Starting in the real estate business entails a lot of preparation and education. Together with the varieties to go about it, you simply cannot jump from one to another, like from single-family to multifamily, for example. Expanding on that and sharing the lessons he learned, guest Kyle Mitchell takes us across his real estate entrepreneurial journey that took him from managing golf courses to scaling a real estate business to $17M assets under management. He talks about the importance of building a team in multifamily, the process of doing Meetups, the investment strategy when acquiring more properties, the fundamentals of looking at a market to invest in, and more. Kyle is the Managing Partner and Co-Founder of Limitless Estates. He also co-hosts the weekly real estate podcast, Passive Income Through Multifamily Real Estate, where he speaks with experts in the industry to help educate passive investors.
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The Fundamentals Of Real Estate Investing As A Team Sport With Kyle Mitchell
Real Estate Entrepreneur with a Multifamily Syndication Focus
I am excited to have this episode. My guest is Kyle Mitchell. I have met Kyle through meetups here in the LA area. He runs one of the multifamily meetups, specifically in Long Beach. He and his partner, Lalita, are multifamily syndicators and they invest in real estate. Kyle Mitchell is a real estate entrepreneur who has a focus on multifamily syndication and has $17 million in assets under management. He is a Managing Partner and CoFounder of Limitless Estates, whose vision is to provide Class-A living to lower-income housing by putting the residents first and instilling a sense of community while inspiring others to do the same. Kyle is also the co-host of the weekly real estate podcast, Passive Income Through Multifamily Real Estate, where he speaks with various experts in the real estate industry to help educate and create clarity for passive investors. With a background in operations, management, and logistics, he has overseen multimillion-dollar businesses and has a passion for doing the same in the multifamily syndication space. As I’ve said, I met Kyle and his wife through meetups here in the LA area. I also listened to a podcast where he was being interviewed about how he got started in real estate. His story blew me away from the dedication both he and his wife have had in building this business, the alignment of their interests and their goals, and the way they’ve approached it. I’m truly inspired by who they are as people. I’m super grateful to have him on the show to share his experiences in this industry so far. It’s an amazing episode. If you want to learn more, keep reading. Let’s go.
Thank you, Kyle, for coming on the show. I appreciate it.
You’re welcome, Lisa. I’m excited to be here.
As everyone knows on some of my previous episodes, I’m going through the series of exploring with my guests how they got started in real estate investing and then speaking about how they play now, to go about their stories in starting about real estate. Kyle, how did you get started investing in real estate yourself?
Back in 2013 is when I first started investing in real estate. It was with a single-family home in Southern California. I have an interesting story on that one. I purchased it by saving up my money from my full-time W-2 job. I was happy in my W-2 job. I wasn’t planning on leaving it at that point. I knew that the stock market was not the way I wanted to go. I had $2,000 in high school that I gave to a stockbroker and three months later, it was gone. I was not happy with that and I was not happy with the lack of control. I started listening to some podcasts and read some books and naturally gravitated towards real estate. I got my license in 2013. I did that mainly because I wanted to learn more. I don’t utilize my license other than for friends and family, but I wanted to learn more about real estate. I bought a single-family home in the Southern California area and it was cashflowing well. The biggest mistake that I made there was I trusted my agent at that time to place the tenant. That happened to be a professional tenant.
If you know what those are, they know the laws and the rules. They take advantage of those rules and regulations until you get them out. Long story short, I tried to evict them by myself and it took me eight months to get it done. I lost money on the monthly rents, but I was able to sell the property and still make a small profit. What I learned there is I don’t want to be in a tenant-friendly state. I want to be in a landlord-friendly state. After that, I started buying some turnkeys in the Midwest. The first market that I went to was Arkansas because it’s the most landlord-friendly state out there. If you’re late five days on rent, you’re out immediately. I did that. I bought some other turnkey properties in the Midwest and they were doing fine. Ultimately, I wanted to scale quicker. I wanted more cashflow. I started looking for alternatives and I found multifamily real estate, which is the space that I play in now. Eleven months later, I left my job to pursue this full-time.If you're any type of person that wants to scale and get bigger, you're going to need a team. Click To Tweet
You said your biggest mistake was allowing your property manager on your first purchase to place the tenant. From that mistake that you found, how do you handle that these days as you continue to invest?
It was my agent. At that time, I wanted to be completely hands-off and I didn’t vet the agent or vet the resident at all. I trusted my agent. It wasn’t his fault either. He was new to this as well. He mainly sold to end-buyers, not to landlords or real estate investors. I had to pick between two people and I went with the one that was more cashflow. That’s the other lesson is don’t chase cashflow. In the paper, it may seem good, but at the end of it, when you take into consideration all the factors, I ended up losing out and likely you will too if you don’t take a look at some other items.
Diving deeper than into going into tenant-friendly states and then scaling and building cashflow, how did you get started on your first large multifamily deal?
After I decided to switch to multifamily, the first thing I did was educate myself. That’s the biggest thing when you’re making that switch. A lot of people naturally go from single-family to multifamily, but it is a completely different game. You can do okay in single-family and do it on your own without a lot of education. When you get into multifamily as a business, you need to educate yourself or be with a team that’s educated before you get into it full-time. It took us 1.5 years to get our first multifamily closed, about thirteen months to get it under contract. It wasn’t a short period of time. The first six months was education. We started a meetup and then a podcast. The whole time we were building our investor lists for those eighteen months.
That was the key that allowed us to take down the first deal almost by ourselves. We did have some partners on it, but we’re the majority of that deal. That took about eighteen months to get our first multifamily property. It was a 42-unit in Tucson, Arizona. We found that through a broker. My wife and I used to drive out to Tucson at 2:00 in the morning for 7.5 hours once a month on a Wednesday. We would take the day off because we both had our W-2’s then. We would drive and we would meet with brokers. On one of those drives, one of the brokers called me and said, “Kyle, I’ve got a property that I just got. I haven’t even walked the units. Do you want to walk it?” We were the first ones to see that because we happened to be in town that day.
Do you still own this 42-unit now?
Yes. We are looking to position that to sell because the market has done well. We’ve been able to push rents a couple of times which was unexpected. We’re in a position where we’re at least going to look at selling it.
Since then, you’ve bought another property as well or no?
Correct. You hear from people, the law, the first deal or the art of the first deal and it happens quickly after. I’m now a firm believer in it because it didn’t happen to us. Three weeks after we closed on the property in Tucson, we got another property under contract. This was a much bigger property. It’s 128 units so $15 million deal. We did get that through. One of the partners that were on our other deal brought it to us and he got that through a broken relationship. Two things that everyone always says is this is a team sport and broker relationships are important. Both of those where what got us that deal. It did take a while to close, but five months later we were able to close on it.
What role do you generally play? Do you play the same role on both properties that you’ve acquired?
Yes. My experience and background are in management operations. I was one of the few people that can jump straight into being an asset manager and a lead sponsor. I’m a lead sponsor on both of these deals. I would say co-lead sponsor on the second deal because my other business partner, Gary Lipsky, is also a lead sponsor on that and we handle the asset management together. My background was I worked for a property management company in a different asset class, golf course. I did that for fifteen years. I was a regional manager. I managed several hundreds of employees and tens of millions of dollars in revenue.
My background is building budgets, sticking to budgets, hiring people, building and implementing systems. I naturally fit into that lead sponsor and asset management role. That’s what I love to do. Once we close on the property, operating and building the systems and executing on the business plan. My role is an A to Z and our ultimate goal is to be an A to Z shop where we have everything in-house. Maybe not property management, that’s still something up in the air. We do hire third-party property management, but from acquiring the deal to raising the capital to asset managing and then the disposition of the property as well is what we do.
Granted, you had experience through your prior job working with budgets and asset managing like the golf course in that particular business. Were there things about multifamily that were different for you? How did you bridge the gaps in learning?
I was all about education and I still am. I’m always learning and I’m always pushing myself to learn more. When I had a W-2 job, it was a 1.25-hour drive each way and every morning and every evening, I would be listening to podcasts. I would listen to 1.5-speed. I listened to them at 2.5-speed which is crazy. One-and-a half-speed, that’s 2.5 hours of podcasts driving. I’m listening to about four hours of podcasts and that’s 5 or 6 days a week for eleven months. I was doing it before I found multifamily and single-family and doing mindset stuff. Between that, starting our own meetup, going to other people’s meetups, going to conferences, reading books, I was a sponge for educating myself.
Going back to my property management experience, a lot of it related to one another and that’s why it clicked in my head and why I fell in love with it quickly. I knew when I found multifamily immediately, this was what I was going to do in my career and I was going to leave my full-time job. You have to educate yourself. There have been some learning curves as far as doing things like raising capital and dealing with the lender, all those things because it’s not something that I was doing in my previous job. That’s why we also have a team beside us and that team has been through those challenges before. We weren’t going on it completely alone.
How important is it to build a team and advice for people looking to build a team?
Building a team is 100% necessary in multifamily. In a single-family, you can do it by yourself. I would highly suggest not to do it by yourself in multifamily. If you’re any type of person that wants to scale and get bigger, you’re going to need a team. That team consists of things like brokers, lenders, attorneys but also people on your team who are going to help you manage the property, whether it be investor relations, due diligence, underwriters, asset managers, all those things. You cannot do it on your own. Eventually, you’re going to run out of bandwidth and network. It’s all about your network. Your network is your net worth. You’re one call away from solving your biggest challenge as you grow if you can grow your network large enough.
Our goal is to continue to build our network and our team so big that we can do a $30 million, $40 million, $50 million deal because we’re one phone call away from that. Having a team is extremely important and I wouldn’t be where I am without a team, number one. I don’t suggest anyone else go out and try and do it on their own. How to build a team? It’s hard work and it takes time. As far as brokers, attorneys, property management companies, all those things can be built by making phone calls and searching in your market once you picked one. It’s important to meet people face-to-face. That’s why I’m out in Arizona, which is our market every other week at least. We have a Meetup that we host out in Phoenix.
We can be in front of people, shake people’s hands and establish ourselves in our markets that we invest in. On the other side, having other people on your team, like sponsors and underwriters and things like that, partnering with people is something that you need to take seriously and take time doing. You have to get to know the person because it’s like a marriage. These deals we’re running into are sometimes 5, 7, 10 years long. You are getting married to that person. Take the time to understand what their values and goals are and make sure they align with yours. For both of the partners that are on both of our deals, I’ve known them for over 1.5 years.
We’ve had several 5 to 7-hour drives each way to Phoenix and Tucson together getting to know one another. These are 12 to 16-hour days and we’re underwriting in the car, the person not driving while we’re doing it. We got to know each other quickly. Before that, we had known each other from Meetups for 6 to 8 months before we even decided, “Let’s consider this.” You want to take time and get to know a person. It’s where you’re going to go to a Meetup or call someone and partner up with them immediately. I may be wrong on that, but I definitely would take the time to get to know someone and understand how they work and make sure if you align with one another.
Touching on meetups, you have two that you do, one here in LA and one in Arizona. Can you talk about the process of deciding to do the Meetup, to begin with, the reality of what it looks like day-to-day, as well as what it also has brought to you day-to-day too?
When we first started the meetup, it was understanding that we needed something to allow ourselves to advance quicker. There are a lot of people that go to a lot of these conferences, but you’re not the head of the table. It’s a lot harder to go further. By starting a meet-up, you’re the person that is the educational leader. Everyone comes to you at the end of the Meetup because you’re the one hosting. There’s a ton of benefits to hosting a Meetup. A lot of people may not think that they’re educated enough to run a Meetup. We had only been in multifamily for about five months at that time. All we did was we talked about our experiences so far. We never talked about closing a deal until we have closed a deal, but we did talk about hiring a mentor, which we did. Getting one-on-one coaching, picking a market, visiting the market and talking to brokers.You're one call away from solving your biggest challenge as you grow if you can grow your network large enough. Click To Tweet
There are several things that you can add value to the people there. If you don’t have anyone to talk to or talk about, then bring someone in to do a case study who does have experience or a lender or broker who wants to talk. There are several different things that you can do to start a Meetup, even have a social gathering where it’s at a restaurant over drinks and appetizers. Don’t let you being a beginner stop you from taking action or being an excuse. That’s how we did it. We started another one in Phoenix because we wanted to establish ourselves in that market since that’s one of our markets.
There’s no day-in-day-out process of it, but you certainly have to do it with intention and make sure you’re doing everything you can to add value back into people’s lives. We have a no pitch environment. We don’t sell anything at our Meetups. It’s not to get anything but likeminded people together to network and learn and expand your network. That’s what we do. We try and add as much value back into people’s lives as we possibly can whether it’s teaching them how to underwrite a deal, bringing on case studies to show them what properties we look like, some of the challenges we’ve had with it and some of the things that haven’t gone well with it. It’s a learning experience.
At this point, a couple of things I think about that I’d like for you to touch on is that some of the readers are people who invest in the stock market. You mentioned the stock market. Having your experience now, two properties in and continuing to build your business, what do you say to individuals who are on the fence and are thinking about, “Do I want to continue to keep investing in the stock market? Do I want to invest passively in real estate syndications?”
Understanding your goals. Number one, real estate investing isn’t for everyone but at the same time, for me, it’s a tangible object. You can touch the real estate and you have more control over that real estate. The other thing is that it’s never going to go down to zero. There’s always going to be land underneath it. When your stock hits zero, that’s it. Your money’s gone. You have to re-up and you have to go back in there. If the property were to lose all of its value and you were still able to hold onto the property and not sell it that time, it will bounce back and you can hold onto it. You’ll never go to zero if you are prudent in your buying. We follow three Rules of Thumb, cashflow on day one with new debt on it as we’re buying properties of cashflow. You’re raising all your capital upfront so that you can execute your business plan no matter what the situation. You’re not utilizing the cashflow to implement your business plan. Number three, we lock up long-term debt.
The place where people get in trouble is when you’re forced to sell in a bad situation. If you cannot be in that situation, real estate has proven that it will always come back in value. That is not the case with the stock market whereas to say if it hits zero, you’ve got to put more money in. You have limited control. Everyone’s heard it but you can’t walk into Coca-Cola and talk to Warren Buffett and tell him that you would like him to do something different with his business. With real estate, you can do that. There are multiple ways that you can go about especially with multifamily adding value to the property. Those are one of the many reasons why I love multifamily.
As most people know, we have been in an expansion in terms of the marketplace. How does that impact or not impact your investment strategy as you continue to acquire more properties?
It certainly impacts our investing in our business for sure on two points. Number one, the prices are high and they continue to go up. You have buyers who are more aggressive, who maybe have cheaper capital or who have more aggressive underwriting, who are paying insane prices. We’re conservative. We stick to our underwriting and that limits the amount of real deal flow that we see. The other part where it hurts us is the market is good. There are a lot of people who don’t want to sell their property because they’re cashflowing well and there’s no reason to because they’re going to have a difficult time trading up into something that is as good. There’s less deal flow even on that side.
We’re seeing at least for the first month or so of the year, there are fewer deals out there even on the market. We’re going to be battling a hot market where people are overpaying and fewer inventories being put onto the market. We’ve got to get creative. We’re now doing direct mail. We’ve got wholesalers that we’re working with. We’re going to be spending more time in the markets, building relationships even further with investors and brokers in the market and we may be adding a market here to see some more deal flow.
On that, when you look at a market to invest in, what are some of the fundamentals you’re looking for?
Number one for me is job diversity. That’s one of the most important key factors. In anything, you want population growth for sure. You want job growth along with those two things. You want to rent growth, wage growth, all those things are important. You want to see more than one industry controlling the market share of that market. Meaning if you had one market that was 40% reliant or 40% of their market is coming from a Navy base or something like that, if that Navy base goes down, they’re going to lose all their jobs and that market is fully reliant on that. We try and stay in markets that have less than 20% dedicated to one industry between healthcare, education, retail, construction, and all those different things. You want to see a good mix of diversification on that. That’s one of the reasons why I love Phoenix now. In 2008, that’s one of the things that hurt them the most. When you look back and you say, “What happened at Phoenix?” they were heavily relying on construction jobs and when ‘08 hit, those all went away and Phoenix struggled. They’ve done a fantastic job of fixing that. They’re one of the most diverse economies out there.
Three more questions I want to ask you. The first one is passive advice for passive investors because as you talk about markets and your business, I’m sure some of the readers are thinking, “I’d want to invest in the syndication. What is it that I need to look for? How do I look at some of these deals?”
Two things that come to mind is number one, it all comes down to the sponsor. You need to know, like, and trust your sponsor because they’re the ones that are going to be making the decisions on the deals. Going further into that, does the sponsor or the team have operation and management experience? There are a lot of sponsors out there that are buying apartments, but they’ve never managed anything. You know that everyone is hyping the whole industry about buying apartments but they fail to realize or mention the back half of it, which is the most important, which is running, managing and operating a company and a business. That’s what that is. It’s not as easy as buying an apartment, putting in $15,000 a unit, raising the rent and then cashflowing. There’s a lot of tough decisions that need to be made and you need to scrutinize everything that’s being done. You need to know how to manage people. Does your sponsor or the team have that type of experience? It comes back down to the sponsor because ultimately, they’re going to be the one holding the cards whether the property does well or doesn’t. Are they the type of person that’s going to make the right decision by the investors or by themselves?
Individuals who are interested in playing in this particular asset class and strategy, any advice you’d give to them about getting started?
I am a Tony Robbins guy and he always talks about modeling after what other people do. You don’t have to go through the same mistakes. I would tell them first to pick the niche that you want to do whether that’s underwriting, asset management, lead sponsor, capital raising with due diligence, things like that. Go find someone that’s already doing it and attach yourself to them to learn because it’s all about education. Once you’re educated and you feel comfortable, add value to someone that’s looking for that piece that you want to do. If you’re going to be an underwriter, find someone that’s not good with numbers, doesn’t like underwriting, but maybe can be an asset manager and pair up your skillsets with one another. I wouldn’t pay attention to the amount of money you’re going to make in the first few years. All I would do is align yourself with people who are doing what you want to do on a larger scale and you’re going to learn much quicker and then you’re going to get more opportunity. In 2 to 3 years, you can start to bring in that larger piece of the pie so you’re making more money.By starting a meet-up, you're the person that is the educational leader. Click To Tweet
My last question, which is last but not least, is building our business with your partner. You and Lalita, your wife, are together in this real estate business and you have played different roles. I’d like for you to share with the readers how you both manage that. Any advice you give to partners who are out there wanting to do this together or one wants to do it and the other doesn’t?
For couples, it’s different than partners. I can talk about both. With my wife, we started this journey when we were barely engaged. The number one thing that has allowed us to continue on with this and start to be successful, we certainly have a long way to go, are we aligned our goals upfront. We had the same goals. We sat down and talked about those things before we started so that whenever there are bumps in the road and certainly there will be, we can always look back and say, “What were our goals? What are our goals?” We’re on the same page as them and we can get back on the same page because it comes back down to those conversations we were having when we first started. Lalita’s role has changed since I’ve left my W-2 job. She still has hers, so she’s supporting our family while I go out and try and build our long-term wealth, which is the goal.
On the other side of it, with my other partner, Gary Lipsky, that’s what we’re talking about is building our business. We always try and stay proactive. We always try and stay twelve months ahead of where we’re at. We have $17 million under management. In twelve months, we’d like to have $67 million, add another $50 million. What does our business need to look like? What does it need to be at $67 million? Whatever we’re coming up with, we’re implementing that now. We’re not going to hit a wall when we get there. We’re able to continue to grow. That’s one of the biggest things with management operations, be proactive, do not be reactive. Do not wait for something to happen. Go out there and poke holes in things and understand where you want your business to be in twelve months, not in 60 days or 30 days.
I learned a lot from this show. I’m sure that other people who will read this are going to feel the same way. You have much information, much insight. I appreciate learning about how you looked into managing your business and building it. It’s going to be awesome, thank you. I appreciate it. If the readers want to learn more about you, how can they do so?
A couple of different ways. On our website, we have a free passive investors guide. If you’re looking to get into passive investing, education is the first thing. It’s a guide that’s free and it talks about all the things that you should know before getting into passive investing. You can reach me on my cell phone, (562) 833-5010. Our website is www.Limitless-Estates.com.
Thank you. I appreciate it.
I had a lot of fun. Thanks, Lisa.
That was an amazing episode. I want to thank Kyle for coming on the show. I appreciate it. He dropped so much good stuff. To recap, I want to give a couple of key takeaways that I got personally from the episode. Number one, don’t chase cashflow. He’s mentioned this early in the episode as his experience buying his first property. This applies to everything. Even from making sure that the tenant makes sense and the situation that he explained, but also making sure the business plan makes sense. Making sure that investment makes sense. Number two, when scaling up, it’s important to educate yourself. He spoke about spending 4 to 5 hours listening to podcasts, reading books and going to conferences. It’s super important. I completely can relate to that of getting out there and learning as much as possible when you’re trying to level up to a new way of playing. Number three, getting started does take time. Don’t give up. He mentioned the importance of setting and knowing your goals.
Number four, real estate investing is a team sport. Honing on what experiences in areas you’re good at, what you bring to the table. He mentioned his own experience being a property manager for golf courses and managing people and how he was able to leverage that experience into the multifamily business. He also mentioned Tony Robbins’ advice, which is finding people who do what you want to do and mirror that. Even if you don’t know how to do something, you can find people who are doing things that you want to do and mirror that. That way, you can learn and then you start looking for people who are looking for that. It’s looking for what you’re good at and adds value to those individuals.
Number five is focused on building and nurturing your network so that you are only one call away from an opportunity or solution. Honestly, that’s why I continue to keep going to Meetups, conferences and meeting people because the reality is it’s your network and it does require you to nurture, grow and be there for it. Number six is building a team. It takes time and hard work. You have to get to know the person, get to know their values, which is my favorite thing. Anyone who knows me, I’m all about getting to know people’s values and their goals. Number seven, he spoke about the power of meetups and how you can get started by sharing your experiences or even bringing in experts. In other words, no excuses, just get started. There’s always an experience that you have that could add value to someone else.Be proactive, not reactive. Do not wait for something to happen. Go out there and understand where you want your business to be. Click To Tweet
Number eight was for passive investors, weighing the stock market and real estate. It’s important to know your goals, number one. Two, know that real estate will give you much more control than the stock market realistically. It’s not going to go to zero. Your stocks can go to zero, let’s be honest, but it can come back. In real estate, it’s not going to go zero. If you buy right, you’ll have a property that cashflows, if you’re buying for cashflow, to begin with. Number nine is passive investors you know, like and trust your sponsors. You want to invest with sponsors who you know, trust and like. You want to ensure that their team has the experience to run the business, execute the business plan and manage the people aspect. You want them to have the necessary experience to know what it is that they’re doing.
Number ten couples investing together, ensure that you’re aligned on your goals upfront. It’s important. What that means is there’s got to be communication. Communicating up front to make sure you’re on the same page. If there’s no communication in that couple, then how would you know that you’re on the same page? You don’t know. Eleven, and this is the last one, business partner’s advice. He talked about looking for twelve months. He and his business partner were planning twelve months ahead. Where is it that they want their business to be? Proactively building their business to be that way now. Putting in the systems and the scaling in place in order to be able to achieve that.
When you see success out there, it’s like the iceberg. There is much going on underneath the ocean. There’s much that goes into that to then start to see the growth than coming up. Please keep that in mind. I love this episode. Such good advice and things that can be implemented now. Thank you for reading the blog. I’m here and I’m aiming to provide content that educates, inspires and provides you with opportunities to level up your real estate investing game. Please check out my website at www.LisaHylton.com for more episodes as well as more content. Until next time, keep leveling up.
About Kyle Mitchell
Kyle Mitchell is a real estate entrepreneur who has a focus on Multifamily Syndication and currently has $17MM AUM. He is the Managing Partner and Co-Founder of Limitless Estates, who’s vision is to provide A-class living to lower-income housing by putting the residents first and instilling a sense of community while inspiring others to do the same.
Kyle is also the co-host of the weekly real estate podcast, Passive Income through Multifamily Real Estate, where he speaks with various experts in the real estate industry to help educate and create clarity for passive investors.
With a background in operations, management, and logistics, he has overseen multi-million dollar businesses and has a passion for doing the same in the multifamily syndication space.