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Global Investors Podcast
GI114: Multifamily Asset Management & Raising Capital with Kyle Mitchell
August 26, 2021
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GI114: Multifamily Asset Management & Raising Capital with Kyle Mitchell

Kyle Mitchell has been investing in real estate since 2010 and currently has $41 million in assets under management.

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Transcript:

Announcer:
Welcome to the Global Investors Podcast, a show that focuses on helping foreign investors enter the lucrative US real estate market. Host, Charles Carillo, combined decades of real estate investing experience with a professional background in international banking to interview experts in all areas of US real estate investing. Now here’s your host, Charles Carillo.

Charles:
Welcome to another episode of the Global Investors Podcast; I’m your host Charles Carillo. Today we have Kyle Mitchell. Kyle has been investing in real estate since 2010 and currently has $41 million in assets under management. So thank you so much for being on the show, Kyle.

Kyle:
Yeah, thanks for having me on. I’m really excited to be here.

Charles:
It’s awesome. Yes, we are too. Please tell us a little bit about your background both personally and professionally prior to getting involved in real estate investing.

Kyle:
Yeah, so born and raised in Southern California and I grew up playing golf. And so my first career and really only career prior to multifamily was in the golf business. So, you know, I played golf throughout high school, played a little bit professionally in Southern California, and then it didn’t work out professionally. Unfortunately for me, my parents were sponsoring me.

Kyle:
I was wasting a lot of their money, so I decided to, to stop that. So I, I stopped bleeding them dry, but so I, I naturally got into the golf business. You know, I did have summer jobs in the golf business when I was 16. And just naturally kind of stepped into a role there and kept getting promoted promoted one year after another, after another. And by the time I was 21, I was actually a general manager, youngest, one ever hired by the company. And so I didn’t go back to school. I didn’t graduate from college. And I didn’t really have time to kind of sit back and think was this really what I wanted to do with the rest of my life? You know, I loved golf. I wanted to play professionally, but I just wasn’t at that level.

Kyle:
And so I just kinda took the next Beck’s mess next best thing. And you know, when you keep getting promoted, you’re making a little bit more money. You just kind of you’re 21 years old. You don’t really think about it very much, or at least I didn’t. So 16 years later, I’m still with the golf business. You know, this was three years ago. And I’m a regional director for her golf management company now. And really in a spot where I started thinking about is this what I want to do for the rest of my life. And I quickly came to the conclusion that was not what I want to do with the rest of my life. You know, it was going to be in the golf business until I was 67 years old because there’s just not a lot of growth in the business.

Kyle:
And so that’s kind of where I decided to leave and start pursuing things myself and you know, become an entreprenuer essentially. And the multifamily investor.

Charles:
Nice. That’s awesome. Yes, that’s a interesting backstory. So why did you choose real estate as your investment vehicle when you were looking at kind of expanding outside of your job?

Kyle:
Yeah, so I’ve never been a stock market person. You know, I had my 401k with the company, but it was, you know, it was pretty small. I wasn’t putting a ton in there to be honest with you. And I had one really bad experience in high school. I had $2,000. I had saved up, I put it into a stock. I didn’t do any research. I didn’t know what I was doing, but I trusted a broker. And like a month and a half later it was gone.

Kyle:
And I said, I absolutely hate the lack of control there. And the fact that I didn’t even see, feel, or be able to touch what I was investing in really. So in 2010, even while I still had my, my golf job, I started investing in single family homes. I got my real estate license just to educate myself a little bit more on real estate. And I really loved it. It’s a tangible object you make and touch feel it, you can go see it. And then you can also manage it yourself if you wanted to. And I, and I love that fact, you’re not going to go into Coca-Cola and tell, you know, Warren buffet or anyone, what they’re going to do with their business model. There’s just, it’s just not happening. So you know, I love the fact that you have a little bit more decision-making behind the business plan and the execution of it which is why I graduated from really single family homes to multi-family because there’s just, it’s more run like a business.

Kyle:
And that’s the background you know, being in the golf business, people don’t think it’s, it’s a business background, but, you know, I was managing hundreds and hundreds of employees, 20 $30 million in revenue, if many systems, building budgets, managing projects, all those types of things, which is what we do in multifamily real estate down. So I absolutely fell in love with the business model of of multifamily and 11 months after I found it, I actually left my job to pursue it. Full-Time.

Charles:
Interesting. Wow. Within a year, that’s that’s very, it’s very very aggressive from going from one place the other. How so, tell us about kind of how you did that, where you’re you’re in single family and what was the decision factor? The deciding factor let’s say for going from single family into multi-family.

Kyle:
Yeah, so, you know, there was a gap in time where I went from single family to multifamily. I ended up having about 10 single family homes back in 2013 or 14, and I quickly realized it was going to be tough to scale. You know, I want to get to the point where I was financially free from my rental, so I can get out of the golf business. And, you know, based on the math, I’d need a hundred, you know, a hundred single family homes. And it was just going to take far too long, especially after you get through 10 homes, you’ve got to have some creative financing. You no longer have that on your personal name. And so you’re, you’re limited to 10 loans there. So actually stopped investing in those for a while. And that’s when I started feeling like, okay, I want to get out of the golf business. It’s shrinking. I want to be growing. I want to have a little more control of my life.

Kyle:
And so it took me three years. So it wasn’t exactly an 11 month process from finding multifamily to, to leaving my job. Once I found multi-family yes, it was 11 months, but it took me about two years to find multifamily. So I knew for about two years, I wanted to leave my job. So I had been saving up everything. I could, my nest egg to understand, to know that, Hey, when I leave, I need some savings. I need to be able to make it a couple of years in order to survive. So I did that. And then that is when I found multifamily and I honestly found it just Googling different things. I knew real estate was a great vehicle. I enjoyed how my real estate investments were going for the single family homes, but I wanted to be able to scale a little bit. So just doing some research, I came across an online course. I took that course of my wife and then man, I, I just absolutely fell in love with the business model.

Charles:
Awesome. Yeah. That’s that’s great. So when you went from smaller multifamily into larger multi-family, what were some of the major hurdles you had to overcome when you’re getting into that?

Kyle:
Yeah, so our first deal was a 42 units, so that’s the smallest multifamily we’ve ever purchased. Other ones were single family, but we did scale from our secondary third. We went from a $1.6 million, four point 42 unit to a $15.1 million, 128 unit property two different markets, same in you know, both in Arizona, but Phoenix and Tucson, different price points, for sure. And so, you know, what we had to learn was essentially being credible with the brokers, for sure. And making sure that they understand that, you know, we can put together a team to actually close on a deal that big luckily one person on our team had closed with this broker before.

Kyle:
So there was that credibility piece, but just getting all those pieces aligned to make sure the team had all the experience that we need working with the right lender. And that was a few years ago and that was in the environment where interest rates were really spiking and going up and down, up and down on a daily, weekly basis, you know, interest rates have kind of piqued off now and yeah, they’re rising the second, but they’re not going up 20, 30, 40 basis points overnight. And at this point it was. And so that was our biggest hurdles understanding the lending environment and how to react to those things, because that is out of your control. All you can control is, is the points in the deal. But as far as the lending, you know, typically you’re not going to be able to control the interest rates. So working through that with our lender and the broker and the seller and all that good stuff was quite a challenge.

Charles:
So you made the leap after for leaving your own career and going into real estate full time after that second deal?

Kyle:
No, I actually left my full-time job before we even got our first deal. And you know, it took a law, a lot of thinking and, you know, talking with my fiance at the time and my wife now about why to do it now, if it was the right move. And ultimately for me, you know, it came down to a couple of things. We weren’t married yet. We don’t have kids, if I’m not going to do it now, I’m never going to do it. And I always refer back to the fear setting exercise from Tim Ferriss and the four hour work week.

Kyle:
And essentially that exercise tells you to sit down and tell yourself what is the worst that will absolutely happen if I do this. Okay. If that happens, what’s the absolute worst that will happen. And then you kind of keep going down that rabbit hole. And what I came to the conclusion conclusion was is that the absolute worst thing that can happen if I leave my job and this multifamily career that I would have maybe a couple hundred thousand dollars less than savings and have to go back and get another job. So I was literally in the place that I didn’t want to be right. That’s my worst case is in the place I already was. And when I did that fear setting exercise, it was just a complete mindset shift. It’s not it wasn’t like, should I do this? What if it’s like, I have to do this?

Kyle:
This is the only option because I can go get another job in the golf industry tomorrow. If I wanted to, I would be fine. And now with all the experience I have in multifamily, I could probably get another job anywhere I wanted. I’ll never go back to getting a job, but, you know, that was the worst case scenario. And so it was really an easy decision after I, I changed my mindset.

Charles:
Yeah. Interesting. Yeah. That’s great. I mean, you definitely took the leap to go into it full time. So what is your role at your company when, during the acquisition or during the the holding period?

Kyle:
Yeah, so my business partner is Gary Lipski and we were both a lot of hats right now because we’re pretty ambitious on a lot of the things we’ve got going. I mean, not only do we have acquisitions for multifamily and we raise our own capital I just moved out to Arizona actually to increase deal flow.

Kyle:
But we have an educational company as well in a, in a summit that we put on for asset management. And so there’s a lot of different hats that we play. And right now we’re really focused on building out our team. We’re hiring an operations manager here shortly, and we already have an executive assistant. So you know, the main things I focus on for our multifamily company is really the acquisitions and the underwriting piece. That’s why I moved out here. So, you know, I’m basically in charge of connecting with brokers, building those relationships and getting deals under contract. And then we also raise capital ourselves as well. And then we’re big on the asset management side. So Gary and I kind of split the asset management piece kind of wants to deals close on, who manages what and how we get things done. But right now we do wear a lot of hats.

Charles:
Can I ask just before we get into like asset management and going down that rabbit hole how did you and Gary meet? Cause Gary has been on the podcast before, and I don’t think I ever asked him.

Kyle:
Yeah. So a local meetup, you know, we, you attended the same meetup for over a year and we had gotten to know one another and he knew I was interested in Arizona. And one day he just came up to me and said, Hey, I know you drive out there every, you know, month or so, or every other week. Can I join you on one of those? And I said, yeah, sure. Why not? Let’s let’s see how it goes. And we were looking for a partner at the time, but not necessarily thinking it would be Gary or anything like that.

Kyle:
We were just kind of testing it out. And you know, you’re driving for 15 to 20 hours. I mean, literally it’s a five, six hour drive there, five, six hour drive back, and then we’re touring properties all day. So you really get to know someone pretty quickly. And on those drives, we would tour a property and we would underwrite it while we’re driving back in the car. So we really got to know how each other worked and we really enjoyed that and our work ethic and, and you know, we decided to test the waters by doing a couple of deals together under our own company’s umbrella. So before company was limitless to states, his was break a day. We just recently about a year ago formed APD capital group under one umbrella, but we tested it first to make sure the first two deals went well and they did.

Kyle:
And so we really liked working with each other. So then we formed a company and now everything’s under one umbrella.

Charles:
Nice. That’s awesome. Yeah. I met Gary a couple of years back at a at a conference. So it’s interesting that, you know, all the networking has done in this industry, between meetups and between face-to-face even with everything that’s going on now. But I mean, obviously this was before that, but that’s great. That’s awesome. Yeah. So anybody out there looking for partners, you know, you might want to have one right in your backyard, so you don’t know if you don’t get out there and start networking, but with asset management, so you guys have an asset management asset management mastery podcast. And what do you guys consider to be some of the most important factors that owners should be tracking and reviewing with their property management?

Kyle:
Yeah, I mean, really it’s everything, but it it’s it’s you know, one of the biggest mistakes out there is just handing the keys over to your property management company or thinking that they’re the ones that are going to fully execute your business plan and that after you close on a deal, you’re done, you know, there’s all this talk about, Hey, close the deal. I raised this much capital, but then like, what about the execution of the business plan? You know, this is a multimillion dollar business that you’re you’re buying. And if you don’t have experience in that you know, you need to get our, you need to have someone on your team that does have that. You can’t just hand the keys over to a property management company and just say, Hey, execute my business plan. Someone needs to hold them accountable. Someone needs to, you know, work with them and partner with them and work through issues and challenges, create systems.

Kyle:
And so it really starts with creating the systems and putting them into place. But we, we manage a lot of things. I think the number, the two top things that we like to have long conversations with, with our, with our property management company is the leasing, you know, how are the conversions going? How are we communicating? How quickly are we getting back to the, to the leads and how many are we leasing up every week? And, and why are we having issues if we are in certain areas and then the management of the renovations you know, those turnovers are your biggest costs and you need to be able to do those quickly. So the quicker you can get that available unit up and running, at least the quicker you’re going to start making money on that unit again. And so really working with the contracting team to make sure that the communication with the leasing office or the, the management office is on point on time and always kind of ahead of schedule that way we can turn units quicker.

Charles:
Yeah. That’s, that’s great information. I remember a first time I got my property and I put it or had a bunch of properties and I put them with my first property manager and I was like in Europe within like a week afterwards. And, and it ran okay. But it wasn’t until like, I really started working with them and not like I had to be at the property, but just doing the asset management and like checking on stuff and being like this and that. And when I’d go back and like, surprise review these properties after like a year, it was doing fine, but the first year, it just like, it was just, it was just a switch over. And a lot of it was because a lot of the tenants that I had put in not saying they’re bad tenants, but it wasn’t something you can blame because it takes months and years for their tenant base that they’ve vetted coming through to get into the property as well.

Charles:
So you have to keep an open mind that you know, when you’re bringing on property management, you have to know that, okay, I’m going to do this for, even though they might have a contract for a year or six months or something. I mean, you really, to, to really vet them out. I mean, it’s really intake 12 to 24 months, I think, to kind of see what they’re doing and you have to stay on top of them, especially if you’re having a project like you know, our regular value-add project going with it. So that’s, that’s great information.

Kyle:
Yeah. I, I think also like, you know, can a property management company handle a property? Yes, that’s what they do. Right. And I think a lot of people think, well, they’re the experts we’re going to let them go. But imagine just driving your NLI in one year by $50,000.

Kyle:
So it’s just over $4,000 a month, not hard to do. If there’s some things out of place that $50,000 is an increase on a five cap. You know, we’re in a forecast market here in Arizona, but on a five cap, that’s a million dollars of value. And so just thinking about that, you’re losing a million dollars in value if you’re not paying attention to your property, probably more, to be honest. And so asset management is a crucial part of this business and it could take a very poor performing property to a very successful property or just kind of one that’s middle of the road and take it to the next level. And, you know, for us during COVID our properties, you know, knock on wood, thank goodness performed pretty well. And I think that has a lot to do with the fact that we have the art, our eye on the prize all the time. You know, it’s not just a property management company. We partnered with them, we worked together with them to make sure we were executing the right business plan for that environment.

Charles:
Yeah. That’s great. Yeah. Being proactive. That’s all, it’s all great information to know when you’re going through this and staying on top of them and making sure that everyone’s on the same page. And it’s a, you know, when you’re doing one of these renovation projects and you’re having the weekly call with property managers and you know, you make sure that you have someone on your team, that’s a straight contact with that property management person. And then you’re also working together with the GCs that are coming out to the property. And there’s so many different moving pieces to doing a renovation on it between everybody, especially when you’re not there. Obviously you guys aren’t there physically and you know, opening doors and stuff like that. So it’s a, that’s great. That’s a lot of other great information. So when you’re raising money, what have you found to be some of the most effective methods for doing so.

New Speaker:
Building relationships, doing it for the longterm and adding value? I mean, that’s, it takes a long time, but I think it’s the the right way to do it. You know, we, we don’t want a thousand, 2000 investors to be honest with you. And it sounds maybe crazy, but to us we want two or 300 very loyal relationships that are investors that we can build over a long period of time. I mean, if you even had a hundred investors that just invested a hundred thousand dollars a year, you could raise $10 million. Right. So that’s pretty good. If you can raise $10 million, you’re going to be okay. So what if you had 300 investors that could do a hundred thousand to $200,000 a year now you’re talking 30 or 30 to $60 million that you can raise.

Kyle:
Right. So it happens really quickly. And so for us, we’re a high touch you know, firm, we like to have relationships with our investors who want to know how they’re doing and, and build it over the over time, you know not flip over and, and find new investors. We’re always welcoming new investors, but they need to align with our vision and goals. And that is longer term relationships.

Charles:
Yeah. That’s a, that’s a lot of great information. The other thing too, about when you’re nurturing these relationships, how are you give us some of the, how do you do that? Are you guys touching reaching out to them every 90 days? Are you obviously they’re on some sort of email campaign as well, other than the deal campaign, but how are you guys doing?

Kyle:
Yeah. So for current investors, you know, we have a pretty good cadence. We do a quarterly webinar for the property that they’ve invested in. I also call them quarterly for a personal phone call. And then they have our monthly newsletters that go out for the property and then all the other things that we do as well, right. Whether it’s in-person meetups, we try and have lunches with them if they’re local. And then we have our drip campaign in our, in our other marketing stuff, our monthly newsletters as well, for people that are interested in investing, you know, they fill out an investor application and I call them actually every other month. And what that does is it helps build the relationship, helps us get to know one another, update them on any deal flow, and then help answer any questions they have. I went back, I go back to adding value. You know, those phone calls are not just a, Hey, we have a deal or we don’t have a deal.

Kyle:
It’s like, Hey, how can I help you? Is there anything you don’t understand? Is there anything I can make them feel more comfortable with or that you’re just not quite sure of. So that’s how we do it. And then we also have obvious our, our monthly newsletters and calls like that. And all of our investors know that, you know, my cell phone’s on quite often and you can call me, text me, shoot me an email, and we’ll be very highly responsive. So it’s, it’s really, we’re very, very focused on that investor relation piece and over-communicating, and if you don’t want to take in all of our communication, then you don’t have to, you know, it’s your choice. You don’t have to pick up the phone, you don’t have to attend our webinar, but we want to give people more than they need and let them decide whether they want to consume it or not.

Charles:
Yeah, that’s great. Because some investors, as you know, probably you’ve, don’t speak to on the phone, they’re too busy or they don’t want to do it. And you have other ones that will be on the phone with you, every call or every instance that they’re able to do. So. So it just depends on what people are comfortable with when investing and it also, depending on their personal, you know, their time and everything like that. But that’s a lot of great information. So what do you think are some of the, your main factors that contributed to your success?

Kyle:
You know, it’s been about persistency and getting out of my comfort zone. I mean, I mentioned earlier, I moved to Arizona. The only reason I did that is to grow our business, right. It wasn’t because we have family out here. It’s not even because it’s cheaper to live here.

Kyle:
If I wasn’t investing in Arizona, I wouldn’t be living in Arizona. And so every step of the way every year, you know, my wife and I and do something that takes us out of our comfort zone. First it, public speaking was terrifying to me when I first got started even being on a podcast like this, I just couldn’t do, but we started a meetup and I got out of my comfort zone there. Then we started a podcast, second podcast, you know, now we have a summit. And now I moved to another state with my family to try to continue to grow my business. So it’s getting out of your comfort zone and not doing what everyone else is doing. You know, and, and really trying to figure out where your niche lies and how you can separate yourself from your competition.

Charles:
Awesome. Yeah. And I want to say, give kudos out to your asset management mastery podcast. It’s great if anybody’s interested in listening to them they’re shorter episodes, but they are very informative and definitely something important since property management, asset management, something that I in Kyle agree with as being one of the most important, if not the most important factor in re investing in real estate. So how can our listeners learn more about you and your business, Kyle?

Kyle:
Yeah. you know, the best place to go is asset management, mastery.com that has all the information about different things that we offer and different things that we do. We’re really passionate about teaching that asset management thing. We even have our summit, which is completely free, right? We do a seven day summit and it’s a free education. We just want people to be aware that, you know, asset management is the most important piece.

Kyle:
It’s you managing your business, you have investors money. At that point, you have a loan of multiple millions of dollars. And if you don’t know how to manage a business, that can go backwards pretty quickly. Now, the last 10 years the market has done, it’s done the work yourself, but in a regular environment, in, you know, in, in a, not so great environment, you could be looking at, you know, possible default and things like that. And so you don’t want that. And you want to be able to learn about the systems that you can put into place and how to read financial reports and how to look at KPIs and make decisions about your business to be able to avoid those things. So we’re very passionate about that. So asset management, mastery.com, we’ll give you all that information.

Charles:
Awesome. Yeah. And asset management really comes out when the market starts pulling back a little bit and you see who’s really managing it and who’s just running off appreciation and compressed cap rates. So, yep. Thank you so much for being on today. We I’ll put all those links into the show notes and looking forward to connecting with you in the near future.

Kyle:
Awesome. Thanks Charles.

Charles:
Talk to you soon.

Charles:
Hi guys! It’s Charles from the Global Investors Podcast. I hope you enjoyed the show. If you’re interested in get involved with real estate, but you don’t know where to begin, set up a free 30 minute strategy call with me at schedulecharles.com. That’s schedulecharles.com. Thank you.

Announcer:
Thank you for listening to the Global Investors Podcast. If you’d like to show, be sure to subscribe on iTunes or Google play to get new weekly episodes. For more resources and to receive our newsletter, please visit global investor podcast.com and don’t forget to join us next week for another episode.

Announcer:
Nothing in this episode should be considered specific, personal or professional advice. Any investment opportunities mentioned on this podcast are limited to accredited investors. Any investments will only be made with proper disclosure, subscription documentation, and are subject to all applicable laws. Please consult an appropriate tax legal, real estate, financial or business professional for individualized advice. Opinions of guests are their own information is not guaranteed. All investment strategies have the potential for profit or loss. The host is operating on behalf of Syndication Superstar LLC exclusively.

Links and Contact Information Mentioned In The Episode:

About Kyle Mitchell

Kyle Mitchell is a real estate entrepreneur who has a focus on Multifamily Syndication and currently has $41MM AUM. He is the Managing Partner and Co-Founder of APT Capital Group and the Asset Management Summit, where their mission is to positively impact the lives of their investors and the communities in which they invest through the highest level of transparency and fiduciary responsibility.

Kyle is also the co-host of the weekly real estate podcasts, Passive Income through Multifamily Real Estate & Asset Management Mastery, where he speaks with various experts in the real estate industry to help educate and create clarity for passive investors and new operators.

With a background in operations, management and logistics, he has overseen multi-million-dollar businesses and has a passion in doing the same in the multifamily syndication space.

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