you, “How long do you think it’ll take you?”
Kyle: “To paint this house.”
Brandon: Did you want me to do that?
Kyle: Yes, I led you through where I wanted you to go.
Kyle: I said, “OK, based on that, you figured it’ll take you” — I think you said two days is what you originally thought.
Kyle: I said, OK, two days, and I said in — and we figured out we broke down per hour, and then I said, “You know, you’re using all of my equipment.”
Kyle: So forth — the fact of the matter is I think you left happy, and I was trying to find more houses for you to paint.
Brandon: That’s funny. I think I’ve been to a lot of houses over the years you know and —
Kyle: Why? You have to ask yourself and ask, you know, your friend out there in your land, why did you look to paint more houses after you painted that first house for me?
Brandon: Well, I mean, for me, one, because I made good money. Two, because I wanted — I wanted to continue that relationship with you over and over and over. I wanted to — because again, I couldn’t provide a lot of value myself. I didn’t have money, I couldn’t just go and teach you anything so what were you going to do for me? You know, like, what was I going to do for you because you were doing all this stuff for me? You were helping me figure out how to buy properties and all that, so I had to give what I could, and what I could do was I could do this with my hand.
Brandon: Spray a building. That’s why.
Kyle: I would have paid you $500.
Brandon: Dang it.
Kyle: That was the number in my head.
Brandon: That’s funny. Got you too low. Yes, and it’s — I don’t know. I like that story, and I don’t you know, I didn’t ask that question about why you worked with me to build up my self esteem. I just think it’s so important that there’s so many people out there watching that want somebody like Kyle in their life to help them and to give them advice, but you know, I get asked everyday, “Hey will you be my mentor? Will you be my mentor?” I don’t think I ever said those words to you, “Will you be my mentor?” It was purely an organic thing. It just developed over. You know, hey, let’s talk about this property, let me paint this house for you. Want to get some coffee together? You know, we’d call each other on the phone. For the past almost decade now, we probably talked, up until you left for the Midwest, we were talking two to three to four times a week on the phone.
Brandon: Even, you know, since then, we talked occasionally talk about, you know, here’s what we’re working on. Here’s a struggle we’re having, and it became a little bit less of maybe mentor-mentee to a little bit more of a friendship, I mean a partnership almost.
Brandon: Colleagues, yes, so we were in the same industry together, working together, and I don’t know, it’s been fun. It’s been awesome.
Kyle: You know and bring up something that’s interesting. On Sunday, we were on our way to church, and I told Terry, that’s my wife, that we were — that was going to come visit with you and Heather, and she says, “You know, you don’t hear as much from Brandon as much as you used to.” I just, out of a reflex, I said because he doesn’t need me anymore. It wasn’t meant as derogatory statement. Yes, you know, some people could take it that way because I don’t feel used.
Kyle: I almost — it was almost a sense of accomplishment because at the time, you know, and I feel as if I don’t feel as if I used you, you used me. I think it was a journey that we traveled together.
Kyle: At the end of it, it’s similar to raising kids. You know, my kids are, you know — I have one that’s already out and married, but you know, what is our goal as parents, is to have our kids and to have them be able to stand on their own two feet, make good decisions, and just be good human beings at the end of the day. Well, what do you expect when you have somebody that you’re working with who wants you to help them? You want the same thing, so when I said, he doesn’t need me anymore, that’s a success story because you have — you and Heather have moved your business to the point where you don’t need me to help you. You know, I mean there’s times when I ask you questions because, you know, you’re local and there is. Because you do this full time. For me, it’s still part of my life, not my life.
Kyle: You bring a lot — you bring things to the table that I don’t offer.
Kyle: It’s a shared goal.
Brandon: That’s cool. That’s cool, so yes, I hope, like, people, like, watch this they see, like, I don’t know. This is like when I encourage people to get a mentor, people ask, should I go pay for a mentor? Should I go pay for some guru who says he’ll for, you know, $20 grand, he’ll mentor me into being a real estate investor? Yes, if you’ve got $20 grand just sitting around and you’re in a bed full of money and cash lying around. Great, spend it how you want, but for the most of us, we don’t have that money or we’re better off using that money for a property, so I mean, this was such an ideal situation because it was so organic for me to learn. I definitely, like, will still I’m sure, I’ll still call you in the future and ask your advice on stuff, but yes, I mean the fact is, like, today, like, we’re at a very similar level. We almost have the same amount of properties.
Brandon: We generally face the same issues. We’ve been through almost everything, like it’s very, very ,very rare nowadays to have a problem that I don’t — that I haven’t faced before. It’s very unusual for something to happen that I’ve never heard of. You know, like occasionally, a tenant will do something that’s really weird, and I’ll ask your advice on it, your opinion and that’s what’s fun. That’s kind of the whole spirit of BiggerPockets anyways.
Let’s just talk about what we’ve done, what we’ve gone through, what we’ve been through, and maybe we can help each other. You can glean stuff. You know, forever, like — real estate has been like this top down thing, where, like, this one guy says, this is how you should it, and then people are like, I’m going to follow that exact blue print. That exact strategy. It just doesn’t work. I mean, I don’t know you. I barely know you, you barely know me. I’m really like, how do you know it’s going to work for me or whatever? Instead, it was just us helping each other, and, I mean, how many countless hours of brainstorming have we done? You just, like, thinking of ideas, and I wonder if this would work, and hey, you should try this. I think that’s the value of a mentor is — it’s just that relationship, like you said earlier on, it’s all about relationships in real estate.
Kyle: It is, and that has brought us to where we are today. You know, we are — I feel that we are equal levels, you know, you guys have grown the business to the point where, you know, I’m proud. I’m proud of what you guys have done, and it’s nice to have somebody when I have questions I can call and if nothing else, we laugh a lot about a lot different things, too.
Brandon: That’s true.
Kyle: Because you just can’t make a lot of this stuff up.
Brandon: Yes, I know, I sat down yesterday, I was going to write a blog post. I haven’t written it yet. I wanted to tell you — it was something like “Ten Things That only Landlords Will Ever Hear or Ever Understand” because there are certain things you just — you didn’t laugh at it. You’re just like, “Aww,” or tenants that we know are like, oh yes, we’ve dealt with them and it’s fun, there’s a camaraderie there that we get in real estate that again, it’s one of the reasons I think people are so attracted to the idea of like community based education and learning from BiggerPockets and like being on the Forums and those things because it’s not like your family and friends don’t care that much about real estate. My family and friends don’t care that much about real estate, but when we’re together, we love talking about real estate. It’s just we want that camaraderie.
Kyle: It’s just — it’s a natural topic.
Kyle: It’s something that we understand, and it’s a lot — people haven’t lived it. It’s difficult because, you know, you can’t believe. A lot of people are interested in, you know, wow, you have properties, wow, you know, how did you do it? Yet they’re — that’s as far as it ever goes, and so even, you know, close families and friends. You know they know that you have properties, but they may not know — they don’t know your day-to-day struggles.
Kyle: We’ve walked in each other shoes.
Brandon: Yes, that’s true. Well, before we get out of here, I want to transition a little bit more to the future where you are today. I know you transitioned recently to commercial. You bought a commercial property? Is that right? Can you tell us why did you do that? Like, what’s kind of the story behind that? How did you get that? What is it?
Kyle: I never started thinking that someday I’m going to get into commercial. I never really did, and, you know, the residential, it was — it has been very good to me personally and to my family and to my partners, but an opportunity came up that there was as it was a four-suite building in the town that we live in and thought behind commercial for me is right now, I typically, you know like to sign one-year leases.
Kyle: You’re dealing a lot with tenants’, you know, day to day issues, concerns, non-payment and those sorts of things. It’s about people, you know, you deal with a lot of people. When you go commercial, it doesn’t — it doesn’t — it’s no longer about the people really anymore. It becomes more about the business and businesses are non-emotional.
Kyle: They sign longer leases. They pay for more of the things that they want, so when you’re talking build outs and stuff, well yes. I’m happy to you know add these walls and this sort of thing for you, but this is what it’s going to cost. I think the expectation of a business is far different from that of a tenant. That was really what was appealing to me. When this opportunity came up, we had to take a look at it — a close look at it and started running the numbers and it’s — well, come on, it’s about making money right? It’s about making money. This property made money, so we took a swing and it’s been a hit. I mean, we’ve been very happy, it’s probably one of our best income producing properties on a percentage basis right now.
Brandon: I know it took a while to get them all rented out. Is that right? Commercial is a little slower, right?
Kyle: Oh boy, oh boy, yes, that’s a true statement, but again, it’s buying smart, and we were able — just because it was commercial, it wasn’t like, you know, a knee jerk reaction. We looked at that knowing that things don’t rent that quickly in the town that we live in.
Kyle: I knew my market, imagine that. OK, so that being said, what’s my payment going to be? You know what are the cost of holding this building? Well, how many tenants do I have? Out of the four, I had two. What did two do for me? Two paid for the building, made the mortgage payment, paid all the, you know, all the cost associated with. Now, when I can get those other suites rented then, that’s just going to be profit right? It took, oh boy, we were able to rent one of the small offices for — it was $400 bucks a month.
Kyle: It was $400 more than I had before.
Kyle: You know, you start doing the math, you know four times 12 is 48, that’s $4,800 a year. That’s a good deal.
Kyle: Well, did we after over a year, we were able to rent the bigger suite, and it was with a major insurance company, and they signed a five-year lease with an escalation clause.
Brandon: That’s cool.
Kyle: Now we’re in good shape. I mean, and we don’t get –you don’t get the late night calls that my drain is plugged up because this building, there’s only a couple two-three bathrooms in the entire building.
Kyle: It’s a good deal, but that being said, that’s the only commercial property I have. Would I do it again? Yes.
Kyle: Would I do it a lot more? No.
Brandon: OK. That’s funny, so let’s talk about the future then, we kind of transitioned into that. Where do you see yourself going now the next 5-10, 15-20 years?
Kyle: I told you when we met, you asked me, what’s your plan? It may not have been the first conversation, but I’ve always had the same plan, and I stick by it. My plan was to buy a bunch of properties, I had no idea how many or with who or how it was going to work out. Someday, have them paid off and then sell them.
Brandon: On contract?
Kyle: On contract.
Brandon: How does that work for people who don’t know what that means?
Kyle: Well, I — at least for me, in the most simplistic terms that I can come up with is, I buy it, I make the payments, or someone makes the payments for me, right? Then twenty some years later, I now have a property that’s paid off. Well, I can do with it what I want. I can continue to rent it, and let’s just say it’s a house that rents for a thousand dollars a month. I can get that $1,000 a month every month, yet they’re still going to call me for a plugged drain.
Kyle: Broken toilet, leaky roof, all of that other stuff. Well, as I get older, I don’t want to do that anymore. I think I made it pretty clear. I’m tired of that.
Kyle: You can have people in place that will do it for you. For me, it’s a personal choice. At some point, I want my out — I’ve always talked, I have to have an out. When I buy a house, I have to have an out.
Kyle: I need to be able to look 30 years out or a week out if something were to become catastrophic, and I need to get out of this house. How do I get out if it? That all being said, I will look for somebody who wants to buy this house, and let’s just for instance Brandon, it’s you. If you buy it, I will sell it to you typically, most people when they go buy something, where do they have to go? They go to the bank and they have, you know, come with their 20 percent down, they have to do the credit reports and all those different things. Well if I own it, I can now become the bank.
Kyle: You, to me, you have, you know — we work out a deal, and instead of you paying the bank the mortgage payment, you pay me the mortgage payment. I now — what does that do for me? Why would I do such a thing? Well, I get the interest for however many years I want to do it, and I don’t really own the property anymore. You do so if you live there, it’s your house or if you decided to rent it, the tenants now call you.
Kyle: There’s a risk in that. There’s always risks. There’s a risk in everything, but my plan is this is I’m going to ask for, you know, let’s just say it’s $100,000 house, well, what if I were to ask you for 20 percent down so you give $20,000? If for some reason, you decide not to pay me, well what would I do? Well, I have the same rights as a bank. I can foreclose on you.
Kyle: I will eventually get the house back. I don’t know what condition the house will be in when I get it back.
Brandon: That’s why you get the down payment, though.
Kyle: That’s why I got the down payment. I’ve got $20,000 that tells me that hopefully, I can rebuild it if it’s left in shambles. At some point, you can continue to buy, buy, buy, buy and you know, with time, as you pay off the properties. You can probably buy with cash so you are not accumulating a lot of debt, but you’re never ever getting to the point at least in my mind — in my comfort zone where I just — there’s comfort in owning something.
You know, when you make the last payment on your car or you make the last payment on your house and you go, the bank doesn’t control me anymore and I think that’s where I’m at, and it’s interesting we’re sitting here talking today because I just came out of a meeting earlier today with one of my set of partners, and I asked him, where do we go from here? We’ve grown this to the point where I think we have all, it has exceeded all of our dreams, expectations. I personally want to stop buying.
Kyle: I want to start reducing debt because at some point I want to have the out. I want to be able to sell these properties. If we keep buying, we’re not paying down our loans, and it just becomes more and more difficult so, but I am the oldest of the group.
Brandon: That’s true, so they maybe want to buy — maybe a side of your partnership at some point.
Kyle: Yes, I strongly — I’ve suggested that. I said, If you guys still want to do this, then by all means, don’t let me be the speed bump in your way. You’ve learned from me, I’ve learned from you, if you find something or if I find something that you guys are still interested in, you should buy it. I want to create your own entity without me being a part of it. Then if you need me to help or come in and do what I’ve done in the past, I’m happy to do it as a friend, you know as a consultant type thing, but nothing more than that.
Kyle: That’s my out.
Brandon: OK. It’s kind of funny we’re thinking about it in these terms because earlier we talked about how like this transition that a lot of people go through and they start with flipping and then they go into rental properties because it’s easier, but then the final part of that transition that a lot of lenders get into is they go from — they go from nothing to business flipping to investor and then they go to lender. That’s the last, that’s like the ultimately is now you’re lender. Now, whether or not you’re private lending your money or whether you’re selling on contract or whether you’re just lending money to a company in the stock market, but like ultimately, that’s the most passive way typically in investment real estate is by being a lender. It’s kind of fun to see your whole story from beginning all the way to the end of becoming that lender. That’s the most passive that it will get to carry you to you know forever, hopefully, until you die.
Kyle: Yes, exactly and that’s what — strangely enough that’s the discussions we’re having. You know, I mean, not the die part, but the part where.
Brandon: That’s a long ways away.
Kyle: Yes, where do we go? How much do you need? You know, I mean, what do we rely on? Like I’ve said before, you know, I have a job right now. I’m putting it into my, you know, I’m putting it into my Roth and my 401K.
Kyle: I have all that, but in addition, you have social security. Well, this is just another entire independent income stream in retirement.
Kyle: There are people out there that you can go and talk to, and they’ll tell you, based on all these numbers, you know, how much do you think you’re going to need to live on? How much, and you know and I know we’re getting into the advisor world, now there’s professionals for that type of thing. I’m just telling you what I’ve done.
Brandon: That’s right.
Kyle: You get out there, and you know, the numbers, when you start looking at what when all these properties are paid off and you’re figuring out what the rents are coming in and then you figure out you know what the costs are — at that time, if you’re not making a mortgage payment, you’re not paying all these interest, it can be a pretty big number.
Kyle: It’s almost staggering, and so and if you don’t, it turns out you don’t need it because this is something that you’ve done kind of on the side, it’s something that you’re going to really leave for your family, your kids, whomever, or you can use it for your day to day life. I mean, you make yourself very comfortable.
Brandon: Yes, that’s very true. I like that, like, a lot of people get into real estate and they’re like, I just want to get rich and I want to get — I want a billion dollars or I want 10,000 units, you know, and there are people that is their ultimate goal, but you don’t have to do that in order to be secure and to have a good retirement. You know, you said it to me before, I got what I want. This was my goal, I got what I want. I love that.
Kyle: I’ve got more than what I want. I mean, it has grown to something that I never expected it to grow to and now, not only is it going to be helping me, it’s going to be helping you know my partners. I brought two people in who had never dreamt of doing this, and we played with the numbers today and saying, hey, when these things are paid off, this is the income stream that each of us can expect from these properties starting maybe in the next few years.
Kyle: There were — you know, all this had to kind of had that jaw drop moment going wow. You know I’m not saying, we’re not talking millions, but we’re talking, you know, thousands a month.
Brandon: Yes, yes, that’s awesome, and like you just got that freedom forever until or at least until, you know, that’s cool.
Kyle: Well, you figure out you can do it to whatever age you want to stop at, but you know, for me, there are guys, like you said, that want hundreds and thousands units and, you know, hundreds of millions of dollars. That’s great for some, but for me, I scoped it to what I needed and what I wanted it to be, and I’m very happy, very content, and I’m ready to start executing. I mean, I had my beginning, I had my middle, I’ve had my end, I guess the end is I don’t want to buy anymore and now, I’m transitioning from the end to the long term.
Kyle: That’s the, which is the sustainable long term I guess I would say.
Brandon: There you go, well, very cool, very cool. Well, before we get out of here, in the tradition of the BiggerPockets podcast, which we do on every episode, I’m going to ask you four questions. We call this the Famous Four, and so I thought I would throw them at you as well. Yes, you didn’t know this was coming so, they’re pretty easy, but they’ll put you on the spot. Number one, do you have or what would it be, your favorite real estate related book?
Kyle: It’s not my favorite. I don’t think it’s related to real estate.
Brandon: I’m going to ask you business next so —
Kyle: You know what book I’m going to say?
Brandon: Maybe, I don’t know.
Kyle: Well one of my favorite books is The Tipping Point.
Brandon: Oh okay, yes, Malcolm Gladwell, I’ve not read that.
Kyle: The Tipping Point is probably one of my favorite books.
Brandon: I’m going to read that, you told me that, like, four-five years ago.
Kyle: Well, there’s one other thing. A friend, I was probably 16 years old, and I don’t even know who the author is, but I remember that it was a series of cassette tapes because CDs weren’t around yet. I was surprised it wasn’t an A Track, The Art of Negotiations.
Kyle: I listened to those tapes. I borrowed them from this guy. It was like a series of like ten tapes, and I would listen to them in the car all the time and I borrow them, give them back, and then you know, a year later, I’d go in and ask Eric, “Hey Eric, can I borrow them again?” I’d listen to that series of tape probably three or four times.
Brandon: That’s cool.
Kyle: I think it helped mold who I am.
Brandon: Yes, I think you are one of the best negotiators I’ve ever known, and, like, a lot of what I’ve learned in life has been from negotiating with you. Thanks so like I was like, dang it, I got to try that next time and like.
Kyle: You did it again.
Brandon: You did it again. Three hundred dollars to paint a house, and I love it. OK, alright, real estate related book would be like the Tipping Point, even though it’s not real estate.
Kyle: Yes, but it helped in my real estate business.
Brandon: What about just other business books anything else that you recommend that you’re reading that you —
Kyle: You know, I used to read quite a bit. I — my job doesn’t allow me. I mean, my job requires me to read so much now, I don’t I typically do not read for pleasure anymore, so I don’t have anything current other than maybe I’ve got a couple of books over there that have the Turners associated with them that I will read.
Kyle: I’m sure I’m going to glean some information from them.
Brandon: I hope you will. I think you’ll be reading — he’s talking, of course, about the Book on Rental Property Investing and Book on Managing Rental Properties written by myself and my wife, and I think you’ll find a lot of the information is, hey, I taught him that.
Kyle: That’s awesome.
Brandon: Yes, alright, so third one would be hobbies. What do you do for fun?
Brandon: Fish, that’s right, which we’ve never gone fishing together, but we’re going to.
Kyle: Yes we have. It was on the ocean with your father.
Brandon: Oh, that’s right. That was the worst experience of my entire life. Like, I almost cut my thumb off the other day, and I would take a thumb cut in half over that fishing trip any day.
Kyle: I don’t know why they called it fishing because Brandon didn’t do much fishing.
Brandon: That’s right, I didn’t do any fishing. That was messed, I mean, those waves were like —
Kyle: It was rough.
Brandon: They were huge. Yes.
Kyle: We went on a charter boat, and Brandon and his father, they were sick. They were miserable sick. I felt sorry.
Brandon: I’ve never been that bad since then, I mean, I was just over the edge of the boat the whole time. Luckily, it was so bad, they ended up turning the boat around.
Kyle: They refunded the money. It was that bad. It was that bad.
Brandon: I ended up having only two hours of misery, not eight that were planned. I thought I was going to die. Like, that was the worst thing I’ve ever done. OK, so you have a boat, you go fishing in the rivers around here, right?
Kyle: Rivers, ocean, bay, yes. Fishing is my sanity.
Brandon: Very nice, very nice, so hobbies fishing, and then the last question is the one I ask every time. What do you believe sets apart the successful real estate investors that are out there from those who you know pretend or they never get started or they get started and they fail? What sets apart the successful ones?
Kyle: That’s a good question. I don’t know if this is the element, the one thing, the one cell that differentiates them, but I think it plays a role in it is humble. I think you have to be humble, and humble can mean a lot of different things. Humble is the ability to say I don’t know. Humble is the ability to ask for help. Humble is being compassionate, I think. You kind of see what I mean?
Brandon: Yes, I know exactly what you mean.
Kyle: I think that’s the difference. I mean, you run across a lot of people that are very aggressive or you know, very forceful or they read a book and they feel they know. You know, that’s a good way to turn at least me personally off.
Kyle: I think that’s why we have the relationship that we do. You know, I think that it’s OK to say, “I don’t know.” I think it’s OK to say these other things that we’ve mentioned throughout this whole interview and at least for me — it’s just being a good human being.
Kyle: Treat people the way that you want to be treated. I know it’s so cliché, but really, I think for me I don’t know what other people say, I don’t know what the right answer is, but that’s my answer.
Brandon: I like that answer a lot, I mean I don’t think anybody’s ever, in a 150 some shows that we’ve done on the podcast, I don’t think we’ve had anybody say humility, but I like that. That’s good. I think, yes, it’s that ability to ask, you know, ask for help. I mean, like, the people that I see that succeed in real estate, I see that in every one of them. They ask for help. They go and they ask people out to lunch or they go and ask them to coffee or they go and post a question on the forum or they’re reading because they don’t know everything. It’s the ones that think, oh, I got this. You know, I went to a course or a boot camp or I went to the weekend seminar, and now I know how to do this. They’re the ones that struggle.
Kyle: Yes, we don’t have all the answers. We don’t.
Kyle: We just don’t, and we never will, but there are people out there that they don’t have all the answers either, but they may have the answers that we don’t.
Brandon: Yes, exactly. Yes.
Kyle: That’s what you need.
Brandon: I find real estate is largely like a puzzle piece. You know, like, you’re just trying to put together this puzzle, and you’ll never get the puzzle finished, but a lot of times, like, I’m missing this one little part right here and you happen to have that one part that we do together, and then I figure something out. You learn, I learn, we both grow, and we go on and more puzzle pieces. I think that’s a cool way to look at real estate. Alright, Mr.Kyle, where can people, I mean they want to connect with you, do you have anywhere they can connect with you at? You don’t have any website or anything, do you?
Kyle: No, I’m a nobody.
Brandon: Alright, we’ll put your phone number and your home address on. Just kidding.
Kyle: Maybe an email. Just throw an email out there for me.
Brandon: OK. We’ll do that, so alright, well, thank you very much. I want to thank you for not just the interview, but for the past decade of your help on everything we’ve done.
Kyle: Brandon, my pleasure and thanks for the friendship.
Brandon: Yes, thank you. Well, see you around. Thank you, guys.
Investors: What was your favorite part of this conversation? Any questions?
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