If you’re looking for a way to invest passively in real estate, then you have to know that multifamily is one of the hottest property classes right now. Known as the Apartment Queen, Kaylee McMahon focuses on working with accredited or sophisticated investors to close apartment deals, mainly in the Texas market. Kaylee found her way into multifamily by accident, which is a fascinating story that she shares in this conversation with Lisa Hylton. Kaylee also talks about her property acquisition criteria, the benefits that passive investors can get out of syndicated deals, how she finds deals in this crazy market, and how she overcame the challenges she has faced in the multifamily investing space. If you’re an accredited or sophisticated investor who’s looking to work with someone who really knows their way around the apartment investing space, then you’re going to want to listen to this.
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The Different Flavors Of Passive Investing – Crushing Apartments With The Apartment Queen Kaylee McMahon
I am super excited to have Kaylee McMahon on the show. She is also known as the Apartment Queen. She has purchased over $68.2 million in multifamily real estate as a general partner and principal. She has sold over $3 million in residential real estate before transitioning into her full-time syndication role. She’s originally from Portland, Oregon. She founded the Women Who Invest Wednesdays networking group in Dallas, which is also digital. On top of that, she has a podcast that is called the #1 Leading Ladies. She interviews kick-ass women who are disrupting their industry and the real story of how they got where they are. I’m super excited to have you on the show. Welcome to the show, Kaylee.
Lisa, thanks for having me. I appreciate it.
You’re welcome. I distinctively remembered when I ran across your profile and I saw Apartment Queen. I was like, “Apartment Queen?” The marketing on that is amazing. We are going to get started. My show is broken into three parts. The first part is the background, then we get into the experience, and the last section is reflections. We’re getting into the background to learn a little bit about Kaylee outside of real estate. Kaylee, tell us where do you live.
Dallas, Texas.
We touched on what you did for work and we’ll go further into it. Before you were a syndicator, what did you do for work?
I’ve done a little bit of everything. I have the learning style of a life-long learner or something like that from the Gallup StrengthsFinder test. That means if I’m in a job and I’m not learning, I’m out. I’m bored. I figure it out and then I move on. I’ve done everything from nannying, IT, EMT-ing. I had a personal concierge business where I worked with wealthy individuals in Dallas and their surrounding suburbs to manage their life. They have multiple vehicles, cars, events, bills and all the things and having it all organized. I enjoy organizing and still do. I’ve done a little bit of a lot of stuff. Leading up to this was a sales career and advertising. I’m kickass in that.
The next thing, I got bored and went into dental sales because I wanted to go to dental school for a while. I’m into that for about three years and I got fired. At the time of getting fired, I was starting to put some time into reading love languages and reading a little bit about who I am and finding out what I need and why I’m different. It ended up increasing my sales at the end of my job there with them because I stopped trying to be this perfect sales rep or this idea that they have of what I should have been. That’s why doctors love me. That was a good lesson moving forward into then deciding to start my own business, and then that led into real estate by accident.
What do you like to do for fun?
I like to travel a lot. I like to backpack. I like to learn about new cultures. I’m a lifetime learner. Part of traveling is everywhere you go, you have to figure out the different language, food, people and different traditions. They have different artwork that’s time period appropriate that I’ve never seen before, whether it’s from Soviet days in Croatia that I’ve seen. It’s awesome. Whether it’s in Barcelona. You’re going way back to get to Casa Batlló. Anyway, I love learning about what’s out there. Whether food, people, travel and then physical challenge, I like them.
For a lot of people, COVID has been a challenging time. I’m curious if there’s one positive thing that has happened to you as a result of these COVID times?
I would say a couple of things. I have a lot of time to think and I’m a deep thinker. When you get into your normal day-to-day routine, life goes so fast. You’re not slowing down and thinking about it. I met somebody in Spain a couple of years ago pre-COVID. I usually travel by myself for a little bit and meet people. You meet my energy and whatnot. This person reached out to me and said, “I can tell in your aura that you are spinning and you’re chasing whatever it is.”
At the time I’m chasing money, deals, investments and meeting new people all the time. During the lockdown, we couldn’t continue to network and look for new stuff. I realized, “Matthew, you are so right.” I was forced to be resilient. If you wanted to move forward in your career and your relationships, which is ultimately what you need to be able to succeed with money or spiritually or whatever it is that you’re trying to get to, you got to go through people to get there.
If you want to move forward in your career, you need to go through people to get to where you want to be. Share on XI’m going, “What groups am I already part of? I’m in Commercial Real Estate Women. I have these great mentors that I don’t reach back out to because I’m trying to make them proud and move forward,” or whatever it is. I reach back out to all these people that played a role in my life where they were the ultimate level of importance for me to get where I was going but go backward and say, “Let’s make this a deeper relationship. Let’s figure out how we can get more ingrained together.” I ended up going through a lot of big heartache issues that I had never been through before.
I’m still going through a couple of them, but it also showed me who people were. Those people that I reached back out to, part of it too was that they were so solid and they had my back. It’s the thing I never had. It resolidified. Normally, when I travel and I get away, I’m able to think the other routine and think about, “Who’s in my life? Are they using me? Are they helping me? What am I doing? What’s my every day? What’s my pattern?” When I get back, it’s clear and then I skyrocket.
COVID forced me to do the same thing to be clear about who I’m spending my time with. Even now when I get invited to events, there was a whiskey tasting one time and I go, “What do I need right now in my business? We need deals. We need whatever the list of things we need.” I go, “How am I going to get that there? I’m going to drink and I’m going to forget what I’m saying. I’m not going to get any business done. I’m not going. I’m going to work out twice now because I need to take care of myself a little bit because I can.” I found that I still have closed deals during COVID. I still have made these amazing relationships with women who were already there. We had calls like this.
Being resilient was a huge lesson during that time, and then also realizing personally that I had a lot of beliefs growing up that were not my own that I still say out loud or I still behave like because it’s built in my subconscious. I had time to think through that stuff like, “Do I believe in killing animals? Do I believe in being racist? Do I believe in these things that I grew up with?” I had so much stuff during that time period and realized that I am a big lover. I have a lot of love to give people and who I grew up as is not who I am.
It’s a reflection of the time. 2020 has been a year of a lot of depth and people discovering a lot of aspects of themselves that they didn’t always have the time to delve into. This then brings me to the experience section. To start off, I want to explore how did you discover apartment investing in general?
It was by accident. Getting into real estate was also by accident in the first place. The moment that I got into it was realizing that I don’t have a business degree. A friend of mine is breaking it down to me and saying, “You like learning.” When people give me criticism, I’m not like, “I’m so mad. I’m not going to listen.” I’m like, “Let me think about it.” He had said, “Your business is a great thing, but the thing is here’s the ESBI, Entrepreneur, Self-employed, Business Owner and Investor. There’s the ESBI quadrant for you. Right now, you’re in the self-employed column. If any money is made, it’s because of the direct effort that you’re putting in. It’s the same thing as being an employee. At some point, you’re going to run out of energy and time. You’re going to get burnout. You’re not going to make any more money. You have to scale and you scale with people, systems, advertising and a system. How do you do that? You need money or cash to grow your business.” He gave me the idea to sell a few houses a year, get my license, and then grow my company from there.
Once I got involved in real estate, I realized a thing called investing that when I grew up, I thought was reserved for the stock market. My dad would invest. He would day trade or whatever. He would do in his office with the door locked, so I was never privy to what was going on. I thought that stock market investing was what investing is. When I got into real estate, I realized that there are these groups of people like REI groups. Trello was the one that got me turned on to a bunch of stuff. They put together educational content on you can invest in everything you see like mobile home parks, land and minerals. Not the sky, but anything tangible. It was amazing in realizing that I could do it all, any of it or none. I dove in and realized, “I want to learn.”
The biggest part of loving the learning and loving that was also that deep way down inside of me, I didn’t know how to put it into words, but I had experienced where you have to go backward to look at things you’ve been through. I had a moment where I realized, “What am I doing?” It then became clear a couple of years ago, and then in 2021, I’m confident in exactly what I’m doing. I know who I am and I trust myself. It was getting some photos and images of some women friends of mine at the time who were being physically abused by their boyfriends, pictures of their broken teeth and their side being broken in.
It pissed me off beyond belief because I was like, “Why would someone be allowed to treat another human being that way?” I didn’t understand the underlying problem that was there until having to go through some deep therapy myself and realizing that there’s this thing called financial abuse that women go through, which is related to that. Sometimes the financial abuse causes that to happen because they stay around long enough. Whether it’s another man or another woman or whoever, they feel like they have control over this person so they can totally disrespect them and hurt them.
I had enough and I said, “I want to do something about this.” What I did then when that happened is I let them stay at my house. I have an extra room where I live. They wouldn’t come which blew my mind. I was like, “Why would you stay in that?” After learning a little bit more about the underlying psychology through reading and therapy, I realized there are a deeper issue, a confidence thing and not having financial security that’s causing all of that to continue and they can’t get out. I had been through the same thing but in a different way.
I was always resilient and able to find places to live if something like that happened, but I got stuck in a few situations myself, I’m not going to lie. Getting out on my own and having my own experience where everything changed because I could think my own thoughts. No one was influencing me. I was able to start learning again. At the bottom of what I did, at that time I go, “It’ll probably be a 501(c)(3), a charity organization or something like that.” At some point in the future, I don’t know when it is, I’d like to provide safe clean housing for women to start over when they go through those things and then be able to teach them how to become financially empowered while they’re in there so that they can make their own decisions moving forward. I didn’t know exactly what that was going to look like. As the years have gone by, it’s become clearer when I got introduced to multifamily.
I met somebody at that investment group who was speaking. He’s very humble and super successful as far as the returns he made as an investor, as far as his lifestyle. He ended up selling everything he had and moving overseas to do Angel capitalist work. They do palate surgery for kids. He’s empowered his wife to have three of her own different businesses and she came from the Philippines. They’re the most awesome people. I’m like, “If he can have a job that he does, will he still able to be that kind-hearted and that loving, which is who I am deep down inside. I want to get involved in that industry.” That’s where it kicked off from. I was able to meet Will. He was moving overseas so he introduced me to someone named Alex. Alex has been the family I’ve never had. I’ve never experienced someone that is that resilient when we’re going through things in business, which also ends up crossing over into personal a little bit. It’s a long story. That’s how I got into multifamily.
Apartment Queen: There is something called financial abuse that women go through and it usually happens simply because they stay around in the man’s home long enough.
I had no idea that that was your story in terms of how you got into multifamily. If people haven’t personally experienced it, they know of someone who is in this kind of situation and how important it is. It’s mind-blowing.
I’m not the only one. What can be done about this to get rid of the stigma? Call it out and do something about it.
I love how that mission has led you to multifamily, and then now investing in apartments and building from there. I want to explore Apartment Queen and the decision to take that brand. Also, your investment strategy. I know you like apartments, but what kinds of apartments do you like to invest in, asset class-wise and markets?
As far as the Apartment Queen name, I never like to reinvent the wheel. When I was looking at who’s my biggest competition, I look at who was the biggest I got to knockdown. There were two of them at the time. Now I only look at one of them as my competition. I thought to myself, “There is no Apartment Queen out there.” This person called themselves the Apartment King, so I was like, “That seems like a cool name that’s going to get people’s attention.” I went ahead and trademarked it and did all that stuff to make sure that it would be safe because once people started noticing it, they’re like, “It’s a good idea.” That was the initial thought. I also thought it’d be super cool if we had women that had shirts on that said, “I’m the Apartment Queen.” I look at all women as queens. We’re also hopefully going to rebrand. We’re starting to get traction so I’m building and building. I haven’t taken the time to slow down and go rebrand everything. It’s on my mind to do it, but it will be Apartment Queen Investments. It’s not “The” but I can still keep my trademark name so it’s original.
When it comes to apartments, what kind of apartments are you focused on purchasing?
Our basic criteria are staying in Phoenix and Texas. We have deals there. Primary markets only unless the building is 100% unrenovated like a 1970 or newer build. I have gone outside that buy box before for sure where mechanical, electrical, plumbing and everything was replaced and new. The interiors were redone in 2001. It’s a different deal. We also like every single floor plan on the building to be 10% to 15% below market rent. We like C-plus class apartments. It’s not C-minus but C-plus, etc. We’d like to target a 6% cap rate minimum. When we’re looking at a property, we need 70%-plus of the units to be classic.
Sometimes that can be flexible a little bit if they’ve only done the floors, for example, because the big bang for your buck just like in a house is in the bathroom, kitchen fixtures, backsplash and extra jazz that you can put in there, especially in a C class property like the little USB GFCI covers. They love it. They’re so cheap like $2. We’re looking for a neighborhood that’s at least one class higher than the asset. We would love it if there was a motivated seller because I’ve dealt with some unmotivated sellers. Those are the guys that are just going to jack you around. They’re going to fall out of contract. They’re going to change their mind and increase the price. They’re going to make it a not fun experience. That’s generally our criteria.
As COVID has continued to roar on, have you made any changes to these criteria compared to the beginning of the cycle to where we are now?
Yeah. I bought a small asset in December of 2020. That’s the first deal I ever bought that size. The thing is the investors’ returns were going to be a minimum of 14% cash-on-cash. That’s hard to get, especially in a big asset where owner-after-owner, they’re sucking all the value out of it. One hundred percent of it was unrenovated. It’s a C asset in a B-plus-plus, A-minus market. We got lucky on that. We bought as partners. There was a piece of property right behind it.
After going through due diligence and whatnot, there was a big fence built and they start digging. I go, “What’s going on?” There’s a B-plus class building because it doesn’t have amenities like a pool or whatever, but they’re building an underground garage. It’s a three-story studio-only complex that they’re building by Crimson Construction. We looked them up and they’ve got nineteen developments in Fort Worth. You can look at their work and what they’re building.
We’ve got units that are bigger than theirs. Long story short, their minimum rent is $1,420 or $1,425. That’s a $425 delta above our highest rent. I didn’t expect that to happen. It was my first deal that I got lucky that’s right around the corner, mom passed away and it was in a trust. They go, “You’re buying this one. Do you want to buy this one too?” Sometimes, lucky stuff like that happens. Sometimes, unlucky stuff happens. That’s the change of the criteria where I go, “If it’s in Dallas, Fort Worth, we can get the economies of scale where the property manager can still bop around to their other deals and they still have 3.5%, instead of out in the middle of nowhere, it’s up to 8% property management fee of your gross. They have access to supplies because my other buddy’s properties have the cubic part of it on their property. They can store all the stuff and we just share. Sometimes, I’ll pay a fee to store my stuff there in a container.
That made sense for economies of scale. Plus if I buy some other smaller ones, it’s the same thing. There’s the return there, the meat is on the bone. It’s hard to find something in the city like that. I’ve been willing to go, “Let’s do 45, 48, 52 units” I’m willing to do several of them. The closing on that sucks. Redoing more attorney’s fees every time sucks. When you buy a large one, you can get some economies of scale. There are some groups here that have taken all the value out of the big deal. That’s one big change. The other change has been being more open-minded towards distressed assets. Not meaning that they are in a D market or C, C-minus going down.
Is the market even worth your time to even look at a deal in at all? Because if it's not, then don't even move forward. Share on XThey’re a B, B-plus, and whether it’s distressed from the outside, there’s CapEx that’s needed. Whether it’s the operations internally. If you’re looking at their P&L, everything’s whacked out of control in operational play. I am looking at more distressed assets. I’m trying to find a motivated seller with all the list of deals and the stuff that’s on market. These people are not motivated. They just want the money. Typically, the deals are $1 million to $2 million more than we can pay to get our investors good returns. I underwrite a lot of stuff and say no to a lot of stuff.
It’s a very hot market that’s going on. It’s extremely hot. A lot of people are willing to buy assets for high prices. That takes me on to your track record. How many apartment deals have you done to date and have any of them gone full cycle?
We have seven in the portfolio. The first one that I learned in South Dallas has gone full cycle. It was only eighteen units. Nothing that’s bad or anything but this is a good one to learn on. I was like the sub-asset manager trying to learn stuff, learn the underwriting, and learn all the things. The next couple of deals that I did, we had them listed on market. We had some complications so we pulled them off. We’ll probably have them listed again. We had received a full cash offer and we had received a financed offer at the price that we wanted to sell at in our underwriting. I have no doubt that we’ll be there because it’s even a hotter time of the year too in summer. The rest of it is all new. We’re refinancing a couple of them but not sold the others yet.
What are the typical returns that investors can get on some of the deals that you’ve experienced in the past, and then perhaps now, given changes in the market?
I can just talk about the past because to tell you the truth, I don’t know what’s going to happen to stuff. For example, the first one, that one we bought for $1 million and within thirteen months, we sold it for $1.8 million. It depends on what you put into the deal. What normally happens is that when you’re in the deal, we do some value-add as we don’t pay out distributions to make sure that we get to stabilization. Once it’s stabilized, we have a new tenant base in there, etc. then we start distributing cashflow typically after your one.
We sold it at $1.8 million. We usually pay year-one, quarter-one. We’re on month-fifteen and we pay some cashflow from the rent, and then we sell it. The investors didn’t get a lot of the quarterly cash-on-cash, but their return total was about 100%. If you put in $50,000, you’re getting back $100,000 within eighteen months or whatever. That’s good plus some advantages as well being able to take both appreciation and regular depreciation. We didn’t do cost segregation on that deal because it was just held for so little time.
In some of these other ones that we’re doing like the Fort Worth one, we bank debt because of some agency complications. We’re going to have to refi that, which is great. The interest rate will reduce, and then we’ll refi cash out. That’s an additional amount of return we were not expecting because of how it goes. We brought in a new property management company that doesn’t charge per gross. They charge per door. We’re automating a lot of stuff with tech. We’re going to reduce the net operating income and increase the investor’s returns even more. I’m always trying to look for things like that. We’re going to try to put in some rental hikes to make some more income.
I’ve got an area that’s weird. It’s a funky area. People like to wash their clothes and hang them, but they also have all these cool modern hangout bars they can walk to down the street. It’s an interesting area. Thinking about figuring out how much it would cost to put in a Tesla or a charger properly because there was what used to be a little driveway and because it’s so small now and they were putting in a barbecue grill, you can’t ever enter that way. I’m thinking of using that driveway space to put one of those in. From the research I’ve been doing, not one but at some point, if you had a couple that could totally surpass the income the property makes and make it so much more valuable.
There’s a lot of creativity in real estate investing.
There are all kinds of stuff.
Moving from there, you talked a little bit about buying with partners. Can you talk a little bit about your team? What does your team look like and what role do you play on your teams?
The team looks like myself and Karolina DiMario. She’s the math genius. She’s the one whipping out the underwriting all day long. We’ve got another person in training to work with her so we could double the amount and we can also look at other markets. It’s just me, the numbers, and then deal-to-deal. It depends on if we have somebody that might have a 1031 Exchange. She wants to be part of the partnership moving forward. She’s awesome. I want to bring her in too, but the thing is she’s a Fortune 500 C-Suite executive in Seattle. I told her, “We can’t quite replace your income yet if you stay deal-to-deal so we have to take on some bigger deals.” I got to know how much money she can raise. We’re ramping up. The idea here is to train several different teams of women because I can’t asset manage in Arizona and all of Dallas. I want to have her over there being the asset manager, boots on the ground, and then we all get together and have our system of how we’re going to manage all of our properties.
Apartment Queen: There is typically less competition when it comes to off-market deals.
I look forward to putting together teams of about three women apiece. That’s where the three-legged stool makes sense. You have the operations person. The money person will help with that, but then also somebody who is usually the person that finds the deal. There’s got to be one person on each deal that’s got the experience. They’re the lead and the person you go to when things get hairy because they do. We’re looking to do multiple teams of women like that. Some of us, leads, will have to repeat. I’ve got a girlfriend that we’re business dating, but she’s a baller. She would be a lead and I’d be a lead. It depends on the geographic area.
I love how you say business dating. That brings me on to the next question I had, which is talking about finding deals. How do you typically find deals in this crazy market?
That one was through relationships. When I’m looking at smaller deals also, there’s less competition. When you’re looking at off-market deals, there’s less competition. A lot of the time, I find an off-market deal that’s not truly off-market. It’s been all over the place 100 times. I have a list of questions that I ask. That reminds me that I should make a protocol for everyone, “Did you ask the wholesaler this?” You can at least figure out if this is for real or not, or if it’s been all over the town. If you can have less competition, that’s the best way.
I got off the phone with somebody who was talking about groups of high-net-worth individuals, people who have money on the property. A group like TIGER 21 or Tony Robbins Platinum Club or something like that. You’re going to meet a whole bunch of successful people that have a portfolio of real estate. They may have one apartment or they know a dude that does that. They have a board and there’s five of them and they all do different things. One of them is specifically hotels or multifamily. They’d say, “I’d hook you up with a dude that does multifamily.”
It’s through personal relationships. Even the brokers, if they don’t like you, they’re not going to sell it to you. You smell the wrong way. They’re like, “No.” You got to treat people right and build up a good reputation. Be patient and be kind. I have listed two deals with a guy that I bought the deal with in 2020. I go, “I’m going to let you list these deals, but I need to get pushed and shoved to get into this deal.” It ended up working out and we’re looking at doing some more. I’m looking at a deal in Longview, Texas that he’s listed. There’s quite a bit of value there. All the population metrics are there. Long story short, you got to keep rewarding these people. You sometimes have to go beyond just like your normal reward of their commission. If you get tickets to something, give it to them. If you have something and they just had a baby. It’s having that personal connection.
Business, in general, is a relationship business through and through, regardless of whether you’re in real estate or something else. Touching back on assessing the apartment investing opportunities. You mentioned a little bit about a couple of questions that you would ask. Connected to that, what would you say are your top 3 to 5 things that you look at when assessing apartments to purchase in this environment?
That’s a deep conversation because you have to look at the actual market first. I have a list that I put together on Neal Bawa’s website. He went through something called Real Focus and you got to dig around to find it. It’s a free thing. You’re figuring out, “Does this market meet my criteria?” First, you got to have your criteria like, “Why am I investing in something newer than 1970s?” I hate chillers because they’re $150,000 to replace plus the piping. You have all these certain issues that are inherent to that age of the property. You have your reasons why you have your criteria and why you have a certain area. “I don’t want to pay taxes in arrears. I’m not going to buy in Florida,” whatever your thing is, you have your criteria. Is the market even worth your time to even look at a deal at all? If not, then don’t even move forward. The population is not big enough or whatever your thing is.
First of all, the main city, down to the zip code, down to the subdivision, depending on the neighborhood. If you’re in Houston, everything has no zoning, so block-to-block you got to pay attention. It’s the same thing with San Antonio. Each block-to-block changes. You can’t just say, “Generalize the zip code.” It’s knowing everything down to your sub-market. I just follow that Real Focus model as far as figuring out the market. Where’s my population growth? Where’s my income growth? Where’s the home value growth? Where’s the crime decrease? Where’s the population growth coming from? You got to have economic drivers to know that people are going to continue to come into where you’re buying. Economic progress and economic drivers are the top things that make it important to pick something.
It’s something I learned from Grant Cardone. He’s learning it from somebody else. We all don’t have these ideas. Somebody else does. They have more experience than us and that’s what the point is. Like with that Fort Worth deal, I was willing to slightly overpay for something because of where it was located. It was in a place that my friends used to own warehouses. They’re like, “I wish I never sold those places. This place is blown up and it’s only going to keep growing.” Just knowing your criteria for the market and for the deal itself. If you can go through that stuff and it starts to still be attractive, then you got to go back through and poke holes in it and say, “What if we have 24 months of no rent increase? What if on exit this happens and we can only sell at this price? What are our returns at that point?” You got to start stress testing it.
This then leads me to the process of investing with you as a passive investor. Do you do deals that also accept accredited as well as non-accredited investors?
If you go to my website, TheApartmentQueen.com, there are a couple of different tabs up on the top navigation bar. One is for the fund that we have launching. We still have not launched it. I’m submitting one more thing in my PPM to the SEC before it launches, but it will be launched soon here. I’ve got a waitlist for it and that is for accredited only. Unfortunately, regulation crowdfunding is not live yet so that is for accredited only. It will define in that little button exactly what that definition means when you go click to get on the waitlist. If you go to my website, on every page, there’s a button on the top right that says, “Take the investor qualification quiz.” It has definitions. It will tell you if you’re accredited or sophisticated. It will give you some freebies once you submit it. You’re on our email list. Whenever there’s a deal that is either for a sophisticated investor or an accredited investor, whether the deal is appropriate, that’s when we’ll call the right investors that qualify for the deal.
Moving on from there, ongoing communication expectations. When investors invest with you, do you do property updates reporting? What does that typically look like?
In any business, you have to learn how to have tough skin, but you still have to be human and have things you are passionate about. Share on XWe do. I got a portal, which is so nice because we do these things in there called blog posts. Instead of me having to type up a long email, it’s simple. I do a PDF that’s like, “December 2020.” I’ll input the information and you can just add attachments. Especially when we get started and we’re going through the process of renovating and things are changing, I’ll do monthly reporting for sure. It will have a little attachment of, “Here’s the financials with the seven different reports that you need to be seeing. Here are some updated photos.” You just add an attachment. I don’t have to embed it in a thing anymore. It’s easier for me. Once we get over a year or over stabilization, then it goes to quarterly unless there’s a big issue. When we hit COVID, I went back to monthly because I was like, “These people need to know.” Sometimes, if nothing changed, we’re all just a little freaked out.
How are your deals structured? Do they have a preferred return or are they usually just a straight split?
It depends. The first couple that I did were simple. It was just a straight split. It depends on my gut feeling of how long it’ll take to raise it. What’s going on in the market right now? What do people want to see? On our fund, for example, we’re doing a preferred return. If you are mentoring some SheVestors, we have a system for all that, then you’ll get an increase on your preferred return after a year. Yes, on some deals. On the fund, yes. Some deals in the past, I haven’t. You can see from the outside looking in why I do what I do.
If someone wants to learn more about your fund, where’s the best place to go to find out more information about it?
If you’re accredited, you know what that means, so your net worth is $1 million minus your primary residence. You make $200,000 a year plus in two years, continued to do so as a single person, or as a couple, you make $300,000 a year and continue to do the same in the future. That’s the accredited definition. Plus, your Series 6 test. You’re now considered accredited. As a fund employee, you now have knowledge of investments. I want to make sure that people know that if you’re wanting to invest in the fund. Just like when you’re investing in a new company, as we increase the proceeds of the fund. It’s first in, first out money. If you’re the first in money, you get in for the cheapest, and then your shares grow over time to be valued at much higher, but you do have to be accredited to do the fund.
That leads me to reflections and close this down. What are the challenges you faced in the multifamily investing space and how have you overcome them? I know you probably have faced a ton of challenges. Maybe just 1 or 2 that you feel would be beneficial to share.
I can list off the topics of what they are, and then maybe when you read my book later or whatever, we can talk deeper about it. At a young age, I’ve dealt with partner lawsuits and partner divorces. I’ve dealt with people dying on our properties. I’ve dealt with floods, arson and roof hail damage. That’s not crazy, but you get a new roof usually. It’s the process of dealing with the adjuster and trying to negotiate with them to pay the right amount in whatever. Those are a couple of the things that I’ve been through. Dealing with sellers that back out at the last minute. You lose your earnest money and they don’t care. That’s just the business world. Having to learn how to get some tough skin, but I’m still a human and I still have my why. I still have things that I am passionate about, care about and that I want to pursue. Otherwise, why am I doing this? It’s that balance of your why in your work. Also, being able to handle being a professional and dealing with greedy people sometimes.
That connects to my next question. What do you love and not love about apartment investing?
I love the ability as a lead to be able to make some decisions when it comes to some tough stuff. I’ve dealt with people that have been living out there. We bought a property and they’re living there for free. Their son has cancer and that was a reason they’re out there. They’re scared that they’re going to lose their home. Being able to be creative to go, “I don’t want to kick you out in the street. How about we do something for rent? We’ll do half rent, and then we’ll employ you. We’ll teach you a couple of skills, and then you can stay on property with your son and make it work. Our business doesn’t suffer, but neither does their life.” That’s cool. In the future, more of that would be community centers that are on the larger properties. I love that. What I don’t love is if you don’t protect yourself legally and you don’t take your time to partner with the right people. I’m shocked at some greed and pride. When you get into this industry, multifamily is more of a big boy game. People have more money, more pride, and then there’s more greed. More money, more problems.
What lessons have you learned from your experience?
Slow down and stop seeking. Let it come to you. If you’ve spent the time on yourself and you’re clear on who you are, what you’re looking for, what your goals, values and vision, and all those things that you care about. If you’re clear on that and you’re sharing that with the right people that you’re either going to partner with or buy a deal from, they’re going to come into your life. You don’t have to search and search and have to get a deal done because that’s where I’ve made my biggest mistakes is thinking that everybody’s like me. Money is cool and it has to happen to make it happen. I want some savings accounts. I’ve got some cool goals on my vision board or whatever, but it’s not what defines me. If I lost it all, I’ve got some cool bartending skills and I wouldn’t hate myself if I was poor. Anyway, the point is you want to find the right people. It takes time to business date to know who those are.
This then leads me to the level-up questions that I ask all my guests. The first one is what are you grateful for in your life?
Apartment Queen: When you’re really clear on who you are and what you’re looking for, the right people and deals will come to your life even if you don’t search for them.
I’m grateful that my roommate took out the trash.
It’s the little things. What has attributed to your success and continuous growth?
I like to learn, seriously. I always read and ask too many questions. I’ve been told that a lot of times so I have to ask less.
What do you now know that you wish you knew at the beginning of your journey?
I now know that I get along best with people who stand for justice. There are so much sickness, abuse and hate that’s out there in the world. It’s common. The people that are willing to take a stand and do something when they find out somebody else is being abused in whatever shape or form, and stand up for themselves and for the other person, those are my people.
Thank you, Kaylee, for coming on the show. I appreciate it. If my readers want to learn more about you, where is the best place they can go?
Check out the site, TheApartmentQueen.com.
Thank you.
You’re welcome. I’ll see you soon.
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About Kaylee McMahon
Kaylee has purchased over 68.2 million in real estate as General partner and principle. She sold over 3 million dollars in residential real estate before transitioning into her current full-time syndication role. Originally from Portland Oregon, host of InvestHER Dallas. She has started a podcast called #1 leading ladies where she interviews kick-ass women who are disrupting their industry and the REAL story of how they got where they are. She is developing technology to help make it easy and convenient for women to learn how to make passive income through apartment investing.
Kaylee has done home flipping, as she feels that to be truly confident in giving advice to clients about buying/selling/flipping/investing in Real Estate one should NEVER take advice from someone who has never gone through these things themselves.
Kaylee has completed continuing education in home comparables, appraisals, real estate investor representation, investment and wealth creation, legal 1&2, broker responsibility, property management, marketing and web development for real estate companies. She continues to learn for fun constantly. Some of her completed subjects/courses have been apartment value add strategies, syndication methods with Joe Fairless, apartment mastery boot camps with Rod Khleif, Rat-race to retirement seminars with the Sumrok group, she’s constantly reading on negotiation tactics (Chris Voss never split the difference), how to buy and flip business’ which are sick and much more. She has completed GRI Marketing for sellers, GRI is the graduate institute for realtors and is a distinction that shows Kaylee is committed to the success of getting you top dollar on your investments.
The entire backbone of what gets Kaylee out of bed everyday is her “why”. This is something she will share when asked personally about it, but at a 30,000-foot view it is to create independence and space for those experiencing codependency and toxic relationships which hamper their ability to visualize and then manifest what their amazing reality truly could be. Her company culture models this why and is “Changing the face of multifamily” to bring more women into the light as powerhouse operators, key principles, and commercial brokers. We will create 1 billion more female investors and “givers”.
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