James: Hey, audience. This is James Kandasamy. Welcome to Achieve Wealth through Value Add Real Estate Investing Podcast. Today, I have Anna Kelley from Central Pennsylvania, who owns around 175 units, around $16 million in worth until now. And you know, I should have invested passively in 900 units. And she’s also under contract on around 200 units right now. Hey, Anna, welcome to the show.
Anna: Thank you so much for having me. Good to see you, James.
James: Good to see you too. And, I mean, for those who do not know, we also have a YouTube channel that shows all our interviews. And you can catch up with us on iTunes or Stitcher or YouTube or Spotify so go and do that. I’m actually in one of my property here in San Antonio so trying to do it from my office. And Anna, are you in your office or where are you right now?
Anna: I’m in my home. I’m not actually in my office.
James: Yes. Good. Good, we work from home, I guess, right.
James: So Anna, why don’t you tell our audience about yourself?
Anna: Sure. So I started out in real estate about 20 years ago, just kind of dabbling in real estate. And I started out doing some property flips and some single-family rentals. And then I slowly started moving up to small multi-unit properties, like four-unit apartment buildings, 10 unit apartment buildings. And I recently last May retired from my full-time career, I worked for AIG for 20 years. And I really built my real estate portfolio up on the side, part-time for all of those years. So busy mom, have four children. And I just went full time. And now I’m focused on and have been focusing on for a while much larger apartment building assets.
James: Got it. So let’s go back to the beginning. I mean, you work at AIG, which is a big insurance firm. And can you just quickly tell us what was your role?
Anna: Sure. So at AIG, I had various different roles. I did internal management, consulting, product development, and then I moved into a role that was very compliance heavy. We worked with private placement hedge funds wrapped in an insurance product. So we worked on SEC audits and filings, reviews of PBMs and hedge funds and things of that nature.
James: Got it, so it looks like you have some PPM level syndication experience, even at your workplace, I guess, is that right?
Anna: Definitely, we worked with alternative investments for about 17 of the 20 years that I worked there.
James: So you work there for 20 years and when did you start to real estate venture?
Anna: Why I’d say, you know, I dabbled, I bought some, you know, singles and I bought a flip. And then 12 years ago, when I moved from Texas to Central Pennsylvania to start my husband’s chiropractic business, we were looking for properties to lease for his office space. And we found that it was very difficult to do that. But they had a lot of buildings that came with tenants, you know. Older buildings on Main Street that had been converted to businesses on the first floor, most of them had residential rental space on the top floors. And so we bought a building and inherited tenants. We had three tenants with his commercial space.
Anna: And then that kind of threw me into the idea of having tenants and having a little extra cash to cover the mortgage. And then at that same time, James, we sold a house in Houston that we lived in, liquidated everything, we had to come here and start a business. And so I knew it wasn’t very wise for me to buy another home right away. And AIG let me work from home on a very temporary trial basis to see how it worked out. So I bought a four-unit apartment building for us to live in. So we downsize significantly and house hacked, basically, to make sure that our business expenses, you know, for the space and our housing expenses were covered if I happen to lose my job, you know, 12 years ago when we started out. So that got me into starting to think about and invest in residential real estate.
James: Got it. So you basically, you did not like had an ah-ah moment, I need to go tomorrow and buy real estate. You were actually thrown into it?
Anna: Well, I’ll say this before I went to work for AIG. I was in private banking, I was a Financial Relationship Manager for Bank of America. And so I handled the top 10% of the wealth in our bank, both small businesses and individuals. And what I found is that many of them owned real estate and had accumulated their wealth in real estate or were already investing in real estate. So in my young 20s, I was very interested in real estate thought that it was something lucrative that one day I’d like to own, but I really didn’t start thinking too much about it until I had my first child in 2003. And all the flip houses shows, you know, we’re coming on and I thought, oh, I can flip a couple of houses and be home with my child. And so I dabbled in flipping before the rental real estate. But my move here is what kind of gave me the impetus to think about rentals more quickly.
James: Got it. So, I mean, I never had a woman guest until now. So you are the first one. And I’m very —
Anna: Oh, thank you.
James: We have a lot of listeners that are listening everywhere and I’m sure a lot of them are women. So I’m trying to get from a woman’s perspective, on how could they start like what GF started, right? I mean, your husband is working and you are working too. Like, I would say what do you think could be the secret formula, or they’re just the formula on how can any woman start while they are in your own position?
Anna: Sure, you know, there are different ways to starting, a lot of it James truly does depend on the personality of the person, your family dynamic. You know, how much support you have for watching your children? What other income sources you have, you know, when you’re starting out? And how much basically time and money that you have available to get started? So, you know, people that have very, very limited time might have the significant cash flow or they might, their spouse might make enough money that they could really get started more passively.
And that’s where maybe they want to start investing in other apartments syndications or getting invested as a passive partner maybe joint venturing with someone that has experienced you know, buying and managing either a single or a small multi or a larger and then just investing with money. And learning how to review the financials and review the operations each month and each quarter. Just to kind of get yourself familiar with what it’s like to own and manage an asset might be a good way to get started. For someone like me, that doesn’t have any cash and really wants to get invested by investing time, you have a lot more opportunity to really educate yourself through reading books and through podcasts.
And going to meetup groups to learn what it takes to ask actively, evaluate deals, find them and hire people to update them and improve the values and put a renter in or you can start learning the skills yourself. You know, my husband and I when we started out, he did a lot of the maintenance and I painted every unit. And I called flooring contractors and you know, designed kitchens and help paint cabinets. I mean, we did everything actively because we started out, we had liquidated all of our, you know assets and started out with quite a bit of debt to start a business and we’re running that.
So we really didn’t have a lot of money. So we invest at the time. So there are many ways to get started. But I’d say definitely align yourself with other people that already know what they’re doing, attend some meetup groups, listen to podcasts. And then just decide whether you want to be active or passive for your first one or two until you kind of learn what you like, what your personality works well with and kind of what works within your family dynamic.
James: Got it. So who convinced who between you and your husband? Did he convince you to, hey let’s go and do, spend time and rehab this real estate or did you convince him or how did you? I’m trying to understand how did the discussion happen? Because a lot of people are struggling, I mean could be struggling, right? How do I convince my spouse especially from a woman to the husband side? Usually, the husband can convince the wife, right? But you are the one who’s active right now real estate, how did that work out?
Anna: Yes. So it’s one of those things when we talk about the personality of the individual. When you’re married, there are two people involved in your decisions. And my husband and I, from the beginning, have always looked at our finances and our lives as a partnership. But we kind of has our roles in reverse. I mean, he’s a doctor, he’s a chiropractor, he went to school for a long time. He’s very smart. But he’s very hands-on and a people person, he doesn’t like the finances, he’s not financially minded. He’s not the kind that wants to be an entrepreneur and grow a big business, like he’s content, just having a small practice, and letting me handle all of the finances.
So because I had a background in finance and understanding investments, I pretty much have always handled our investments. And when we decided for him to start the business, I kind of took over the operations and learned how to, you know, run a chiropractic business and set up insurance and all that kind of stuff while he was the doctor and saw the patients. And so when it came to real estate, I said, listen, we’re starting out with a lot of debt after paying off all of the school that it’s just not financially wise for us to do anything other than buying something so we have tenants helping to pay the rent. So it was easy initially to get Vincent to buy his practice and our building, just to be financially wise and not going into more debt.
But growing that beyond that was definitely me as the driver, he was busy with this practice. He did not like to do maintenance, but he learned to do it and liked the fact that once we did rehab units, they were worth a lot more and we had a lot more cash and could keep buying them. But I’ve been told multiple times, slow down, pull off the brakes, we have enough units, why do you want to keep growing? And I am like because I’m passionate about it. And I’m passionate about the wealth that it can create. So I’ve been kind of the driver. And he’s been very supportive and very hands-on for the 70 units that we self manage in our area. But definitely likes that I’m now buying much larger assets where I’m asset managing and he’s not involved day to day in the management and maintenance of the properties.
James: He must be very happy now.
Anna: Very happy, yes.
James: Yes, we started with 45 units. And my wife used to be sitting there whenever we were missing our property manager in the beginning, I mean, she was sitting there doing things and I didn’t do maintenance. But, I used to be with her and trying to buy this and buy that and make sure you know the contractors are lined up. And it’s a lot of work, but it involves teamwork. And yes, we are two different people, we have to learn how to work with each other.
Anna: For sure.
James: That’s good. And so you started with 70 units, with the chiropractic real estate, right? I mean, is it like a commercial center?
Anna: It is. It’s a commercial mixed-use building. So there’s a commercial space that his business lease’s from my business. And it had three tenants, three, you know, residential renters and four garages to that property.
James: Got it. So you got some kind of tax benefit, I guess because the [inaudible11:44] is leasing from the owner itself, I guess, right?
James: So get some write off there, good. And how did you, I mean, so after that and then what was the next acquisition that you did?
Anna: So James, as many people were affected by the 2008-2009 economic crash. Imagine working for AIG at the time and AIG, you know, coming in and having one of the largest insurance liabilities of any other provider in the country between mortgage insurance and credit default swaps. And I worked for them. So I had already, I had been working for them for a year on a work from home basis. And we thought we were going to be laid off, my stock went from 1-o-1 a share to 43 cents a share. My retirement funds were almost just destroyed. They were destroyed. I lost about two thirds within a week. And I decided, oh man, I’m going to lose my job.
My husband has a brand new business with hundreds of thousands of dollars in startup debt and I’m the sole income. So what are we going to do? And the only thing I could think to do right away was to borrow from my 401k, about $50,000 that I had left that I could borrow and buy another four-unit because I thought at least if I buy another 4 unit, I’ll have another, you know, $1200 to $1500 dollars a month of cash coming in. And that’s in the asset, that is solid and stable that I won’t lose any more in the stock market, no matter what happens.
So that was my next acquisition. Again, it wasn’t really thinking about oh, this isn’t a phenomenal investment. It was, what can we do to survive? And I know that cash flow is a good thing. And that residential real estate will not go down in value significantly compared to the stock market.
James: Got it. So after that four-unit, what did you buy the next one?
Anna: Another four units.
James: Okay, and when did you start with the 70 units where you self manage?
Anna: Okay, so what we did, we self-managed, again, initially just out of necessity, not having a lot of extra cash, thinking our finances were not super stable because I was the sole breadwinner at that point. My husband’s income was nice, you know in six figures gross, but it was covering expenses. And so we just we’re continuing to find ways that we could cash flow and make the most cash and be willing to put in the time to do it ourselves and learn at the time. And so we kept buying a couple of single-family homes that we bought as foreclosures, renovated them and instead of selling them as a flip, we did a cash-out refi, we kept them as rentals, we took the proceeds to buy another and another.
And then we did the same thing with small four-unit apartment buildings. So four-unit apartment buildings were kind of my niche and the sweet spot for several years chains. Because there were in a smaller area, I’d say maybe a tertiary market right outside of Hershey. And there’s not a lot of apartment complex supply, no big complexes, but there’s a lot of demand for housing. And so most of the rental real estate here were four-unit apartment buildings that had been built that way or converted, you know, couple decades ago. And there weren’t a lot of big buyers buying those four-unit building.
So they’d sit for a while. So I kind of I saw a niche where I could buy properties without having a lot of competition. And I could basically treat them like a larger commercial asset, but on a, you know, on a four-unit scale instead of a five or six-unit scale. And so I kind of honed my skill in updating those units, managing those units, raising the values, cashing out repeating. And then decided, okay, now it’s time, once I built up, you know, a strong six-figure passive, you know, net rental real estate portfolio, then I decided, now I can retire and I can scale and start going after much larger assets. And so that’s what I did.
James: Okay, got it. So when was the first time that you acquired a much larger than four-unit property? Which year was that?
Anna: Okay, so in 2018, I had basically created a five-year plan James in 2013, that by 2018, I wanted a $5 million portfolio, you know, about $150,000, at least in passive income, and then I would retire and start going for a bigger one. So I’m my goal in four years in 2017. And then just started kind of working my way into, you know, saving six months of salary and expenses for all my buildings and starting to look for larger deals. So I found the first larger deal for me, it was a 73 unit apartment building, right outside of Hershey, Pennsylvania, that I found off the market and I [inaudible16:20] on that with two other owners. That was a six and a half million dollar purchase 73 unit. And we closed on that in 2018.
James: Got it. So how did you manage your time? I mean, your husband is working, and you are doing this fourplex, fourplex, fourplex and your four kids. And you give some tips for people who are in a similar situation and how can they manage and be as successful as you are?
Anna: You know, I think really the key to my success has just been resilience and grit and determination. I worked truly, most people say oh, rental real estates passive. But I like to say and I totally believe James, that passive income is built on the blood, sweat and tears of active income. And it takes years of active, sometimes to build up the financial wherewithal that you can truly become totally passive. So between my husband’s business and my work, and my rental real estate, I truly worked 70 to 80 hours a week over the last 10 years, in order to be able to get to where I am.
My four children are all involved in sports, pretty competitive sports. So we have sports every morning, we have sports after school every day. And most days, it’s seven days a week, you know, multiple tournaments on a Saturday and on a Sunday. So every waking moment when the kids went to school before I started work, I did real estate. My lunch breaks, I did real estate. My vacation days, five out of six weeks a year, I did real estate, you know, evenings between when the kids got home and I worked, it was real estate.
And after nine when the kids were in bed, I often stayed up till midnight to get things done. So it was very time-consuming. But I’m very, very grateful that I stuck with it and did it. And it was just a matter of utilizing every day, I didn’t watch TV, we didn’t have cable, I didn’t go do a lot of recreational things, I really, you know, not nose to the grindstone just focused on building the portfolio so that I could retire and spend more time with my kids.
James: Yes, it’s really hard work, I can really appreciate what you’ve gone through. Because I was working and my wife was like running around in the beginning. I mean, I only stopped working after we had like, 340 units. Now we have like, 1300, it’s a lot of work, right. So based on what you’re saying, it can be done. It’s just like not, please don’t give excuses, right?
Anna: Exactly. I’m here to tell you, you know, if I can do it, working full time, running my husband’s business, four kids and doing it, you know, anybody can do it if you just have grit and determination. So you make the time for what’s important to you. And I knew that it was important to me to be able to work myself out of my job. And especially with AIG, you know, a couple of years ago, they said, we really are going to sell our unit, and we need to all be prepared to figure something else out in terms of career. So that kind of drove me to have executed my plan in a certain period of time. And now you know, that I’m retired, I’m still very, very busy. But I have the freedom to control my time, you know, to do what I enjoy and go after larger deals where I’m not having to be quite so involved in the day to day.
James: Yes Can you define what is grit and determination in your mind?
Anna: Sure, so grit is the ability to stick with something, no matter what comes, no matter what obstacles without basically, you know, melting into a wallflower. And just keep ongoing. And, you know, there’s been a lot of studies done on what makes people successful. And you know, some kids were tracked from high school, through college, through their professional lives and they were really surprised that the top students like the valedictorian, the [inaudible20:04] rarely ended up actually being the most successful people in their professional lives. It was usually the people that went through a lot of hardships, and just kept going and push through and got creative and figured a way through and around every obstacle and became stronger and more confident, and determined. And those are the people that ended up the most successful. So I just I think it’s an extra drive and extra determination and a willingness to keep pushing through no matter what and to not give up on your goals.
James: Yes, so look, I mean, I always tell my listeners and whoever talked to me that it’s always, you know, whether you want to be successful, or whether you like to be successful, whether you required to be successful so, I mean, if you have been this successful, you must have that, I really need, I really required to be successful. I mean, is that true statement that you came to that way?
Anna: I think so. I grew up with very, in very humble means. And I always knew that I wanted to create a different type of lifestyle and a different financial future for my kids and I was just determined to do it. So I’ve always been driven, I’ve always taken on challenges. You know, my first job at Bank of America, I won the number one ranked Financial Relationship Manager in Texas and Employee of the Year awards at multiple jobs, my first couple of years. Because I’ve always had, that I’m going to be the best, I’m going to succeed, I’m going to achieve and do whatever it takes attitude. So I think part of that was ingrained in me from a young age.
James: Yes, I think it’s important, I mean, just the personality itself and the drive to be successful and the requirement; I mean, because your husband and your AIG was going downhill and you must be successful otherwise, your family, it may not be in a good place, in terms of financial. So that’s really good. So describe to me, what was your toughest day in a one day when you have like four kids and all going to all these classes and schools and all that? Have any time where you think that, oh, my God, this is just too much for me as a mom and as a real estate sponsor? And can you describe that feeling and experience?
Anna: Yes, I just actually, you know, Facebook is kind of a mixed bag of whether you like it, or whether you don’t. But I like the Facebook memories that kind of pop up and remind you of something. And I had something pop up this last week, about a three day in the life of a real estate investor that works full time and has four kids. And I looked back and thought, well, I don’t know how I survived it. But back in February of 2018, I believe it was, I had a call that there was mould in the basement and that they were smelling mould. So they opened it up and there was a lot, well, you know, I’m thinking it’s probably like a dripping water heater or something we walked in and there was literally like six inches of goopy mould hanging from every rafter of every space in the basement of a three-unit apartment building with the ground floor, a dirt floor.
And when we opened it up, I mean, it was just really bad. And what had happened was a hot water heater, pressure relief valve had failed in the basement, nobody seemed to notice nobody called us. The person in hindsight said, you know, I thought my hot water pressure was kind of low and not as hot. And I should have called you well, within about a six week period, six to eight weeks, somewhere in there, our entire three in an apartment building was just covered in mould. And inside all the units, I had to meet the tenants, it was snowing and really bad weather. And I had to call, you know, restoration companies and re-home all my tenants and get all of this stuff out of the property. Right after that, we had another property where a roof blew off in another big storm.
And we’re handling the kids and multiple other small things were going wrong, we had a couple of frozen pipes because it was a winter that the ground was just frozen for so many days. So we’re dealing with frozen pipes, re-homing tenants, working full time, insurance, the tenants all wanted to sue me because there was mould and their kids were sick and going to the hospital. And my kids were just young and very needy. And it was like a two or three week period where I thought I’m done, I can’t do this anymore. It’s not worth it. It’s too hard. And I kind of had a little pity party for a few weeks and said, okay, I need to take a break. I’m not buying anything else. And I took about a three-month break where I didn’t buy anything else. And I just kind of took care of those issues. And then, you know, said I need some breather time, we went to the beach. And after I got back from the beach, I’m like, okay, I’m refreshed. It’s behind us now that I’ve handled that period can do anything and just kept going.
James: It’s crazy the amount of pressure and tense moment that you have during that kind of things with family and issues with the deal. So I want to ask one last question before we go into the details of some of the deals that you have done here. So why do you do what you do? I mean, you don’t have to do this right now. Right?
Anna: So a couple of things, James, I’m really passionate about real estate, I’m really passionate about wealth building. And there is nothing like real estate to build wealth. You know, I started out teaching clients about mutual funds and stocks and bonds and how they can make you know, eight to 10% returns on their money if you time everything right. And realize that it takes money to be invested in the stock market. It’s volatile and it’s risky. And really, people can go from nothing to multi-millionaire in a couple of years of investing in real estate if they do it the right way. And so I’ve just seen the real power in that.
You know we went from literally negative $750,000 net worth when we started my husband’s business to a several million dollar net worth and just a few years of really aggressively buying rental real estate. And so it changes lives. And I want people to know, especially women, that that you can change your financial family trajectory, not just for today, but for future generations. And also we’re providing really good housing to people. So you know, I grew up in government housing, my mom was a single mom, she was a property manager for a government housing apartment complex. And I know what it’s like to grow up in an apartment and we didn’t have the best amenities.
You know, all my friends were wealthy, and I lived in a little apartment complex. And I’ve worked with inner-city kids who live literally in shacks with dirt floors in the middle of Houston, Texas. And to be able to empower people and say, your life can be different. And I can show you the financial tools to take better steps and to know better so that you can create generational wealth for yourself. And it just empowers me, it drives me to keep doing it, not just for my own wealth accumulation, but to help other people to learn that they can do the same.
James: Yes, that’s very interesting. I mean, what you say this, anybody can do this, right? And I know a lot of people are listening to you, there will be some people who think, yes, I can do it too. Then there’s another group of people, they’re going to give reasons, oh, Anna has this, Anna has that, that’s why she’s successful. So if you are the one who’s giving reasons, I know you want to stop that, because indefinitely, you can make money in real estate, especially millions of dollars, if you really work hard. And if you really, really want it, a lot of them just do not want to do the work. They really don’t want the success, they just want to continue with their life and just go ahead and do whatever they’ve been doing and let the life takes wherever it takes them.
Anna: Yes and I think part of that James, for so many years, you see these teams, these shows reality TV, and people convince you that it’s easy money that you can do it, that you can be successful. There’s coaching programs and gurus that you know, charging five, ten, twenty thousand dollars to sign up and learn how to do real estate. And they promise you that if you follow these three steps, you’re going to be independently wealthy in a year or two.
And I think when reality hits people, and they start investing, and they start to see how hard it actually can be on a day to day basis until you build up that experience and that wealth, they just give up and they feel like failures because they’ve been sold an unrealistic expectation of getting rich quick in real estate, when it’s really the long game. You know, you’re playing a long game, it takes sometimes longer than it should you know, some people get lucky or find the right network and connections and very quickly can build wealth. But for most people, it’s slow and methodical growth. And it’s just people need to realize that it’s not easy, but it’s not that complicated if they just stick with it.
James: Yes. And they are people who did one real estate and failed badly. And they gave up on real estate. So there other people that you know, yes, one time fail doesn’t mean anything we could, we would have failed many times, I guess. Right, so.
Anna: Sure. I lost money on my first flip. And I was convinced I’d never do another one. And yes, I changed my mind quickly. And I’ve done a few but rental real estate is really where the wealth build up comes.
James: Yes, yes, in my single-family days, I do like 11 rentals, but I was also doing two flips. And I regret doing flips, because I made like, 40,000 on one flip and I buy a loss and $1,000 on another flip. And that thousand dollars feel very painful.
James: Because you shouldn’t be losing money in real estate, but it really taught me a lot of things on how I didn’t do it right in terms of the flip. But just because somebody did one and they fail, doesn’t mean the whole real estate is a scam. Right?
James: Definitely make millions of dollars in real estate, especially if you’re living in the US.
Anna: Yes, yes.
James: It’s a country where it allows anybody to grow, there is no limit is just you. Right?
James: So no reasons, right? So if you give reasons, that’s you so that’s the only thing. So let’s go to some of the deals that you have been done. And you so you are buying fourplex, fourplex, fourplex. And you started [inaudible30:21] on the 70 units and you self manage and you go into the syndication, why are you going into syndication now?
Anna: So, I think some of it comes back to the time and the money, that spectrum of do I have more time or do I have more money? When I got started, I didn’t have money and I could have said I didn’t have time, but I made time. So it was a heavy, heavy time investment. As I built wealth and as I built more cash flow, it just made more sense for me to be able to scale larger with other partners and to be able to be an asset manager, operator, rather than the property manager or the maintenance person. So I’ve gotten to a point in my life where even though I’ve retired from my job, I really want my evenings to be free with my children and just to be wife and mom in the evenings and just spend a certain number of hours a day doing real estate.
And so I got to a place where I had to say, you know, how can I really scale if I’m still self-managing many, many more units, it’s going to take me a lot longer of full time effort, even though I don’t have a job. And I wasn’t really willing to sacrifice any more years with my children working more than 40 hours a week. And so I wanted to control my time and continue to scale. So I figured I needed to start working with other people, utilizing other people’s time and other people’s money. And the larger multifamily allows you to do that because you can afford full-time property management, full-time maintenance staff and really become more of an asset manager and business plan executer than you are an individual who self-managing your own properties.
James: Yes, business plan executer, that’s the operator definition, I would say.
James: How do you define operator slash active asset manager in your mind?
Anna: Sure. So an operator is basically the person responsible for operating that asset soup to nuts and executing your business plan. So it’s generally, you’re just general partners. And there will be either all the general partners will be involved in the asset management or overseeing the business plan and making sure that your plan for that particular property is being executed the right way. So for example, if we’re buying a value add property, like the 73 unit that we did and the others that I go after, it’s a property that is usually poorly managed, its expenses are not being managed well, the rents are below market, and perhaps the units need to be updated in order to maximize the rents so that you can then increase the value of that property.
So as an asset manager and operator, I’m working with our property management company or a property manager and with our contractors to make sure that you know, when units come available, we turn those units quickly, we update them on time and on budget, we raise the rents, we get the new tenants in there. So that we can execute our plan to raise the values before we sell or refi. And we work with the property managers to make sure that they’re cutting the expenses in the way that we planned, that they’re monitoring the expenses, monitoring the rents, making sure rents are being collected, and you’re just basically overseeing soup to nuts, all of the things that are supposed to happen to make your asset more valuable.
James: Got it, do you think there’s a certain advantage of being a local asset manager?
Anna: I would say yes, in that really bad, unforeseen, unexpected things happen, like mould damage, or like when blowing roofs off or a hurricane, you can be at that asset very, very quickly. And you can also stop in and visit with your property manager, your property management company on a monthly basis, bimonthly basis and just say, hey, let’s walk the ground, show me what you’re doing. And there’s just never anything as valuable as actually being on the ground and seeing it. However, in today’s world, where we have the technology, we have zoom, we have our phones, where we can take pictures, and we can walk around, it’s pretty easy to do things virtually as well.
So while the operator in me that’s always had, you know, my boots on the ground, and always been able to see kind of likes the control of being able to be at a property within an hour. It’s not necessary, if you trust your team and have a good team that’s boots on the ground, and can just go to your asset maybe once or twice a year. So I haven’t really done it from afar. I’m asset managing my first property that we have under contract right now, two properties in Atlanta. And so I’ll be sharing asset management responsibilities there. And that’ll give me a little better feel for how much easier or harder it is to do from afar.
James Got it. Got it. So let’s come back to value add. So all the deals that you’re buying a presume are value add, right?
James: I mean, you’re adding some things to the operation, either the income or the
expense, right? So what do you think is the most valuable value add in your mind?
Anna: So I really like Class A to B areas and an older building because your area you can’t change, a lot of syndicators go after class C area, workforce housing and older buildings. And so you’re struggling not only to bring the asset up to today’s standards but also with a tenant pool who may suffer more heavily if we head into a recession or they may be more susceptible to losing jobs and not being able to pay rent. Where when you’re in a nicer area where there’s really good school districts and people want to live, there’s a lot of good employers and a lot of good shopping and things around, you’re always going to have people that want to move into that area because it offers the best lifestyle for those people. And so if you can find an older asset, you know, you’re not struggling with the area to keep your units filled. It’s just a matter of now offering an asset that people want to live in while they are in that area. So I’m really a value add investor, not doing like full major repositions, taking units in a C class area, that’s 40% bacon and trying to fill them up. I like stable assets in a stable area that just needs some updating and operational efficiency in order to bring them up to today’s standards.
James: Good, that’s very interesting. I never heard that from anyone else. Because the strategy is for you to look for the good area, but look for older buildings and try to improve from those older buildings, I guess.
James: Okay. Interesting. But what about the like interior rehabs and do you do any like rehabs on the inside? And do you think is there any specific rehab that you think is more valuable than others?
Anna: Sure, you know, it’s really market-driven James’s I know that you know, but for your listeners, every market demand something different. So where some parts of the country in order to get you to $1100 a month rent might demand granite countertops, and they might want really nice luxury vinyl plank flooring, other areas like tile, and they don’t like granite, they like maybe stone countertops, and other areas to get that much, you might be competing with a $3,000 a month luxury apartment that would have granite and vinyl plank and maybe 1000 would get you carpet and a nice floor-laminate. So you’ve really got to look at what does your particular market demand and not just assume that every rehab has to be a cookie-cutter that looks the same.
So what I do is I look at what is the competing market? What is the complex is offering to get that top rent that they’re getting today? And I kind of secret shop those complexes or go on their website and see what those units look like. So for the 73 unit, for example, our property was a 1985 vintage when we bought it in 2018. So it was a little bit older, had a lot of original oak cabinets, plain commercial grade carpet, old looking vinyl. And basically we went in and we just changed up the flooring to vinyl plank flooring in the main living areas with carpet in the bedrooms. And the reason we did carpet in the bedrooms is because it’s really cold in the northeast. And so a lot of people don’t like solid flooring in their bedrooms. So we kind of save a little bit of money on doing carpet in the bedrooms and vinyl plank elsewhere.
And we replace some countertops and updated old cream-coloured appliances to stainless steel, or very nice white depending on the unit. And then we painted the apartments, a soft, grayish color kind of more on the gray side. But the flooring has kind of had some greys and browns that go well with everything. And really for just a couple thousand dollars in new flooring and paint and some countertops and appliances, we were able to raise the rents $200 a unit. So it was a significant increase in rents because when we bought the property, not only were the units kind of dated, but the owners had not raised rents on several other tenants for several years. And so the property right next door to ours was asking 175 to 225 more a unit with the exact same floor plans as we had. So it was a great property because we didn’t have to do a whole lot in order to bump those rents and achieve that big increase in value.
James: Got it. So I want to go a bit more detail on how did you choose your rehab plan because you said you did countertops, you did stainless steel and a few other things there. But it’s for example, how did you choose? Why did you want to install stainless steel appliances? Can you give some education on how did you go to that process, say I want to do stainless than black appliances?
Anna: Well, and again, this is we’ve kind of left appliances, we’ve kind of played with it a little bit because we had so much room to bump the rents. And we looked at what is next door offering? They’re the biggest competitor. So next door had certain units where they offered a premium package with stainless steel appliances. But the standard package didn’t, it had white appliances. So we said for the first couple that comes available, let’s do the vinyl plank, let’s paint them. And if there’s a cream color, for example, one unit had a cream color stove and a white refrigerator and cream color, you know stove and we said let’s keep the brand new white refrigerator. And let’s just put in a white dishwasher, a white stove and see if we can get the rent that we want without going stainless. So we did that on a few. And we had a huge waiting list of people that wanted those apartments, they couldn’t care less about the stainless steel and so we didn’t do it. So you know initially we thought we were going to go all stainless but people, we’ve been achieving the rent bumps we want without having to do stainless. And so we haven’t done it at this point.
James: Got it. Yeah, that’s how you and I think that’s a good strategy to look at the base on where you didn’t want to overspend versus how much rent bump you need, right, because —
Anna: Yes. Sorry, go ahead.
James: No, I mean, somebody can use that extra money for something else.
Anna: Exactly. And the other thing, you know, because I focused primarily in my general area, I know the market like the back of my hand. So the buildings that we bought the 73 unit and the subsequent 31 unit that we just brought too, they’re basically my direct competition. So I know what tenants are looking for, I’m already offering it in my town. And basically within a 30-mile radius, we know this is what the market demands, this is how much room we can get for it. And so while people think, oh, I need to do all these fancy bells and whistles, you really just need to look at what your competition is doing it over, improve it to the level that you’re going to get the top rent, but don’t over-improve it to the point here that you’re spending needless cap backs, that aren’t going to get you that much of an incremental rent bump.
James: Got it, sounds really awesome man. Let’s go back to the slightly more personal side. Is there a proud moment in your real estate career that you are really, really proud of, one moment?
Anna: One moment, I think, on my 73 unit, sitting down with my JV partner and his partner that he had partnered with stuff, and really being able to convince him that this was an amazing asset to invest in. And he agreed to fund my first large syndication deal. So I was just really proud that I was able to build up the financial knowledge and build up the confidence and the track record from what I had done on a smaller scale that investors would trust me to take their investment and really manage an asset well for them.
James: That’s where you broke out from the four units to more than 70 units, which is a big achievement, I guess, right?
Anna: Yes. And I think that and the day that I retired, when I was able to retire from a job where I worked with accredited investors to be able to say, you know what, I’m retiring, I’ve replaced my income, I’ve more than doubled it, I’m now an accredited investor. And I don’t ever have to work for someone else, again, I think is probably one of the best moments of my life.
James: Yes, that’s really important. Can you name like three or five advice that you want to give for newbies who want to walk along your path?
Anna: Sure, I’d say educate yourself as much as you can, you know, listen to these great podcasts and just learn from people that have already done it because you learn the things not to do and you learn that the good habits to do to kind of make yourself an excellent investor. So really commit to your education, podcast, read some books and attend some local investor meetup groups so that you can align yourself with other investors. So one is education. One is networking and alignment. And you’ll get some continual growth and continue education just from learning from people that are in your network that are already doing what you want to do.
I would say also start really looking at yourself and what your goals really are. So like you said early in the podcast, many people think they want to be a real estate investor. But when they discover how hard it is to do so, they kind of back off and maybe flounder for a while. And all of us can do that if we really don’t know why we’re doing something. So look at yourself, ask yourself what you really want in life. And why do you think real estate can get you there and then back into how much time and money am I willing to commit to my real estate investing venture. And if you don’t have a lot of time, you’ve got to commit yourself to find money or finding other people’s money or working with other people. And if you have a lot of time and not money or I think vice versa, then you need to really be willing to put in that time. And so look at your why; look at your time and your money and start figuring out how best to utilize every moment of time that you have, every moment of cash you have and other people’s time and money so that you can start to scale as quickly as possible.
James: Awesome, awesome. So Anna, why don’t you tell our listeners how to get hold of you?
Anna: Sure. So I’m on Facebook as Anna ReiMom Kelley. And I have a Facebook group called Creating Real Estate Wealth that lasts with Anna ReiMom, where we talk about real estate and really creating wealth and kind of the good, bad and the ugly of all the different asset classes. And you can email me at firstname.lastname@example.org.
James: Well, Anna, thanks for coming into the show and providing tons of value. Anna, you gave a lot of very good perspective from how you juggle your role between being a mom and being a wife and trying to grow the business and I think our listeners would absolutely get tons of value out of this. And as I say there’s no reason not to be successful in anything that you do and real estate is just a tool. You can be successful in anything but you can be successful if you really put your heart into it. If you really, really want it you will be successful. I mean, if you give reasons, there are tons of reasons you can give not to do something.
Anna: Absolutely. Thank you so much for having me, James. It’s been my pleasure.
James: Thank you, Anna, bye.