The Real Estate Investing Club

Perfecting Multifamily Asset Management with Kyle Mitchell | The Real Estate Investing Club #11

Transcript of “Perfecting Multifamily Asset Management with Kyle Mitchell”

Gabriel Petersen 0:01
All right, we are live. Kyle, thank you very much for coming on the show. How are you doing today? I’m doing great. Thanks for having me on. Right on. Where are you? Where are you calling from?

Kyle Mitchell 0:14
We’re from Southern California. So right on the border of La in Orange County.

Gabriel Petersen 0:18
Oh, man. All right. So you guys are bathing in the beautiful, beautiful weather down there. We’re in Seattle, so I’m a little jealous.

Kyle Mitchell 0:26
Yeah, it’s beautiful. 80 degree day today with the sun out so can’t complain.

Gabriel Petersen 0:31
Perfect. All right. So yeah, to get us started, why don’t you tell everybody listening, watching you know who you are, where you’re from? And then just give us a little brief intro into how you got into real estate in the first place.

Kyle Mitchell 0:43
Yeah, sure. Again, thanks for having me on. My name is Kyle Mitchell from Southern California born and raised, and I started investing in real estate in 2010. And at that point, I had a full time job was never planning on leaving my w two at that point, actually, and I’m sure we’ll get into that later on, but In 2010, I house house hacked my first primary home and a couple years later I sold that for a pretty good profit and that’s kind of what springboarded me into being able to buy my own single family homes to get started in real estate investing and then from there wanting to scale and got into multifamily so been investing for about 10 plus years now and our company is now in the value add multifamily space where we buy multifamily in the Arizona markets Phoenix and Tucson. Very cool I

Gabriel Petersen 1:30
love I love hearing stories about people who just you know bought a house house hacked it and then they just you know from there grew to something such so big is what you’re running right now. So that’s a that’s a cool story. I’d love to hear it. So you’ve already you’ve already kind of touched on it a little bit. You’re in multifamily kind of tell us what is the bread and butter of your business today. You know you started in single family, but you’ve since changed. So what are you doing right now and what is what what’s kind of bringing in the dollars for you?

Kyle Mitchell 1:57
Yeah, so multifamily value add which is a space Really like, which is basically forcing appreciation by, you know, implementing better systems and putting money back into the property, whether from a curb appeal standpoint or just from the interiors so that the residents can have a better space live so you can bump up the rents, and it’s all about controlling the noi. So you know, really we’re our secret sauces is in the asset management. I’ve been in prior to real estate, I was the general manager and a regional manager for a Golf Management Company. So same thing is property management for apartments, but for golf courses, right. So hiring, firing, implementing systems, driving revenue, controlling expenses, all those types of things. And so I did that for 16 years, my business partner has run multi million dollar businesses and had an exit. And so our secret sauce, like I said, is really in the management operations of the building, although we are an A to Z shop where we, you know, acquire the properties raise the funds for the properties and the management manage them as well.

Gabriel Petersen 2:58
Awesome. I love it. There. I mean, you just covered a huge swath of things. And there’s a lot to unpack there. So I really want to, I mean, your your wealth of wisdom when it comes to multifamily operations, and it sounds like acquisitions as well. So, kind of let’s start at the beginning, you know, you know, pretend like you don’t have to have an apartment complex that you own. So start there, how do you go about actually finding the apartment complex? And and what criteria do you use to identify you know, diamonds in the rough the ones that you can really add value to?

Kyle Mitchell 3:30
Yeah, so our criteria, I would say is different than getting started our criteria now is you know, 1985, or newer product. And there’s a reason behind that is because typically things older than 1980s are going to have boilers and chillers and very old mechanical systems that are very expensive to maintain. And, you know, the older they are, the more it costs to maintain. So we like 1985 or newer hundred plus units where you can get the ability to put in on site management for scale. And then just a value Add Component whether that’s a long term owner who just hasn’t taken care of the property or is you know, an owner that just doesn’t have a lot of experience a mom and pop owner and someone who has operational and management experience can go in and actually implement systems to you know, get more efficiencies out of the property to drive that in a why for people just getting started, I would say education first, especially in the multifamily space. You know, I started in single family and you can certainly start in single family by yourself with limited education and get away with it and do fine, but when it comes to multifamily, it’s a completely different game you got you’re buying multi million dollar businesses here when you’re buying multifamily. And I know there’s all this hype about buying apartments but it really is a business right? I mean, you have on site staff that you need to manage and hold accountable. You have things like payroll and and benefits and 401k stuff and you know, you’ve got to drive income control expenses, you got people living in your in your apartment complex day in and day out. So there’s so many different aspects to it when you buy apartments. And so I always tell people to educate themselves first. And that’s how we first got started. You know, I came across a video online course that me and my wife did for the first three weeks of our education and then we hop straight into one on one coaching. And we did that for six or seven months. And we also did this with full time jobs. So I used to drive two hours a day, you know, to and from work, so an hour each way. And all I did was listen to podcasts every time the gym, listen to podcasts. And so it was all about educating myself and then modeling after others who had already been there and kind of follow their path on on the way to grow our business.

Gabriel Petersen 5:41
Wow, very cool. So it sounds like Well, for one, your your your first piece of advice is to get get knowledge figure out exactly how to do this because it’s not, it’s not a single family house. There’s a lot that goes into it a lot to manage the property. So that’s your first step and So actually, how do you go about finding these properties? A lot of people when they’re doing single family, they, you know, they’ll send out yellow letters, they’ll do digital marketing. They’ll talk to realtors. How is it different in the multifamily space?

Kyle Mitchell 6:14
Yeah, you can do all that stuff still a little bit with multifamily. But you know, we’re in a market now where it’s very difficult to find deals, it’s the hardest part. And it comes down to building relationships, whether that’s relationships with, you know, other local investors who you team up with in the market, or brokers, which is the route that we really take is we spent a lot of time and energy building relationships and friendships with brokers, and more of a long term approach versus Hey, let me get one deal now. We’ve done some direct mail and calling owners and skip tracing and things like that nothing yet. But you know, I think with multifamily with with the inventory so low right now, you really have to have multiple ways that you’re going about sourcing deals, but I think it always comes down to building relationships. And that does take time. You know, I just yesterday called 50 brokers and I didn’t get a hold of all of them. But you know, I spent four hours on the phone and still getting return phone calls today calling brokers that I call every three weeks now because of the COVID situation. There’s just not a ton going on but pre COVID every other week just to check in, see how they’re doing start to build that friendship and that relationship with the hopes that downline you know, we’re going to be on that top top five list.

Gabriel Petersen 7:30
Wow, that’s, that’s really interesting. So so you kind of have a cadence with, with the brokers that you’re developing relationships with you, you put them on a calendar every you know, sounds like three weeks. Sounds like earlier, it was even shorter than that. So every couple of weeks, you would reach out to say, hey, checking in. Have you seen anything? How are you doing that kind of thing? Right?

Kyle Mitchell 7:48
Yeah, and you know, these conversations have evolved over time, which is natural. And one piece of advice I would have is trying to have them evolve quicker, anything that you can to start to build that relationship. Right. So, you know, used to be like, hey, it’s Kyle, DNA deals, right. But they get that a lot, right. And that’s not really relationship building. And I see that now. And that’s probably one thing I would definitely do better if I was starting out is, you know, ask them how they’re doing, how is their weekend and over time, you get to know they have kids or they don’t have kids. So they like to do that. And you can ask them about that, you know, this whole COVID situation is also help because it really is impacted everyone. So you can talk about things like that. So, you know, these conversations are not two to three minutes. What do you have nothing, Okay, goodbye anymore. They’re, you know, 510 1520 minutes long with each of these brokers building a relationship, getting to know them, and really, honestly, caring about their side of the business, too. I think a lot of people think of them as robots, you know, they’re the ones that provide the deals and they just spit it out. And that’s not the case. They have families and they’re trying to make ends meet as well. So, you know, it’s always about trying to position yourself to make it a win win.

Gabriel Petersen 8:56
Yep, I have a lot of wholesalers that reach out to me and the ones that win Whenever I am in a position that I’m ready to take on another property, the ones that popped into my mind are the ones that actually talked to me and didn’t say, Hey, Hey, I got a deal, Hey, I got relationships in real estate is tantamount. It’s the one thing you need to focus on. So I like that you said that?

Kyle Mitchell 9:17
Yeah, think about it in a way where you can add value to that person, right? I mean, of course, you want them to bring you the deal, but what are you going to give to them other than their commission at the end, but like, what’s going to separate you and we always try and position ourselves in a way of, hey, how can we add value to the brokers and that’s not always easy, but you know, we do things like we we bought a handful of brokers in each of our markets $150 gift cards during the COVID situation. We call them pre COVID packages, and we sent them out and so now that they’re opening up, they’re using those gift cards and who they’re thinking they’re thinking of us, you know, and so hopefully that helps a little bit to get us to the front of the list and, and top of mind when a deal does come their way. Awesome.

Gabriel Petersen 9:59
Okay. Okay, so you said in multifamily it really is it you know, it’s a business, you’re running a business. So there’s a lot of operations that go into it. This is our it’s a really difficult topic to kind of broach on such a short, you know, timeframe that we’re working with. But if, if you could give a piece of advice on how to most efficiently manage your properties, what would that piece of advice be?

Kyle Mitchell 10:25
Yeah, everything needs to be measurable and traceable. Okay, number one, and you always have to follow up, I think where most things fall apart is in the follow up, you know, you ask someone do something, you think it’s clear, and so you expect it to be done, and you just don’t check on it. And you just think it’s done. And a month later, you happen to stumble across the fact that it’s not done. Well, that sets your business plan behind right now you’re a month behind on that. And you’re just when those things start to build up 5678 910 things and you got a mess on your hands. So you know, always Make things measurable and traceable so you can follow up. And what I mean by that is something as simple as you know, if the leasing office, His goal is to lease up or to make 50 phone calls a week, that’s not enough. Like what are the results of those phone calls, you know how many people you can get ahold of? How many of those you’re going to show up and have an application for do a showing for and then eventually get a lease for? And it’s all about identifying bottlenecks. Where are the bottlenecks happening? And how can you alleviate those bottlenecks and by doing that is where you really get, you know, your property running the most efficiently, but the only way to do that is to measure and track things so you can identify them otherwise you’re guessing and I see a lot of people thinking the problem is one thing where it’s actually another you know, a great example of that would be you know, looking at days vacant on a unit. If you just if the only thing you look at is days vacant you say 60 days vacant and you You say, Okay, well, the leasing person is just not doing her job or his job. Right. It’s been leased for 60 days or 60 days, and the average is 26. Why is that? Well, where was it during that process of 60 days? Was it an eviction for, you know, 25 days? Was it in rehab, and then they had an issue with the rehab and the flooring took a little bit longer to get in. So they had to go an extra week, you know, where is that bottleneck? And when you start to break those things out, you’re able to identify, okay, well, the eviction took a week longer because of this, and the flooring took a week longer because of this. So actually, the problem is not with the leasing person, it was just this unit had a specific issue or is there a problem with the leasing person? Are we having more leads than usual, but none of them are turning into actual appointments, what is the process going on right there that we can improve upon, to get those conversions to be greater.

Gabriel Petersen 12:55
I like it. So kind of on that topic. So measuring is really crucial in order to figure out how your business is performing, and and where you need to, you know, do some tweaks to improve it. So there’s kind of a two part question one, what do you use to do the measurement? Do you just put it all in Excel? Do you have some special tools software that you use? And to what are what are some of the main KPI that you, you, you feel reflect the health of your business the most?

Kyle Mitchell 13:28
Yeah, so right now we track in Google Drive. And we also have an Excel spreadsheet. So we are lucky enough that our property management company customizes, some of their reports for us and so we have a simple calculator to show conversions as far as leases and applications and showings and I’m blanking but basically it’s called lacell eyes. I still have that from Neil Bhalla. But basically it’s all the conversions for each portion. You know, and so they fill that out every week, and they send it to us. And so there’s a couple different things that we work on. Right now though, what we’re trying to do is build a tool for our own properties that can pull 50 different KPIs. And that’s the thing that we’re really focused on right now is because KPIs and tracking and trends, those are what are going to drive your business and to be able to see those in a snapshot over a day to day basis is really going to help when you’re getting all these different reports from your property management company, you may get seven different reports, it’s really tough to just see really quickly what the trends are, you know, you have to pull a couple of reports, you got to look at a few line items. But so we’re working on that. And it’s proven to be challenging, for sure. Unfortunately, the BI dashboard, which is a business intelligence dashboard is not being offered by our property management company through their software. So we have to go create it on our own. It’s pretty expensive, but I think it’s something that’s really needed. So that’s something that we’re working on, but Just tracking trends on you know, dollar per square foot rent per unit, how they’re going occupancy, economic occupancy, you know, things like that. Are we tracking up this whole time or they’re, you know, big dips along the way and why. And I think the biggest thing about tracking KPIs and making things trackable from an asset management standpoint is so you can ask the question, why? If you don’t know about it, there’s no way you can ask right and you need to work closely with your property management company, making sure that you, they know that you’re doing this for the betterment of their business and also make their job easier, and ultimately, it will make their job easier. But there definitely can be some headcount clashing if you don’t approach it the right way with your property management company.

Gabriel Petersen 15:48
Yep. Bringing it back to relationships. I like it. Yep. So that you mentioned that you’re you guys are kind of working on your own kind of proprietary tool for multifamily tracking is that going to be your You’re gonna consider turning that into a SAS at some point and offering it to the public.

Kyle Mitchell 16:04
It’s something that we’re talking about, we’re not sure yet we’ve got a long way to go on it, to be honest with you. It’s just, it’s not as easy as I had hoped. I honestly hope there’s something that’s coming out ahead of us, because I just want it for our properties right now. But right now, what I do is I just track it on the Excel spreadsheet and I look at it and takes me a little bit longer, but it could be something that does come out that we sell to the masses.

Gabriel Petersen 16:29
Very nice. Yeah, I’ve I’ve gone through a few few tools myself, it’s hard to find really good ones. Yep. All right. So we’ve kind of talked about your business. We’ve talked about the nuts and bolts. And you you are you’re offering a group course coaching session session, correct.

Kyle Mitchell 16:47
Oh, no, I when I was talking to you about is our asset management summit. So it’s am summit 2020 calm and that’s a free asset management seminar. So I feel there’s a huge gap right now in this market. where people are learning how to get started, which is fantastic. And they’re getting education on how to get started. But a lot of these people don’t have education on running a business. And again, like I said earlier, this is buying a multi million dollar business. And so the goal of our summit is to help educate current asset managers, current apartment owners and new ones on how to set up systems and be more prepared, you know, from an asset management standpoint and what are the tricks and the trades and the best practices of the best out there on getting the best noi you know, and getting efficiencies in your business. So driving income controlling expenses, driving in a why staffing, value, add all those different things we’ll be talking about, but not at a high level, really getting down into the details of how to manage things. And so it’s a virtual, because of all the stuff we’re probably going on, but it’s the asset management summit, Ms. summit 2020 COMM And that’ll be launching here in the next few weeks, and it’ll The first date will be September 21. It’ll actually be a 14 day event. So we’re gonna have a ton of speakers and again, it’s a free event. We’d love to have anyone come on. Awesome.

Gabriel Petersen 18:10
So that for anybody who missed that, that’s a ms summit 2020 calm and that’s for anybody who wants to learn how to do asset or how to improve their asset management. Somebody anybody who wants to get into multifamily so really good resource for you there as summit 2020. calm. All right, Kyle. So we’re gonna we’re going to shift gears a little bit here. I’m going to take it into a little bit more experiences and stories, you know, pass you’re the nuts and bolts of your business. So we all know real estate, it’s a roller coaster, economically and emotionally. You got your hot, you got your lows. So kind of take us what have been some of the What’s that? What have been some of the low points in your business and what have what have what are the lessons that you’ve learned from those?

Kyle Mitchell 18:53
Yeah, so some of the low points I would say is not scaling as fast as I’ve wanted to not hitting the goals as fast as I wanted to. And, you know, we’ve we’ve set some pretty big goals but unfortunately, you know, we are pretty conservative with our underwriting the way we’ve been trained, which is the right way in my opinion. So we’re just not as aggressive as some groups and so our deal flow is not as as plentiful as is some I would say. So the low points on that is just trying to be patient and understanding it’s a process versus Hey, we’re just gonna blow up and scale quickly to you know, a half a billion dollars in assets so it’s it’s been about really being patient

Gabriel Petersen 19:36
patience is definitely one of the hardest things in real estate that is that is for sure. Okay, so so dealing with the with the slow pipeline is kind of a rough thing for you. So now to the top. What’s the thing that you love about real estate? What What brings you back? What gives you up in the bed, or in the morning?

Kyle Mitchell 19:53
Yeah, for me, it’s really just adding value to other people while I learned myself and while I expand our business, it’s amazing. This industry is such a giving industry and going through this whole COVID-19 the amount of information that’s been provided to help other people has been inspiring for me to watch. And that’s kind of what we like to do. And that’s why we’re, you know, presenting the asset management summit as well. But as far as anything else, you know, the highest point when I first got our first deal, we closed on May 29. And everyone says, it’s the law the first deal I don’t know if you ever heard of that, three weeks later, we got our next deal. And that was a pretty amazing feeling. And I, I felt like we had established ourselves right. And you know, little did I know, this is just the beginning and there’s a long road ahead, but it was that was a great feeling, but just accomplishing some of your goals, you know, as a, as an owner of a real estate firm and an entrepreneur. You know, there are a lot of peaks and valleys and when you’re first starting out, I think there’s more valleys and peaks and you start to see more peaks as you go. So I’m excited for that. But it’s it’s amazing to see that hard work. really does pay off.

Gabriel Petersen 21:01
Yeah, you just I mean, as you said before, kind of piggybacking off your low point, you got to have patience. You got to have grit. It’s been a common thing, theme everyone coming on here has said. So I like that just keep pushing. And eventually something’s going to happen and and you’re going to get more and more of those high peaks the high points as you go along, no doubt. All right, so do you do you have a favorite deal that you’ve done so far? something specific that stands out in your mind?

Kyle Mitchell 21:29
Yeah, favorite deal is the 42 unit, which is the first deal that we ever purchase in Tucson. We actually just passed one year of owning it, we listed it This was just right pre COVID. But the properties just does so well. Right? It’s 100% occupied, we’ve got six people on the waiting list. We’ve been able to bump rents still with COVID going on, and we listed it less than a year of owning it. And the biggest thing for me on that one is being able to provide our investors With the returns that not just the returns, we said, but more, and just seeing the fact that we’re helping other people build wealth. It’s really, it’s it’s just an amazing feeling for me, you know, when you first start, you’re doing your first deal. You want everything to go well, but being able to talk to your investors and seeing that things are going well is a it’s a really nice

Gabriel Petersen 22:22
president counting. Yeah. So how do you go on that topic? How do you go about finding finding your capital? How do you how do you go about finding your private investors?

Kyle Mitchell 22:31
Yeah, we have a bunch of different sources and you know, we’re very, I don’t want to say mom and pop more grassroots than a lot of people we do five or six B’s, which are you know, we need to have pre existing relationships with our investors and those relationships take time to build it’s not one conversation and you’re investing in our deal. So we have a bunch of different resources. We’ve got three different meetups between Southern California and Phoenix that we host you know, they’re all virtual now with COVID. But before we were doing them in person and plan to again This summit that we’re going to be doing, we have a podcast that airs on Mondays for passive investors Fridays for asset managers. And then we do free webinars as well. So we just try and add value, you know, I’m on bigger pockets answering questions and things like that. So there’s tons of different ways we’ve got a monthly newsletter as well. But I’m of the mind that, you know, the more kind of fish lines that you have out there, the better chance you’re going to be able to catch one. So we just try and add as much value from different platforms as possible.

Gabriel Petersen 23:33
I like it. So kind of going into, you know, back to that, that idea of, you know, what keeps you going. So if you could give yourself you started in 2010, you started in single family, and then you’ve slowly you know, you hit those valleys along the way and now you’re seeing a little bit more peaks come along. So if you can go back to 2010. That first, the first that Kyle that was doing that first deal in 2010. What one piece of advice would you give him going forward? goes straight into multifamily.

Kyle Mitchell 24:03
Oh man. Yeah, I would not be here if I went to multifamily in 2010. You know, I mean, holy cow that was quite a run. But other than that, you know, constant constant education, which is something that I still do. But you know, I think education is you need to consistently educate yourself, no matter where you’re at, in your journey. Even if you’re, you know, one of the most experienced people things are forever changing. And to stay ahead of people in the value add space, you really need to be creative. And so if you’re not educating yourself and thinking about some creative ways, then you’re falling behind.

Gabriel Petersen 24:39
Couldn’t see it any better myself. Alright, so I we try to keep these between 20 and 30 minutes. So we’re kind of at the end of our podcast here. But if somebody wanted to get actually two things, one, what is it that you need, that you would like people to bring you and to if somebody wanted to get ahold of you, what would be the best way to do that?

Kyle Mitchell 24:59
Yeah, so I would check out an AMX summit it’s not a ms summit I may have misspoke am summit 2020 calm. That’s the best place to catch us at right now because we’re going to be promoting that like crazy. Check out our podcast, passive income through multifamily real estate. And we’ve got a Facebook group by that same name as well. So please reach out I’m pretty active on our pages and happy to help in any way that I can. As far as what anyone can bring us an off market deal in Arizona. How about that?

Gabriel Petersen 25:29
multifamily 100 hundred plus units? Yeah, yeah. All right. Sounds good. Well, Kyle, thank you very much for coming on. I am positive I can speak for everybody listening and watching. We appreciate you sharing your knowledge in the multifamily space. For everybody listening watching if you want to get in contact with Kyle, he just listed where you can go. That is am summit 2020 calm not Ms. summit 2020 calm. So go there or go to LinkedIn. Kyle Mitchell, multifamily investor syndicator is what you can start Other than that, we look forward to seeing you guys on the next podcast.

Unknown Speaker 26:06
Thanks Gabe

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