Section 8 Housing

Out Of State Rentals And Section 8 Housing With Kevin Dugan | The Real Estate Investing Club #8

Transcript of “Out Of State Rentals And Section 8 Housing With Kevin Dugan”

Gabriel Petersen 0:01
All right, we are alive. Kevin, thank you for joining us today. How you doing?

Kevin Dugan 0:06
Doing well, man. Thanks for having me today. I appreciate it.

Gabriel Petersen 0:09
Yeah, absolutely. Where? Where are you calling from?

Kevin Dugan 0:12
here in sunny California, Los Angeles, sunny California. I’m actually wearing a coat because it is too cold here in Washington. So I am super jealous of you. Man. We got a little bit of gloom today though.

That weather down here.

Gabriel Petersen 0:27
Alright, so to get us started, why don’t you tell everybody you know who you are, where you’re from and how you got started in real estate in the first place?

Kevin Dugan 0:35
For sure. My name is Kevin Dugan from Altis Investment Group, been investing in real estate since 2012. And I kind of dabble in a couple of different spaces but the core business I have is single family home turnkeys I got started a while back, you know talking to some friends and one friend that I kept in contact with after equipment A corporate consulting job for the gas and oil industry hit me up and asked me if I wanted to flip houses in Chicago. So basically, he was from Indiana, he proposed some of the numbers to me, he said you could buy about 50,000, put 50 into it and sell for 170 200,000. So, okay, the numbers. Let’s try it out. So that was the humble beginnings. But even before that, it was Rich Dad, Poor Dad was kind of the origin of motivating me and changing my mindset on wanting to be an entrepreneur.

Gabriel Petersen 1:32
I’m pretty sure every single real estate investor has at one point read Rich Dad, Poor Dad.

Kevin Dugan 1:39
I mean, it’s a classic and mindset is so important, just in general, and that one really opens up your eyes to give you different perspectives on the way you can kind of live a professional life. So I’m big fan of it.

Gabriel Petersen 1:53
Absolutely. I agree. Cool. So you got you used to do consulting, which is funny because that’s how I I started in consulting and then I went to real estate. Yep. So you’re doing consulting, your friend came to you. He was flipping out in Chicago. He said, Hey, we can double our money 5050. And you’re like, let’s do this. So since then, Where has your Where’s your path kind of taking you? What’s your main bread and butter of your business right now.

Kevin Dugan 2:20
So that original business of fixing and flipping with my partner kind of dissolved, it’s really difficult to flip things from across the country, especially here. First, go ahead. So he was a project manager at Westfield, and I’m an action taker. My skill sets are really on the sales side and his are kind of like construction management. So it was a good partnership. But it’s still challenging to do that. You know, when you’re in California, and then managing some fast talkers in Chicago, especially contractors, you never know what they’re actually doing. You hope that there can be trust there, but the difficult one, so fast forward to today. I’ve come full circle. So I’ve created turnkey single family home business and what that means is we basically buy houses, we renovate those houses, we rent them out to high quality tenants and we actually specialize in section eight. And then we sell it as a rental investment on the back end, managing with our our in house property management company and then doing all the repairs with our in house general contracting. So that’s core bread and butter. What I do, I’ve also been tied into the multifamily space. It’s a really tight community. So I’ve been part of a GP and LP total 400 units. And then there’s some other stuff in the pipeline for larger commercial deals, but still waiting to see if those work out for later on this year.

Gabriel Petersen 3:40
Cool. Wow. So you are that sounds like a very, you have a wide breadth of experience but your, your real core, the core of your business, single families, you buy them, do you Is it a bur kind of strategy? Are you buying rehabbing them and then renting them out or is it just you buy you know relatively new houses to rent them out?

Kevin Dugan 4:00
Yeah, so it’s it’s basically like a modified bur method. So, exactly as you mentioned, you know, really the value of a home is identify when you acquire it. So we try and buy houses about 50 to 60% discount, usually because they’re outdated, the original owners weren’t taken care of this house, and it can’t acquire the rents that a normal, you know, renovated house would for market standard. So that’s how I, you know, built up my personal portfolio. And because we were trying to acquire larger volumes, we started to bring in, you know, different services in house, which is why we built a property management company, which is why we have a general contracting company here as well, so that we can basically add value across multiple points of the business and then provide it as a service and product to investors who maybe don’t have the bandwidth, or the time to do all those wear all those hats themselves.

Gabriel Petersen 4:55
Very, very cool. I like it. And you’re doing all this in California.

Kevin Dugan 5:00
This is all across the country. So okay, I’m purely an out of state investor, California, you need deep pockets to invest here. And yeah, um, truthfully, like when it comes down to it, the margins are going to be a smaller return. And you really want to catch this market and appreciation markets like on an upswing. So especially when times are a little bit kind of funky or the top of the market. You know, that’s where there’s even more risk. If you’re off by 10% of the rehab budget, that could be your entire profit. Right there. Gotcha.

Gabriel Petersen 5:32
So I the next step, I really want to get into the nuts and bolts of your business. But before we go there, you said, you know, you focus 100% on out of state investing. So what are I mean, you know, 2020 this is worrying COVID time right now, this is a completely new area for for everyone. So what are your top markets that you’re looking to invest in right now.

Kevin Dugan 5:54
So a lot of the top markets are the original markets that were performing well prior to COVID So I’m really big on following the demographics. And traditionally speaking, if you have strong population growth, strong job growth, you know, increasing wages, decreasing crime rates, those are all going to lend itself to be a more desirable place over time. So I’m very bullish on like the southeast parts of Florida, the western parts of Florida, you know, Atlanta, Carolinas, Texas, Arizona. So a lot of these traditional markets, you may have heard of, you know, they’re gonna get hit, depending on their ratios of exposure to hospitality, to the service, food, food and beverage. But at the same time, because there’s so much demand there, usually they’ll bounce back a little bit quicker. So, really, it’s just trying to, it’s still so fluid at this point, honestly, today’s March 25. And, you know, we’re still waiting for a lot of numbers to come out and, you know, there’s gonna be some change coming in this year, the second half of this year and potentially some opportunity to For going into 2021, but honestly, people don’t know. I mean, it’s it’s kind of like a crapshoot. So

those numbers are constantly changing. Okay,

Gabriel Petersen 7:10
so, so prior to COVID, and you know, you’re just keeping the same kind of strategy, you’re focusing on the southeast, because you see the demographics are much more favorable for investors in those areas.

Kevin Dugan 7:21
Exactly. And it’s supply and demand, honestly, to it, were more people moving towards, and that will push up potentially the rents on the properties or the Commercial Investments that you’re involved in. Gotcha. All right.

Gabriel Petersen 7:38
All right. So we’re gonna change gears a little bit here. We’ve kind of got the idea of what you do on a holistic level on a high level, um, so kind of take us down into the operations of your business. So you buy houses, you fix them up, you rent them out, and then you get section eight tenants. Sounds like that’s your main, your main tenant base. So kind of take us first How do you go about acquiring the leads for these properties? Do you do digital marketing? Do you do you know, networking, yellow letters, whatever it may be? What’s your main source of leads to generate to to find new properties to buy?

Kevin Dugan 8:13
Yeah, so that’s a great question. You know, investing in that market for seven years. At this point, I’ve gained a lot of relationships. So typically, the deal flow just comes towards me and I purchased properties across the board. So wholesalers, delinquent tax liens, tax notes, auctions, short sales, estate sales, and it’s one of those things were single family home, you know, if you invest the time, or just invest the time in real estate in general, you’ll start to acquire more leads that way. So I’ve done some yellow letters, but more of just a trial and I know it works, but you really have to invest the money into that to get the results because it touches you know, how many times does this person see your name, where when that their situation has changed. They’re going to come to you first But to be 100% honest with you, you know, everything just kind of in natural growth. And this is the point I actually quit my corporate job last year to run the company full time. Congratulations. Thank you. Thank you. So, you know, now it’s the point where business starts to be a lot more fun because we get to explore a lot of different options on which levers to tweak and which ones to focus on that, you know, drive traffic towards us. Oh, absolutely. Yep.

Gabriel Petersen 9:26
So very cool. So the main way that you guys are getting, getting leads in your business is more just from sounds like just from networking. I mean, you know, you guys don’t do digital marketing. You do. Sounds like you don’t do yellow letters. Not really, I mean, honestly, it’s just relationships. And

Kevin Dugan 9:42
yeah, so it’s kind of interesting that we can kind of get around with that and yeah, I mean, that’s worked for us currently. But yeah, scale up.

Gabriel Petersen 9:53
No, that’s that’s an enviable, enviable position. I mean, I know for me and my partner’s we do a lot of digital marketing. My backgrounds in digital marketing. So that’s kind of our how we get leads coming to us. But if you’ve got already I mean, if your name is solid in your markets that you’re working in, you got leads coming to you then that, then I mean more and more power to you. That’s, that’s really an enviable position for sure.

Kevin Dugan 10:15
Appreciate it. Appreciate it.

Gabriel Petersen 10:17
Okay, so you’ve talked about how you get leads. So now go about? Well, actually, let’s talk about your you said earlier that you really liked section eight tenants. That is extremely unique for investors because most investors don’t want to have section eight tenants. Yeah. So tell us why. Why is it that you’re focusing on on section eight.

Kevin Dugan 10:38
So the premise behind investing for section eight is really the fact that people come across tough times in this world number one, and then number two, the government’s paying the majority of their rental income. So really, the goal and my philosophy around real estate investing is taking care of people and and having that Trust as well as you know, how would I say it respect where the person’s holding and obligated to perform the way that they’re supposed to. So, Section A, you know, a lot of its elderly people with disabilities are single family mothers with you know, many children, people who’ve just been put in tough situations that maybe don’t have the finances to get their foundation straight. And, you know, we tend to do a pretty solid rehab on these houses like in the 30 to $50,000 range, and the price point the houses anywhere from like 70 to 100,000. So, proportionately we’re really updating the houses drastically new floors, updated kitchens, bathrooms, new electrical plumbing, to give them a great home that they’ll treat as a house. And we found that if you treat people like people, they tend to live there longer because really vacancies one of the biggest expenses for single family homes and then traditionally people are afraid of section eight You know, government subsidized rents or low income housing because they feel that they’re going to destroy the house. And I’ve been through enough houses where I’ve had some bad experiences. But generally we have more good experiences than bad. And when it comes down to it, you know, this is a, it’s a privilege to be on that program. And if people, you know, they create any crimes or they, you know, go delinquent on any of their payments, like they can lose their voucher, and that potentially is risk for them, you know, losing a household for their family. So, you know, it’s not to be leveraged, but at the same time, it’s a mutual respect of, you know, giving them a great home that they’re gonna appreciate and making sure they take care of it.

Gabriel Petersen 12:43
Very cool. I almost went into section eight housing at one point, but just the Carson Fallout, you know, cartoon go my way. So it’s interesting to hear somebody that’s, that focuses exclusively on that, that’s, I like your philosophy on that.

Kevin Dugan 13:00
Yeah, it could be good or bad, you know, I’m still not certain on like multifamily and like large populations of section eight because it can be difficult to like can like understand and and kind of control the environment and community there. So, but I do know that there’s a lot of successful investors who do that as well. Okay.

Gabriel Petersen 13:21
Okay, we’re going to switch gears one more time here. We’ve talked about your business, we talked about where you are right now. So now I want to hear a few, you know, experiences excuse stories that you you’ve had, I mean, it sounds like you’ve been doing this for a while now. So I’m sure you got some good ones in your pocket. So, kind of take us back. I mean, we all know that real estate is an up and down both, you know, economically and emotionally it can be it’s a roller coaster. So kind of take us to to the to the trough to the bottom. what’s what’s one of the hardest things you’ve experienced? and What lesson did you pull from that? And then after that, take us to the top like what’s what do you love about real estate? What’s your favorite thing you’ve been doing? Recently.

Kevin Dugan 14:00
Okay, cool. So, I mean, I’ve really changed my mindset around investing and being a business owner in general, typically we’re just solving problems. So if anybody has seen like the diagram of, you know, an entrepreneur, it really really does look like an iceberg. You know that the peak is up here and everybody sees like the greatness that comes from it, but there’s a lot of a lot of stuff going on beneath that water. So, earlier in my investment career, some of the challenges were purchasing houses that looked great, but their bones are bad and that was kind of the motivation for wanting to bring in more control in house so purchased a house back in 2015 that basically look beautiful, I mean, new paint, new tile floors, you know, new bathrooms, new kitchen, so look, look great. Fast forward, you know, about a year and a half from there. That’s where like the bone started to have some issues. So the water bill started spiking up You know, there were like little holes like, there’s like some mold growing behind like the kitchen cabinets that nobody could quite understand why it kept growing. And then there’s like little holes like throughout the wall. So this house was like infested with termites. No, that’s just had a main line that collapsed. So like that was like, the mold was like backing up, like behind this thing in our tenant, and there was a good legacy tenant, and she she was an odd one test. I mean, she was like, partially deaf, and, you know, she didn’t really ever respond to her phone. So she was like, a really difficult time. So all of these together is like, okay, early stages, like, you can’t just look at the, like, what the house looks like from the surface level, you need to do a little bit more digging as to like, what the structure is and what’s going on behind it and what what the story is. So a couple lessons, you know, I like having a lot more control over what I see. In the house, because when you open up walls, you get a fuller picture of what this house is and how it’s going to perform. And also providing a higher quality product if people like the more you know about the house, the better it can be for your, your investors, and then tenant wise. Yeah, I mean, you really want to know and screen the tenant and kind of hear their background story. And that was earlier on when we were renting it out to ourselves. So like, you know, the questions you ask are a lot more superficial as opposed to really diving deep into what their story is and why they need this house and what their current circumstances are. So lots of lessons revolved around early mistakes, but the rental income was so good on it, that it you know, over time, I see that as like an education. So

Gabriel Petersen 16:45
yeah, still works out. Yeah. So so you’re I mean, the main issue that you ran into was your you were buying houses at the very beginning of your career and you weren’t looking at the at the structure were you getting in praise? Were you getting in? inspectors go went out to the houses or was it? Were you just buying sight unseen?

Kevin Dugan 17:03
No, I’m pretty active. So like, I’ll travel out there so I would see it. But then my eyes are pretty novice and like, honestly, I’m a very big picture. Yeah, we’re so operationally operational side is like more of a challenge for me. But I’ve learned over time, and I just looked through like a lot of small details, like silly details ago, it didn’t realize these doors didn’t close over here, because it actually cut it properly. So like, there are all kinds of like funky things on it that, you know, somebody who is a little bit less like, you know, shoot by the hip would probably look into that and maybe do some better due diligence. So,

Gabriel Petersen 17:40
it takes you a few deals like that to really learn your lesson. So that’s good.

Kevin Dugan 17:45
Yeah, and I mean, fortunately, I get to pass on those lessons. You know, help people skip those lessons going forward, because they cost money they cost time they add headaches, and you don’t have to go through them. Most people, you should try to avoid them.

Gabriel Petersen 18:01
Alright, so that was your trough and I take us to the top like, what do you love? I mean, what’s your favorite thing about real estate? If you have a specific project in mind, anything like that, what really gets you out of bed when you’re thinking about, you know, running a real estate business?

Kevin Dugan 18:14
Yeah. So I love the creativity about real estate, and the fact that you can dive into a lot of different asset classes. Traditionally, you want to focus, you really want to focus and put your time and your diligence into one space so that people know you. Oh, what I mean by creativity is the fact that, you know, right now with the turnkey stuff, I’m able to provide a product to a lot of investors who didn’t think it was possible to own real estate, out of state. And it’s really eye opening when they start to collect that rental income on a monthly basis. And it’s really rewarding to see how excited they get knowing that they’ve purchased an investment. They have somebody that we can trust that will take care of their properties first, and then hopefully get them on the path towards financial freedom. Cuz that was really my motivator once again, going back to Rich Dad Poor Dad. Financial Freedom isn’t necessarily a requirement. Like I wouldn’t say that everybody should go for that. But I would say everybody should always add additional income streams. So that diversification so that they can basically have stability when, you know, things get crazy, like right now, like, you know, having one or two or three or most millionaires have seven additional income streams, that allows you to have more sense of security. So that’s really the aspect that I love about the business.

Gabriel Petersen 19:34
I completely understand that financial, I mean, financial independence is more peace of mind is how I like to look at it. I mean, money is is itself is not, it’s not happiness, but it will give you peace of mind. It’ll allow you to think about other things. Think about your family, think about your, your health, a little a little bit freer. So

Kevin Dugan 19:56
I definitely agree with you on that. 100%

Gabriel Petersen 20:00
Alright, so we’re changing gears one more time. I’m going into your personal your personal life here, and not really that personal but so you’ve had a lot of success in real estate, you’ve helped a lot of people you bought a lot of houses, what habit? Would you attribute to that success? in your own life? What habit contributes the most to most to your success?

Kevin Dugan 20:22
Definitely. So, habits is a funny topic. I’m

rewiring myself currently and always trying to kind of self reflect, to improve. And I just, I mean, I love that aspect of challenging myself to try and do more. But the aspect that has made me successful is just like being greedy, in a sense of like, knowing that, you know, things are going to be tough, and there are going to be challenges. But understanding that you only fail if you let the challenges stop you from what your goal is. So if you continue to like move forward and you continue to to persevere, then that gives you a lot of opportunity to grow in real estate honestly, like, I’m not the smartest person in the world, but I work hard. And by working hard and then continue to work with higher level colleagues and professionals, mentors and coaches, like it continues to push you up to another level, where, you know, really, the opportunities are kind of endless, like if you put in the time and the hard work, so

Gabriel Petersen 21:23
I like it. That’s a that is. grit is definitely, in my opinion, one of the most important factors when it comes to real estate, because at first, at least when I first got into it, problems just came left and right. And if you start with the first problem, you’re not going to get anywhere. You got to have that ability to just push through. So I 100% agree with you. Yeah, kind of piggybacking on that question. You know, you started so many years ago, let’s say what what year did you start by the way?

Kevin Dugan 21:49
It was in 2012.

Gabriel Petersen 21:51
So 2012 Okay, so you started 2012 you know, 2012 version of Kevin, if you could go back to that guy who hasn’t started this business, he’s still in the corporate life and give that that guy one piece of advice going forward, what would that be?

Kevin Dugan 22:08
I would say network more.

Unknown Speaker 22:11

Kevin Dugan 22:13
One of the things at least for me personally, because I, I see opportunities, and I can kind of gauge opportunities fairly quickly. But I’m also I can be very narrow minded if I’m not exposed to good opportunities. So the more you meet other individuals who are playing at a higher game than you, you know, it’s your network is your net worth. And if you meet more people, you get more ideas, and you can get excited about different different ventures. So there’s pros and cons like I’m a, an advocate that people should invest, and you kind of have to go and feel like what your own vibe and paces at the same time I do very much understand like when you go commercial, like it allows you to get to a level of scalability that you wouldn’t normally with single family homes, so that is kind of the reason why like, like, single family, beautiful asset class like extremely profitable. It’s just challenging to scale at times unless you build a business around it. So yep.

Gabriel Petersen 23:16
All right, so um, so we definitely appreciate having you on we are at the end of the time, we’d like to keep these scheduled these episodes around 20 to 30 minutes. So I think I can speak from everybody listening and watching. We appreciate everything that you shared with us. If anybody wanted to get a hold of you, first, what is it that you’re looking for in your business? And second, where can they get ahold of you? What’s the best way to do that?

Kevin Dugan 23:41
Yeah, of course. So like many real estate investors, we’re looking for passive investors who you know, with the single family home stuff, maybe want a lower entry point into real estate, and exposure to collecting rental income on a monthly basis. So you know, these are busy, professional Like engineers, IT specialists, you know, doctors, lawyers, nurses, people who can’t wear all those hats, but want to gain exposure to real estate and, you know, have the ability to learn and maybe branch off from there. So, and how you can find me. I’m working on growing the social media side, but right now LinkedIn, if you look for Kevin Kay Dougan, or if you go to my website, Altis, Id that’s al TUSIG. Calm and find out more information there. You can also email me I’ll give you my contact information. So have questions, shoot me an email.

Gabriel Petersen 24:38
Perfect. Again, Kevin, thank you very much for for joining us here. I appreciate it all the wisdom that you shared. I’m sure everybody else did as well. For people listening and watching if you want to get a hold of Kevin, he just said his information. I’ll also put it in the show notes so you’ll be able to reach it there. And until the next time we look forward to seeing you. Thanks, guys. Appreciate it, man.

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Topics you’ll learn more about throughout our episodes:

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– How to use property management companies to help scale your real estate business

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– How to do out of state investing without risking your shirt in the process

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– Investing in commercial real estate

– Stories about brand-new investors and the lesson’s they’re learning as they take on their very first flips and rentals

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