Welcome to The Deal Pen, a podcast that digs into the details of untold stories from crafty real estate investors. And now here's your host Avi Rasowsky.

Okay. We're live in The Deal Pen with Jim Kittridge from Roth Capital. Jim, how are you doing today? Good, how are you doing Avi? I'm doing great. I'm very excited to chat with you. We have always swapped notes ever since we first got to know each other, but I'll tell you the first time I ever really saw your name, I moved to Charlotte about five years ago and I started seeing your name as one of the go-to buyers. I think I probably saw you post in one of the Facebook groups local here to Charlotte, but how long have you been in Charlotte yourself? I don't really even know.

Avi Rasowsky

I grew up in Charlotte since I was like five and left for college, came back, you know, a couple of years after college. Okay. And got real estate, like, uh, first properties in 2019. I bought, so five years ago.

Jim Kittridge

Oh, wow. So you, okay. So you've been building pretty quickly then. Uh, cause I, I mean, I know a little bit about your story, but would love to dive into as much as you're willing to share. That's okay with you.

Absolutely.

Absolutely. What were you doing up until 2019? Kind of just background up until you got to real estate.

I was in tech space for a while, but I wanted to be a tech founder, did it. I was unsuccessful at it. I built a zombie company that was successful just enough to keep going, but not enough to actually go anywhere, life-changing. I had a midlife crisis in my mid-20s and trying to decide what I wanted to do. decided I wanted to get into real estate. But the only way to do that, that I thought at the time, was to build a business that generates a lot of cash that I could then invest into real estate. So I went on a couple side quests and eventually saved enough money to do my first flip. I found my first flip deal and come to find out I spent all that time trying to build a business and save money and I got a lender to fund 100% of the deal.

This was a private lender?

A hard money lender, but they liked my story and my background and my business plan for the property and did 100% financing on it.

Okay, nice. And you had intended, okay, I'm going into this to flip it and sell it.

Yeah, that was a fix and flips. I bought it, renovated it, and then sold it like 45 or 60 days later.

Okay, nice. Just briefly, because I'm sure others would be interested on the tech side. You built something that you said it wasn't really to a point where you were wanting it to go, but it was enough to keep it going. Is it still alive or no?

No, it's dead. We had two big clients. And funny enough, the day I got my first check in real estate, I made 20 grand. That night, I got an email from the owner saying, hey, we need to talk. Can you talk tonight? And everybody's like, we're ending the contract.

It was kind of funny how it worked out.

The day I made money in real estate, there you go, kind of kicked my butt out the door.

What kind of technology was it?

I had a software business for the multifamily industry, ironically enough. So it was for like operations and marketing for like larger companies that have like 20 to 40 communities.

Are you still looking at tech as something you build in the future or not right now?

No, I mean, real estate is like a get wealthy for sure game. Tech is a catch lightning in a bottle game. I really like the get wealthy for sure type strategy.

All right. I love it. So, okay. So you went into that flip, you got a hard money lender for a hundred percent of the deal. And I mean, how did it go? Was it, was it as planned or were there hiccups that you didn't think about?

Uh, no, it was really easy. Um, I, funny enough, I sent out a lot of direct mail a year beforehand, never got any deals from it. And then one guy held onto my card and 30 others that called me. I bought that deal. I think we made a lot of like 110 grand or something and put 15 or 20 into it and sold it almost immediately and made like 95 grand on my first deal.

So not, not bad for a first taste. Yeah. That's, that's amazing. Okay. So he held on to it for, for how long, about a year?

Almost exactly a year. He held on my postcard and I remember sitting on the couch and asking him, like, can I look at these? It was like giant stack of letters, postcards, yellow letters. I mean, every single thing I spent weeks analyzing, which one to choose, all of them were on his table. And I'm like, why did you choose mine? He's like, I just looked good.

Hopefully you replicated that design or maybe that guy just had very interesting taste.

Yeah, we'd still did some direct marketing and switch it up and got some deals that way as well.

Yeah. Well, I know, I mean, lately over the last you know, four, five, six years, I see your name all the time as buying something new, whether it's rentals or I think even storage and multifamily. I mean, tell me a little bit about what you buy now and kind of what you've done over the last several years as you've built your portfolio.

Yeah. So the first property I ever bought was I bought an office building. I found off market, partnered with a guy, quickly became really good friends with, and we did that deal. Then I did the flip and I bought a bunch of houses and smaller multifamilies like duplexes and triplexes. Did a lot of fix and flips over the years. And over the last two years, I'd say I started focusing on bigger deals, like slightly bigger multifamily. I bought a five unit, then a nine unit, then a 14 unit. Most recently bought a retail building that's like 10,000 square feet, and then a warehouse and a car wash on one property. I'm still buying houses, but they don't move the needle as much as they once did.

You're saying the bread and butter single family stuff? Yeah.

It's not going to change my life or my retirement one day. So I've looked at other deals.

Interesting. So in the retail deal, you said it had a carwash on it and a plaza, or what is it?

Yeah. So the retail deal is like a 10,000 square foot retail building that I bought, again, with that same brand I bought that first office building with. We did that 50-50. And then the other one that you're referring to, I bought a warehouse. It's like a 4,000 square foot warehouse with a self-service carwash out front.

Interesting. Yeah. Is that your first car wash?

Yeah, probably my first and probably my last one.

Probably last. Okay. Yeah. So, okay. So you've done, you've done a wide range of things. Are you looking, when you look for these bigger deals, what are you actually looking for to make it interesting to you?

Uh, looking for upside primarily. Like if I can sell it, if it's worth like a 7% cap rate, um, then I want to be able to buy it at like a nine to a 10% cap rate. So I can capture that upside. Okay. whether I refinance it and keep it forever, or if I sell it, I can, you know, make some money, make it worth the gray hairs.

So are you always looking for different opportunities or are you just kind of like, are you targeting something specifically when, when you're looking for these interesting cap rates? Yeah.

I'm pretty open and opportunistic in the way I look at things. Like I'm still buying houses, like, I'm closing on one this week where just an easy deal I can throw to my manager, I can pick up 40, 50K in equity, lose $100 a month in cashflow with these interest rates, but it's worth it for the equity. On the commercial side, I'm primarily looking for value-add deals where the building's probably vacant or the owner slash tenant is planning on closing their business or moving. So I can buy it on a lower price per square foot, lease it out, and then it's worth more.

How long did it take you, or I guess what type of transaction volume and experience did you face when you started to shift away from single family?

I mean, my first deal ever was an office building. It was like 6,000 square feet. So after that one, it was mainly single families and small multifamilies. I probably did 70 deals plus before going heavier into like larger commercial or larger, like multi, I say large multifamily, but like not like your one to four units stuff.

Okay. Got it. And the, I want to dig into the office building, the first one, if you don't mind some of that too. Um, and then, and then maybe we'll get into some of the mix of the 70 houses. What, uh, so, so what was the origin of the office building? Like it was, you said you did it with a friend of yours and how did the deal come about?

A wholesaler brought it to me, and I walked it. The building, 6,000 square feet, two-story building, needed a ton of work. It had fire damage, mold, leak. The building had been foreclosed by four different banks and just basically left to sit there and rot. One of my side quest was a disaster restoration company. I was pretty familiar with how to deal with water damage and mold and even fire. I came across that deal. It was 130 grand for 6,000 square feet. We probably spent $70,000 or so on the renovation. That was the first rehab I ever managed and I was there four to five days a week. every single week for probably almost seven months. The deal with my partner was he's done a ton of deals. He had five office buildings at the time. The deal was like, we're going to do it 50-50, both put up half the money, but he's got to A, help us get the loan, but also answer my phone call so when I ask a question, you can say, no, don't do that, do one of these two things. Now, it's immensely helpful because before that, I'd probably still be stuck in analysis paralysis if I didn't do that deal with him, where I put together a gnarly spreadsheet with nine tabs, super detailed, paid some high-level commercial guys on the internet to review it and improve my model and get all this feedback. I walked it with him. I was like, so what do you think? He's like, yeah, this will work. Let's do it. I was like, wait a second, you didn't see the model I built? Forecasting cash flow, renting each unit up a certain amount of time and this and that. I was like, what do you mean? You're just going to do it. He's like, well, I have a really simple rule. If I can't do it in my head, then the deal's too tight and I don't want to do it. I was like, all right, I really appreciate that. If I've got to forecast it in Excel, it's probably too tight. I should probably move on.

Yeah, that's really eye-opening to hear. So how many had he done before that, that he had built that experience level?

He had like five Austin buildings and probably like 80 or 90 houses.

Okay, all right, so quite a bit of experience. Yeah, a lot of experience. So you're like, you've got your spreadsheet ready to go, and he's like, well, in the real world, it's a green light.

Yeah. Okay. I can't sit on like a napkin and like, I'm not doing it.

So whatever you're open to sharing on the numbers on it, so you're all in 130 purchase, 70 renovation after seven months though. So you had loan costs as well, I assume?

Yeah, I had loan costs as well. And then doing that renovation, I learned so much. So I was trying to find the cheapest labor imaginable to get this done. Down to nickel and diming, the trim work, the flooring, everything. So you can imagine the lessons I learned hiring the cheapest labor. There's a lot of lessons. And we really have six ounce square foot building for 70 grand, like exterior, interior paint, drywall, flooring, everything imaginable.

Yeah. Significant fire damage you said?

Yeah, it wasn't too bad. It was like partially remediated many years ago, but there's still like the roof was leaking and there's water mold everywhere, but we made it really nice.

Okay. Well, what was the plan? And I guess, what did it turn into ultimately with it, with how many tenants?

So the plan was to do the coworking model, and this was in like a suburb of Charlotte. Okay. Cause we both love that model, easier to lease up and everything in theory. Once we got done with the renovation, three other coworking venues opened up from zero before us.

In that same town?

Yeah, in this small suburb. We spent probably another six months marketing it for rent with the manager for coworking. We did a big opening party with the governor and everything. I think after six months, we had three tenants basically covering our Internet bill. Not the utility bill and definitely not the loan or making money. Then we decided, you know what, maybe this is too new for this smaller market. Let's market it for rent. We got an insurance tenant to lease the whole upstairs for five years. That covered our note and made a good amount of money. Then we started marketing the offices downstairs on a rent. rent per office model, which worked out great. And now the property, I would love to just do like 10 more of those and I can retire. That's a really good deal.

Interesting. So when you said the first three tenants, you're talking about three coworkers. Yeah. Three coworkers paying like a hundred bucks a month. Oh God. Okay. Okay.

So you're like, I was like, we have all these beautiful offices, really nice furniture. And like, it looks cool. The vibes are good, but the income isn't good.

Okay. All right. So, and how many total, uh, units are there to rent? You've got the insurance.

I just consider it two units on my spreadsheet. It's like one upstairs, one downstairs, but there's probably 15 private offices downstairs. Oh, wow. Okay. Okay. Nice. And it's probably a similar number upstairs, but we run upstairs out to like one big insurance agency.

The upstairs is one insurance agency, downstairs is all individuals.

It's all individual tenants, like everything from therapist to piano teacher to like sales guy and you name it.

Nice. How is that with, are they, do people pay pretty, pretty much on time with that property specifically?

Yeah, I think it's been really good. There's been, you know, a couple of challenges during COVID with some tenants, but the managers done a really good job of like managing that appropriately, getting people caught up and, Most business owners are pretty good. If they can't pay, they tell you. Then you find a way out. Whereas some tenants in houses fight it for as long as they can and make excuses for as long as they can. And it gets ugly for no reason. Or the business is like, hey, sorry, this can't work out. I signed me in the last month. And then we just fill it with a new business.

That's nice. Somebody actually telling you the truth.

Yeah, like a very professional conversation. I'm a manager for all the stuff. But yeah, it's a lot smoother.

You said you have a property manager for that?

Yeah. Manager for everything. I don't self-manage. I self-manage my car wash. That's about it.

Okay. You just want free car washes, right?

Yeah, free car washes and no one else will manage your car wash for you. Interesting.

Okay. Okay. Um, so, all right. So, so you did that deal, you got into the first flip and then you did a bunch of houses and multifamily and, and kind of graduated from there. What, um, what'd you learn through the process with just getting into this, this was all full time, right? From the beginning of the first flip? I jumped in full time. Okay. All right, what was your progression in terms of different marketing strategies? Because I know you buy a lot from wholesalers, and maybe we'll talk about that. But did you do a lot of direct-to-seller as well, and how did you kind of build it?

Yeah, a great question. My first three years was hard direct-to-seller marketing. I should start off, in 2018, I actually started, and I tried to get deals, and I tried to call wholesalers. I called like 30 wholesalers and I think one or two called me back. Like, hey, I'm a cash buyer, I'm looking for houses, want to buy properties from you. Then when I finally saw wholesaler deals, none of them worked until I saw how much money they were making. Then I was like, wait a second, if I just do what they're doing, I can get my own deals and I can like all these make sense now. I was like, oh, that's easy. I'm going to look up wholesaling on YouTube, I'm going to copy their marketing strategies, and I'm going to buy the deals. So I did that. I did that for three years. We did a lot of marketing, did a lot of direct mail, did a lot of cold calling. Okay. And a lot of text messages. Okay. Before the restrictions came on.

Yeah. Before texting, it became really difficult. Yeah.

Yeah. There's a point where we had just for like me personally, we had eight cold callers, one person just handling text message responses. and two people on our team doing acquisitions. So it got pretty heavy for a while. And it's really expensive to run an entire marketing and sales department. And if you're not willing to wholesale deals, like highest and best on every single one, it's hard to make that make sense. So I decided to slow down on the self-marketing and just buy more directly from wholesalers because I could be a little pickier about what I wanted. Because if you're trying to do it all in-house, then you have to maximize every dollar. And if you can make 20 grand on a flip, you got to do it because you have to pay for your marketing. You have to pay for your team. So I like the model of being able to be pickier, better. But I don't think I'd be where I am today if I didn't do the direct to seller marketing first. It got me into a lot of deals, a lot of the equity on the front end that I've benefited tremendously from.

Yeah, well, you probably got much better at buying, I would imagine, too. Yeah. Just learning, yeah. I totally agree with you, too, on being able to be picky. Because I did a lot of Google marketing, and it forces you to have to go get the cash back from a wholesale deal. And I also wanted to not be forced to do that. So when you started to slow down and get pickier and sort of wound down the marketing and sales department, I guess, Were you intending on, just for single family specifically, were you intending on buying whole just rentals or what was your aim there?

Yeah, so my general thought was like, I need to flip a certain number of houses to make enough money for my family to eat and live comfortably and us to go out to restaurants and Starbucks and not to think about prices. Okay. And everything after that would keep as a rental. Okay. As long as it made sense, and maybe throw in an extra flip or so a year, but I didn't, it didn't make sense to flip like 50 houses or 30 houses a year because you just pay so much in taxes. Like, yeah. flip the biggest profit margins, you know, make a couple hundred grand or whatever for it and then keep everything else.

Okay. So it was here, here's the number we need to hit for our active stuff and then everything else rentals. Um, and then, so, okay. So you did somewhere in that 70 house range as you were building in more multifamily as well.

Yeah. So right now we've got 82 units is what I own. I'm building four rentals, like new construction that we're going to keep. And then I'm under contract to purchase another house. So we'll be at 83, 87. And then I've also done like a lot of flips and land deals in between then. So I've probably done 150 deals or so.

Yeah. And that's a significant achievement just in five years to be able to do that. I mean, you hear people talk about wholesaling, you know, tons and tons of deals, but keeping that amount is very impressive. I don't, just to be clear, I don't keep 150.

No, no, like 80 something.

Yeah. Yeah. Yeah. No, just, just to be able to acquire that many, if you're open to talking about financing, do you do a lot through banks or private lenders? Like what's your main financing strategy?

So it's evolved over the years as finance has like starting out, all my long-term holds were financed with local banks. Okay, interesting. Because DSCR lenders weren't really a thing in 2019 and 2020. It really popped up in, I'd say, late 2020, early 21. DSCR, basically, local banks were charging 4% to 5%, and DSCR lenders at that time were charging 8.5% to 9.5%. There's no way it could be competitive using a DSR lender until probably 2021, where they started also to get more competitive.

Where DSCR was getting more competitive?

Yeah. Got it. Institutional non-bank financing for rental loans, commonly referred to as DSCR, they got more competitive. What I would do is I'd buy properties with either my own cash or a private lender or even a bank. Then I'd fix it up, get it rented. and then I'd take a portion of them or just one of them to a institutional lender, like a DSCR lender, and have them refinance it out. Then I can go and recycle my cash, the private lender's cash, or the banking relationship, and keep that going.

Make sure I understood correctly, before the DSCR really came into play for you and for a lot of investors, you were going to local banks and getting- Part of the loans. but you would get them to buy the property or just as a refi after you bought and renovated?

Both. I mean, you'd have to talk to a lot of local banks and figure out where they want us to be and if they're comfortable buying one that needed work. I'd say the majority of banks want it fixed up and rented before they want to do a loan on it. But you'd find like two or three local banks who'd be willing, based on your experience and your chat group with them, they'd be willing to let you go buy it, fix it up. And you can take a draw on it and then keep going.

And these were individual loans tied to the property or they were like line of credit deals?

Yeah, that's funny. All individual loans, no business credit or anything you see on the internet. It's all tied directly to the property and my credit score.

OK, got it. Very cool. So I've never really dabbled too much in that. I've gone to talk to some banks, but what was your, I guess, a couple of things. What was your process to get into some of these banks and talk with the right banks? And then also, is that a play you still use today, or is it really kind of faded out?

Yeah. I mean, so like, uh, on commercial properties, like there is no DSCR lender, um, that lends on that competitively. So you have to go to local banks. So you have to have those relationships with the bankers there for the commercial commercial properties.

You said, right. Okay.

Got it. So if you want to buy a warehouse building, like there is no DSCR loan or lender for that. Okay. You pay a private lender, but then it's going to be 10, 11, 12% interest. And you're never going to be competitive enough on a deal. When I can get money at six or seven percent interest. Local lenders are still very important. They're less important on single family because DSCR lenders came out and if you have a high credit score and you can fog a mirror, they'll give you a loan. Whereas the quote olden days, you had to have a track record, a business plan, net worth, income, liquidity, and then the property had to qualify. Whereas now, you can have no job and a good credit score and you can qualify for a DSCR loan on a house.

Do you have, have you mapped out basically all your local bank options and try to get in touch? Okay. So when you look for the type of local bank, I mean, is it somebody that, is it somebody that has a certain limit on, they don't, they don't have more than a certain number of branches or how do you, how do you look at that to categorize?

Yeah, that's a great question. I'd say start out like, First of all, if you're trying to build relationships with local banks, find people you know who like and trust you and ask them and have them introduce you. I'm not going to want to introduce someone I just met to my banker because you're using my reputation to help get a loan done. If you're a complete idiot, they're going to be like, why the heck do you waste my time?

Never listen to Jim again.

It's very much like intros are very helpful. If you don't have that, I would say you need to schedule meetings with commercial bankers at local banks, not Wells Fargo, not Chase or Bank of America. They don't deal with us small guys. You have to go to local banks, like your local credit unions, your banks with, let's say, zero to 20 locations. Those are great. But you want to go talk to them and find out what their lending appetite is to rental or landlord or investors. Tell them what you're doing and see if that's a good fit and what loan products or solutions they have for someone like yourself. If it's your first deal, no one wants to deal with you. The reality of it. Once you have 5-10-15 rentals, then you're considered more serious. But a local bank is going to look at your tax returns. They're going to want to see that you make money and you claim to make money with the IRS.

Yep. Okay. All right. No, that's helpful. Yeah, it's interesting. Every now and then I'll drive by and I'll take a picture of a bank that I haven't heard of and I'm trying to build a little list of possible options, but that's good to know. And then, like you said, getting the intros, I've had buyers that dealt with me before, they're like, hey, I'm using this bank, go talk to so-and-so at like, I don't know if Towne Bank is a small enough bank. TowneBank, for example, or others like that. Um, that's cool. That's, that's great to know. Thank you for the suggestions. Yeah.

The other, like the other way I'd say is like, if you're willing to find a great deal and you're willing to share that with someone else, they're going to bring in financing and like, you're going to build a relationship with that lender after you've successfully executed on that deal and that business plan where like, now you have another contact in your Rolodex, a banker who's like, You know you've got reputation by isolation and partying with the other person so i'd say like be willing to partner with other people who will open doors and like give you their experience as well so. It's not just about the dollars in that deal.

Yeah, for sure. It's refreshing to see even from your very beginning of your first deal, you you've been open to partnerships. I always like to see how people balance that between building it all on their own versus equity share. I'm assuming a lot of your portfolio is just you or you have partners on pretty much everything.

Yeah, I've got probably my spreadsheet mapped out like what I am. I'd say it's probably

20% is with partners. Okay. And then, and then the rest. Yeah. Like it's really important.

It's like that, that first office building deal I did, I was under contract on a house that was like, had some things with some homeless people I had to deal with that kind of scared me. Okay. I tried to wholesale it. And like the three people I know who quote bought houses said no. So I was like, what do I do? And I talked to this other person, this friend, and he's like, oh, call my buddy Zach at this bank. Like, he'll get it taken for you. Like, are you sure? It's only like a $43,000 house. No one wants to lend on that. And it means work. He's like, no, Zach will take care of you. Here's what to ask for. I'll send you an intro tomorrow. Call Zach up. And he did this loan that like, for everyone listening, like, no bank, no lender wants to mess with like, a $40,000 or $50,000 loan. It's not worth their time. But he did that deal, and then he did another 15 deals for me after that. So it's like because of that relationship that we had made together, and we both made a good amount of money and had a lot of fun, you can help each other out. And it's really important in real estate to have those relationships with people, not just be doing it by yourself. Because if I did it by myself, I might be at two or three houses. after five years, you know.

Yeah, exactly. Yeah, no, that's great. Well, another thing I want to talk about is, you know, before we jumped on to the recording, you know, you said, okay, I'm looking for more land, right? Like, can you talk a little bit about what you're looking for these days and what people can bring your way?

Yeah, absolutely. Thank you. So looking for infill lots primarily that have access to city-sewn water in the Charlotte Metro. Okay. The whole Charlotte Metro, anything within an hour of Charlotte, I'll even buy up in Winston-Salem, Hickory, and Morganton. But looking for just lots I can build a simple house on and either sell it or keep them as rentals. So city sewer and water is a requirement, like you won't even look at well and septic for lots of- I'll do septic if they already have the PERC done, but I'm not a huge fan of like chasing down properties and doing PERC tests on properties. Because like a lot of sellers have already had a PERC test and it failed, but they don't tell the wholesaler. Maybe the wholesaler doesn't tell me that. It's like, I don't want to waste 60 days of my time chasing a dead end, you know? Yeah. You get the test, you get it done. I'll buy it.

Okay. Interesting. All right. So you would, and what about wells? Will you stay away from those or?

If it's a good enough deal, I'll do it. Well, the issue with wells is it could be nine grand. It could be 40 grand. You don't know until you hit enough water.

I'm thinking if it's already there, like if they already got a drilled and it's a, it's a lot that maybe there's already a well. Yeah, of course. Okay. No problem. You just don't want access to water. Got it. Okay. Okay. And the, so do you have a specified exit on all these? Like, are you trying to build a bunch of stuff to rent or is it just. Yeah. Good question.

Same thing as before of like, whether I flip or hold stuff, like I want to have a certain level of income a year just for my active incomes. Like I'm going to like build and sell probably four houses for the year. And then the rest I'll keep as rentals. Okay. As long as it makes sense in that market, in that neighborhood, you know?

Okay. And I don't want to dive into anything you don't want to cover, but one of the things I heard you mention was, oh, these lots would be a great deal for my IRA. Are you doing a certain percentage? What are your rules for yourself on when you put something into your retirement accounts?

That's a good question. I don't have any.

Do you have any?

Yeah, I probably should. I threw like 40 something grand in my IRA like a year ago, I did a quick land deal that made a good amount of money on it. And then I like lend out of my IRA and like, as I get a surplus, I have a choice, I can either like buy a deal that comes across my desk or do another loan for somebody. And this one came across my desk that like, match closely to what I have in that account right now. So I was like, buy that. It's a good deal. It's going to go up. I think it's worth more than what I'm buying it for today. It's going to keep going up in value and it's LAM, so it's really easy. I don't have to maintain anything.

Okay, nice. Do you have, not to go too far down the IRA path, but do you have multiple retirement accounts or how do you, self-directed specifically, how do you set that up?

I have two, I technically have a pre-tax and post-tax. We did like a backdoor Roth conversion, I think is the proper term for my CPA. To put some money in there, like into the Roth.

Okay, nice. And just, when did you, you said about a year ago you started that path? Yeah, I just started this year and I regret not having done it a long time ago.

Yeah, I go back and forth. I think a lot of people like focus, on the retirement accounts, it's super heavy. And my friend I did the office deal with, he had really good feedback. He's like, you have to realize if you're active in real estate, you can use that cash and make a lot more cash really quickly. And the retirement account, it's locked away and some type of transactions are prohibited. So you have to balance it out. how fast you can turn that cash yourself or it's like in later stages of retirement, you're probably not as active.

That's a good point. Don't go too extreme where you're like, you still need money today.

Yeah. It's like, I mean, I approached him like, Hey, I just got this big tax bill. I could shove this much money into my retirement account. What do you think? And he had that really good feedback. I was like, Oh, okay. I'm going to push that off a couple of years.

Yeah.

Okay. Nice. If you could, so you deal with a lot of wholesalers who are probably either just getting started or maybe earlier on in their wholesaling career, investing career, whatever you want to call it. What do you see that separates those that really make it? What are they doing Because, let me back up, a lot of people try it and never figure it out. Have you noticed anything that's common across those that do figure it out?

Wholesalers? I think the most successful wholesalers I know are like laser focused on acquisition and marketing. And they dispo towards the path of least resistance. So like one of the biggest ones in town I spent two and a half years trying to get on their buyers list because they only sold their deals to one investor. I asked them, why the heck do you do that? I'll pay you three, four, five, six grand more than they will every deal. That's great. But with this other buyer, it's automatic. We don't have to think about anything. We don't do showings. One buyer happened to walk it with us onto the next one. So I think that ability to focus strictly on what makes the most money, which is buy more good deals or get more good deals on our contract, and then finding a way to have a couple of buyers who you know buy in volume and you know what they're looking for. I see a lot of wholesalers, they'll get one deal, and then they stop marketing and doing acquisitions, and they spend three weeks trying to dispo this crappy deal. And trying to make two grand when they should just go back to the drawing board and keep going after more deals. Find a good one, sell as quickly as you can, and then go back to marketing.

They put their energy in the right places. Yeah.

The place to make money is buying good deals.

What about someone that doesn't want to get into wholesaling, somebody wants to build a portfolio like you've done or mirror some of your success? As you and I both know, it's not an easy business and a lot of people can't necessarily stomach it. How would you say, if you had to look back and say, okay, here's the keys to how I was able to kind of make it through one level to the next. Let's say it's somebody that's just kind of maybe dabbling or has a few rentals that wants to go into it much more full-time like you've done. What do you think made it possible for you to build what you built?

Yeah, good question. I think there's two approaches. One is to be successful and build this big portfolio. You need some way to generate a lot of cash. Most people will be better off making more money at their job or in their business than quitting and trying to do fix and flips. I think if you go to like real estate meetings and you say like, raise your hand if you make 200K a year profit doing fix and flips, I think that number is surprisingly low.

And- Yeah, before tax or after. What's that? Before tax or after. Yeah, exactly.

I mean, well, no benefits, you pay your full FICA and FICA taxes, everything like, you're taking on a lot of risks to make 100, 200, 300 grand a year. Yeah. The two paths, one is you don't make a lot of money and you want to get into real estate and you're willing to create a job for yourself, whether it's wholesaling, fix and flipping, building houses, whatever. Figure out a way to generate a lot of cash and then invest it in good rental assets that have cash flow and have value and use leverage and financing the right ways. The other approach is the people that make good money and their job or in their business, they should be stowing away and buying as many rentals as they can comfortably and safely. I think it's two approaches. I don't know which one you want to go down, but that's how I view it.

Are you okay on time, by the way? Yeah. If you could expand on that a little bit. The two approaches, you're saying pick one or the other.

Yeah. I think if you make good money, you should, take your extra money you make and invest it, whether that's in equities or rental properties. I think everyone should figure out how to get on wholesalers buying list, and you should look at those deals first before you go to the MLS or Zillow.com to buy. Generally, wholesalers are going to sell deals for, if it's worth 200 grand, they're going to sell it for somewhere between 100 to 170 grand. even if you pay the most, you're still saving 30 grand or creating 30 grand in equity for yourself. So I'd say make money and try to invest in real estate. It's a great path. The other path is if you don't have a good way to make a lot of cash, then get into real estate and do wholesaling, do fix and flips, do new builds, probably fix and flips or wholesaling. create a business that generates cash by making profits from doing these flips or wholesale fees, and then take that cash and invest it into real estate. The advantage of being full-time in real estate is you're going to have access to better deal flow, you'll have access to better contractors, and you'll also learn a lot more a lot faster, so you can avoid some pitfalls. Whereas the guy who's doing it part-time buys, looks like one house a year, he doesn't know as much. into real estate space. He might not know the HVAC guy who's a thousand bucks cheaper. So the grand scheme of things, it's not a big deal if he's making more money in his business or in his job.

Yeah. Your active income is going to come from one of those two, either the cash pops in real estate or a full-time job.

Yeah. My trajectory is built on making a a good amount of income from real estate and reinvesting it back into rentals.

Okay, perfect. And then I guess the last topic, if you're okay sharing some of this, I've seen you post on Facebook a few times over the years, like on some of the key performance metrics that you look at. For example, I've seen you post about return on equity, which a lot of people don't really talk about and other things. Do you have sort of a bird's eye view of here's your dashboard of, okay, I know I'm doing well if I'm hitting certain metrics?

Yeah, I've got like a a net worth tracker that I track that tracks how much equity I have after all my debts and everything, and then also tracks the cash flow, how much principal I'm paying down every month, how much appreciation I'm quote, getting every month in the long run, and how much tax benefits I'm getting on average every month. As long as I see that number, keep going up, like my, quote, cash flow return, what I call net return, like the total of all of those, and then my net worth goes up. If all those keep going up, then I'm good.

It sounds like the only things you're actually selling are the things that you're planning on making your active income from, everything else. Your long-term holds, do you keep those with the intent of selling them one day, or how do you look at the long-term?

Yeah, good question. I mean, I just sold my first rental for a long time, like last week. So I will sell rentals. If I could wave a magic wand, I would sell all my single families.

Really? Okay. Yeah, yeah, I would. Interesting. So tell me more about why.

So before I say why I would divest, I would say that single families are a great investment because I believe we are fundamentally underbuilt in single family houses in the growing cities in the country. I don't see us getting out of that problem. So I think there's long-term appreciation is as close as guaranteed as you can get. Same thing with rental rate increases. I also think they're like, They're very easy to finance and refinance and pull equity out. They're also very liquid, where as soon as it's vacant, you can do a quick turn and sell it. Whereas if I have a 15 apartment building, I can't be like, oh, I need 300 grand this month, let me sell these four units. Sell the whole thing, and it takes a lot longer to sell. Less liquid. So it's really liquid, it's appreciating, rental rates go up. The downside is having 50 houses scattered across a metro, you have 50 HVACs, 50 roofs, 50 sets of appliances, 50 kitchens, bathrooms. You guys can see where I'm going here. It's more complex to deal with. Tenants can be challenging even if you have great managers who do a great job screening and qualifying all the tenants appropriately. you still like you have this many units, you're going to get some people that are a little bit on the crazier side. And I like less gray hairs. I got just crazy situations and stories that we can laugh about it for beer. But yeah, I, my business tenants are much to cash flows more consistent.

Okay. And even through the property manager on both commercial and single family, you're still feeling the pressure more from the single family side. Oh yeah.

Yeah. Okay. I don't like, I've got a tenant that they're apparently settling, but it's like suing me over complete bogus stuff. But like, nonetheless, it drags me into it and have to get like litigation attorneys involved, even though like we've done nothing wrong. The things they're claiming are completely irrelevant, but still we're involved.

Yeah. Oh, that sucks. I'm sorry to hear that. It's not fun to go through lawsuits. So if you can, just so people can get a taste of how you think about it, you sold a rental for the first time in a long time. What did you put the money towards?

That's TBD. It's in a 1031. The reason it's around why did I sell, going back to that question, is I would like to take more of my capital and put it into easier commercial deals. For the rental properties I have that go vacant, and if I don't love the location, if I don't love the house, and if I don't also love the debt structure on it, and it's got a good amount of equity, why not sell it? Why not take that 100 grand and put it somewhere that I like better? And that might be a commercial building, or it might be lending to someone and making 20% of my money.

Okay, nice. Have you toyed with the idea of actually selling the whole portfolio or not quite yet?

Yeah, I mean, I toy with it every other day. I think everyone that has a substantial amount of rentals, every other day, they want to sell the whole thing.

Interesting.

The challenges right now is the premium you get selling them one at a time is so much higher than what an investor is willing to pay for the package because the investor is using debt. They want a premium on that cost of their debt. Their cost of capital is, say, 7%. They want to buy it at an 8% cap rate. The retail market is paying effectively a five or five and a half percent, so a significant premium. In 2021, when rates were low, investors were paying sometimes more than the retail. It would make sense to sell everything at once or everything in packages if rates come down again. If not, then just one at a time.

Take me 30 years. I just met with a realtor a couple of days ago. that was selling a house close to where I live. And I looked at it because I was interested in location. And she said she represents a hedge fund and they're selling a ton of stuff right now. They have 50,000 houses and they're selling a lot of them. Whereas that same fund was buying everything they could get their hands on a couple of years ago. Are you seeing anything like, I don't want to say doomsday, but do you see a coming down the mountain with the real estate market right now or not in Charlotte?

Yeah, I mean, in metros that are growing, and we haven't overbuilt, no, I don't see a doomsday scenario, unless we go into like, a very large, prolonged, like unemployment, like depression type environment. I don't see it. I do see like, there's going to be some pain over the next 12 to 36 months in cities where they overbuilt apartments. We had like 14,000 units delivered last year. I think another 14,000 come this year. I think last year, the market absorbed half of them. I understand that houses are great, but if you have a class A luxury apartment offering three months rent-free, a beautiful pool, a dog park, some portion of your potential tenants are going to choose to live there. So it's going to bring rents down and make it softer for the next couple of years until we work through that supply issue. But the good thing is on the back end of all of this is no one's building new apartments or new large subdivisions that weren't already approved two years ago. Only reason they're building them now is because they already bought the dirt, they already got it entitled, they already have the loan, they already started, they can't stop.

Well, I appreciate how you think about things. It's fascinating to just hear your mind work through some of the things that a lot of people don't think about, frankly. So thank you for sharing. Is there anything that we didn't touch on? I know we didn't really get into the car wash or other things that may be on your mind, but is there anything you would like to share that you haven't shared already? Yeah, I mean, not especially.

I mean, the only thing I do is encourage everyone to get to real estate. It's a fantastic asset class. I don't think it should be your only asset class, but it's fantastic if you can buy a good rental property that truly creates cash flow, and it's in an appreciating market. It's going to be hard to lose over the long term, so everyone should get into that.

Yeah, no, I agree. What do you look at as a healthy breakdown of real estate being what component, and then what else do you I think is smart.

That's difficult. I'm more or less exclusively in real estate. Even my alternatives to real estate are like private loans and real estate. I don't have a ton of equities. So I think a balance is somewhere around like 20 to 40% in what I'd call alternatives and real estate would be one of those.

Okay. And then other than that, what do you look at blue chip stocks or what's interesting to you on the non-real estate?

index funds. I'm an index funds or DAI person. I'm not smart enough to be smarter than everyone else in the world. Yeah. So I get index funds. Over the long term, they do 9% to 11%.

You're not betting it all on GameStop?

No, I did watch that saga unfold with a buddy of mine. We laughed and always said we should have, but now we didn't.

Yeah.

Okay. All right, very cool. What's the best way? I know you said you have Instagram and YouTube are two good ways. What's the best way if people want to reach out to you and see your stuff and contact you?

Yeah, you can reach out to me on Instagram or check my YouTube. Both of them are my name, Jim Kittredge. I'll probably put a link somewhere in here. Or email, just jim at rothcapital.com. And if you have any land deals in Charlotte, Metro, North Carolina, send them to me. I'm looking to buy as many as I can find.

Okay, so your definition of Charlotte Metro is how many counties out?

Really one county out, plus Hickory, like Burke and Catawba County, and then plus Forsyth, like being Winston-Salem.

Okay, all right, so Forsyth, Burke, Catawba, and then everything Mecklenburg and touching Mecklenburg? Everything touching, yeah. Okay. All right, good deal. And so Jim at RothCapital.com, and then the Instagram and YouTube is, how do you find that again? Just my name, Jim Kittredge. Jim Kittredge, okay. All right, we'll make sure that's spelled out in the title. Thank you for doing this, man. I really appreciate it and have a lot of respect for what you're doing.

Thanks, man. Appreciate it. See you, Avi. All right.

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