How Kyle Mitchell Did His First Multifamily Syndication in Only 8 Months
Like many other real estate investors, Kyle Mitchell got his feet wet with real estate by investing in single-family homes on the side. He spent the majority of his days working as a regional manager for a management company specializing in golf courses. When he invested in his first single-family home several years ago, his goal was to develop a stream of passive income. Today, he is the co-founder and managing partner at Limitless Estates, a firm that specializes in multifamily syndication. How did he make such a swift professional transition from a first-time investor to an active commercial real estate investor?
The Scalability of Single-Family Investment Properties
Approximately six years ago, Mitchell started building up his portfolio of single-family homes with the intention of continuing on this path until his passive income needs were met. He eventually accumulated a total of nine investment houses, and he continues to own these homes today. However, he realized after a few years that the scalability of single-family investment properties was limited. He hoped to grow his passive income stream at a faster pace, so he took a closer look at multifamily investment properties.
Identifying the Right Multifamily Property
Kyle initially decided to invest in a multi-unit apartment complex with his fiancée, Lalita, and they focused their search on the Tucson market. Mitchell estimates that he and Lalita traveled to Tucson from California approximately 10 times before they stumbled on the right property. Because they were out-of-state buyers, they took a boots-on-the-ground approach to familiarize themselves with the market and with key players who they wanted to team up with in various capacities. The property they located was a 42-unit apartment complex that they ultimately purchased for $1.65 million.
A Closer Look at Finances
Initially, Kyle and Lalita planned to purchase the property themselves, but they ran into a roadblock with financing. When they transitioned to a loan application for a Fannie Mae multifamily loan, they needed to take on a few investors to provide additional required capital. Altogether, they instilled $1 million in equity in the property. Approximately $350,000 of the upfront funds were allocated toward renovations. Specifically, the renovation funds have been used for interior and exterior painting and replacing sliding glass doors with wooden doors. In addition, funds were applied to replace railings, rebrand the operation, buy a new sign, and add amenities like a barbecue area and a dog park.
Post-Closing Insight on the Property
As is the case with many real estate investors, Mitchell and his partners learned more about their multifamily property after closing. Specifically, they determined that the former property management company did not communicate well with the established tenants. The partners have since improved the situation by bringing a new property management company on board. In addition, the investors discovered that the renovated and improved property could support a rent bump. Overall, this was a $125 per month increase per unit plus an additional $35 per unit per month for RUBS.
A Look at the Project’s Equity Partners
Kyle believes that one of his most insightful quotes of all time is, “Real estate is a team sport.” This applies as much to the property management company and third-party professionals that it takes to make a project successful as it does to the investors. When Mitchell and Lalita determined that they needed to take on investors, they were approximately 30 days away from closing. They had to scramble to find the right investors for the project. Ultimately, they found investors who were willing to participate with between 5% and 15% equity in the deal through a meetup group. Mitchell acknowledges that some of his investors ultimately were not able to contribute as much as they thought they would simply because of life factors. He references events like extensive traveling, having a baby, closing on other investments, and more. In hindsight, he realizes that he should line up investors before the deal kicks into gear and that he should have access to more equity than he may ultimately need.
The Decision to Focus on Real Estate Full-Time
After purchasing the property, Kyle and Lalita decided that he should focus on managing real estate investments as his full-time work. He left his old job and has not looked back. Overall, the couple realized that they did not collectively have enough time or energy with full-time careers to focus on building the relationships necessary to be truly successful as multifamily real estate investors. In fact, Mitchell states that some of the best advice that he can offer to other aspiring investors is to break out of your comfort zone. He believes that true growth comes when you push yourself to the limits, and he views his shift away from his salaried job in this way.
Focused on the Future
With this commercial real estate property purchase under their belts, the investors are ready to look forward. Mitchell plans to sell his nine single-family investment properties. While they are profitable and he may take a loss on their sale, he believes that his assets may be better focused on multifamily investments over the long run.
Networking and Developing Relationships
One of the meetup groups that Mitchell participates in has approximately 10 members and operates in a roundtable format. Each member of the group has the opportunity to talk about projects that he or she is working on over the next month. This gives members the chance for both education and networking. Mitchell also participates in a much larger meetup that focuses specifically on educating investors.
Going forward, Kyle and Lalita plan to continue attending the meetup groups every other week. They also run a podcast and host a free webinar to help others who are getting started as real estate investors. You can keep up with the pair’s future endeavors with multifamily syndication through these platforms.
Disclaimer: The views and opinions expressed in this blog post are provided for informational purposes only, and should not be construed as an offer to buy or sell any securities or to make or consider any investment or course of action.