Sitting Down With Commercial Real Estate Syndicator, Kyle Mitchell, Managing Partner of Limitless Estates, LLC.
*This interview took place in September of 2021.
Kyle, thank you for joining us. It’s a pleasure to have you. We’ve had some interesting folks interviewed in this Newsletter, but you’re the first ex-pro golfer. If I was a betting man, I’d say we probably won’t have another for a while. Can you give us a lay of the land on your background in golf and how you first got into real estate?
Sure, and likewise. I’m honored to join you. I’ll start with your later question first. I was not formally trained in real estate and actually did not get into the real estate business until around 2010. In my previous life, which you’ve mentioned, I was in the golf business. In fact, I have been involved with golf pretty much my whole life. I started when I was 13 years old and fell in love with the game. I played in high school, played for a brief moment in junior College, and then I actually turned professional for a couple of years. Additionally, during the years I was playing from high school onward I always had a part-time job at a golf course.
Some might say you mixed business with pleasure.
You can say that. That said-to make a long story short, playing golf professionally didn’t work out for me. However, I still stuck to the business side of things and continued to work at a golf course. I was quickly promoted to a management position when I was around 21-years-old. And at that point in my life, I just enjoyed being in that position. I still loved the game and also found the work fulfilling. Additionally, I was learning a lot about management and getting regularly promoted. It was a win-win for me.
But, after deciding not to play golf professionally, I never actually sat back and thought to myself-what do I want to do with my life. So, I kept at it and kept getting these promotions. And 15 years later, there I was at a regional director level, managing tens of millions of dollars in cash flow and hundreds of employees. However, I really wasn’t happy with where I was and I never sat back and thought, what do I want to do now?
Well eventually you made a change. Why real estate?
Correct. In 2010, while I was still working in the golf business, I had decided to start investing in single family homes. That was my first foray into personal real estate investing. Real estate as an asset class appealed to me from the vantage point of passive income down the line, from an asset that I could physically touch. I understood that knowledge and education are important and I actually got my real estate license, mainly so I could learn more about the industry. I also took some educational courses and started listening to many podcasts. So, I had already been in real estate with my single-family home investing-now I was just getting more serious about it.
Sure, education is certainly important. I like that you point out various avenues of it. Today, there are so many ways to learn about industries aside from the old-school method, no pun intended, of enrolling in a degree program. So how did the single-family home investing go?
Precisely, there aren’t many excuses not to learn these days. So, I’m educating myself and at the same time I started buying single-family homes. It went well, but I quickly ran into the problem that most single-family real estate investors run into-you can’t quite scale with single-family homes. Regardless, I did that for about three or four years. I got up to ten single-family homes and then I stopped. Then, in around 2014-15, I really got burned out with my job. And I said to myself, I’ve had enough of this. I wanted to find something else. And in my mind that was either another career completely or starting my own business.
Did you immediately jump into multi-family syndication?
No, it actually took me two-years to find what I now do, which is like you said-multifamily syndication. Prior to that, I feel like I looked at every possibility across the globe. I felt like I couldn’t find anything. And then one day I was searching online and I found multifamily real estate. Then, I found a course on multifamily investing. I bought the course, and I absolutely fell in love with the business model of it. Interestingly enough, a lot of what I did in the golf industry can be translated over into multifamily apartments. And not a lot of people understand that transition.
Can you elaborate on the connection between your experience in the golf industry and apartment investing?
Sure, in the golf business I managed hundreds of people. I managed large projects and tens of millions of dollars in revenues. I implemented systems. I hired people. Unfortunately, I had to fire people as well. And so now with that background, there’s a lot of similarities in the apartment industry, where each property is essentially a business of its own.
Just like in golf, where I was in charge of driving revenue and controlling expenses and driving the bottom line for our company, I use similar processes in my multi-family investing. Perhaps that’s why it spoke really well to me. And so about eleven months after I first found multifamily, I left my job to pursue it full time, even before I got my first deal. And I’ve been doing it ever since.
It’s interesting how you lay that out. I see a lot of patterns and similarities in different areas. For example, in general finance one might learn about formulas such as the dividend discount model-which is based on quite a similar structure to the discounted cash flow analysis used in real estate. There are many other examples of this. Was there also perhaps an element of property management to the golf management business? After all, a golf course is technically real estate?
Absolutely. And I was on more of the property management operation side of things too. So, I did liken my job to property management as well, but for golf courses. We reported back to the owners, and I was in there on the day-to-day managing people and managing the financials and so on. There’s a lot of the same in commercial real estate and apartment investing. And, like I mentioned earlier, I always say that multifamily and buying apartments is a business. And you’re buying a business. So, for 15 years, that’s what I did-I managed those golf businesses. Now, I’m managing a different sort of business.
Sure. At a certain point, you have about ten single family homes and you’re finding it difficult to scale. What exactly do you mean by that? Is it that every time you’re looking at a house, you’ve got to do due diligence and everything that comes along with it-for each separate property? And, as a result, it takes a lot of time to close on each single property? As opposed to looking at the grass on the other side and seeing that for a larger complex, it’s one due diligence, one closing, and it’s easier to get to the bigger numbers quicker?
Yes, all that. Another thing was that I was buying turnkey properties. As you know, these are the ones where someone basically flips the house and then I buy it from them already turnkey rent ready. The problem with those is that a lot of the cash flow and the profit potential of the deal is burned up by the people actually flipping the home or the middleman provider who’s also trying to sell you these homes. As a result, when you buy a turnkey rental house, a lot of them are only cash flowing about $100 to $150 a month. The problem for me was that I had a goal where I wanted to be making $10- $15k/month passively on these deals. And to do that, I’d need 100 to 150 houses.
To add to that, unfortunately, the performance on paper often can look better than what the actual property performs at. To jump back to multifamily real quick, that’s another reason why I like it-there are multiple sources of income and multiple controllable expenses that that you can manage and drive towards the bottom line. With single-family homes, there’s not much-you might say everything’s based off the property next door. You’re not going to get a ton more rent for a similar product. But in multifamily, you could manage that asset better than the one next door. If you play your cards right, you’re going to have a better NOI and the property’s value can go up substantially. Generally, more so than a single-family home.
To go back to my dilemma, sitting back and looking in 2013-14, I could not imagine owning 100 single-family homes. It just would have taken too much time. Another roadblock was that I was trying to use my own money. With multifamily syndication, we are able to use other people’s money to buy these multifamily apartments and, of course, at the same time provide a great return to our investors. Listen, you can do that in single-family homes too. But, I think it’s better to do in the multifamily space because of the business environment that I just explained. There are also management reasons why multifamily is a better investment as opposed to an assortment of single-family homes.
Thanks for that background. Now, can you tell me about your first multi-family investment and how you got that deal? As an aside, do you still have your single-family home portfolio or did you cash out of that and use those proceeds for your first multifamily project?
Sure. So, I have one single-family home investment property left that I am trying to sell right now. It is currently occupied, so I don’t think I’ll be able to sell until it’s vacant next year. I’ve since sold off the rest and, as you guessed, used those funds for the multifamily investments. When I left my full-time job, I actually cashed everything out, and I just went all in. I cashed out my 401K. I sold my personal residence and moved into an apartment. I also sold my car. As a result, I built up this little rainy day fund. I figured that for two or three years, who knew what was going to happen with my business pursuits? So I wanted to be prepared just in case. Additionally, in multifamily, you generally need to have some liquidity and some funds to invest yourself alongside your investors. So that’s the route I went-to one single family home left, which I’m hoping to sell early next year.
And then, as far as my first multi-family purchase, I ended up acquiring a property that I had originally come across about three months after I left my full-time job. We closed on it about six months after I left. It was a 42-unit apartment building in Tucson, Arizona. We actually just sold that this year.
That’s the Midtown on Second, correct?
That’s right, Midtown on Second. It’s interesting the way we found that one. To backtrack a bit, my wife and I got started together in this business. We both had our full-time jobs, and we would take a Wednesday off during the week, get up at around 2AM, and drive to Tucson or Phoenix- depending on the market we were looking at that time. We would do that every month and get there at around 9AM. We toured properties, met with investors, brokers, and property management companies, and then toured the city itself. We really packed our calendars and did as much as we could to familiarize ourselves with, and learn about, the area. We’d then drive back later that evening and get home around midnight or even as late as 1-2AM.
Sounds like a pretty intense schedule.
That’s an understatement, we’d then have to go to work the next day. That said, I guess in part due to the pretty much across-the-board agreement that our schedule was intense, the brokers saw that we were really serious about what we were doing. As a result, after one of those drives, a broker called me and said, “Hey, Kyle, I know you’re coming into town today. Do you want to see this listing?” The broker had just obtained the listing and we’d be the first to see it. I said, absolutely. We went and saw it. As an added benefit, we had our property management company with us at the time. We all walked the property and then walked the comps as well. Long story short, we were able to be the first offer in and we were able to take down that deal.
That’s a great story. Out of curiosity, how were the returns on that deal?
Returns wise, it was a great deal. I can’t talk about the specific returns on that deal-but our investors were very happy. We actually were able to sell it in less than two years. The market had appreciated tremendously and we were able to then get our investor’s capital out of that deal and into another strong deal.
That’s great. Now that we’ve covered some of your processes, I want to touch on your capital sources. You’ve put yourself out there as a syndicator. Can you give me a background on how all that came together? It seems to have been a pretty quick process.
Yeah, the timeline was pretty short now looking back on it-though it definitely didn’t feel short while we were in it. It took a lot of hard work between my wife and myself while we were first getting into it.
The first thing is that people need to know who you are and what you can do. When we first got started, we started small. We started with a monthly newsletter, and then we went to a meet-up. Then we started a podcast, a second podcast, and started attending a second meet-up. Now we’re at the point where we have a book, an online course for asset management, and a summit as well. And so that is how we source investors now-both through our summit and our educational platforms. I should add that in the beginning, there were a lot of one-on-one meetings. In fact, we still do a lot of those.
In addition, like I’m doing right now, we are featured in other people’s podcasts and other materials. It’s cliché, but if you’re coming from a place of adding value to others and trying to help others achieve their goals, that will in turn help you achieve yours. Through our educational platforms, we try to do just that.
That makes sense. Your portfolio is about 600 units or so right now, how did that come about?
Yes, in addition to just the general buildout of the Company, we’ve been able to scale our AUM pretty quickly as well. To be exact, we’re at about 400 units right now and have about 400 under contract-so we should be at 800 shortly. There is really not “secret sauce” to how we got there. It’s just about grinding and looking at lots of deals.
In some ways, real estate is a numbers game. This is not one of those industries where you’re going to look at ten deals and take down half of them. Sometimes we have to look at 150- 200 deals to just get 1. And that’s where I think a lot of people getting started get a little frustrated and start to give up. They don’t understand that we’re looking at hundreds and hundreds of deals to get the ones that we really like and eventually go for.
In fact, between our second and third deal, we actually went 13 months with no deals. That was simply because none of the deals put before us made sense financially at time. Now, in retrospect-the market appreciation has been so significant that had we locked up some of the deals we look at during that aforementioned 13 months, we would have made very good returns. All in all, we’re really patient and just stick to the process and trust the process. And we know that as long as we do that, we’ll be successful in the end.
I agree with that. Now, as far as strategy-what is yours? Are you primarily looking at value-add plays? The property you mentioned earlier, Midtown on Second, was that a value-add play?
Yes, it definitely was a value-add play. We always look for some type of operational inefficiency at a property. With our background in management operations, that’s where we are very strong. On that particular deal, when I first went there, I decided to call the number on.