Kyle is a 27 year old Real Estate Investor, he wanted to get out of the rat race, but unlike most he quit his job before financial freedom. He had 4 properties, some capital, and a few creative ways to buy rental properties.
Here’s some of the topics we covered:
- Beginning In Multifamily
- Should You Do Everything Out Of Pocket?
- Syndication
- Joint Ventures
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
Full Transcript Below
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 I know you’re going to get value from the young man I’m interviewing today. It’s a little unusual. It’s not somebody with hundreds of thousands of doors. It’s someone that’s pretty much you know, just getting things rolling. I mean, don’t get me wrong, he’s already done a lot in a short amount of time. But I think we’re going to have a lot of fun with this interview. And I think those of you that haven’t started will get a lot of value. So his name is Kyle Root, and he’s got, I think, a total of 25 rental properties, 14 are multifamily, and he’s wanting to go bigger. Kyle, welcome to the show brother.
Kyle
Thanks, Rod. I appreciate you having me.
Rod
Absolutely. So why don’t you take a minute and talk about you know, what you were telling me before about your job and so on and so forth. Talk about you know, maybe why you got into real estate, when you got into real estate, and bring us to today, if you would.
Kyle
Sure. Yeah. So I went to college in a small school in Michigan. My background is in construction, so I have a construction management degree. So early on, I was involved in a lot of, like, residential building, things like that. The whole real estate side wasn’t really a thought at the time. We were doing a lot of just small remodels. So I was able to kind of pivot some of that into my mind through a property development class that I took in school. And that really sparked things for me. That was my junior year in college. I took a property development course, and that really sparked a lot of things. We had some big-time guys that were coming in and talking to us about you know, like we were talking about before getting on here, raising capital and buying commercial properties. And I was like, you know, he was probably 45 years old, and he had just said you know, he was able to walk away from his job early. So that kind of got things rolling for me. So fast forward out of college, I graduated, went on the road, traveled as a project manager, construction role, managing large construction projects. And anybody that’s you know, lived that road life, it’s not really that enjoyable. You know, you’re working long hours, you’re away from your family. It’s difficult to do. So I started reading some books. The first one I ever read was “The BRRR Strategy”, and another one that I read was “The Greatest Deal Through Real Estate”. I don’t know if you ever heard of that one. It’s not one that’s highly sought after. But anyways, through my knowledge and just getting this foundation built, I just wanted to jump in. So I bought my first duplex a year and a half ago, and then since then just kind of started scaling real estate.
Rod
Now, you kept your core job for a while, but I know that you left it you know, fairly early on. Talk about that for a minute.
Kyle
Yeah. So I only had three rental properties. I had two duplexes and a single-family home. And it was just one Monday morning. I had been getting a lot of information. Some things started clicking my brain with flipping houses and flipping properties where I said, you know, what if I gave this a real shot and I had some capital built up, personal capital built up that I had to fall back on. So if everything went to crap, I was able to at least fall back on some of that. And I had a good rapport with my company, you know, I’d be fine going back to them. Yeah. Three rental properties. I left my job. That was 16 months ago. And we just started flipping properties and buying residential multifamily and a few single families in there and just kind of kept rolling.
Rod
Wow, you accumulated that many more in 16 months. You said we, have you got a partner, or is this your spouse?
Kyle
No, I guess I say we, so I started hiring some–so I also started a construction group. One thing that we lacked in that I noticed early on was contractors and scheduling. So it was kind of one of those situations where it was, do we keep having this issue or do we bring it in-house? I guess I don’t like saying I over and over. Right. I started a construction group, brought in three guys, and they’re strictly are kind of get in there and get some stuff done. So, yeah.
Rod
Okay, that sounds good. Obviously, the construction you know, background is a fantastic framework for this business in any capacity. Whether you’re doing single-family, multifamily, frankly, any asset class doesn’t even matter. That’s a great foundation for this business. Now, you and I talked briefly before we started recording about what your game plan is moving forward, and why don’t you tell my audience what it is you want to do now? I know you got 14 multifamily, and I guess the rest are single-family. What is it you’re going to do now?
Kyle
Sure. So my game plan now moving forward in this year and then moving forward in the next few years is we want to buy between single-family and small multifamily at scale. Right now, we’re putting in 20 offers a month. So purchasing between three and five properties a month.
Rod
So you want to continue in the smaller-sized assets? Do you want to go with smaller?
Kyle
No.
Rod
Okay. I thought that’s were going to be then.
Kyle
We’re going to be flipping a lot of these properties to raise cash. We’re going to hold on to the good ones, right. So we have a certain criteria. If it meets our–we want to cash flow $500 per–so it’s a duplex. I mean we’ve got a lot of duplexes, two units that were cash flowing, 500 a door. So those were to keep. But there are other ones that we’re going to sell to raise our own capital and then start looking maybe the middle to the end of this year to get into a larger asset class.
Rod
Okay. And we talked about this. And listen, there’s nothing wrong with buying and rolling up into larger deals with your own money. And you’re not sharing that money with anyone else. And certainly, that’s a model that works very well. And you’re limited. Okay. You’re only going to go as long as you have dollars. And right now, you know, typically, a multifamily asset of any size requires you know 25%, 30% down, with the average unit cost in the country up around 100 to 130,000 right now. You know you’ll run out of money very quickly. And so, you know, one of the things and I told Kyle here that maybe we’ll do a little coaching as we go through this process together because you know, it’s my belief that I’ll take, you know, a certain percentage of something over 100% of nothing any day. And so, you know, once you get to that point, I’m not saying don’t do what you’re wanting to do, because I think it’s a great idea to take that money and keep rolling it into larger assets. But once you run out of money, it would be crazy to stop at that point, in my opinion. I think if you take the time to start building relationships now with potential joint venture partners, with potential investors, if you, you know, like to syndicate and you’re able to put larger deals together, you can keep going, I guess, is the point that I’m making. And so, you know, I hope you’ll consider that, Kyle, because I really think that as motivated as you are and as impressive as you are with what you’ve done already, I’d hate to see a stall, frankly, because I think this next year is going to be one of the best years we’ve ever seen in this business. And so it’s going to be some real opportunity. And the fact that you’re finding deals with those kinds of margins up there right now, you know, you don’t want to stop. You want to capitalize on this while the getting is good. That’s my two cents in that regard. In fact, you may even want to consider my Warrior program, frankly, because you know, as I was telling you before, we recorded, they’re up to over 50,000 doors right now, and I’ve only been teaching four years. I mean, we’re averaging I think they’re closing on 1000 to 2000 a month right now. So it’s crazy. They’re really killing it. I’m really proud of it. But I’m not going to sell you, but just something for you to consider getting larger deals and start raising money. It’s an incredible ecosystem but, you know, I want to talk about something else that you talked about as well where you quit your job to do this full time. And I just was crazy. I just interviewed another young guy on the show that did the same thing. You know the way I always approach that because I get asked that all the time, should I quit my job and do it full time? And my answer is always no, unless like you said, you’ve got some fallback. Now, you had not only the fallback of a financial cushion, but you also had the ability to go back to your job if it didn’t work out. So that’s my caveat on that guy. So if you’re listening and you’re thinking about that, if you’ve got those two you know, situations where you have the ability to survive on your own cash for a while and you have the ability to go back to whatever field you’re in, then yeah, that may be a great idea. But here’s the problem, though, is if you don’t and you do it, you’re going to have fear. And what does fear do? It paralyzes you. And so you’re literally unable to do anything. And so that’s the thing you want to avoid. But you know, in your case, obviously, it worked. And then someone else I just interviewed yesterday, it absolutely worked as well. So let me ask you this. What market are you in again? You told me and I forgot. Forgive me.
Kyle
Yeah. We’re in Northeast Wisconsin, so Green Bay Area. Green Bay, Wisconsin.
Rod
Nice. And you plan to stay fairly localized there?
Kyle
I don’t. Actually, there are a few different markets I’m looking at. So part of the hiring process that I’ve done. And when you ask me why I say we, I’ve brought on an acquisitions specialist. So there’s somebody now that’s chasing deals for me. I’ve hired a project manager and someone says you know, it’s early on and it is, it’s early on. And you know, people are probably wondering how are you paying for these people? What this has done is forced me to get stronger on my acquisition side. I didn’t really want to give up a lot of my rental income because like I said, I don’t have 1000 units like you or other of your students might have. So it forced me to get better deals so I could backload all of my employees on the acquisition side.
Rod
I’m sorry, could you clarify what you just meant by that? Because it didn’t make sense to me.
Kyle
Sure. So from the acquisition side, when we go in and we purchase this, let’s say we purchase a duplex, let’s say we would normally purchase at $60,000. We’re going to increase our volume of offers and say that what we would normally buy at 60,000, we’re going to offer 50,000 with higher volume in hopes that we get more of those $50,000 properties. So that $10,000 gap can pay for my employees. If that makes sense.
Rod
Yeah. Listen, I’m going to coach you a little bit more on that. I will tell you that I would encourage you to incentivize more based on production than pay. That’s my two cents there. I’ve owned 27 businesses that I’ve built. Few have been worth tens of millions of dollars. Many have been failing. They’ve failed. But I’ve learned a lot over the years. And the more you can incentivize based on production, the better you’re going to be as it relates to what you’re doing right now. And frankly, a lot of people would rather have pieces of deals, too, rather than a big paycheck. So keep that in mind. I’m sure you probably already thought about that, but I would encourage you to incorporate that as well. These numbers you’re throwing around as far as purchase prices are frankly staggering. They are very, very low. And I would absolutely ramp that up as quickly as possible while they’re still available because you know, that’s not what the rest of the country is selling for. It’s much, much higher. You’re also flipping. Are you going to continue to flip?
Kyle
I am. Like I said, we’ve got our little niche right here in the market where you know, you said that that purchase price where we’re buying anything from $50 to $80,000 and the value is you know, 150 to 170. So we’re buying as fast as we possibly can. And you know, like we talked about with syndication and raising funds at this point, I’m not doing that. Certainly, with your advice, I will look more into doing that. But at this current moment, we will continue to flip.
Rod
Yeah. Okay. Well, you know, you’re only flipping single-family, right?
Kyle
Correct.
Rod
You’re holding on to the multi that has good cash flow numbers. I think that’s a sound strategy. Again, you know, in the smaller multifamily it’s going to take longer. That’s all. I mean, you can do it. I’ve interviewed people on my show that are multi-millionaires that did it one duplex at a time. It just takes longer. And candidly, it’s about the same amount of work to buy something larger. You know, and again, if you’re out there telling everybody that the whole still long enough what it is you’re doing and then show them because you’ve already got a track record built up, you don’t have to fake it. A lot of my students, when they get started, we give them what’s called a sample deal package and they can show that to an investor and say this is the stuff we’re looking for. If we find something like this, are you interested? In your case, you can show them the deals you’ve already done, you know, and get them involved and interested in juice and even on the small side. But, you know, again, at some point you’re going to run out of money. And that’s the reason I wanted to share that. Is real estate in your family as well or did it just got sparked by you going to that development class and being in the business?
Kyle
Yeah, it’s not in the family at all. It’s just something that sparked my interest. It was really the financial freedom thing, and I knew this was a good vehicle to do it. And then as I started getting going, it became a passion of mine.
Rod
Nice. Now, I just had another thought and I lost it. So the goal is you’ve got some numbers here. You want to have 500 doors by your 30th birthday. I actually believe you could easily do that on your own for sure. But if you want to get to $5,000, it’s going to require outside capital. And, you know, I like that. Now, the fact that you had project management experience, by the way, you know, in this multifamily business, there are lots of ways you can go about adding value to a team, and it really isn’t for the most part of team sport. You get in a larger multifamily, 100 plus doors. It’s very unusual to find anybody that does it, much of it on their own for the reasons we just define. But, you know, one of the pieces of multifamily investing in the larger you know, assets that I do the most of is asset management. And that’s really just project management, frankly. It’s managing the capital expenditures. When you’re fixing up a property, it’s managing the ongoing you know, management of the asset. You’re managing the property management companies. Now, are you managing these yourself now?
Kyle
I’m not, no. I have a property manager doing all of it.
Rod
Fantastic. Good for you. Well, that’s really good, too, because then you’re not dealing with all that. Now, I will tell you very often, you know, property management companies that deal in single-family and small multi, you know it’s somebody that’s a broker that’s doing it on the side, or it’s somebody that’s got a small company, and they’re typically not as sophisticated. And you really need to be careful. This is an asked me how I know things. I’ve got shirts that I sell at my boot camp and say pound or #askmehowIknow because I’ve made every mistake in the book. And so, you know, when you’re dealing in the larger assets, you’ll get very sophisticated, very tight, very well run systemized property management companies. In the asset class that you’re in right now, that’s unusual. Very unusual. And so, you know, I encourage you to keep a very close eye on what they’re doing. I’m sure you are but very important that you do that. And, you know, I’ll say something else on the smaller assets. It just triggered with me. And they may or may not be doing this, but, you know, a small management company is not going to visit the property that often. And so I’d encourage you to encourage them to have somebody on site that gets a couple of bucks off the rent, to take care of the place, pick up the trash, keep an eye on things. Even in a duplex, maybe do the yard work, whatever, but do something where they’re getting a little break to be your eyes on the property. That’s a little tip for those of you that have small multifamily that are listening. It’s a smart move. You should have somebody there that’s got some ownership, even if it’s $50 off of the rent a month or something, just to keep an eye on things, it helps. And then, you know, when you get into maybe a 20 unit asset or 22 unit, then you can find an old retired couple. Those are like gold where you know, you’ve got a guy that’s got a contracting background and whatever trade doesn’t matter. Electrical, plumbing, carpentry doesn’t matter. Somebody that did that his whole life, and then you’ve got his wife and they’re retired. And it’s that wife that’s in everybody’s business. So she’s at the window with their binoculars, you know rattling everybody out. That is the perfect scenario for you know, an onsite team. You know you’re doing them a favor and they’re doing you a favor. They can manage the property. They can do minor repairs that the guy can. The woman can take care of things. I’ve had that several times. It’s a fantastic dynamic. Do you have a family now, you say, or are you single? What’s your personal situation?
Kyle
Yeah. So I have a fiance, no kids, getting married next July. So that’s kind of in the works. It may change a few things, but no, something that’s been really helpful. She’s back me this whole time. You know, she’s been really supportive and she’s excited for me. No, it’s good. It’s definitely helpful. And I’ve learned from just hearing a lot of other people talk about how their wife or husband or whatever significant other doesn’t back them. And it’s just tough.
Rod
No, it’s one of the things I spend time on in my boot camps because I even pull people in the audience and say, you know, how did you get past that with someone that’s not on board? And we talk about it because I’ll tell you, you need that foundationally. So you’re blessed that she’s already enrolled in it and behind you on it because you can just go so much faster and so much further when you have that. You know when you come home to that. Very, very important. I asked you this before we started recording. Did you have any mentors? And I think you talked about somebody in the business. Can you elaborate on that a little bit?
Kyle
Yeah. So like I mentioned, I guess in the sense of an actual mentor, I didn’t hire a coach or a mentor, but I did have a guy, his name is Dave Zusky. He’s a local realtor in our area, and he really helped me with as far as contacts, learned a lot about the right funding, and things like that. So he pushed me in the right direction, which definitely helped. You know, he wasn’t there to hold my hand, but he got things kicked off for me. And then, you know, I’m very grateful.
Rod
Where did you meet him and how did you develop that relationship? I think that will add value to my listeners.
Kyle
Yeah. So I found him. So I was just doing research online, trying to find a good realtor. I was struggling to find a good one and ended up calling 10, 15 different people. And we probably talked for an hour on the phone. Half of it wasn’t even about real estate. We just connected. And I knew that it was going to be a good thing. And he’s an investor himself, so that helped me kind of with the comfort that he knew what he was doing and he understood that we’re going to go look at a lot of properties. We’re going to offer a lot of properties, and hopefully, that volume outweighs the purchase price.
Rod
Okay. So you actually developed a business relationship with them as well. It wasn’t just a mentor coaching you or helping you. It was a business relationship. But you leaned on that relationship for advice and so on and so forth. Got it. Okay. Well, that’s awesome. So what motivates you, brother? What juices you? What gets you to jump out of bed in the morning to go do this?
Kyle
There are a lot of small motivating factors, but I would say the biggest one is that you know, I come from a small town and I see a lot of people get stuck in the rut. I find this thing that’s developed inside me. It’s pretty tough to explain, but there’s just like this burn to continue to push and build this success. And I’ve said to many of my friends and other people, like, I want to raise my level of success, but I also want to build this team. I just feel that you know, I’m a Christian guy. So I believe that God put me on this Earth to do something very powerful, and I want to bring people with me. I don’t want to get to the top and be there alone. It’s just building a team and building a structure and giving people a good workplace. I think that’s really what makes me at this current stage of my life. I think that’s what makes me tick.
Rod
That’s fantastic, brother. I got to tell you, the fact that you answered the question that way means success is inevitable because power moves to those who serve and want to make the world a better place. I tell people we’ve got two hands, one to pull ourselves up and one to pull people up underneath us. And the fact that you answered the question that way is very impressive at your age. I’m embarrassed to say, I had to be 40 to get that memo, you know. I talk about it. I won’t bore you with it now, but the point is–
Kyle
I appreciate it.
Rod
That’s very, very impressive. So, you know, we’ve got a lot of listeners that haven’t taken action yet. Okay. And young like you, okay. And that haven’t taken action yet out of fear or analysis, paralysis, or you know, maybe some limiting beliefs they have about themselves. You know, fear of failure, fear of rejection, whatever. There are so many reasons. Maybe they’re comfortable and they’re just afraid to get out of comfort, to go build the life they really know they deserve. What would you say to someone like that?
Kyle
Yes. And while you’re going through this, I’m going back to Kyle two years ago, and what I wish I’d known then. I think the best way to get rid of the fear and anxiety of getting into your first deal is, you know, finding somebody like you that is a mentor, somebody that can put you in the position that has done it and you know, not necessarily hold your hand through it, but at least tell you things to look out for. When I did my first one, you can only read so many books. There’s an application side of this thing that if you don’t apply, it’s very difficult for me to learn. Maybe other people learn differently, but I need the application side to learn. And I think if you find a mentor early on, it will help remove a lot of those fears.
Rod
It basically shortens the learning curve is really what it was. It’s what it does. I tell people you’re paying for speed. You can do it on your own, but, you know, you can do it in five to seven years on your own. And that’s about what it would take, two to three with me, you know, or with someone like me. It doesn’t have to be me or any mentor. You found a local mentor that you didn’t have to have to pay anything. You just build a relationship. And that’s why I wanted to expand on that because you know, those of you listening, I mean, you can go to your local meet up groups and meet people that are doing this business. And very often you’ll find some old dog that’s done it forever. Forgotten more about it than you and I will ever know. And they’re happy to help you. And so, you know, it’s about networking. It’s about building those relationships. And I just heard an awesome definition of world-class networking, and that was having an incredible curiosity about whoever it is you’re talking to. And I thought, what an awesome definition because when you do that, you know, and show them how interested you are in them, they really want to have a relationship with you. People love talking about themselves, you know, right? It’s like the book “How To Win Friends And Influence People”, Dale Carnegie’s book, and you know, you take a genuine interest in someone and they think it’s the greatest conversation they’ve ever had because they’re the ones doing all the talking. But anyway, I’m blabbering. And what I want to tell you like I mentioned earlier, Kyle, is you’ve been doing this yourself, but you’ve been bringing people in on the construction side and building this team out of your pocket, which is admirable, a little dangerous, I will add. Just ask me how I know.
Kyle
Sure.
Rod
And that’s why I would encourage you to try to get, you know, people that are incentivized in some fashion where you can minimize your outlay and have them you know, be paid on production as much as possible. But, you know, just keep in mind that this multifamily game. This larger multifamily game requires a team. And, you know, my most successful students are the ones that will take whatever their superpower is like. In your case, it would be project management, construction, experience, your drive, and bring that to a team. Like maybe align with someone that’s super analytical or maybe you’re the analytical one. I don’t know what your superpower is, but a lot of super partnerships or someone that’s analytical with someone that’s outgoing, that’s the most common one I see in this business. That’s mine, for example. And I’ve had you know, other guys your age in their 20s. I had three guys in here. I forgot what I called it. I think I call it young rock stars. I had three guys and they had about 100 million in assets or more than that now. I know they had because I know who they are now, but 100 million in assets between them. And every one of those partnerships was an analytical person with an outgoing person. Because this business is primarily empirical, it’s primarily numbers. And somebody got the numbers down and someone else is asking all the questions and building the relationships with brokers and investors and sellers and so on and so forth. Vendors. I mean, that’s an absolute recipe for success when everybody’s playing to their strengths. So anyway, let me see if I’ve got any other questions. Do you have any quotes that you like? Anything that drives you? Yeah.
Kyle
I don’t know about necessarily quotes. I don’t know. I’m not really sure if I can.
Rod
No worries. You mentioned some books that you like. I had one more question. Tell me about any epiphanies that you had as you started getting into this business, any aha moments. You know, as you were working through, you started, you bought a house, you bought a duplex, as you were working through you know, the last few years or 16 months, even. Any epiphanies, any like, holy cow, now I get it, kind of moments.
Kyle
Yeah, definitely. And it’s actually happened here within the last few months. And it’s not so much on the actual performance of real estate investing. It’s more so on the belief in myself. I actually was having a conversation with my fiance two nights ago and I came upstairs from my office and I was talking to her and I said, literally, everything that I’m thinking about is all my belief in myself. If I only put three or four, five properties, if I get three to five properties a month, the only reason I’m getting that is because that’s all I want. What do I have to do to get ten? What do I have to do to get 15, 20, or 1000 units this year? To me, all the issues that are going to come with 1000 are going to come with one. And I think if I just continue to pivot you know, my problem, whether it’s raising funds, construction, brokers, whatever my problem is, they’re always going to be there, whether it’s one or a thousand. So t’s– I think my epiphany if you will, is think bigger, quicker, and I’m starting to kind of get into that.
Rod
You know, we all have these boxes that we live in, okay? These financial constraints and they’re all mental. I mean, they’re really all mental. And maybe you’ve heard it say, we make what we must make. And so, when you elevate these mental limits you place on yourself, they’re very often subconscious, but you identify them. You look in the mirror, you get real with yourself, and you identify these subconscious barriers and just eliminate the damn box. Okay? I think that’s kind of the epiphany that you had because you’re right. It’s the same amount of freaking work. It’s absolutely the same amount of work. I know people that bought you know, a few thousand doors in a few years, okay? It’s the same amount of work, but well, listen, brother, it’s been a real treat for me, mainly because I’ve been the one doing a lot of the talking, because I’ve been preaching a little bit here, but it’s been a treat for me to have you on the show. You’re very impressive. I know you’re going to be an incredible success, and I know that you inspired some people that we’re listening, so I appreciate you coming on, buddy.
Kyle
Yeah. Thank you, Rod, for having me.
Rod
Absolutely. Talk to you later. Thanks.
Kyle
All right.