Nov 5, 2019
James: Hey, audience. This is James Kandasamy. Welcome to
Achieve Wealth through Value Add Real Estate Investing Podcast.
Today, I have Anna Kelley from Central Pennsylvania, who owns
around 175 units, around $16 million in worth until now. And you
know, I should have invested passively in 900 units. And she's also
under contract on around 200 units right now. Hey, Anna, welcome to
the show.
Anna: Thank you so much for having me. Good to see you, James.
James: Good to see you too. And, I mean, for those who do not know,
we also have a YouTube channel that shows all our interviews. And
you can catch up with us on iTunes or Stitcher or YouTube or
Spotify so go and do that. I'm actually in one of my property here
in San Antonio so trying to do it from my office. And Anna, are you
in your office or where are you right now?
Anna: I'm in my home. I'm not actually in my office.
James: Yes. Good. Good, we work from home, I guess, right.
Anna: Yes.
James: So Anna, why don't you tell our audience about yourself?
Anna: Sure. So I started out in real estate about 20 years ago,
just kind of dabbling in real estate. And I started out doing some
property flips and some single-family rentals. And then I slowly
started moving up to small multi-unit properties, like four-unit
apartment buildings, 10 unit apartment buildings. And I recently
last May retired from my full-time career, I worked for AIG for 20
years. And I really built my real estate portfolio up on the side,
part-time for all of those years. So busy mom, have four children.
And I just went full time. And now I'm focused on and have been
focusing on for a while much larger apartment building assets.
James: Got it. So let's go back to the beginning. I mean, you work
at AIG, which is a big insurance firm. And can you just quickly
tell us what was your role?
Anna: Sure. So at AIG, I had various different roles. I did
internal management, consulting, product development, and then I
moved into a role that was very compliance heavy. We worked with
private placement hedge funds wrapped in an insurance product. So
we worked on SEC audits and filings, reviews of PBMs and hedge
funds and things of that nature.
James: Got it, so it looks like you have some PPM level syndication
experience, even at your workplace, I guess, is that right?
Anna: Definitely, we worked with alternative investments for about
17 of the 20 years that I worked there.
James: So you work there for 20 years and when did you start to
real estate venture?
Anna: Why I'd say, you know, I dabbled, I bought some, you know,
singles and I bought a flip. And then 12 years ago, when I moved
from Texas to Central Pennsylvania to start my husband's
chiropractic business, we were looking for properties to lease for
his office space. And we found that it was very difficult to do
that. But they had a lot of buildings that came with tenants, you
know. Older buildings on Main Street that had been converted to
businesses on the first floor, most of them had residential rental
space on the top floors. And so we bought a building and inherited
tenants. We had three tenants with his commercial space.
James: Okay.
Anna: And then that kind of threw me into the idea of having
tenants and having a little extra cash to cover the mortgage. And
then at that same time, James, we sold a house in Houston that we
lived in, liquidated everything, we had to come here and start a
business. And so I knew it wasn't very wise for me to buy another
home right away. And AIG let me work from home on a very temporary
trial basis to see how it worked out. So I bought a four-unit
apartment building for us to live in. So we downsize significantly
and house hacked, basically, to make sure that our business
expenses, you know, for the space and our housing expenses were
covered if I happen to lose my job, you know, 12 years ago when we
started out. So that got me into starting to think about and invest
in residential real estate.
James: Got it. So you basically, you did not like had an ah-ah
moment, I need to go tomorrow and buy real estate. You were
actually thrown into it?
Anna: Well, I'll say this before I went to work for AIG. I was in
private banking, I was a Financial Relationship Manager for Bank of
America. And so I handled the top 10% of the wealth in our bank,
both small businesses and individuals. And what I found is that
many of them owned real estate and had accumulated their wealth in
real estate or were already investing in real estate. So in my
young 20s, I was very interested in real estate thought that it was
something lucrative that one day I'd like to own, but I really
didn't start thinking too much about it until I had my first child
in 2003. And all the flip houses shows, you know, we're coming on
and I thought, oh, I can flip a couple of houses and be home with
my child. And so I dabbled in flipping before the rental real
estate. But my move here is what kind of gave me the impetus to
think about rentals more quickly.
James: Got it. So, I mean, I never had a woman guest until now. So
you are the first one. And I'm very --
Anna: Oh, thank you.
James: We have a lot of listeners that are listening everywhere and
I'm sure a lot of them are women. So I'm trying to get from a
woman’s perspective, on how could they start like what GF started,
right? I mean, your husband is working and you are working too.
Like, I would say what do you think could be the secret formula, or
they're just the formula on how can any woman start while they are
in your own position?
Anna: Sure, you know, there are different ways to starting, a lot
of it James truly does depend on the personality of the person,
your family dynamic. You know, how much support you have for
watching your children? What other income sources you have, you
know, when you're starting out? And how much basically time and
money that you have available to get started? So, you know, people
that have very, very limited time might have the significant cash
flow or they might, their spouse might make enough money that they
could really get started more passively.
And that's where maybe they want to start investing in other
apartments syndications or getting invested as a passive partner
maybe joint venturing with someone that has experienced you know,
buying and managing either a single or a small multi or a larger
and then just investing with money. And learning how to review the
financials and review the operations each month and each quarter.
Just to kind of get yourself familiar with what it's like to own
and manage an asset might be a good way to get started. For someone
like me, that doesn't have any cash and really wants to get
invested by investing time, you have a lot more opportunity to
really educate yourself through reading books and through
podcasts.
And going to meetup groups to learn what it takes to ask actively,
evaluate deals, find them and hire people to update them and
improve the values and put a renter in or you can start learning
the skills yourself. You know, my husband and I when we started
out, he did a lot of the maintenance and I painted every unit. And
I called flooring contractors and you know, designed kitchens and
help paint cabinets. I mean, we did everything actively because we
started out, we had liquidated all of our, you know assets and
started out with quite a bit of debt to start a business and we're
running that.
So we really didn't have a lot of money. So we invest at the time.
So there are many ways to get started. But I'd say definitely align
yourself with other people that already know what they're doing,
attend some meetup groups, listen to podcasts. And then just decide
whether you want to be active or passive for your first one or two
until you kind of learn what you like, what your personality works
well with and kind of what works within your family dynamic.
James: Got it. So who convinced who between you and your husband?
Did he convince you to, hey let's go and do, spend time and rehab
this real estate or did you convince him or how did you? I'm trying
to understand how did the discussion happen? Because a lot of
people are struggling, I mean could be struggling, right? How do I
convince my spouse especially from a woman to the husband side?
Usually, the husband can convince the wife, right? But you are the
one who's active right now real estate, how did that work out?
Anna: Yes. So it's one of those things when we talk about the
personality of the individual. When you're married, there are two
people involved in your decisions. And my husband and I, from the
beginning, have always looked at our finances and our lives as a
partnership. But we kind of has our roles in reverse. I mean, he's
a doctor, he's a chiropractor, he went to school for a long time.
He's very smart. But he's very hands-on and a people person, he
doesn't like the finances, he's not financially minded. He's not
the kind that wants to be an entrepreneur and grow a big business,
like he's content, just having a small practice, and letting me
handle all of the finances.
So because I had a background in finance and understanding
investments, I pretty much have always handled our investments. And
when we decided for him to start the business, I kind of took over
the operations and learned how to, you know, run a chiropractic
business and set up insurance and all that kind of stuff while he
was the doctor and saw the patients. And so when it came to real
estate, I said, listen, we're starting out with a lot of debt after
paying off all of the school that it's just not financially wise
for us to do anything other than buying something so we have
tenants helping to pay the rent. So it was easy initially to get
Vincent to buy his practice and our building, just to be
financially wise and not going into more debt.
But growing that beyond that was definitely me as the driver, he
was busy with this practice. He did not like to do maintenance, but
he learned to do it and liked the fact that once we did rehab
units, they were worth a lot more and we had a lot more cash and
could keep buying them. But I've been told multiple times, slow
down, pull off the brakes, we have enough units, why do you want to
keep growing? And I am like because I'm passionate about it. And
I'm passionate about the wealth that it can create. So I've been
kind of the driver. And he's been very supportive and very hands-on
for the 70 units that we self manage in our area. But definitely
likes that I'm now buying much larger assets where I'm asset
managing and he's not involved day to day in the management and
maintenance of the properties.
James: He must be very happy now.
Anna: Very happy, yes.
James: Yes, we started with 45 units. And my wife used to be
sitting there whenever we were missing our property manager in the
beginning, I mean, she was sitting there doing things and I didn't
do maintenance. But, I used to be with her and trying to buy this
and buy that and make sure you know the contractors are lined up.
And it's a lot of work, but it involves teamwork. And yes, we are
two different people, we have to learn how to work with each
other.
Anna: For sure.
James: That's good. And so you started with 70 units, with the
chiropractic real estate, right? I mean, is it like a commercial
center?
Anna: It is. It's a commercial mixed-use building. So there's a
commercial space that his business lease's from my business. And it
had three tenants, three, you know, residential renters and four
garages to that property.
James: Got it. So you got some kind of tax benefit, I guess because
the [inaudible11:44] is leasing from the owner itself, I guess,
right?
Anna: Yes.
James: So get some write off there, good. And how did you, I mean,
so after that and then what was the next acquisition that you
did?
Anna: So James, as many people were affected by the 2008-2009
economic crash. Imagine working for AIG at the time and AIG, you
know, coming in and having one of the largest insurance liabilities
of any other provider in the country between mortgage insurance and
credit default swaps. And I worked for them. So I had already, I
had been working for them for a year on a work from home basis. And
we thought we were going to be laid off, my stock went from 1-o-1 a
share to 43 cents a share. My retirement funds were almost just
destroyed. They were destroyed. I lost about two thirds within a
week. And I decided, oh man, I'm going to lose my job.
My husband has a brand new business with hundreds of thousands of
dollars in startup debt and I'm the sole income. So what are we
going to do? And the only thing I could think to do right away was
to borrow from my 401k, about $50,000 that I had left that I could
borrow and buy another four-unit because I thought at least if I
buy another 4 unit, I'll have another, you know, $1200 to $1500
dollars a month of cash coming in. And that's in the asset, that is
solid and stable that I won't lose any more in the stock market, no
matter what happens.
So that was my next acquisition. Again, it wasn't really thinking
about oh, this isn't a phenomenal investment. It was, what can we
do to survive? And I know that cash flow is a good thing. And that
residential real estate will not go down in value significantly
compared to the stock market.
James: Got it. So after that four-unit, what did you buy the next
one?
Anna: Another four units.
James: Okay, and when did you start with the 70 units where you
self manage?
Anna: Okay, so what we did, we self-managed, again, initially just
out of necessity, not having a lot of extra cash, thinking our
finances were not super stable because I was the sole breadwinner
at that point. My husband's income was nice, you know in six
figures gross, but it was covering expenses. And so we just we're
continuing to find ways that we could cash flow and make the most
cash and be willing to put in the time to do it ourselves and learn
at the time. And so we kept buying a couple of single-family homes
that we bought as foreclosures, renovated them and instead of
selling them as a flip, we did a cash-out refi, we kept them as
rentals, we took the proceeds to buy another and another.
And then we did the same thing with small four-unit apartment
buildings. So four-unit apartment buildings were kind of my niche
and the sweet spot for several years chains. Because there were in
a smaller area, I'd say maybe a tertiary market right outside of
Hershey. And there's not a lot of apartment complex supply, no big
complexes, but there's a lot of demand for housing. And so most of
the rental real estate here were four-unit apartment buildings that
had been built that way or converted, you know, couple decades ago.
And there weren't a lot of big buyers buying those four-unit
building.
So they'd sit for a while. So I kind of I saw a niche where I could
buy properties without having a lot of competition. And I could
basically treat them like a larger commercial asset, but on a, you
know, on a four-unit scale instead of a five or six-unit scale. And
so I kind of honed my skill in updating those units, managing those
units, raising the values, cashing out repeating. And then decided,
okay, now it's time, once I built up, you know, a strong six-figure
passive, you know, net rental real estate portfolio, then I
decided, now I can retire and I can scale and start going after
much larger assets. And so that's what I did.
James: Okay, got it. So when was the first time that you
acquired a much larger than four-unit property? Which year was
that?
Anna: Okay, so in 2018, I had basically created a five-year plan
James in 2013, that by 2018, I wanted a $5 million portfolio, you
know, about $150,000, at least in passive income, and then I would
retire and start going for a bigger one. So I'm my goal in four
years in 2017. And then just started kind of working my way into,
you know, saving six months of salary and expenses for all my
buildings and starting to look for larger deals. So I found the
first larger deal for me, it was a 73 unit apartment building,
right outside of Hershey, Pennsylvania, that I found off the market
and I [inaudible16:20] on that with two other owners. That was a
six and a half million dollar purchase 73 unit. And we closed on
that in 2018.
James: Got it. So how did you manage your time? I mean, your
husband is working, and you are doing this fourplex, fourplex,
fourplex and your four kids. And you give some tips for people who
are in a similar situation and how can they manage and be as
successful as you are?
Anna: You know, I think really the key to my success has just been
resilience and grit and determination. I worked truly, most people
say oh, rental real estates passive. But I like to say and I
totally believe James, that passive income is built on the blood,
sweat and tears of active income. And it takes years of active,
sometimes to build up the financial wherewithal that you can truly
become totally passive. So between my husband's business and my
work, and my rental real estate, I truly worked 70 to 80 hours a
week over the last 10 years, in order to be able to get to where I
am.
My four children are all involved in sports, pretty competitive
sports. So we have sports every morning, we have sports after
school every day. And most days, it's seven days a week, you know,
multiple tournaments on a Saturday and on a Sunday. So every waking
moment when the kids went to school before I started work, I did
real estate. My lunch breaks, I did real estate. My vacation days,
five out of six weeks a year, I did real estate, you know, evenings
between when the kids got home and I worked, it was real
estate.
And after nine when the kids were in bed, I often stayed up till
midnight to get things done. So it was very time-consuming. But I'm
very, very grateful that I stuck with it and did it. And it was
just a matter of utilizing every day, I didn't watch TV, we didn't
have cable, I didn't go do a lot of recreational things, I really,
you know, not nose to the grindstone just focused on building the
portfolio so that I could retire and spend more time with my
kids.
James: Yes, it's really hard work, I can really appreciate what
you've gone through. Because I was working and my wife was like
running around in the beginning. I mean, I only stopped working
after we had like, 340 units. Now we have like, 1300, it's a lot of
work, right. So based on what you're saying, it can be done. It's
just like not, please don't give excuses, right?
Anna: Exactly. I'm here to tell you, you know, if I can do it,
working full time, running my husband's business, four kids and
doing it, you know, anybody can do it if you just have grit and
determination. So you make the time for what's important to you.
And I knew that it was important to me to be able to work myself
out of my job. And especially with AIG, you know, a couple of years
ago, they said, we really are going to sell our unit, and we need
to all be prepared to figure something else out in terms of career.
So that kind of drove me to have executed my plan in a certain
period of time. And now you know, that I'm retired, I'm still very,
very busy. But I have the freedom to control my time, you know, to
do what I enjoy and go after larger deals where I'm not having to
be quite so involved in the day to day.
James: Yes Can you define what is grit and determination in your
mind?
Anna: Sure, so grit is the ability to stick with something, no
matter what comes, no matter what obstacles without basically, you
know, melting into a wallflower. And just keep ongoing. And, you
know, there's been a lot of studies done on what makes people
successful. And you know, some kids were tracked from high school,
through college, through their professional lives and they were
really surprised that the top students like the valedictorian, the
[inaudible20:04] rarely ended up actually being the most successful
people in their professional lives. It was usually the people that
went through a lot of hardships, and just kept going and push
through and got creative and figured a way through and around every
obstacle and became stronger and more confident, and determined.
And those are the people that ended up the most successful. So I
just I think it's an extra drive and extra determination and a
willingness to keep pushing through no matter what and to not give
up on your goals.
James: Yes, so look, I mean, I always tell my listeners and whoever
talked to me that it's always, you know, whether you want to be
successful, or whether you like to be successful, whether you
required to be successful so, I mean, if you have been this
successful, you must have that, I really need, I really required to
be successful. I mean, is that true statement that you came to that
way?
Anna: I think so. I grew up with very, in very humble means. And I
always knew that I wanted to create a different type of lifestyle
and a different financial future for my kids and I was just
determined to do it. So I've always been driven, I've always taken
on challenges. You know, my first job at Bank of America, I won the
number one ranked Financial Relationship Manager in Texas and
Employee of the Year awards at multiple jobs, my first couple of
years. Because I've always had, that I'm going to be the best, I'm
going to succeed, I'm going to achieve and do whatever it takes
attitude. So I think part of that was ingrained in me from a young
age.
James: Yes, I think it's important, I mean, just the personality
itself and the drive to be successful and the requirement; I mean,
because your husband and your AIG was going downhill and you must
be successful otherwise, your family, it may not be in a good
place, in terms of financial. So that's really good. So describe to
me, what was your toughest day in a one day when you have like four
kids and all going to all these classes and schools and all that?
Have any time where you think that, oh, my God, this is just too
much for me as a mom and as a real estate sponsor? And can you
describe that feeling and experience?
Anna: Yes, I just actually, you know, Facebook is kind of a mixed
bag of whether you like it, or whether you don't. But I like the
Facebook memories that kind of pop up and remind you of something.
And I had something pop up this last week, about a three day in the
life of a real estate investor that works full time and has four
kids. And I looked back and thought, well, I don't know how I
survived it. But back in February of 2018, I believe it was, I had
a call that there was mould in the basement and that they were
smelling mould. So they opened it up and there was a lot, well, you
know, I'm thinking it's probably like a dripping water heater or
something we walked in and there was literally like six inches of
goopy mould hanging from every rafter of every space in the
basement of a three-unit apartment building with the ground floor,
a dirt floor.
And when we opened it up, I mean, it was just really bad. And what
had happened was a hot water heater, pressure relief valve had
failed in the basement, nobody seemed to notice nobody called us.
The person in hindsight said, you know, I thought my hot water
pressure was kind of low and not as hot. And I should have called
you well, within about a six week period, six to eight weeks,
somewhere in there, our entire three in an apartment building was
just covered in mould. And inside all the units, I had to meet the
tenants, it was snowing and really bad weather. And I had to call,
you know, restoration companies and re-home all my tenants and get
all of this stuff out of the property. Right after that, we had
another property where a roof blew off in another big storm.
And we're handling the kids and multiple other small things were
going wrong, we had a couple of frozen pipes because it was a
winter that the ground was just frozen for so many days. So we're
dealing with frozen pipes, re-homing tenants, working full time,
insurance, the tenants all wanted to sue me because there was mould
and their kids were sick and going to the hospital. And my kids
were just young and very needy. And it was like a two or three week
period where I thought I'm done, I can't do this anymore. It's not
worth it. It's too hard. And I kind of had a little pity party for
a few weeks and said, okay, I need to take a break. I'm not buying
anything else. And I took about a three-month break where I didn't
buy anything else. And I just kind of took care of those issues.
And then, you know, said I need some breather time, we went to the
beach. And after I got back from the beach, I'm like, okay, I'm
refreshed. It's behind us now that I've handled that period can do
anything and just kept going.
James: It's crazy the amount of pressure and tense moment that
you have during that kind of things with family and issues with the
deal. So I want to ask one last question before we go into the
details of some of the deals that you have done here. So why do you
do what you do? I mean, you don't have to do this right now.
Right?
Anna: So a couple of things, James, I'm really passionate about
real estate, I'm really passionate about wealth building. And there
is nothing like real estate to build wealth. You know, I started
out teaching clients about mutual funds and stocks and bonds and
how they can make you know, eight to 10% returns on their money if
you time everything right. And realize that it takes money to be
invested in the stock market. It's volatile and it's risky. And
really, people can go from nothing to multi-millionaire in a couple
of years of investing in real estate if they do it the right way.
And so I've just seen the real power in that.
You know we went from literally negative $750,000 net worth when we
started my husband's business to a several million dollar net worth
and just a few years of really aggressively buying rental real
estate. And so it changes lives. And I want people to know,
especially women, that that you can change your financial family
trajectory, not just for today, but for future generations. And
also we're providing really good housing to people. So you know, I
grew up in government housing, my mom was a single mom, she was a
property manager for a government housing apartment complex. And I
know what it's like to grow up in an apartment and we didn't have
the best amenities.
You know, all my friends were wealthy, and I lived in a little
apartment complex. And I've worked with inner-city kids who live
literally in shacks with dirt floors in the middle of Houston,
Texas. And to be able to empower people and say, your life can be
different. And I can show you the financial tools to take better
steps and to know better so that you can create generational wealth
for yourself. And it just empowers me, it drives me to keep doing
it, not just for my own wealth accumulation, but to help other
people to learn that they can do the same.
James: Yes, that's very interesting. I mean, what you say this,
anybody can do this, right? And I know a lot of people are
listening to you, there will be some people who think, yes, I can
do it too. Then there's another group of people, they're going to
give reasons, oh, Anna has this, Anna has that, that's why she's
successful. So if you are the one who's giving reasons, I know you
want to stop that, because indefinitely, you can make money in real
estate, especially millions of dollars, if you really work hard.
And if you really, really want it, a lot of them just do not want
to do the work. They really don't want the success, they just want
to continue with their life and just go ahead and do whatever
they've been doing and let the life takes wherever it takes
them.
Anna: Yes and I think part of that James, for so many years, you
see these teams, these shows reality TV, and people convince you
that it's easy money that you can do it, that you can be
successful. There's coaching programs and gurus that you know,
charging five, ten, twenty thousand dollars to sign up and learn
how to do real estate. And they promise you that if you follow
these three steps, you're going to be independently wealthy in a
year or two.
And I think when reality hits people, and they start investing, and
they start to see how hard it actually can be on a day to day basis
until you build up that experience and that wealth, they just give
up and they feel like failures because they've been sold an
unrealistic expectation of getting rich quick in real estate, when
it's really the long game. You know, you're playing a long game, it
takes sometimes longer than it should you know, some people get
lucky or find the right network and connections and very quickly
can build wealth. But for most people, it's slow and methodical
growth. And it's just people need to realize that it's not easy,
but it's not that complicated if they just stick with it.
James: Yes. And they are people who did one real estate and failed
badly. And they gave up on real estate. So there other people that
you know, yes, one time fail doesn't mean anything we could, we
would have failed many times, I guess. Right, so.
Anna: Sure. I lost money on my first flip. And I was convinced
I'd never do another one. And yes, I changed my mind quickly. And
I've done a few but rental real estate is really where the wealth
build up comes.
James: Yes, yes, in my single-family days, I do like 11 rentals,
but I was also doing two flips. And I regret doing flips, because I
made like, 40,000 on one flip and I buy a loss and $1,000 on
another flip. And that thousand dollars feel very painful.
Anna: Yes
James: Because you shouldn't be losing money in real estate, but it
really taught me a lot of things on how I didn't do it right in
terms of the flip. But just because somebody did one and they fail,
doesn't mean the whole real estate is a scam. Right?
Anna: Absolutely.
James: Definitely make millions of dollars in real estate,
especially if you're living in the US.
Anna: Yes, yes.
James: It's a country where it allows anybody to grow, there is no
limit is just you. Right?
Anna: Absolutely.
James: So no reasons, right? So if you give reasons, that's you so
that's the only thing. So let's go to some of the deals that you
have been done. And you so you are buying fourplex, fourplex,
fourplex. And you started [inaudible30:21] on the 70 units and you
self manage and you go into the syndication, why are you going into
syndication now?
Anna: So, I think some of it comes back to the time and the money,
that spectrum of do I have more time or do I have more money? When
I got started, I didn't have money and I could have said I didn't
have time, but I made time. So it was a heavy, heavy time
investment. As I built wealth and as I built more cash flow, it
just made more sense for me to be able to scale larger with other
partners and to be able to be an asset manager, operator, rather
than the property manager or the maintenance person. So I've gotten
to a point in my life where even though I've retired from my job, I
really want my evenings to be free with my children and just to be
wife and mom in the evenings and just spend a certain number of
hours a day doing real estate.
And so I got to a place where I had to say, you know, how can I
really scale if I'm still self-managing many, many more units, it's
going to take me a lot longer of full time effort, even though I
don't have a job. And I wasn't really willing to sacrifice any more
years with my children working more than 40 hours a week. And so I
wanted to control my time and continue to scale. So I figured I
needed to start working with other people, utilizing other people's
time and other people's money. And the larger multifamily allows
you to do that because you can afford full-time property
management, full-time maintenance staff and really become more of
an asset manager and business plan executer than you are an
individual who self-managing your own properties.
James: Yes, business plan executer, that's the operator definition,
I would say.
Anna: Yes.
James: How do you define operator slash active asset manager in
your mind?
Anna: Sure. So an operator is basically the person responsible for
operating that asset soup to nuts and executing your business plan.
So it's generally, you're just general partners. And there will be
either all the general partners will be involved in the asset
management or overseeing the business plan and making sure that
your plan for that particular property is being executed the right
way. So for example, if we're buying a value add property, like the
73 unit that we did and the others that I go after, it's a property
that is usually poorly managed, its expenses are not being managed
well, the rents are below market, and perhaps the units need to be
updated in order to maximize the rents so that you can then
increase the value of that property.
So as an asset manager and operator, I'm working with our property
management company or a property manager and with our contractors
to make sure that you know, when units come available, we turn
those units quickly, we update them on time and on budget, we raise
the rents, we get the new tenants in there. So that we can execute
our plan to raise the values before we sell or refi. And we work
with the property managers to make sure that they're cutting the
expenses in the way that we planned, that they're monitoring the
expenses, monitoring the rents, making sure rents are being
collected, and you're just basically overseeing soup to nuts, all
of the things that are supposed to happen to make your asset more
valuable.
James: Got it, do you think there's a certain advantage of being a
local asset manager?
Anna: I would say yes, in that really bad, unforeseen, unexpected
things happen, like mould damage, or like when blowing roofs off or
a hurricane, you can be at that asset very, very quickly. And you
can also stop in and visit with your property manager, your
property management company on a monthly basis, bimonthly basis and
just say, hey, let's walk the ground, show me what you're doing.
And there's just never anything as valuable as actually being on
the ground and seeing it. However, in today's world, where we have
the technology, we have zoom, we have our phones, where we can take
pictures, and we can walk around, it's pretty easy to do things
virtually as well.
So while the operator in me that's always had, you know, my boots
on the ground, and always been able to see kind of likes the
control of being able to be at a property within an hour. It's not
necessary, if you trust your team and have a good team that's boots
on the ground, and can just go to your asset maybe once or twice a
year. So I haven't really done it from afar. I'm asset managing my
first property that we have under contract right now, two
properties in Atlanta. And so I'll be sharing asset management
responsibilities there. And that'll give me a little better feel
for how much easier or harder it is to do from afar.
James Got it. Got it. So let's come back to value add. So all the
deals that you're buying a presume are value add, right?
Anna: Yes.
James: I mean, you're adding some things to the operation, either
the income or the
expense, right? So what do you think is the most valuable value add
in your mind?
Anna: So I really like Class A to B areas and an older building
because your area you can't change, a lot of syndicators go after
class C area, workforce housing and older buildings. And so you're
struggling not only to bring the asset up to today's standards but
also with a tenant pool who may suffer more heavily if we head into
a recession or they may be more susceptible to losing jobs and not
being able to pay rent. Where when you're in a nicer area where
there's really good school districts and people want to live,
there's a lot of good employers and a lot of good shopping and
things around, you're always going to have people that want to move
into that area because it offers the best lifestyle for those
people. And so if you can find an older asset, you know, you're not
struggling with the area to keep your units filled. It's just a
matter of now offering an asset that people want to live in while
they are in that area. So I'm really a value add investor, not
doing like full major repositions, taking units in a C class area,
that's 40% bacon and trying to fill them up. I like stable assets
in a stable area that just needs some updating and operational
efficiency in order to bring them up to today's standards.
James: Good, that's very interesting. I never heard that from
anyone else. Because the strategy is for you to look for the good
area, but look for older buildings and try to improve from those
older buildings, I guess.
Anna: Yes.
James: Okay. Interesting. But what about the like interior rehabs
and do you do any like rehabs on the inside? And do you think is
there any specific rehab that you think is more valuable than
others?
Anna: Sure, you know, it's really market-driven James's I know that
you know, but for your listeners, every market demand something
different. So where some parts of the country in order to get you
to $1100 a month rent might demand granite countertops, and they
might want really nice luxury vinyl plank flooring, other areas
like tile, and they don't like granite, they like maybe stone
countertops, and other areas to get that much, you might be
competing with a $3,000 a month luxury apartment that would have
granite and vinyl plank and maybe 1000 would get you carpet and a
nice floor-laminate. So you've really got to look at what does your
particular market demand and not just assume that every rehab has
to be a cookie-cutter that looks the same.
So what I do is I look at what is the competing market? What is
the complex is offering to get that top rent that they're getting
today? And I kind of secret shop those complexes or go on their
website and see what those units look like. So for the 73 unit, for
example, our property was a 1985 vintage when we bought it in 2018.
So it was a little bit older, had a lot of original oak cabinets,
plain commercial grade carpet, old looking vinyl. And basically we
went in and we just changed up the flooring to vinyl plank flooring
in the main living areas with carpet in the bedrooms. And the
reason we did carpet in the bedrooms is because it's really cold in
the northeast. And so a lot of people don't like solid flooring in
their bedrooms. So we kind of save a little bit of money on doing
carpet in the bedrooms and vinyl plank elsewhere.
And we replace some countertops and updated old cream-coloured
appliances to stainless steel, or very nice white depending on the
unit. And then we painted the apartments, a soft, grayish color
kind of more on the gray side. But the flooring has kind of had
some greys and browns that go well with everything. And really for
just a couple thousand dollars in new flooring and paint and some
countertops and appliances, we were able to raise the rents $200 a
unit. So it was a significant increase in rents because when we
bought the property, not only were the units kind of dated, but the
owners had not raised rents on several other tenants for several
years. And so the property right next door to ours was asking 175
to 225 more a unit with the exact same floor plans as we had. So it
was a great property because we didn't have to do a whole lot in
order to bump those rents and achieve that big increase in
value.
James: Got it. So I want to go a bit more detail on how did you
choose your rehab plan because you said you did countertops, you
did stainless steel and a few other things there. But it's for
example, how did you choose? Why did you want to install stainless
steel appliances? Can you give some education on how did you go to
that process, say I want to do stainless than black appliances?
Anna: Well, and again, this is we've kind of left appliances, we've
kind of played with it a little bit because we had so much room to
bump the rents. And we looked at what is next door offering?
They're the biggest competitor. So next door had certain units
where they offered a premium package with stainless steel
appliances. But the standard package didn't, it had white
appliances. So we said for the first couple that comes available,
let's do the vinyl plank, let's paint them. And if there's a cream
color, for example, one unit had a cream color stove and a white
refrigerator and cream color, you know stove and we said let's keep
the brand new white refrigerator. And let's just put in a white
dishwasher, a white stove and see if we can get the rent that we
want without going stainless. So we did that on a few. And we had a
huge waiting list of people that wanted those apartments, they
couldn't care less about the stainless steel and so we didn't do
it. So you know initially we thought we were going to go all
stainless but people, we've been achieving the rent bumps we want
without having to do stainless. And so we haven't done it at this
point.
James: Got it. Yeah, that's how you and I think that's a good
strategy to look at the base on where you didn't want to overspend
versus how much rent bump you need, right, because --
Anna: Yes. Sorry, go ahead.
James: No, I mean, somebody can use that extra money for something
else.
Anna: Exactly. And the other thing, you know, because I focused
primarily in my general area, I know the market like the back of my
hand. So the buildings that we bought the 73 unit and the
subsequent 31 unit that we just brought too, they're basically my
direct competition. So I know what tenants are looking for, I'm
already offering it in my town. And basically within a 30-mile
radius, we know this is what the market demands, this is how much
room we can get for it. And so while people think, oh, I need to do
all these fancy bells and whistles, you really just need to look at
what your competition is doing it over, improve it to the level
that you're going to get the top rent, but don't over-improve it to
the point here that you're spending needless cap backs, that aren't
going to get you that much of an incremental rent bump.
James: Got it, sounds really awesome man. Let's go back to the
slightly more personal side. Is there a proud moment in your real
estate career that you are really, really proud of, one moment?
Anna: One moment, I think, on my 73 unit, sitting down with my JV
partner and his partner that he had partnered with stuff, and
really being able to convince him that this was an amazing asset to
invest in. And he agreed to fund my first large syndication deal.
So I was just really proud that I was able to build up the
financial knowledge and build up the confidence and the track
record from what I had done on a smaller scale that investors would
trust me to take their investment and really manage an asset well
for them.
James: That's where you broke out from the four units to more than
70 units, which is a big achievement, I guess, right?
Anna: Yes. And I think that and the day that I retired, when I was
able to retire from a job where I worked with accredited investors
to be able to say, you know what, I'm retiring, I've replaced my
income, I've more than doubled it, I'm now an accredited investor.
And I don't ever have to work for someone else, again, I think is
probably one of the best moments of my life.
James: Yes, that's really important. Can you name like three or
five advice that you want to give for newbies who want to walk
along your path?
Anna: Sure, I'd say educate yourself as much as you can, you know,
listen to these great podcasts and just learn from people that have
already done it because you learn the things not to do and you
learn that the good habits to do to kind of make yourself an
excellent investor. So really commit to your education, podcast,
read some books and attend some local investor meetup groups so
that you can align yourself with other investors. So one is
education. One is networking and alignment. And you'll get some
continual growth and continue education just from learning from
people that are in your network that are already doing what you
want to do.
I would say also start really looking at yourself and what your
goals really are. So like you said early in the podcast, many
people think they want to be a real estate investor. But when they
discover how hard it is to do so, they kind of back off and maybe
flounder for a while. And all of us can do that if we really don't
know why we're doing something. So look at yourself, ask yourself
what you really want in life. And why do you think real estate can
get you there and then back into how much time and money am I
willing to commit to my real estate investing venture. And if you
don't have a lot of time, you've got to commit yourself to find
money or finding other people's money or working with other people.
And if you have a lot of time and not money or I think vice versa,
then you need to really be willing to put in that time. And so look
at your why; look at your time and your money and start figuring
out how best to utilize every moment of time that you have, every
moment of cash you have and other people's time and money so that
you can start to scale as quickly as possible.
James: Awesome, awesome. So Anna, why don't you tell our listeners
how to get hold of you?
Anna: Sure. So I'm on Facebook as Anna ReiMom Kelley. And I have a
Facebook group called Creating Real Estate Wealth that lasts with
Anna ReiMom, where we talk about real estate and really creating
wealth and kind of the good, bad and the ugly of all the different
asset classes. And you can email me at info@reimom.com.
James: Well, Anna, thanks for coming into the show and providing
tons of value. Anna, you gave a lot of very good perspective from
how you juggle your role between being a mom and being a wife and
trying to grow the business and I think our listeners would
absolutely get tons of value out of this. And as I say there's no
reason not to be successful in anything that you do and real estate
is just a tool. You can be successful in anything but you can be
successful if you really put your heart into it. If you really,
really want it you will be successful. I mean, if you give reasons,
there are tons of reasons you can give not to do something.
Anna: Absolutely. Thank you so much for having me, James. It's been
my pleasure.
James: Thank you, Anna, bye.
Anna: Bye.