Ep #244 – Kerry and Bonnie Staples – From Corporate Executives to 4500 unit Moguls
Here is some of what you will learn:
How passive investing is a solid foundation in Multifamily Investing
What type of person is best suited for multifamily investing
What to learn your first 90 days of real estate investing
What to sacrifice to see massive gains
The challenges for starting and the challenges as you grow
Unique ways to bring value to a property
The meaning of “Hard Money”
The two biggest mistakes new investors make
Leadership skill: Importance of sharing your vision
Rod’s “Mutant” skill
The value of making an investment plan
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Full Transcript Below:
Kerry and Bonnie Staples – From Corporate Executives to 4500 unit Moguls (Ep #244)
Rod: Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing”. I’m Rod Khleif and I’m thrilled you’re here. And you guys are really going to enjoy the couple that we’re interviewing today. They are a real dynamo. Their names are Kerry and Bonnie Staples. They own in excess of 4,500 units. They’re based in Dallas and we are very lucky to have them on the show. How you guys doing today?
Kerry and Bonnie: We’re good.
Awesome. Awesome. Awesome. So you know, the stock question that I always ask initially is tell us how you got going? How you went from you know I know you guys were in corporate America, how you got to 4500 units? How that process started and involved and please share that sure.
Bonnie: So our story started way back when we were doing single-family and trying different avenue and trying to build our portfolios in single-family to hope one day to sell and then graduate to multifamily. Fortunately, we only did that for a few years and then discovered some educational programs that taught us that we didn’t have to do single-family and then graduate to multifamily and so after getting that education and taking massive action, we started working on our multifamily situation. We started first investing passively and at the same time we were trying to find our own deal and the leaders of multifamily unit and with being passively, actually learned a whole lot through that time process and after about 18 months or so again the whole time we’re still looking for multifamily. Finally we landed one after about 18 months and landed our first multifamily with 106 units and we do syndicate that. So we have investors, we had 17 investors with us on that deal and then since that time we’re now over 29 deals and we’re in 4500 doors and four of them that we’re the lead on.
Fantastic, fantastic and you know I’m so glad that you mentioned starting passively because you know it’s interesting. I’m doing a deal right now. We’re actually closing tomorrow. It’s a small property, 101 units up in Dayton but you know one of my outcomes for that deal with my students and with the investor is just actually making an educational process but you know part one of the things I told them is the fact that you know just by being in passive, you see a lot of the behind the scenes stuff, the stuff that I can’t even teach from stage you know the little nuances, the little tweaks that you just don’t think of and in fact we’re doing a webinar here as soon as I’m done interviewing you guys. We’re doing a webinar for our investors because we’re gonna do regular training as part of the process which is I know a little unusual but you know I feel like it’s a great opportunity and like your situation, would you agree it’s a great foundation to get started to you know, it actually even enhances your experience, the banks look at as experience right?
Kerry: Absolutely. And because you know you’re getting all the reports, you’re getting all the same information that a lead would get. So when you become a lead, your already familiar with it, you see how we’ve analyzed it, we see but yeah you gain a lot of experience out of being a passive and it does increase your resume for when you if you do want to be elite from a lender’s perspective just as you spoke of.
Rod: Right. So let me ask you guys this question. In your opinion, what type of person you know of my listeners are people like yourselves that started in single family I started in single family in a huge way. I had 2,000 houses. It’s painful to even talk about but yeah buy-and-hold by the way I wasn’t flipping it was buying and holding yeah but you know, so my listeners are single family, they may have some plexes, they may have a 10 unit or 20 unit, and then some larger ones of course as well. You know what type of person do you think is best suited for this game and I call it a game because it’s fun.
Bonnie: It is so much fun and I really don’t think that anybody is omitted from this task you know. So I think its available to anybody, sky’s the limit you know. I mean carrying our just normal regular people that had regular corporate jobs and I actually love my job and never thought I would ever quit, but I love this more. Now I feel like I have a bigger sphere of influence because I can not only influence help you know better the properties, so it makes it a better situation for the tenants but it also makes it a better situation for our staff, management company. And now also for our investors you know so really it seems like we’re able to help so many people.
Rod: Touching a lot of lives.
Bonnie: Touching a lot of people’s lives. So I don’t think anybody is eliminated from being able to do.
Kerry: I think I’m a genius but every . .
Rod: (Laughing) I love it.
Kerry: And I say you know, if you’re doing multifamily today, I mean there’s a lot of things that do correlate, not just apples to apples but part of that experience does all you know come over into multifamily with you and we were looking at it, it’s just as much work to go out and find a single-family deal that works for you as it does for a multi-family.
Kerry: We’ve had deals when we were first starting with single-family and that’s a whole another reason we ended up in multifamily and we were like this is going to take us you know we never got to 2,000 doors. I’m sure you have a much better system than we did on single-family but we were like, this is going to take us a lot longer than we ever thought to get we want to get.
Rod: Sure. To reposition it, to turn it around, to flip it, or whatever you’re doing with it, no I mean, yeah exactly. So you know let me ask you this because I’m sure at this point in your careers you’re probably already doing some mentoring and helping and bringing people up and pulling them up then that’s just how life works when you reach a level of success you know, speak to the people that are listening right now. What would you tell them about this business? What would you do? What words of encouragement might you give them?
Bonnie: My words of encouragement are number 1, get educated. So you don’t make mistakes that be out there making by yourself. So have some good education also have a mentor that you can ask those questions. Again to keep you from making mistakes you know some people look at having the education and having a mentor as having insurance because it saves you a lot of money in the long run if you have good education. I think that’s key, is having some good information, access to good information and resources.
Rod: Now that’s great advice great advice and you know it’s funny I started this podcast never ever intending to do that and you know now I get so much pleasure out of it you know that role, I mean that educator role right now you know. I never planned in fact it’s kind of funny early on in my podcast I said “I’ll never sell you anything” and now I’m actually a liar because I got so much pleasure out of it you know, I would take free phone calls from my listeners and I took oh gosh hundreds and hundreds and I got so much pleasure you know it’s like you know I tell my kids do what you love and I wasn’t eating my own cooking you know. And I really loved it and so you know finally and people were saying hey you should do a course, you should do coaching, you should do live events, and I’ve had two sold-out live events now. I’ve got another one coming in Chicago in August and I’m just I’m freaking loving it. I mean I’m working seven days a week. So let me ask you, in that vein you guys are super successful, what did you have to give up for that success? People think that it’s you know it’s so simple but typically something has to be, you have to exchange something for that. Can you, anything come to mind?
Bonnie: We did have some sacrifices right. So once we started in multifamily and we realized that we wanted to take this to the next level, both of us were working full time jobs, Corporate America, we had great jobs both six-figure jobs. So some of our step back was that I actually quit my job that I actually loved so that I could step back,
Rod: That’s a sacrifice.
Bonnie: No income.
Rod: Right. That’s scary sacrifice right.
Bonnie: Yeah it was like you can quit, you can quit, you can quit and like no no no and that made me realize you know being able to step back and quit and living off with the lower income for a short period of time allowed us to then give me more time to focus 100% on multifamily that then helped launch where we are today and now Kerry actually just retired from Corporate America about six weeks ago.
Rod: Wow. So you were still there throughout this process? Holy cow through to 4500 units. Wow okay so anytime someone tells me you can’t do this on the side. I’m gonna point to you guys. I mean 4500 units. I mean obviously you were working at full-time Bonnie but I mean that’s still amazing. So let me ask you this, what do you think is the most challenging part of your roles right now? I mean actually let’s go back when you did that first asset as a KP as you as your deal, you were this indicator. What was challenging then and now as you’ve evolved into? I’m sure you’ve got an incredible team. By the way do you guys self-manage or do you have third party management?
Bonnie: Third party.
Rod: Third party okay all right. So what was the challenge back then? What’s the challenge now?
Bonnie: I think that the challenge then is for a broker and a seller to recognize that you are serious and you’re not just a tire kicker. You’re not just someone out here trying to tour a property and that you are serious and you can close the deal. And I think again being a passive, that gives you a credibility.
Rod: Sure does.
Bonnie: You know we first started looking you know they send out their least experienced agents to tour us on these properties and you would know that you know and finally you sort of graduate a little bit hard once you’ve closed that first deal or we were passing them seven deals before we beat our first plus on our first deal and so I think that that was the biggest challenge back then is just making sure that people know that you’re serious.
Rod: Took you seriously sure and yeah it’s the same problem that people have today. I mean you know obviously brokers are the bell of the ball you know and they’re not going to waste time with anybody they can’t close today because there’s so many people scrambling for deals. So what’s the challenge today as I guess, not that one but
Kerry: Some challenges you know finding good trades to do the rehab on your property at a reasonable price. I mean that you know takes some time to go through that and get some good trades on your property. And then the others just funding the deal that works. I mean sellers right now are wanting you know obviously top dollar for their deals. So it’s finding you know a way to make that deal work for you and how you’re going to run that property to be able to you know you know find one that you can acquire. That is you know the trick. There’s deals out there it’s just if you just take them for face value, they typically don’t work. You have to say how or what am I going to do? How am I going to add some extra value to this that’s really going to make you
Rod: Yeah no question and so you have to dig in but you are having to look at a lot of deals right now is that an accurate statement?
Rod: Yeah and so talk about some of the ways, are there any unique ways that you’ve added value. I’m sure the regular ways you go in and put in a new kitchen package you know, put in the plank flooring and you do the regular unit renovations, you paint the exteriors, anything unusual that you’ve done to create value.
Bonnie: Yes some of the things that we like to do to add value to the property is to add amenities to the properties that you know they may not have today. So as an example, one of the properties that we just acquired didn’t have a playground for the children so we added a playground for the children. One of the properties that we purchased had a great community of people that really liked and enjoyed each other, but they’re only gathering place was on the stairs out by the parking lot and so what we did is we came in and added picnic benches and picnic tables, grills, pergolas just out in the center of the property so it built that community.
Bonnie: Yeah and then what we’d like to do is actually, love on the tenants as well with tenant events like Mother’s Day events where actually you ask them to do a potluck dinner, they bring out all the foods you put the tables out and supply the drinks and then they’re just out there building that community you know and another thing we do is we actually engage city items where they’ll come and actually help you with your property like we have a place that they come in and actually bring in breakfast and lunch for the children during the summertime
Rod: Wow like subsidize, some sort of subsidize your program
Bonnie: And it cost the property nothing, you know you have children on the property they’ll come in and they’ll help you with a school drive to make sure that all the children get to go back to school with a backpack and paper and pen so they don’t feel left out because other children are able to do that. So that’s what we like to do is build that community where people have that connection and they know that they’re loved by the by the owner.
Rod: I love that you just struck a chord with me because I’ve got a foundation myself and you know I’m blessed to say over the last 18 years we’ve fed 60,000 children for the holidays but what resonated with me was I’ve given away tens of thousands of backpacks filled with school supplies as well and so it’s such a sore spot for me in this country that there’s children that don’t have the basic school supplies. So in your experience, you know obviously it’s not a straight line to success. You have setbacks, you get your nose bloodied, you get knocked down, talk about one of those and the lesson you learned in it? A time you got your butt kicked a little bit. We all had that happen.
Bonnie: So one time we got our butt kicked a little bit, it ended up being a good deal though. I mean I ended up a good experience I said it was not a good deal it was a good experience even the butt-kickin you learn a lesson.
Rod: I call them seminars okay. I’ve had huge seminars.
Bonnie: Absolutely. So one of their deals actually was that we were under contract for it was a deal that several people had tried to buy that deal and it was a very difficult seller, very difficult financial that they had, and they were not very helpful to give you that information but anyways we got under contract, we discovered that there was some issues with the plumbing on that on that property, and we asked to be able to do some more investigation because we were in our due diligence period and we had up to a certain date that we would then be you know totally committed to this deal and the buyer just quite honestly wouldn’t allow us.
Rod: The seller you mean.
Bonnie: The seller wouldn’t allow us to do the investigations that were needed to make a proper evaluation of what we would need. So we actually had to walk away from that deal and we were
Kerry: Well actually technically what happened was, within our due diligence, we tried to scope the line. So he was letting us check the line but the lines were so clogged that he wouldn’t even let us, we couldn’t even scope them to see what if there’s any issues. So we asked him to pay to clean out the line so that we could see you know what we’re really looking at and that’s what he said no.
Bonnie: He said no, so with all that we had come down to the last like two days before due diligence was over and so we just had to make a business decision and walk away from that deal and you know you some people may look at that like “gosh you were you were so close to closing the deal” you know but you know closing a bad deal is not
Rod: Sometimes the best deals is the one you don’t do.
Bonnie: Exactly you walk away from, so that’s why we should have built and then the educational value that we received through that process, we had went through all of the due diligence. We had done the lease, we had done the audit from on the inside, we had did it with the bank on the on the form that you need to do your loan you know so we had done a lot of the processes so we learned so much from that situation the educational value that we ran away with even though it cost us you know a few thousand dollars. The educational value far exceeded the cost.
Rod: Oh sure sure.
Kerry: And what we always say now it’s not about winning a deal, it’s about getting a successful deal right because anyone can win it. They all go buy a deal tomorrow but I mean I’m going to overpay for it.
Kerry: So that’s what we focus on. And luckily at that time when we did that deal hard money was not you know kind of a big thing or else you know we would have potentially lost some hard money on the deal which others have. We luckily keep our fingers crossed have not lost any hard money on any of our deals up to this point.
Rod: Right. What you’re referring to is, in this day and age you almost have to go hard right out of the gate to even be considered.
Rod: And those of you that are brand new, hard means you don’t get your money back it’s a non-refundable. When your money goes hard, it’s non-refundable for those of you that are brand new to the business. So let me ask you guys this, what do you think in your experience is the number one reason people fail in this business or really crash and burn? What would you say? I mean, I, in my opinion there’s some stupid mistakes being made people are overpaying today. What’s your opinion you know what are your thoughts on that?
Kerry: I think it’s people get impatient and they really want to get a deal so they get way more aggressive on their underwriting than just providing their time and eventually a deal will come. So basically impatience. It is a patient business. You have to be patient is one and then two is you know we do hire third-party management on our properties but you still need to stay engaged and keep an eye on your third-party management. Those are your two biggest mistakes. You can’t just hand it over and you can’t get too aggressive on your underwriting and if you do those two things, you know those are the two most critical mistakes I see people making.
Bonnie: You’ve got to have the time to also to keep your eye on the ball. Again like Kerry said, that’s because you have a third party property management company which we love our property management company however you know they’re not us you know so they look at things through a different lens than what we do and so you still have to be on top of them and have them, you have a level executing your vision. You make sure they stay focused on what your vision versus you know just running on their own.
Rod: Sure. That’s the core tenant of good leadership is you have a vision and you share that vision with all the people on your team, be it employees or vendors or outside partners as it were in the third-party management world. So let me ask you this, what’s the most challenging part of your roles right now?
Bonnie: I wish that there was like two or three of me and two or three Kerry.
Kerry: Yeah I mean I think it goes back to the point you’re making. I mean you know but we love it so it’s not like work but we do put in a lot of hours you know it’s fun. So we do go buy the property you know and then of course we’re looking to acquire more property so you know out doing tours and all that, meeting with brokers. So it’s really you know that the struggle is just not having enough time in a day to do anything you want done.
Rod: Right right. I couldn’t agree more. You know I’m suffering the same thing you know cuz what you’re doing, I’m doing what you’re doing as well and you know the podcasting is but you know I love it so it’s okay.
Kerry: Exactly. And that is the difference here too because it is your own business. So you know working 80 hours a week for IBM you know that pretty much just sucked. As this at least it’s my own business you know so it’s a different mentality.
Rod: You either worked in your dream or you’re helping somebody else build theirs.
Kerry: That’s right.
Rod: So what’s the least favorite part of what you do? Do you guys divide and conquer? Does one of you handle the investors, the other one handle the acquisitions? or do you each cross over on everything?
Bonnie: You know until recently I was doing most of the work and yet Kerry, although he works for IBM, he actually works in the house. So he had a lot of interaction with me as well now that he is there full-time, so we are splitting the item. So I’m more investor relations and admin and making sure everything showing the reports and everything like that. Kerry’s more on the acquisition side and more on rehab management. We are trying to conquer and divide.
Rod: Divide and conquer yeah yeah.
Kerry: The body is definitely a process machine so she really love that back in and good clean processes and all that. So if I was doing that, that would be what I would say I hate about the job but she loves that about the job. So between the split, it works out well for it.
Rod: Every business is nothing but people and systems. And if you’re great at setting up the systems, that’s so critical in any business frankly and that happens to be my superpower as well. I’m a mutant like that as well there Bonnie. So leave my, leave the aspiring investors that are listening to you right now, that are encouraged by you right now, motivated by you right now, leave them with some final words of wisdom. What would you tell them the person that hasn’t maybe taken action yet? The person that knows they want more for themselves in their family what would you tell that person?
Bonnie: Well I would say make a plan. I said it all comes with a plan first. So start off with a plan, and then start taking action on that plan. And just remember that you don’t have to take a huge gigantic step. Your first step doesn’t have to be you know a 200 unit deal you know. Just start make that plan, take a little step, then take another step, and then before you know what you’re going to look back and you’re going to see how far you come.
Bonnie: So I say, make a plan, take steps and put your plan into action.
Kerry: And my advice would be, focus on the same but slightly different. Don’t spend too much time on your plan, it’s more about action. You’ve got to get out, take it and you’ll figure this out as you go but make sure that you get some good training, some mentor to help you along so you don’t make you know very expensive mistake. But it’s really about taking some action and you know getting out start you know talking to brokers you know because you can take action now.
Rod: Absolutely. Start the relationships and guys if you’re listening to me and you’re serious about this come see me in Chicago in August. I’ll be there August 24, 25th and 26th. There’s still some great pricing it just me training for three days you know if you’re serious come see me. Just go to rodsbootcamp.com and guys and if not me, then do it with someone else but continue your education that’s the key to this business. And then you’ve got to take massive action, bottom line, you’ve got to do it. And focus on that first deal right. I mean you guys, once that first deals done, it’s almost like they’re not as scary anymore. It’s almost like they’re dominoes. They just fall down after that. Would you guys agree with that?
Kerry: It’s funny you said that that unknown is what gets you and it’s fearful. Once you get past one, it just becomes easier and easier because now you’re a lot more comfortable and you’re just and the brokers and you have more credibility but it’s really more about you and how much more comfortable you are about the whole process.
Rod: Pushing through the fear.
Bonnie: You gonna get on the game.
Rod: Yeah I don’t care if even if it’s a duplex or a four-plex whatever a ten unit building doesn’t have to be a hundred unit, get that first property and then trade up. Guys thank you so much for being on the show. It’s been a real treat. We had some audio stuff so if you guys are listening to this and you had a couple of breaks in this thing we’re gonna do our best to put it together but they were kind enough to give us their time and their in their car which is it’s just why we had some challenges but definitely tons of value you guys added today and I’m so grateful to have met you and had you on the show with me today.
Bonnie: Its our extreme pleasure.
Kerry: Yeah Rod, we really appreciate you having us on.
Rod: Thank you guys. All right take care!
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