Syndication with Kyle Mitchell: From a $1.65M to a $15.15M Property

Your life before real estate - I was a Regional Manager for a golf management company, I had 250+ employees and managed over $20M in revenue. Up until 2015, I was happy at that job, I didn’t plan on leaving, there was a path of growth in my life with the company. Then they started shrinking and opportunities for growth disappeared. I started looking for an exit plan, I was invested in real estate but just on the side, to build up some passive income. 12-18 months went by and I was looking for other alternatives: start my own business, start franchising. I had been in the golf business for 15 years so I was looking for something else, something that I could build on my own and scale. I had been investing in single family homes but it didn’t click as it did when I found multifamily. I fell in love with multifamily when I found it. I like that it is scalable and the business metrics of it: you can drive revenue, control expenses, manage people, build relationships, it is much different from single family homes investing: when you buy a multifamily you buy a business, I like the way it is valued.

How did you get started? I had a group of friends that started a mini-mastermind with one another that met weekly to talk about business ideas. We struggled finding something so we started searching online for an idea for a business, originally we were going to sell a product on Amazon but that did not work out. I read about multifamily online and I bought an online course with Michael Blank and then I educated myself further through books and hours and hours of podcasts. 11 months later I quit my W2 to pursue multifamily syndication full time (before we even had our first deal).

Why syndication? Because of the scalability piece, on your own you only have so much money. You can buy larger apartment buildings and you get the true economies of scales, better margins, it is easier to manage with onsite management. And multifamily is valued based on it’s efficiency and NOI, so the better you manage it the more it’s worth. So I naturally gravitated towards it because of my business and management background.

Mentorship I signed up for 1 on 1 coaching with Michael Blank’s team for 6 months along with his online course, from January to June 2018.

How was it beneficial? Having a mentor in this business is crucial, you can get away without a mentor with SFH’s but in MF I highly suggest you educate yourself and get a mentor. You get to bounce your ideas off a coach who has experience, you talk about your challenges, they tell you where to improve specifically all while training you on how to get started and understanding the business, how is it valued, how do you separate yourself from the competition, how to do spot on underwriting. You also get the benefit of having them as your advisor and you really gain confidence through mentorship.

Do you still use your mentor? Not anymore, even though I was still emailing with Michael this past week. Well, not paid mentorship but we have many relationships with extremely successfulpeople in the field that I consider my mentors. I am always learning and making our systems better and I can a lot of those ideas from these mentors. I also have a business and life coach who helped us develop our website, business, our overall structure of the business. Michael Blank was more the nuts and bolts of multifamily investing.

Are you financially free now? Not quite, still have a long way to go, my wife still works full time. Real estate is not get rich quick, it’s get wealthy over a long period of time. You have to be patient in real estate but I know we are making the right decisions and I am confident that it will pay off in the end.

What is your why? Helping others, giving back, leaving a legacy for my family, help other
people while we help ourselves, help others with training, free webinars on a monthly basis, free meet-up groups and free podcast. We focus on adding as much value back to others as we can and that has been a huge reward.

Talk to us about your greatest success. I just closed on a $15.15M property in Phoenix after
closing on one at $1.65M, it was a real mindset shift. We are a startup so taking that leap was huge for our company, thanks to building a team and growing our network, learning about the market we wanted to invest in. It took us 1.5 year to do that but we stayed patient, knew the market, had a database of investors and the ability to raise capital and and most importantly we had built the team to get it done.

Talk to us about a challenge and how you overcame it. When I wanted to get started, I wanted to be a big success, which requires to get outside your comfort zone. I dreaded speaking in public, I used to manage 250 employees and was afraid of talking to 5-10 employees that I had known for years. It was negative self-talk. I knew I had to become more comfortable speaking. At our first meet-up last March I was terrified but my wife was there to support me. Now we have 3 meet-ups on a monthly basis, webinars online, a podcast and I speak at live events now, I feel more and more comfortable with it.

Can you walk us through a syndication process?
Time is of the essence: when you get a property under contract you typically have 30 days for due diligence, you’re working with different people, working with the SEC attorney to draft your PPM document, working with the lender to get your loan going, an transactional attorney to review the PSA, property management on finalizing the business plan, budget and takeover. There is a lot going on in the first 30 days once you get under contract
Close is usually 30-60 days after the Due Diligence. You need to be very organized with the closing to close on time. At the end of the due diligence period, the deposit goes hard, you start the capital raising process, using a webinar or by calling investors, but you need your PPM ready from the attorney. So it’s important to have a timeline drawn out so you can keep track of things. There are many things within the process that cannot start until something else is finished. You need to give the lender time to underwrite your team, as a lead sponsor number 1 duty is how to best handle those road bumps and challenges, that is your job. Have an extension built into your contract in case you need more time to raise your money or for some reason the lender needs extra time to close. If you are raising $5M you need a team capable of raising $7-8M.

Do you mentor?
I do free phone calls and help in any way that I can, no paid mentorship at this point but as I mentioned we do try and add as much value to others as we can so I am happy to help in any way.

What are your goals for the next 5-10 years?
I want to build our company the right way, want to be a large purchaser in AZ market and start hiring people on our team to keep growing, then once we are at several 100 millions of dollars of assets under management and a solid team: take time to live remotely and spend time with family, but still growing the company and helping our investors build long term wealth.

How does your business coach help you? They help on the personal and business level,
designing my life, with a focus on the relationship with my wife since we work together in our business. They help us structure our business, lot of focus on self-confidence so I can be great, we used to meet every other week, now every quarter, he is a huge influence in my life. Coaching can be expensive but can be worth it if they help you grow, with no cookie cutter approach. My coach makes his success depend on me getting better, it was not about money but about development. I pay him $400/hour.

Do you have any recommendations for starting a meet-up?
Do it, do it intentionally, 5 years from now how do you want it to look? Do some research, is there already something similar, traffic, parking, plan it in advance and add value. We talked about ourselves and our personal experience, as we grew, we were able to talk about more things. Not only a social meet-up, think in terms of adding value.