All Forum Posts by: Mike Kehoe

I will chime in on the common sentiment here - I think it is better to find what you are good at and run with it.  When I started investing, I was highly focussed on fix and flip single family homes.  Turns out, I was pretty terrible at it.  During the same start-up period, I also happened to buy a couple multi-family fix and hold properties in the same are.  At the beginning, I swore up and down I didn't want to be a landlord.  It turns out I was pretty good at that and more successful.  Over the first few years, I developed the "profile" of my style - I buy distressed multi-unit properties, fix the problems, and hold them long term.  I started out 12 years ago (wish I had started sooner) and that has worked for me.  I used to buy only 2-4 family.  That evolved into a preference for 4+ units, then evolved further into a mobile home park and more recently mixed use properties.

My thought on your situation is that you are overwhelmed trying to emulate your mentor, who has also very likely evolved through his own experiences.  You will do far better to focus in the beginning, and analyze the results.  If you are consistently doing well with a particular type of investment (or location, or whatever is common among successful deals), keep doing those types of deals.  If you flop on a deal, look at why and try not to repeat it.  Not repeating it could come in the form of learning from a mistake, or by staying away from a particular kind of deal that doesn't work well for you.

Over time, you will add to your education and experience and will probably branch out into more diverse investments.  In the beginning, however, it is critical to be focused on your education and deal-making.  Some of my "best" deals ended up in a garbage can because I didn't know what I was doing and was either forced out of the deal or couldn't put the money together.  The latter was the result of much more experienced investors looking at the deal, looking at me, and simply saying no way.  Looking back, it is likely that more than one of those deals could have wiped me out.

Through the experience I have gained, I have found myself to be a patient hunter.  I run other businesses too, so I can't always devote as much time as I'd like to my investment growth.   However, I will sit and wait in the weeds for quite a while to wait for the trophy to walk into my scope rather than simply taking shots at everything that moves.  That's my style.  Other investor friends seem like they are taking down a new deal all the time, that's their style.  Develop your own and you will do well.

Hey B-Peeps! Wanted to do a quick update after leaving my W-2 job 18 months ago today, with some reflections on what those 18 months have looked like and where I'm headed from here.

Quick background: I got started in REI a little over 4 years ago with one SFR rental in Kennesaw, GA (Cobb County, northwest Metro Atlanta). I still have that one, along with 7 others for a total of 8. My original reason for getting into real estate investing was to build a portfolio that would cash flow from now into retirement (vs. continuing to throw money at a 401K and hope for the best, which was basically my "plan" prior to real estate).

In August 2017, I left my full-time job ( of almost 20 yrs, multiple 6-figures) because I couldn't see myself sitting in front of a computer for another 20 years, withering on the vine (pretty sure that's the phrase I used with my husband every other day in the last few months before I quit ;) ).  

My plan was to do a few flips a year to supplement my husband's income and work on creating more cash flow through SFR rentals. As I was making moves to leave my job, friends that we were already lending to for their flipping business approached me about starting a wholesaling business, so that's what we did.

I bought a couple of properties in 2018 through that business and flipped them - one went great, one was a financial disaster (didn't lose money but didn't make much) but I sold it to my daughter and son-in-law and they love it, so it worked out. I also flipped one more I found outside the business and did a few JV's with my partners, so total net (pre-tax) income from flipping (not counting the wholesaling business) for 2018 was around $100K. The wholesaling business did ok also, but I can't give exact #'s until my taxes are done!

Now notice what I did NOT mention in all of this.  We didn't acquire a single rental property.  Not one, even though I had access to deals through my business.  I got completely focused on running the wholesaling business and doing TRANSACTIONS that I completely moved away from building that cash flow that was the whole reason I got into real estate in the first place.

So... at the end of 2018, my husband and I did a serious evaluation of the past 12-18 months and decided to get back to our REI roots. What does that look like?

1. The wholesaling business is being phased out.  I was working my tail off in a business I didn't really like that much anyway, and I wasn't building wealth, I was doing transactions.  Once that decision was made at the end of 2018, I felt a huge sense of relief.  It had become my whole focus - I had effectively landed myself in another job that was a lot more work than my former one and didn't pay as well!
2. I'll only do flips if they are light to moderate rehabs and the numbers make them a no-brainer, but I won't be aggressively looking for deals.
3. No more SFR buy and holds. While it is certainly possible to build wealth and create cash flow with SFRs, my time frame is too short (see 4 below) to accomplish what I need to in the SFR space.
4. So all of this led to the next logical step... multi-family investing.  My goal is to retire my husband in 4 years (he loves his job, but in the event he doesn't in 4 years, he'll have the option to leave if he wants to).  That's my why, along with being able to give freely and be a blessing to others, both financially and with our time, out of extreme gratitude for the countless ways God has chosen to bless us.  

To accomplish this goal, we'll need net cash flow of $20K/mo, but would ideally be at $30K/mo.  For 2019, our goal is to acquire at least 50 units.  In a perfect world, that's a single property (apartment, mobile home park or self-storage facility), but could be spread across 2-4 properties.  I just prefer less transactions, so the bigger the better!

My biggest advantages going forward are having a decent amount of capital to invest and knowing several folks already doing multi-family successfully who will be resources as we move through the process of identifying, evaluating, acquiring and operating multi-family properties.  

My current biggest disadvantage is battling the wrong mindset and limiting beliefs, but I'm overcoming that with education (books, podcasts and forums like BP), reaching out to brokers and lenders, marketing for off-market deals, and telling everyone I can what my goals are. Basically the same process I went through to buy that very first SFR rental property.

If you're still reading this... thanks for sticking with me!

Once I've hit that 50 units, I'll follow up with another post :)

@Mike Kehoe. My advice is never post how much money you have or want to spend on a public forum

What you describe sounds like an excellent plan, @Mike Kehoe .  I would also recommend focusing on strengthening your personal balance sheet and income statement in preparation for starting to network with local (to where you are going to be investing) commercial lenders.  You'll need to line them up prior to getting your first commercial loan, which can be quite difficult without any prior track record.  

Hope you're enjoying the weather in the Windy City.  Keep bundled up and stay safe.  Best wishes and continued success!

Hey @Mike Kehoe I think that is a great starting point.

I would say be cautious, when you have cash on hand and you mix it with the excitement that all investors get when starting out, it's easy to get into bad deals and bad partnerships. There are always people who will look to take advantage of your inexperience and your money.

It sounds like you are already headed in the right direction. You may want to think about diversifying both your money and your education across a few different deals and with a few different sponsors. In my experience it has been very beneficial to see how a number of people operate. 

Spread your time out by adding value to two or three different individuals.
Spread your money out by partnering or investing in two or three different deals with two or three different deal sponsors.

This is definitely a longer term process, but with the 5 year mindset that you mentioned you have, this is a realistic strategy to equip yourself in the right way in order to move yourself to where you want to be five years from now. 

I have an associate in Chicago that has LOCs for real estate investing.  It will build your business credit (do you have a DNB #) .  One purpose is for rehabbing/paying contractors. It is based on your personal credit but it will build your business credit.