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Financial Independence Through Real Estate with Kaylee Mcmahon - CREPN #233

Commercial Real Estate Pro Network

Release Date: 01/30/2020

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Retail trends in real estate continue to change with the and for the consumer.

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I would say if you own retail real estate and you have an exposure, um, high exposure to department stores and apparel retailers, I would say if your portfolio contains a large portion, the percentage of your occupancy, um, is coming from department stores or apparel retailers. I would say you need to rethink when those options come up.

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So the saddest, I'll give you the saddest phone call we get in this office. My sale closed yesterday. I want to do a 10 31 exchange. So the BIGGEST RISK is not talking to an exchange company and they get fixated on the 45 day deadline, which as I said is the worst deadline. But the biggest risk and the worst case scenario is they don't talk to a 10 31 exchange.

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The biggest risk is an external, uh, situation happening in your life that forces you out of an investment earlier than you wanted to be in it. You know, and that's really the, for most people when they're investing in the stock market, a margin call comes along and that wipes out, you know, 50% of their portfolio. We don't get involved with margin, we don't get involved with leverage. So for us, the biggest, the single biggest risk is a life situation happens.

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This may sound funny to a lot of real estate investors out there, but for me, this is a big deal. I purchased a two and a half acre property for $700, and two weeks later I sold it for $2,800 cash. I just tripled my money on a land deal. And I'm a physical therapist. Like I don't have an ounce of business or, or real estate or you know, anything in my body, sales or marketing, I'm not an economist, nothing. And I took this, I took $700 and I turned it into $2,800.

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Financial Independence through Real Estate is available to you.  

Kaylee Mcmahon is proof that if you are willing to hustle, you can create financial freedom through real estate.  She is based in Texas and has tried a lot of different things, learned a lot and grown an impressive portfolio in a short amount of time.  

Single Family Real Estate

In the beginning, Kaylee got her real estate license and worked as an agent and broker listing and selling single family properties.  This availed her to do flips and learn how to manage projects. Flipping houses taught her that she has little patience for babysitting grown men, contractors, who cannot perform as they have promised.  But the experience taught her what is involved in renovating a property. 

Marketing 

Regardless of what you do, in order for others to know what you do, you have to market yourself.  Kaylee was featured on Ryan Harper’s Propelio TV, YouTube channel, which created a video resource for real estate investors.  Here, she met and networked with real estate professionals with many different skill sets while growing her sphere of influence in real estate.  

The Apartment Queen

At one of Propelio’s large networking events, she heard Will Crozier talk about the $780 Million  portfolio of multifamily properties he acquired in just eight years. He explained how the economies of scale multiply with multifamily.  At that moment, she knew the path to her future and true financial freedom through real estate. The Apartment Queen was born.  

She connected with Will, and other investors and learned all she could.  

Multifamily Syndication

To date Kaylee has syndicated six apartment properties in just under three years.  The first two deals happened almost simultaneously. Kaylee raised all the money herself, and leveraged the experience of her partners.  The experience of her partners provided Kaylee with a sounding board for her to solve the problems and issues that go with syndicating multifamily properties.   

Her partners also provided the networth required with the banks to qualify for the loans.  Lenders require your net worth be greater than the value of the property you are acquiring.  When you are just starting out, this is a great opportunity to find and work with a high net worth investor. 

Raising Money

Raising money in the beginning is tough.  You have no track record, everything is new.  The key she has learned is to continuously be raising capital.  When she meets with her investors, she qualifies what her investor is looking for and how much they have to invest.  Then she stays in touch with her investors.  

Her efforts have paid off.  Now her deals are getting oversubscribed, and she is able to raise millions in hours.  

Independence

Real estate has provided independence for Kaylee.  As an agent, she made enough money so that she could afford to live on her own.  Her success has allowed her additional opportunities for networking and travel so that she can get away from work and recharge.  Being alone provides her the time to evaluate what she is doing and how it is working for her.  

BIGGEST RISK 

Each week I ask my guest, “What is the Biggest Risk Real Estate Investors face?”  

BIGGEST RISK:

I think the BIGGEST RISK in what I do, multi-family investing, is making sure that the deal the way that you buy it. If you don't buy it, right. Sorry, sucker! 

The point is, is you want to buy it at the right price to where there's a margin of error. There's a margin. So, for example, if you screw something up, it's like, OK, well, we have enough cash sitting over here, we can fix that problem. Or you want to be as far away from foreclosure point as possible. 

You know, everyone's everyone's freaking out honestly about, you know, these the cycle changing and coming.  I think people are freaking out and that's going to cause an issue. I don't think that there really is going to be an issue probably for another three years. But I think because people are preemptively freaking out. You know, so you have to mitigate the risk.

So one thing I build in to the underwriting on a deal is you want to look at the market vacancy. So for me, I go ahead and say, OK, let's look at the deal. If we have to drop the rents or if we have to increase vacancy 10 percent. So I do that and then I take the rent number or the rent amounts we think we can get. And when I reduce rent and take the actuals. What it's doing today, not what we think we can, which is twelve. But on an actual worth doing today, I take that down 10 percent. 

Let's decrease rents 10 percent because we have nonrecourse debt on these loans. Right. I check out the expenses and I use the expenses at the same rate of growth. So like if to expense growth every year. Expenses are going to increase. And so I say, OK, we're gonna grow 2 percent every year. 

I could talk on this forever, but there's there's several stress tests that we put our deals through to make sure that we can ride out a recession, which I think is the biggest risk.

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