The real estate industry presents various opportunities where you could grow your wealth. There are many ways to succeed in real estate, but you must get started. Listen to your host Moneeka Sawyer as she talks with Kenny Simpson and Krystle Moore about tips on how you can get in the real estate game today. It’s not yet too late. It’s time to get your action plan together. In this episode, Kenny and Krystle share the importance of constantly growing and not making decisions based on fear to achieve your goals and attain financial freedom. They discuss the benefits of owning multifamily properties and what kind of investments will help you beat inflation. Tune in to learn how to be in control of your financial future.
I am so excited to welcome to the show, Krystle and Kenny. Krystle Moore is the Founder of Pacific Shore Capital, San Diego’s leading expert in commercial financing and real estate investing. She began her career at the age of nineteen. With over eighteen years of experience, Krystle has funded over $1 billion in loans, helping over 1,000 clients with their commercial and multifamily financing needs. Between managing over 1,000 units, rehabbing, and designing countless properties, she is committed to sharing her immense knowledge and industry expertise with our clients.
Kenny Simpson, Head of The Simpson Team, is San Diego’s premier residential financier and real estate investor. He has worked with over 1,000 clients on 1 to 4-unit financing, helping them shift their mindset, and have confidence about qualifying for a loan, whether for a primary residence or investment properties. He is a Co-host of San Diego’s most popular real estate podcast, Get in the Cashflow Game with K&K. Kenny has over seventeen years in the business, including his own investment and management experience, having managed over 1,000 units, helping rehab, and design countless properties. Welcome to the show.
Thanks so much for having us.
I’m excited to have you on the show because I want my ladies to know this. It’s important to have mentors in the industry that have been here through the cycles. You guys went through the 2008 and 2009 crash. Many people that are in real estate now got in the last 10 to 12 years. They got in at the bottom when things were easy to get into. They didn’t have to ride that wave. That wave was a rough one. I love that you guys have been in the industry long enough to know that things can go bad and what to do when that happens. Congratulations on your success around that. I’m so excited to be having you chat with my ladies about financing.
I’m excited too. I’m passionate about women being involved in their financial future. I was honored to be able to be on the show.
Thank you so much for that. What’s important for us to all understand is that as women, we need to be in control of our financial future. We’re not taught that as younger women. We have to figure that out ourselves. Our allies, the men in our lives, are an important part of that success. Kenny, I super appreciate your support of our ladies. My husband is the same way. My husband is not as involved in my business though. He is a good support staff. This is big. Could you talk a little bit high level about how you got into the industry and what your story is?
I got started when I was nineteen. I was taking some community college classes. Quite frankly, my family couldn’t afford to pay for college or anything like that. It was all on me. As a young 19-year-old, I thought, “Why am I paying to go to school? I should get paid to do this.” I needed to pay my bills. My mom worked as a rep at Washington Mutual at the time. I was begging her to give me an in, call somebody, and let them interview me. That’s all I’m asking for. Don’t give me a handout, but give me an opportunity. When she felt I wouldn’t embarrass her, she finally gave me a couple of recommendations.
I interviewed and did residential for about four months, but I always wanted to do commercial. I did what they tell you to do, “Tell everybody. Tell your friends. Tell your family. Eventually, someone is going to give you a shot.” I met my first client at the gym. I was super into fitness at the time. I winged it from the beginning. I had no idea what I was doing. He knew that anyways. That’s how I got my first deal. From there, it was a good time. We were on the upswing on 2003. His partners referred me to their partners and his partners’ partners. It was a snowball effect from there.
Why were you so interested in commercial rather than residential?
I thought to myself, “I’m not as the emotional touchy-feely first-time home buyer. I wanted to work with business people.” On the commercial real estate side, even when you’re getting a real estate commercial loan, it’s a business loan. We assume that you’re a sophisticated business person. That’s why we don’t have RESPA and all these other crazy things that came as a result of the 2008 financial crash. I liked working with more sophisticated investors, generating wealth for people, and figuring out how to get more cashflow. That’s what lights me up. That’s why I went in that direction.
Kenny, how did you get started?
It’s a bit similar. I was in college, paying for my own way too. I had a lot of friends. In 2002 and 2003, they started making a lot of money around me in real estate and I’m sitting there going to college day after day. I woke up one day and I said, “I’m over this.” I want to go to work and make money. I always wanted to be in real estate, not sure which aspect. A friend reached out and said, “Do you want to come and join my team?”
I started off in the business as a loan processor which is good. It gave me a lot of well-rounded skills and I learned the background. Quickly, we ended up starting a branch, and then several years later, I’m here as a mortgage broker and enjoying what I do. I dove in and figured out residential was the way. I knew I didn’t want to sell real estate. I didn’t know I wanted to do financing, but now that I’m into it, I enjoy it.
I was a mortgage broker for years and it was so much fun like the puzzle of a loan package. Whether it’s commercial or residential, it’s like a puzzle. Putting the whole thing together, getting exactly the right product for the right person and the right property. There are so many moving parts. I love that you started as a processor because so much of the time, the processors don’t understand what mortgage people go through on the front end.
We’re trying to put together a puzzle. They’re trying to get it to underwriting. They’re the middleman. They are a key part of our success. Many of them don’t understand what it takes on both of those sides, the front end and the real back end. That’s amazing that you did that. What an asset for you because you understand them then.
The business has come a long way with technology. Lenders have tried to figure out how to make the process as easy as possible. As we’ve gotten further away from 2008 and 2009, Fannie, Freddie and a lot of the banks have eased up on some stuff and got a little bit more realistic. The pendulum swung way too far then way too far the other way. We’re getting some normalcy. It’s helpful because getting a loan sometimes cannot be fun. As we all know, it’s paperwork and it’s a stressful time when you’re buying a house. We try to make it easy as possible.
You wanted to talk about multifamily properties which is a topic that my audience is interested in. Let’s start by talking about why. Why did you get started in multifamily to supplement your income and how does that work?
The thing is we’re all taught in school to get our education, go out and get a good job. That may have worked a long time ago, but if you’re living in a major metro like us in San Diego, it’s not cheap to be here. Having a W-2 job your whole life is not going to work out well for you when it comes time to retire, even if you contribute the max to your 401(k) and things like this. We backed in to see what lifestyle we wanted to have.A lot of real estate investors don't pay taxes. They provide housing and in exchange for getting a lot of tax benefits. Click To Tweet
I had the benefit of seeing that since I was nineteen. I got to see tax returns. I worked with a lot of real estate investors that own multifamily. It seems like they didn’t have to work. They were always on vacation. Their idea of work was driving by the properties or having lunch with brokers. It seems so fun for me. I’m like, “I love to fill my days doing this.” I started realizing the cashflow that they were getting because it doesn’t look like that on tax returns.
That’s the benefit of being a real estate investor. A lot of real estate investors don’t pay taxes. They provide housing. In exchange for that, they get a lot of tax benefits. I find that multifamily is the absolute safest investment vehicle that has the most tax benefits. That is why I truly believe in owning multifamily properties.
I would like to add something interesting that shines a light on my own life. That’s similar to what you said, Krystle. First of all, Krystle, congratulations on starting at nineteen, both of you guys. The younger we started, the more opportunities we have to create huge amounts of wealth and a huge legacy.
Those of you ladies reading that are 19, 18 or 20, you need to get started. Even later in life, there are so many opportunities. I always say there are a million ways to make $1 million in real estate, but the sooner you get started, the easier it is. Congratulations on you guys. To anybody who’s reading that’s young, get started. It’s important. The thing that I wanted to comment on is my husband and I bought another property, a primary residence. I was dismayed at what we can afford.
There were a couple of things that I noticed that I want to highlight to my ladies. Because of the write-offs, the depreciation, and all of that stuff, in real estate, it looks like you’re making no income. Plus, you get to do a ton more write-offs. For me, I’m showing huge losses. That means we pay fewer taxes. What that also means is that because of me, we can’t qualify for loans. My husband does all the loans.
This is how we’ve distributed it. What’s also interesting about this is when we were young, our first house was $200,000. Our next house, five years later, was $700,000. Our next house was $750,000. What’s interesting is that even now, all we qualify for is $750,000 to $800,000. Why? My husband is a superstar at work. He gets nice raises, 3% to 6% raises each year. Think about that. Have property values gone up faster than 3% to 6%?
What do we qualify for? It’s still about the same number of dollars because he has only been going up 3% to 6%. We can do a little bit more if we dig into the numbers. There is stuff because of losses and stuff like that shows up on the tax returns. That’s not about me. Everybody who’s reading this, take that in. It has been 25 years that he and I have been together buying real estate. We still qualify for the same property value now almost that we did twenty years ago.
If you are going to rely simply on your W-2 income, are you going to be able to grow your wealth? We have to buy in bad neighborhoods to qualify for our loans. We didn’t have to use to do that. You hope that in life, you’re improving your lot. You’re improving the neighborhood. You’re improving the house size. Why are we not able to do that?
There are a lot more conversations around that. I don’t want to say that that’s the end of the story. It was an interesting thing for me to notice. How is this even possible? We have been in the business for 25 years. We made some adjustments. We did some different things, stop writing off things, stop taking losses or do some other things that we can do. If you’re just relying on your W-2 to plan your future, that’s what you’re in store for. It does not keep up with inflation. It does not keep up with house prices. The cost of living is going up. Your income will not keep up. It’s important to find ways to supplement that income. Does that make sense?
That is such a good point. We’ve always been commissioned-based. We’ve never had that idea. Even thinking about a W-2 job, that’s what we’re trained to do. That’s the safety that we run to and the safety is not winning in this environment.
In any environment, it’s never one. If you look at W-2 versus housing prices, over time, we’re not able to keep up. People have to move to cheaper areas to afford the homes that they like or you need to be a dual income. You’ve got to do something other than being a W-2 employee to keep up with housing prices. There are some interesting things there.
First, that’s your cost of living. The other thing that tells us is real estate is a good investment. It is increasing significantly faster than inflation and our incomes. It’s not true in every single market. If you do your homework and you pick the right markets, that is true. Ladies, I’ve never said this on the show. It’s important to understand where you’re headed if you’re not going to invest in real estate and you’re not going to create those other streams of income and cashflow.
I have a good example for your story on that because you do bring up a valid point. I do residential financing. Krystle is different. A lot of her clients might not even have a job. They might be real estate investors. Mine typically have a job and they’re just getting started or some. I happen to do her clients, but I have a client that worked at Qualcomm for 25 years. He did the retirement. He did the stock thing but never bought real estate or bought a house, and the crash came.
He said, “I’m going to go in and buy real estate. This is it. This is my time.” I remember meeting him. We probably ran into him 5 or 6 years after the crash. He bought all this real estate. He went crazy and worked crazy hours. I remember sitting down for lunch. He goes, “It’s crazy. I worked 25 years as a W-2 employee for Qualcomm.”
He did well and saved for retirement. He’s a conservative guy. He’s like, “I built more wealth in five years from real estate and cashflow than I have ever done with this job over 25 years.” He realized and said, “I should have started younger.” To prove your point, this is why you start younger and as soon as possible. What you can do at 5 years, 10 years or 20 years is unbelievable.
I am so grateful that for some reason, I figured that out also when I was in my early twenties. There’s a huge amount of my audience that is not in their early twenties. They’re in their 40s and 50s. There are many different ways for you to make money in real estate. If you’re not getting started early, it’s not the end of the world. It’s not the end of the game, but it is easier and takes less effort to build that wealth if you start younger. There’s a compounding, inflation, appreciation, and all of those things that aid intuitively and naturally so you don’t have to think about it.
Getting started is the most important part. It doesn’t matter how old you are. We have clients who got started later in life. We have a huge investor we know here now who didn’t get started until he was 35. He was a musician playing in bars. He borrowed $3,500 from his broker to buy his first property. He owns over 6,000 units now. He’s in his late 60s. From 35 to let’s call it 65, he owns 6,000 units, 100% by himself in San Diego, the most expensive market in the country. There are stories for every person. It’s not like if you didn’t get started in your twenties, it’s over for you. Get started at any point in time and you will exponentially improve your life going forward.
I’ve talked about this on the show all the time. Before you pick a strategy, you have to figure out who you are and where you’re at. What is your risk tolerance? What are the things that you’re trying to achieve? Part of that has to do with the timeframe that you have to achieve your goals. How much time do you want to spend each week and each day, but also how much time do you have? That’s one of the components to think about when you’re picking your real estate strategy. You’re not out of time, but more time gives you more opportunities. Kenny, what do you look for in an investment property?Start younger in real estate and start as soon as possible, because what you can do at five years or 20 years is unbelievable. Click To Tweet
We have this conversation a lot because we do get referred to a lot of first-time home buyers and also first-time investment property buyers. I have the same conversation. I said, “Why are you buying a house or an investment property?” I then said, “You need to answer that question.” I tell people that a husband and wife should be on the same page. If you don’t have a husband or a wife, then you don’t have to be on the same page with anybody. It’s your own money.
That’s the question. Sit down and say, “Why?” The other questions are, “What are the goals? What are you looking to do? What is the plan?” Some people are like, “In five years, I want to make $5,000 a month in income.” When you come up with the why, the plan and the goals, then we back into, “What kind of property do you want to buy? Are you going to buy a single-family? Are you going to buy a four-unit? Are you going to buy a five-plus?”
We always push, if you can, to buy the most units as possible because that’s what we push to. At the end of the day, if it’s your first deal, you might not understand it. If it’s your third deal, you’re like, “I should try to buy as many units as possible.” When you’re looking for your first real estate investment property, when you answer all those questions, it gets easier. If you’re getting pre-qualified with somebody like me, we back into it, “How much money do you have? Is it just you or are you bringing in other partners?”
We then back into, “This is what you can afford. This is what the gross rents need to be. This is how we can get you a loan.” Krystle could be a little bit different because the property has to qualify. When people say, “What are you looking at in your investment property?” I’m more like, “What’s your why? What’s your game plan? What can you afford?” From there, then we go, “Where are the areas we might want to look at?”
For example, here in San Diego, you might not want to go buy an investment property. We have to drive 45 minutes away every time you have to go somewhere. Maybe you’re going to look for something closer. My idea for your first property is if you can buy close to you or near you, it’s easier. Especially if you’re buying it, rehabbing it, and managing it, you want to be close by. What I’m looking for is probably not the first question I ask. It’s more backing in and getting all those questions answered and all the pre-qualification. I feel it makes it so much easier to identify what you want.
That’s exactly how I operate and used to work also with my clients. I love that. Krystle, how about your perspective on that?
It’s similar to Kenny. A lot of times when I’m working with new investors or even people who own a couple of 2 to 4-unit investment properties, and now they want to take the next step, it’s great that Kenny and I worked together because people don’t know when they’re making that crossover to apartments that the property has to qualify. They come to me and they say, “I have X amount down. I can get 75% LTV, right?” Technically, yes, but the property has to support the cashflow.
This is why having your criteria, your goals, and understanding exactly what you’re looking for is so important. You can go buy a 2 to 4-unit property and put 25% down and cashflow negative. If you don’t do your homework upfront and you don’t understand how to run cashflow, and you don’t have criteria, you could be in a property that doesn’t even cashflow. On apartments, we won’t let you do that. It’s difficult to fail. At the same time, you might have to come in with a lot more money down than what you anticipated.
The first step for me is talking to someone in getting qualified. It’s not just a broker. A good broker is going to want you to be in contact with a lender as it is, but you want to take a handful of deals to your lender and say, “What do I qualify for on these deals?” You can start understanding all of the different terms that we use in multifamily. It’s much different.
Every building that you look at is a business. I’m underwriting the business. That business needs to cashflow. Based on that, I can tell you what loan I can give you. For most of us, if you don’t have a loan, you don’t have a deal. We usually start there. Pre-qualifying for multifamily is a much easier process than it is for residential. It’s a different way of looking at it if you’re used to residential.
I want to highlight quickly and summarize for my ladies. I’ve said this before on the show, but I want to say it again. The big difference between lending in residential and in commercial is in residential, you qualify. In commercial, the property qualifies. There are completely different ways of analyzing whether you’re qualifying or not.
Keep that in mind when you’re looking at switching over. Maybe you’ve got 1 to 4 units. You’ve been doing residential. If you’re going to switch over to multifamily, understand that the big key to remember is it’s not about you. It’s about the property, which can be amazing if you don’t have the income or the credit. There are a lot of things that we need in residential that we don’t need necessarily in commercial. That’s true, correct?
That is correct. In your example of you guys buying a house and the fact that you only qualify for about the same as you did over the last twenty years or whatever, that doesn’t necessarily hold true in multifamily. I have plenty of real estate investors who cannot get a home loan but can go get a $5 million apartment loan.
Isn’t that amazing?
I like to say we use common sense.
It’s also interesting how we define common sense, but it’s a business loan, so you don’t have to qualify. Your business has to qualify. I love that. Let’s talk too about how to maximize your ROI.
One of the things that are so important when you’re buying a property is when you’re looking at properties, for example, some people might say LoopNet is the worst place to find apartment buildings. I’ve heard that so many times. I found some of my best deals on LoopNet. Why is that? I can look at a building and see the income potential that other people didn’t see. I get it and I get deals because of that.
When you’re looking at properties to invest in, you want to look at other ways that you can increase the ROI. The beauty of multifamily too is that the higher your NOI, your net operating income, the higher the value of your property. We value properties based on the cap rate. If you can increase the NOI, and multiply that by the cap rate, then you’ve already got an exponentially higher value.It is advisable in high inflationary environments that you should be running to real estate. Click To Tweet
I look at other things. When I walk into a building, I not only look at, “Does this building have RUBS, utility billing? If the landlord is paying all utilities or some utilities, can I come in and charge the tenants for their utilities to offset that cost?” A lot of buildings are doing that nowadays. “Is there storage? Is there parking? Are there other ways that I can increase?” In California, we have ADUs, which not every state may have. You can add an Accessory Dwelling Unit. “Is there a potential for me to add some ADUs or granny flats on the property? If I make small improvements to the property, can I increase the rent? Does that make sense?”
Also, I take a look at expenses. “How can I cut expenses?” Sometimes I go in and energy costs are astronomical. They haven’t converted to LED. The trash bill might be high. You can go renegotiate. There are a couple of different trash providers. You can negotiate the price down. There are so many ways to increase your NOI on a property. You have to be a forensic investigator when you go in and look at a property to see how you can maximize its potential.
Ladies, as you’re reading this, there are a lot of terms thrown out there that can be a little intimidating. Understand that that’s why you need a pro. When you’re looking at your financing and starting this journey, talk to somebody like Krystle. She’ll explain all those numbers and the way that the lending works around this so that you can understand it. Once you’ve talked to a pro, now you know what to go out and look for.
One thing that has been helpful for us in our business and also with other clients is when you’re looking at somebody to work with, it would be helpful that that person is also a real estate investor because they understand. They’re looking at the property as if they owned it. They know things that someone who has never invested in real estate would never know because they’ve never been there.
It’s helpful when you’re looking for somebody to work with that you go to somebody like that because we can be more of an advisor. I’m not just going to come and throw out loan options for you. I’m going to say, “What if we can do this? Maybe we can increase rents during escrow to push loan dollars. Maybe I can get this insurance quote down.” I’m doing everything I can to maximize your loan or get you the loan that you want. That’s the person you want on your team.
That’s going to be true, whether you’re buying a single-family, multifamily or commercials like offices, retail, or whatever. Anybody that you have on your team should be investors themselves. If they’re not walking the walk, they don’t understand your pain points. They also don’t understand the opportunities. That’s a good point. Kenny, do you want to add anything?
Some of the obvious things for ROI is you go into a dilapidated unit. You go put your cabinets, flooring, countertops, and all that. That’s a way to generate higher rent. That’s going to increase the value of the property. The other thing here in California that is huge is jet parking. I know that sounds weird. You have a garage. You have access to storage. We try to put laundry-in units, instead of a laundry room because people pay $100 to $150 more for a garage and $150 more for a laundry-in unit. We’ll also put AC and wall AC units in because people will pay more money.
As you get further along in the journey. We had the privilege of managing a lot of units. We learned a lot. We tested it. We would say, “Let’s remodel this unit. Do all this fancy stuff. What did we get? Why do we keep this one plain Jane over here?” We realized you’re getting a lot more money. It was worth it long-term. When you sell the building, some of these are going to pay you a premium.
When you’re doing ROI, what are you doing for the short-term for the rent game, but also what is a potential buyer if you are going to sell that property and exchange up for something bigger? Are they going to pay you a premium? We’ve found that there are a lot of buyers, especially here in California, who might be in a different part of their life and age.
They’re like, “We own this property. It’s got a lot of issues. We don’t want to deal with it. We have it free and clear. We want to sell it.” When you want to buy something that has market rents, is completely rehabbed and completely done, we will pay a premium for that. There are many reasons why you would increase the NOI and fix up the building, not just for the cashflow, but it could be if you’re going to sell in exchange for the building.
We refinance too. That’s another key.
This is an intuitive thing, ladies, to think about. When you walk into a house, if you look at it and go, “It needs air conditioning. This fridge is old. This doesn’t look nice. It was livable,” and then you walk into a comparable property that’s got air conditioning, it looks nice, and it’s a home for you and your family, would you pay a little bit more? It may not be dollar-to-dollar, but there’s this intuitive sense of, “I would much rather live here?” This is how I run my business too.
I want to make sure that people walk into the house and have a sigh of relief, “I could live here. This is so nice. This is so much nicer than these other places. I can do laundry inside. I can park my cars without getting sap all over them. I don’t have to pile the kids into the car and run to the car wash every week.” There are these intuitive feelings that we have in our gut when we’re moving into a home. Taking care of those pieces may not necessarily be a direct relation dollar-for-dollar, but you will notice it’s so much easier to rent, sell or maintain if you’re doing those things.
Not to mention retention too. That’s one of the things that we found. When you put laundry and/or AC unit, people stay longer. That reduces your turnover costs and vacancy. That’s our goal. We want you to get cozy and stay there.
Most of my tenants stay between 10 to 12 years for exactly that reason. They love the property. They don’t want to have to move to someplace else that’s not as cozy. I’m proud of my tenants. They usually buy something. Once they’ve lived in a happy home, they’ll usually buy something, which I love. It encourages them. They understand what it feels like to live in a place that feels like home.
Let’s talk about inflation. Everybody is talking about this. There’s a lot of fear around this. I can understand the fear, but we have had inflation before and real estate investors still have done well. It’s something to be aware of. It’s something to consider, and it’s something that you can use to your benefit. It’s not a time to sit on the sidelines and go, “It’s inflation. We’re not going to touch real estate.” I would like to get both of your guys’ perspectives on that, both in residential and commercial.
Frankly, I would advise in high inflationary environments that you should be running to real estate. Most of us want to feel the safety that we have all this cash in the bank. The truth of the matter is that the higher the inflation, the less your dollar is worth. You’re losing money by keeping money in the bank. That’s not to say that you shouldn’t be able to pay for your expenses for 6 to 12 months, whether it’s in your business or your personal life. You need to be able to cover your costs for a period of time.
In terms of the fear of inflation, I get that. The best thing to do in a market like this is to understand that there are things that you can’t control. While you need to be aware of them, you should not make decisions based on fear. You need to make decisions based on getting the knowledge, understanding where you’re at, and that you can’t change it, but you can have some control in your personal life about growing your wealth, making smart financial decisions, and changing some habits. It’s more like, “Let’s get an action plan together,” rather than, “Let’s be scared and be paralyzed.” This is the problem. Most people freeze because they’re scared. That’s the worst thing you could do in an environment like this. The most successful people take action.The most successful people take action. Click To Tweet
How about you, Kenny? What do you think?
For residential, because people are buying their homes, their costs and bills have gone up. If you bought a home, the rate is high. We’re in the camp that rates will come back down in the future. In 2020 and 2021, we saw all-time crazy low rates. We saw inventory at all-time lows. We saw buyer demand crazy. That resulted in crazy inflation in real estate. People overpaying all this stuff. We come to 2022, demand is going down. Supply is coming up. Some are selling for different reasons. Now, the buyers are going, “What should I do here?”
I tell everybody, “We have already seen price reductions. Some things are coming down and cooling off.” People are sitting here and listening. You hear this over and over. This is the story we’re having. “Should I buy now? Should I wait?” There’s probably a window from now until when the Fed says, “We’re going to do QE again.” That is quantitative easing. It means they’re going to put money back into the system. Now they’re taking it out at a rapid rate.
If you look at the ocean, it’s a low tide. They’re pulling money out. The water is draining out and they’re going to flood the system back. When that happens, interest rates will drop. Demand will go up. People feel more confident, but that’s also when everybody decides, “I’m going to get off the fence and buy.” Between now and whenever QE is, if we knew, we would write a book. This is what it is. We wouldn’t be here. This is the time to buy.
I would encourage people to look at inflation. It is now to your advantage. If you know rates are high and you think, “I’ve done my homework,” there are plenty of YouTube videos, podcasts and stuff to study, that interest rates go up and they’re going to lower the interest rates. Even if I lock in at a high-interest rate, I get a deal on a house. Let’s pick a house. A $500,000 house in 2021 was selling for $550,000.
The $500,000 house listed now is getting an offer at maybe $500,000 but they’re asking for a $15,000 lender credit. That is a huge difference between what was happening now and yesterday. If you’re seeing that, you are getting a discounted house. If you have a higher rate, it might not feel good, but if you can be in the camper, you’re refinancing in a year. You’re getting a lower rate and you’re not in the camp where everybody else is. You now have to buy. You’re amongst all these people and this whole wave of people that are going to come in.
I think now is the time to do it. Inflation is fearful for most because they don’t understand it. Putting your money in the bank is when they’re paying you 2% and inflation is 8.5%. We know it is more than that. You’re getting crushed. You might see a dip in real estate for now because of inflation and the rates are being manipulated up. In the long-term, you’re going to wish you look back. This is an opportunity to buy.
I loved your analogy of the ocean and the tides because that is how real estate is. There are low tide and high tide, and seller’s markets and buyer’s markets. It has been that way since the beginning of time. To understand that what’s happening is not permanent. You’re not married to the system. The system is going to change and you get to pivot and adjust based on what’s possible.
Even though interest rates are high, rents are raising higher. Interest rates are going up. They have gone up to 2% in the last few months. That’s too high. Anyways, they have gone up quite a lot. What have rents got up? Rents have gone up 30%. Even if you buy a place and you’re paying more, you’re getting significantly more in rent.
Inflation is playing on your side. You can be afraid of interest rates. You’re also losing a huge amount of money in the appreciation. The market is cooling down. We might see some corrections. Over time, if you guys can see me on YouTube, the real estate market is market specific. This is not true everywhere. In general, you have a correction and then it goes about higher. Over time, the general curve of real estate goes up.
In 2008 and 2009, we saw some people weird. It was a complete crash. Still many markets are significantly higher than they were before that crash. If you’re looking at real estate as a long game, what rates are doing is going to influence inflation, inflation influences rents, which influences your cashflow. Over time, appreciation is steady growth. There are different strategies in different markets, but I can’t say, “Don’t invest in real estate.” You have a good opportunity to benefit from inflation by investing. Would you guys agree?
Yes. Not to mention that you talked about buyer’s markets and seller’s markets. It shifted to a buyer’s market. You don’t have to go out and put an offer on a property, non-contingent, money-hard, day one anymore. You can ask for your proper due diligence timelines. You can get your financing contingency and your appraisal contingency because it’s not a seller’s market anymore.
It’s a much safer time, especially if you’re new to investing, to get that time to do your due diligence. Whereas before, it was this extreme pressure situation. You’re competing with all of these people. Nothing makes any sense. You just want to win. Now you get a lot more time to do your due diligence and research and make sure that you’re making the right decision when you’re making offers.
That’s a good point because it’s so much less stressful. You’re not scrambling constantly. Also, your taxes are based on your purchase price. In 2021, if you bought something for $550,000, as long as you own that property, you are going to have increases every single year based on a property value that started at $550,000.
If you buy it and it’s at $500,000, even if you’re paying a higher interest rate, you’re paying less in taxes. It could balance it out. You get exemptions on your tax returns too. It’s all a numbers game. Instead of running away in fear, take a look at the way that the numbers are working out. You may be pleasantly at what the opportunities are. If you take a look, you will be pleasantly surprised by what’s going on.
This is the thing. I’ve seen this so many times, even with clients who were experienced real estate investors. Every time they close a property, they go, “I don’t know. I don’t think it was a good deal. I think I overpaid.” Of course, you feel that way. You just paid the market price for the property that you bought. Let’s talk in three years and tell me how you feel. With property management, I did budgeting all the time for our clients. Every year I would have this budget and then, at the end of the year, I would look at it and calculate what their actual returns were on their properties.
In year one, they would be like, “That’s all right.” Year two, “Okay, fine. It’s a little better.” Year three, they’re like, “This is great. I made a good decision.” Everything feels expensive on day one because you are paying the market price. Sometimes you’re going to get a home run, but you can’t count on a home run every time. If you pay a market rate for a deal, and 3 or 5 years from now, you will look back and be happy that you did.
Even in the financial crash of 2008, our apartment values didn’t go down for us at least. There were some pains in a lot of parts of the country, higher vacancy, management companies going bust, mismanaging properties, and things like that. You’re going to have to watch those things. If you can hold on and responsibly manage your real estate, you’re going to win in the end.Stick to your discipline. Know your numbers and know what you want to buy. Click To Tweet
I feel like I could talk to you forever. We’re getting to where we don’t have time. I want to make sure that we complete the show and then we’ll talk some more in EXTRA. In EXTRA, ladies, we are going to talk about hacks to get your first deal. We’ve got two people. We’ve got commercial and residential. Both of them are going to weigh in on that. I’m super excited to be talking about that in EXTRA. Before we move towards the end of the show, could you tell us a little bit about how people can get in touch with you? You got a free offering for my ladies which I’m excited about.
We are almost done with a course on how to buy multifamily properties. It’s called the Real Estate Hustle Course. We’re going to offer the first ten people who DM us to Get In The Cashflow Game. That’s on Instagram, @GetInTheCashflowGame. We’ll offer the first ten people free beta access to the program. It will be a subscription-based program. People who will come into it are going to pay a monthly fee. We’ll give your first ten readers free access for a year.
That is so generous. DM is a direct message, ladies. It’s a DM on Instagram and it’s Get In The Cashflow Game. We’ve got so many ladies. I did a poll. I was like, “What social media are you on?” They’re all like, “I’m not on social media.” That’s what that means. Thank you so much. That was a generous offer. I love that. Are you guys ready for our three rapid-fire questions? I’m going to ask each of you separately.
Who wants to go first?
I’ll go first. Krystle asked me to go first.
Kenny, tell us one super tip on getting started in real estate investing,
One super tip in getting started is listening to podcasts like this. We live in a day and age where you can go on YouTube, Apple or anywhere and find so much great content. It’s unbelievable. That is where you should start. Swallow and absorb as much content as you can.
What is one strategy for being successful as a real estate investor?
Stick to your discipline. Know your numbers and what you want to buy. Don’t start wavering on that and making bad decisions. Stick with what you set out to do. Don’t start doing crazy things and getting out of your comfort zone just to do a deal because they can come back to bite you in the butt.
What would you say is one daily practice you do that contributes to your personal success?
I am an early riser. I get up probably between 3:30 and 4:00 AM. I’m not saying I recommend that, but I would tell anybody is whenever you get up, maybe you get up an hour extra and take that time. I call it “Me Time.” If you have two kids or if you’re a mom, tell your husband, “You’re going to watch him,” but go spend an hour on making yourself better, whether that’s learning about real estate, meditating, or going for a walk. That hour extra added up over one year over 20 to 30 years, I guarantee you, will change your life.
Thank you for that, Kenny. Krystle, are you ready?
Those are some good answers. Let’s see if I can come up with something original. I promise you it won’t be telling people to get up at 3:30 or 4:30.
That was painful to listen to.
I’m tired just thinking about it.
It’s true. Each of us is different. We’re all built differently. When you’re picking your strategies or how to run your life, be aware of who you are. That works for Kenny. It wouldn’t work for me, but it works for Kenny. If it works for you, that’s awesome. No judgment at all. Krystle, tell us one super tip on getting started investing in real estate.
The super tip is to get started. First, you want to know your criteria because you’re not going to go anywhere without knowing your criteria and your goals. Once you identify that, you get off the sidelines and get in the game because you’re going to keep analyzing over and over. If you don’t get started, you’ll keep analyzing and never do anything. Know your criteria and your goals and just move.Investing in yourself is one of the best decisions that you can make. Click To Tweet
What is a strategy for being successful in real estate investing?
My strategy for being successful is that I’m constantly growing and learning. I not only have listened to podcasts, YouTube, and things. If you have the benefit of investing in yourself, that is one of the best investments that you can make. I had a hard time with that over the years. I would invest in real estate any day, but then investing in myself for marketing or courses seemed silly, which now I know that’s silly. I have a mentor. I am in coaching groups. Kenny is part of mastermind groups. We are investing in ourselves, growing our knowledge, and being better every day. That is how we’re able to be more successful every day.
What do you say is a daily practice that you do that contributes to your personal success?
For me, I keep up with the news. It goes along with all of the podcasts and things. I don’t turn on the news in the morning, but I look at things on my phone. I listen to people that I respect in the industry, whether it’s economists or real estate investors. These are people I’m always trying to stay up-to-date with the newest strategies. Who are the newest lenders? Maybe there are newer types of loans available. Maybe there are other things I can do to improve my portfolio.
For example, we’re looking at doing solar and common areas to increase cashflow. It’s all these little things that I’m looking at to do to better my investing, but also me as a person. I focus on that. I don’t listen to the noise of the media, but I do look at people that I know and respect and people who are where I want to be. I look at what they’re doing.
I love all of it, but that last point of looking at people who are where you want to be. Don’t listen to the people who are not. It’s important to stay focused on the people that are where you want to be. They’re going to help you to get there faster. This show has been amazing and I’m so excited about what we’re going to be doing in EXTRA. Thank you so much for what you’ve contributed so far.
Thanks so much. This has been so fun.
Ladies, we’re going to be talking in EXTRA about hacks on how to get your first deal. If you’re subscribed to EXTRA, please stay tuned. There’s more. If you’re not, but would like to be, go to RealEstateInvestingForWomenEXTRA.com. You get the first seven days for free. Check that out. For those of you that are leaving us, thank you so much for joining Kenny, Krystle, and me for this portion of the show. You know how much I appreciate you and I look forward to seeing you next time, until then, remember, goals without action are just dreams. Get out there, take action, and create the life your heart deeply desires. I’ll see you soon.
Kenny Simpson is San Diego’s premiere Residential Financier and Real Estate Investor. He’s worked with thousands of clients on 1-4-unit financing, helping them shift their mindset and have confidence about qualifying for a loan whether for a primary residence or for investment properties. He leads the Simpson team and is the host of San Diego’s most popular Real Estate Podcast, Get in the Cashflow Game with K&K. Kenny has over 15 years in the business, including his own investment and management experience having managed over 1000 units, and rehabbing and designing countless properties as well.
Krystle Moore is the founder of Pacific Shore Capital and San Diego’s leading expert in Commercial
Financing and Real Estate Investing. She actually began her career at age 19 and now, with over 16 years of experience, Krystle has funded over one billion dollars, helping over 1000 clients with their commercial and multifamily financing needs. Between managing over 1000 units, rehabbing and designing countless properties, she is committed to
sharing her immense knowledge and industry expertise with her clients. Krystle’s expertise has been featured in SD Voyager and the San Diego Business Journal and she spoke on investing in Real Estate for the “MAX NOI” event. She shares insights and strategies as the host of San Diego’s most popular Real Estate Podcast, Get in the Cashflow Game with K&K as well as her Pacific Shore Capital YouTube Channel.
To listen to the EXTRA portion of this show go to RealEstateInvestingForWomenExtra.com
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