481: So Cal Husband & Wife Team Crushin’ It in Indianapolis

SHOW NOTES FOR EPISODE 481: SO CAL HUSBAND & WIFE TEAM CRUSHIN’ IT IN INDIANAPOLIS

Have you been wanting to get started in real estate investing but just don’t know where to start?  In this episode, learn how husband and wife accountants Dan and Kelly Perez faced the same decision and, despite a strong sellers market and a global pandemic, they start investing and, in just two years, have managed to acquire 125 doors and counting!

What You Will Learn

• How you can make your “non-asset” personal home into a cash flowing real estate asset
• Where you can invest if your neighborhood or state have no promising rental properties
• Why out-of-state investing is ideal for “”A-Type” personalities
• How you can grow a real estate portfolio while working a full-time W2 job
• What you can do if you want to invest in real estate but don’t have the money
• How to leverage your strengths and invest effectively as a couple
• The two types of real estate businesses you can do

About Our Guests

Dan and Kelley Perez

Dan and Kelly met at the University of San Diego where they both studied Accountancy.  They have always had a passion for real estate and began investing via house hacking in 2015, but started out of state investing at the end of 2018. They both currently have a portfolio of single and multi family properties in Indianapolis and are also partners in a Kansas City multifamily deal.

Their goal is to create an additional stream of income to provide financial flexibility as they look to expand their family. Buy and hold investments have been the most consistent method thus far, even though they have tried a few fix flips as well based on opportunities in the market. They pride ourselves on building relationships and allowing the real estate deals to occur organically through the processes and systems they have established. Ultimately, they would like to master the trade of building a profitable business that provides affordable homes for tenants and, at the same time, teach their strategy to other investors so they may find similar success.  They both currently live in Carlsbad, CA.

More About Dan and Kelly

• They are both from Southern California
• Met at University of San Diego
• Both studied accountancy
• They both are currently full-time W2 accountants
• They live in Carlsbad, CA
• At the end of 2018, they started their real estate investing journey in Indianapolis and Kansas City when they started to research markets and build their teams
• In the beginning of 2019, they bought their first property
• They currently have 125 doors – 70 they own outright and the rest with partners
  • Many single family
  • Just purchased a 54-unit in Indianapolis
  • Limited partners on a 32-unit in Kansas City
  • Will continue buying single family and multi-family
• Their main strategy is “buy ‘n hold,” where they have rental properties for long-term passive income
• They have also done some “fix ‘n flips” as the opportunities present themselves

Buying Their First Personal Homes

• Kelly said:
  • Some people spend their money on cars, concerts and other things
  • She always wanted to just buy a house
  • But buying in So Cal is not cheap
  • Starter homes in So Cal begin in the $600,000s
  • They worked very hard to get their first “starter home”
• They rented out rooms in their house to friends to reduce expenses
• They ended up selling that first primary resident and rolling the gains into their next primary resident
• They are currently in the second primary house
• It has a “casita” (a small house) in the back of they lot that they rented out as well

Real Estate Investing and Partnerships

• A friend of theirs and her boyfriend really wanted to get into real estate
• They were seeing friends buying rental property out-of-0f-state first, before their primary residence, because it’s cheaper and can generate cash to fund their first primary home
• Both couples started talking with their friends and discussed cities they were interested in, did some analysis and started discussing what they wanted to do
• They took about 6 months to evaluate, do market analysis, find key cities, pick out-of-state teams (PMs, contractors, etc.)
• They threw out a few offers
• In that process, they discovered that the two couples would not work well together
  • Dan and Kelly were very decisive, understood the risks involved and were able to move more quickly
  • The other couple were fairly hesitant
  • The other couple also hadn’t purchased their primary residence as well
  • They never ended up investing with the other couple but the process helped them to move forward on their own investments

Evaluating Strengths as a Couple

• It many ways, Dan and Kelly are alike but they both still have their dominant individual skills/interests
• Dan is…
  • More of a “people person”
  • She calls him the “Director of Friendship”
  • Strong networker
    • Joins key groups
  • the “acquisition guy”
    • Builds relationships
    • Identifies the properties
    • Cultivates relations with brokers, realtors, sellers
  • coordinator with out-of-state team members
    • Walks through properties with contractors
  • Value-add aspects
• Kelly is…
  • More in the “back-end”
  • the deal analyzer
  • evaluates deals in relation to their overall investment goals and long-term strategy
  • person to make sure projects are going according to plan
  • assistant to doing the closing on the property
  • rehab coordinator
    • holding contractors to their deadlines
    • draw payments
    • video walk-throughs with contractors
  • the person to arrange financing
  • quality control – making sure things don’t fall through the cracks
• Both are very process and systems-driven
• Not real strong on utilization of technology solutions
• Their strengths are
  • Overall relationships with team
  • In relaying their goals to team members
  • Tough on their teams and set high expectations
  • When things go poorly or not according to plan, they give quick, honest feedback
  • When things go well, they also are quick to acknowledge those things to their teams

The Covid Advantage

• One benefit Dan and Kelly drew out of the coronavirus epidemic is that the companies have found that accounting personal can easily work remotely
  • This has made it easier for them to both do their W2 work and manage their real estate business more effectively
• This has also allowed them to move closer to family (Kelly has relatives in Jacksonville) and their properties in Indianapolis

Moving to Jacksonville

• Kelly has family in Jacksonville, FL and they have decided to relocate there
• Florida also doesn’t have personal income tax
• They may also look at properties in Florida
• Dan says, because they are both strong “Type A” personalities, they don’t want to live too close to their properties or they would be over there all the time
• They like being out-of-state investors and they are good at it
  • They check-in early in the morning with their teams periodically
  • They manage very well at a distance
  • One of the good things that did very early on with contractors was a verification system
    • They have their inspector do a checklist of items with their contractors before they send their final draws.  He evaluates
      • Was the work complete?
      • Was it done properly?
      • This is in addition to the contractor’s punch list

Biggest Mistake

• Partnering with the wrong team members
• Before they got started, they made calls to local investors, real estate agents, wholesalers, contractors, property managers just to get a sense of the market and who (when speaking to other investors) investors are working with
  • Some are reluctant to share their good contractors, property managers, etc. but, as they build relationships, people are more likely to share
  • Even though a team member will work with one investor doesn’t mean their style and approach will work with another
    • Dan and Kelly are very Type A and they work best with prompt communication
• Their biggest mistake was partnering with team members that weren’t exactly what they wanted and hoping it would eventually get batter (and it didn’t)

Biggest Success

• Knowing how to identify and pivot properties to their best advantage
  • Should they flip or buy ‘n hold or wholesale
  • Leveraging a property for the best long/short term strategy

Advice for Old Dawgs Looking at Real Estate Investing to Help Them in Their Retirement Years

• First, you must know what your goals are and how much time are willing to put in to your real estate investing
• Many people think that what Dad and Kelly are doing is passive.  Yes, it’s passive income but to generate that income it has not been a passive experience at all
• There’s a lot of time and stress involved
• What is your risk tolerance and what kind of time do you have available?
• From there, you need to determine are you in it for cash flow or long-term generational wealth
• Look at your options
  • Type of investing
    • Passive
      • Debt or equity partner
        • Have someone else to the hard work (find the deals, rehab, manage)
    • Active
      • Finding your own properties
      • Financing
      • Rehabbing
      • Building a team
      • Managing
• Also, if you’re not ready to invest, get your business ready and wait for the right deal
  • Set-up LLCs
  • Get pre-approved financing
  • Get provate financing
  • Develop a team
  • Talk to your CPA and attorney
  • Do research

Structuring Their Investments

• When they first started, they only had one LLC
• They started adding properties to their LLC but as they got to about 10 properties
• Their attornet told them they were at a lot of risk with so many properties in one LLC
• They never dreamed that they would grow their portfolio as fast as they did
  • They have now created two arms to their company
    • a “C Corp” on one side that is the owner of their rental properties
      • There are a couple of LLCs under the C Corp
      • That is their “flipping” arm
    • a Wyoming holding company
      • Under that are 20 LLCs registered in Indiana and some other states
      • All rental properties are here
      • Filed as a partnership return

Current Business

• They are still discussing what they want their business to become
  • A “lifestyle” business that grows to a certain size to fund their lifestyle
  • Or will they build an “empire”
• They like both but see the difference
  • A Lifestyle Business
    • It’s easier
    • As they’re building a family, it fits in better with family priorities
    • Focus on paying down debt
    • Consolidating debt
  • An Empire
    • Building your balance sheet
    • Someone else is paying down your mortgage
    • Requires much more time
    • Full-time job
    • More stress
• What excites them about real estate investing and their future?
  • They have options
  • To be able to…
    • Travel whenever they want
    • Go out to dinner anywhere, anytime
    • Spend time with family
    • Go to sporting events
  • They like the idea of the freedom real estate will give them that their jobs do not allow
• They figure that right now each property yields them $100 to $125 a door
  • They want to eventually own them outright
  • Then, they can have the freedom to do what they want

Rap-It-Up

• Favorite real estate book: One Rental at a Time by Michael Zuber
• Favorite business book: Tax-Free Wealth by Tom Wheelwright
• Most valuable web site for success (other than your own): No website but big on podcasts: Old Dawg’s REI Network, The Bigger Cashflow Podcast and One Rental at a Time on YouTube.  Kelly also likes Redfin.com
• Favorite app: Facebook
• Favorite quote: “You miss 100% of the shots you don’t take.” – Michael Jordan
• If you lost everything – all your assets – and had to start all over, knowing what you already know, and you only had $1,000, what would you do to launch your real estate investing business? Dan would use the $1,000 for coffee, meals, networking, even flying to meet face-to-face with potential investors and team members.

How to Reach Dan and Kelly

• E-Mail: paperrouteinvestments@gmail.com
• Instagram: paper_route_investments

IF YOU LIKED THIS PODCAST, we would love if you would go to iTunes, Stitcher, GooglePlay, iHeartRADIO and Spotify and Subscribe, Rate & Review our podcast.  This will greatly help in sharing this podcast with others seeking to learn real estate investing as a means to achieve a successful retirement.

Check out our other podcasts at olddawgsreinetwork.com.

Get a FREE copy of our 3-Minute Rental Property Analyzer at olddawgsreinetwork.com.

Additional Episode Sponsor: Meno Studio – menostudio777@gmail.com