This is episode #436, and my guest today is Kyle Doney, who operates in the Denver market.
Kyle is a fellow Investor Fuel mastermind member, and has been crushing it in Denver over the past couple of years.
I’ve thought about doing more case studies on the show in the past, and that’s exactly what we do on today’s show. We’re going over 5 case studies on deals that Kyle has done, all of which were a bit creative….deals that most investors passed on, and deals that he wouldn’t have done if he didn’t get a bit creative.
This episode is an awesome learning experience, and I’m glad you’re here with us.
Let’s jump in…please help me welcome Kyle Doney to the show!
Mike: This is the flipnerd.com “Expert Real Estate Investing Show.” The show for real estate investors, whether you’re a veteran or brand new. I’m your host, Mike Hambright. And each week, I bring you a new expert guest that will share their knowledge and lessons with you. If you’re excited about real estate investing, believe in personal responsibility and taking control of your life and financial destiny, you’re in the right place.
This is episode number 436. And my guest today is Kyle Doney who operates in and around the Denver-Colorado market. Kyle is a fellow Investor Fuel Mastermind member and has been crushing it in the Denver market over the past couple years. Now, I thought about doing some case study shows in the past but we just really haven’t done it. But that’s exactly what we’re going to do on today’s show.
We’re going to go over five case studies on deals that Kyle has done, all of which were a bit creative. Deals that most investors would have passed on, or deals that other investors did pass on. They’re also deals that Kyle wouldn’t have done if he didn’t get a bit creative. This episode is an awesome learning experience of some real world examples, and I’m glad you’re here with us. Let’s go ahead and jump in. Please help me welcome Kyle Doney to the show. Hey, Kyle, welcome to the show.
Kyle: Hey, Mike. Thanks for having me. I appreciate you having me on this time of the year.
Mike: No doubt, no doubt. Hey, man, really awesome to talk about some case studies today. We don’t do enough of that on the show, and this is episode number 436. We talk about deals sometimes every once in a while. But I’m excited to really just have a whole show on learning a little bit about you and then go through some case studies on deals that the average investor would probably pass on or just missed completely. So, I think it’s going to be a great learning opportunity.
Mike: Yeah. Hey, man, so, you and I are buddies. You’re in the Investor Fuel Mastermind. I know you well, but a lot of our listeners might not. So, tell us a little bit about your background, and a little bit more about you.
Kyle: Yeah. I got into real estate investing in 2013. So, I live here in Denver, Colorado, and moved out here in 2012. And I was in the military for six years before that. So, that’s kind of my background. And while I was in, after active duty, I was a reservist and went to college in North Carolina. And from there, I decided on Colorado because my brother was out here, and I actually moved out here and started a healthy vending business. So, right out of college, I knew I didn’t want to work for the man and I had done that, you know, for six years in the military. And for someone that doesn’t like being told what to do going into the military . . . You know, it wasn’t for me, so I decided to be my own boss and started this vending business and that kind of led me on the path to entrepreneurship.
And then, you know, that business started making some good money and I had another wholesale business as well, wholesaling electronics, and that was putting off good cash as well, which led me into real estate. So, I bought a house in 2013 and lived in it and did the whole, you know, the rent the rooms out and house hacked it. And then I bought another house in 2013 and decided I was going to try to flip one. And so, that was a fix and rent, so bought it, it was 25 grand, which is crazy cheap in Colorado.
Mike: Yeah. No doubt.
Kyle: So, I learned a lot of lessons from that flip, that first one and ultimately ended up renting it out and puts off good cash flow, I still own it and kind of just went from there. You know, I had other businesses for about five years while doing real estate on the side. And so, it was kind of, real estate was kind of a side hobby for me. The other businesses were making money and didn’t exactly, wasn’t confident enough to jump out of those and jump full time in real estate until I got to a certain point where I was like, “You know what? I’m just going to do this full time.” And that was around 2017, beginning of 2017, I sold other businesses and just focused 100% of my energy on real estate.
Mike: Yep. That’s awesome. That’s awesome. That’s great. And then Denver has obviously been on . . . There’s a lot of markets that have been hot, but Denver has been really on fire for the past several years. And we were talking, you know, maybe we’ll get some chance to talk about that a little bit more towards the end. But we were talking a little bit about how kind of where we sit right now, what you’re seeing in Denver, what I’m seeing in Dallas is markets are slowing down a little bit, right?
And so, I mean, the truth is, you know, as a real estate investor, I’ve been saying for years, “I’m looking forward to the next downturn, right?” But it’s easy to say that academically, like, because we know that what will happen is a lot of people that are overpaying for houses don’t really know what they’re doing are going to get washed out. And if you hang in there, and you stay in the game, then more opportunities will come your way.
But, you know, it’s not like somebody flips a switch one day, there’s this transition that could take months or six months or a year, right? And it’s like, how do you operate? How do you adjust during that time to keep running a business and keep making money, but stay safe and not get knocked out of the game by, you know, getting caught up and paying too much for houses that now you’re upside down in, right?
Kyle: Yeah, yeah, definitely. And we’re seeing that, just like Dallas, we’re slowing down. And, you know, the stuff I was buying five, four, three years ago, has almost doubled in price which is mind boggling and it’s already an expensive market. But we’re seeing it with our flips, and so, we’re starting to, you know, trying to get a little more safe with what we’re doing and be a little bit more conservative, stack cash, maybe wholesale a little bit more than when we do currently, transition.
Mike: Yeah. Good. Good. Awesome, man. So, let’s jump into these deals. So tell us, I want you to kind of tee up how you would describe this section we’re going to go through here. We’re going through five different case studies, really?
Kyle: Yeah. Well, you know, to start it, I look for big deals. I don’t want to do 100 deals a year. I mean, I’ll do 100 deals a year, if I can make what the profit I’m making now, that’d be amazing. But I’m more concerned with . . . I want to do quantity but I want to find deals that have big spreads of big profits. And so, that’s what we’re always looking for. We’re looking for stuff that a big profit and kind of looking at all angles of a deal, and how can we capitalize the most on this. And so, I try not to limit myself to be just a wholesaler or just a flipper. I’m looking at whatever strategy I can do that’s going to make the most on these houses. And that’s, you know, also the least stress as well, you know. I also don’t want to find a piece of land, I don’t want to go develop it and become a developer, you know. I want to move it along and keep doing what I do.
Mike: Yeah. Yeah. No doubt, no doubt. Awesome. So, let’s jump into the first one. So, go ahead and tell us a little about that one.
Kyle: Yeah, definitely. So, the first one’s a land deal. My acquisition guy brought this house to me, and he said, “Hey, man, I have this house. It doesn’t really look like a deal. They want too much. They wanted 500K. And you know, I don’t think it’s going to work.” And I looked at it, and I said, “Well, look at the lot. You know, that’s a . . . it has an acre . . . ” It was over an acre lot. And I looked around the area, and there’s a bunch of development going on, you know, a couple blocks away. And you can see that, basically, the development was pushing over to the way of this house. And, you know, in Denver, you don’t really see an acre lot very often. It’s pretty rare.
Mike: Right. It was in town, right?
Kyle: Yeah, yeah. It’s pretty, you know, it’s a suburb of Denver in Lakewood, but a couple miles out. And so, you know, I said, “Let’s, let’s take a look at this a little deeper.” And we looked at the land, and looked at the zoning, and said, “Okay, what can we do here?” You know, and eventually, we figured out well, we can put eight units on it as it is. So, this one house, let’s not look directly at this house is a flip because, you know, at 500K, it doesn’t make any sense as a flip, but all the value is in the land.
And so, you know, it’s just looking at a deal differently where some somebody else may be just getting into is going to look at that house and say, “The house isn’t worth 500 grand. Maybe the ARV’s 525 or 550 in it and it needs a full remodel, the person’s been there 20 years smoking in it and whatever.” But basically, that land we figured out, okay, we can put eight units on it. So, this is great for a developer, they’re going to come in, knock this house down, and they’re going to build and the path of progress is pushing towards that way.
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Kyle: . . . 500 grand, maybe the ARV’s 525 or 550 in it and it needs a full remodel, the person’s been there 20 years smoking in it and whatever. But basically, that land, we figured out, okay, we could put eight units on it. So, this is this is great for a developer, they’re going to come in, knock this house down, and they’re going to build, and the path of progress is pushing towards that way. So, we’re actually still working on that deal. I bought it a few months ago, and a lot of back and forth with the city and meetings and whatnot, but got tentative approvals that, “Yeah, you can put eight units on there.”
Mike: Just to clarify, so you actually took possession of it?
Kyle: Yes. Yep.
Mike: Okay, so you took the risk. So, you’re a half million dollars into it and that was before you knew whether the city would approve of actually putting eight units there, or . . . ?
Kyle: Yeah. They kind of . . . You might call like a soft approval, like there’s nothing in writing. But we had a few meetings at the city, I think, two or three meetings and, you know, the planning department said, “Yeah, you can do this,” but they wouldn’t put it in writing.
But I just knew what was going on here by, we knew it was worth the risk to buy this thing and we knew in the deal. There wasn’t really any land comps, but you can look at what the other . . . A lot of its kind of condo, townhouse type of properties. So, you can look at those, what they’re going for, and say, “Okay, yeah, we could, we can put up 8, 1,600 square foot units here. And the average square foot prices X and each unit is worth, you know, X dollars. Let’s say $400,000 or $450,000 I think is about what it is. So, we knew, yeah, there’s value there, somebody’s going to buy this lot and put these up and there’s big profit at the other end.
Mike: So, your play is to try to find a builder that does, like, infill type stuff in the neighborhood and to sell to them. So, could you have, let me ask you this because not everybody is willing to go plunk down half a million bucks to see if that happens, so you just talked about being risk averse, my friend, what are you doing? Would the seller have waited for you if you said, “It’s kind of contingent upon us getting approved to rezone or . . . ” You know, like that, would the seller have gone for that or sounds like probably not?
Kyle: They kind of did. So, we didn’t make a hard commitment on it. We didn’t have hard earnest down or anything like that. We did meet with a city before closing it. So, it’s not a full green light. It’s still not a full greenlight, actually. You know, it takes months of going back and forth with the city to get these approvals. It doesn’t happen overnight. But we knew enough where it was worth the risk, and we actually still are working this deal or actually set to close here in, I think, about two weeks, but we got a contract on it at 720K. So, profit, huge spread, you know, hopefully it goes through knock on wood. We know one way or another we’re money.
Mike: Is it a neighborhood where you’d seen houses being dozed and kind of new construction type going on, or have you seen some of that type of activity going on there?
Mike: Not necessarily turning one lot into eight, but just like more like you know bulldozing houses and rebuilding or . . . ?
Kyle: Yeah. Putting up duplexes, putting up single families, you know, things like that. It’s just Denver’s just pushing out to the suburbs now, so it’s so expensive in the city that it just keeps pushing out. And so, this this area was in the path of progress, and it’s actually in what’s called an opportunity zone as well. So, that’s a whole nother story. But there’s a bunch of tax benefits there for whatever developer buys that lot, and is willing to sit on it for a number of years. They can actually go and flip that and sell it tax-free. Pay no tax in their profits. That was another thing with this lot.
Mike: Yeah. So, it’s kind of a revitalization type zone anyway?
Kyle: Exactly. Yeah. I mean, when they designate these zones, these areas, you know, that eventually, this is going to be another hot area, because they’re going to . . . restaurants will come in bars, all that all that stuff, that young people will move there, and it’ll be a trendy area eventually.
Mike: Cool. Cool. Awesome. So, let’s go on to the second one here, your wholesale deal.
Kyle: Yeah. So, this one, we were up against a few wholesalers. It was a PPC lead. And generally, when we get these PPC leads, usually the people just kind of go out through Google and they submit a bunch of forms, and you’re kind of one of the other buyers in line. All right. And so, you’re competing against the bunch of people. And sometimes we can stop them in their tracks and if we’re the first one or something, but usually, there’s a ton of competition when those come in. So, anyway, we had a few people we were competing against, and the highest offer was about $34,000 more than what we were willing to pay. And so, we looked at it and said, “Okay, how, how can we make this deal work?”
Mike: Which, by the way, that’s a common scenario, right? Like, we get beat out, we’re never the highest. Whenever somebody says, “Oh, we got 10 other investors looking at it,” like, I know, we will never be the top buyer. And sometimes they’re coming back with prices like that, they’re like, you know, “We got an offer for double yours.” I was like, “I don’t know how I’m supposed to be making that work.” But so, it’s a common situation. So, tell us about how you made lemonade out of those lemons.
Kyle: Yeah, yeah, definitely. So, you know, a lot of times when those people are coming in super high? They have a plan. There’s a reason they’re doing that. They have an inspection contingency in there and they’re going to drop that person a week before close. You know, and when we see it so often, you know, somebody comes in, and yeah, I can pay 20 grand more than the next guy, but then all sudden they’re renegotiating and the seller has already packed their stuff, they’re ready to move out and now they’re dealing with this situation. And they’re in a corner and they’re like, “Okay, well, I’ve already planning on moving. I got everything lined up. And now this guy is trying to drop me 40 grand. What do I do?”
And so, we try to tell our sellers that and explain that to them. Like, this is a common thing, this could happen, and it probably will happen because this price that this guy’s paying makes no sense. We show them the comps. A lot of these people know what their house is worth fixed up. So, they know. You know, it’s like, “Okay, this, this house needs 50 grand worth of work and this guy’s offering you this price.” He’s going to lose money on it. Like, there’s a reason he’s offering this.
So, with this particular seller, she was actually, I think she was a former real estate agent, I believe. So, she kind of understood the game a bit, how everything works, and she was savvy, you know. So, we explain that to her today, “Look at this guy’s contract.” She actually showed us his contract. A lot of times we asked for that, because we want to see what they wrote up, and pick it apart, you know, and then come in with a better one.
Mike: Look for the fine print and the contingencies.
Kyle: Exactly. Yeah. So, we pointed all that stuff out to her. We said, “Look, this, this guy, yeah, his offer is $34,000 more than ours but here’s why you should go with us,” and kind of explained some of its benefits. We’ve made this really quick close which was valuable to her. And then we went hard in earnest money, which a lot of wholesalers aren’t willing to do. And so, right off the bat, we put five grand down hard. You know, if we screw up, or we find something, we’re not getting that money back, that money is gone.
But a lot of times, that’s enough to push a seller over the over the edge and say, “You know what? These guys are serious business. They’re going to close this deal. And this other guy, he’s not hard in his earnest money, he has these inspection dates a week out, you know, a couple days before it closes.” And if you can open your eyes to that, they’re willing to take less money, you know, than the next guy.
Mike: That’s a great lesson there. There’s a lot of . . . so a lot of people . . . We’re you’re newer, let’s say, if you’re listening to this right now, and you’re a newer investor, like, you have other levers than price, right? There’s time, time is really valuable. A lot of people, you know, what we do is, you could, like you said, you could put more down in earnest money, I found that a lot of people don’t really understand earnest money, but we don’t try to explain it to them. We just like, “You know, we usually do 100 bucks.” So, we don’t go out of our way to explain to them.
But if I needed a lever, I could say, “You know what? Normally, we put down $100. But for this, I’ll put down $10,000 and I’ll make it nonrefundable right now, you know, because . . . and every state is different, but in the Texas contract, you know, we might have an option period where we could have a couple days to deliver that earnest money, or we could say that we get it back if something else doesn’t happen, or whatever.”
But you could actually change that in the contract and just say, “It’s completely nonrefundable. My option period, zero days, like I don’t have one.” And stuff like that, like you said, the truth is, is that what people what I found people want more than anything in this business when we’re buying houses from them, is they want kind of closure, right? They like are at a point where they want to sell this thing. They’ve probably, a lot of people that we deal with don’t know about this situation, probably should have called us like 10 or 15 years ago, right? Like, their situation has just gotten worse over time. And now, when they come to terms with it, finally, like, what they really want is to close that door. And so, if you could provide confidence that, “Hey, we’re haven’t closed yet. But when you sign this contract, you truly are done today, right? You don’t have to worry about this anymore.” So, that’s a great, lesson for, I think, for newer investors, that it doesn’t always have to be about price.
Kyle: Yeah. And, you know, we said, “Hey, look, if we, for some reason, back out of this, well, you just made an extra five grand on your house, and now, you can go back to the other guy,” and they love that, you know. It’s like, “Cool. Well, all right, got nothing to lose here. I can only gain. You know, either you’re going to come through for me, or I’m going to get your money. I’m going to go to the next guy.”
Mike: Yeah. Yeah, that’s awesome. Awesome.
Kyle: Yeah, yeah. So, that particular one, you know, we made almost 50K profit on that house. You know, obviously, we could have paid, we could have matched that guy, came in right around where he was at and still made money on it.
Mike: Well, 50 is better than 15.
Kyle: Exactly. Yeah. And, you know, I mean, look at just that little thing just increased our spread that much more, you know, threefold.
Mike: And we’ve had people too . . . We forgot lots of examples. But we’ve had people over the years too where they have a higher offer. And it’s clear there’s some people that are always just going to go with whoever the highest offer is, like, they’re single track mind. They don’t care about anything other than . . . “I don’t care if I have to wait a month. It’s a higher offer.”
But we’ve had people before that. If they will literally say like, “You know what? I have a higher offer. I would rather work with you guys.” And then, early on, I would say, “Well, what if I beat their offer?” And then I’d say, “Well, I’ll go with it.” Then, of course, sometimes they go back to the other side, and the other side ups their offer again, and you play this game.
But what I found is, instead of saying, “Well, you know, do I need to beat it?” I would say, “Well, do I have to, like, match it? Or, you know, what are we talking here?” And there are people that have said, like, “You know what, could you just come up a little bit?” Like, they’re not even asking to, like, match or beat it. They’re just like, “I appreciate, you know, the option to work with you versus this other person that was a little more flighty. Can you just give me a little bit more money to make kind of make me feel better? But I’ll still sell it to you for less than what somebody else offered.”
Kyle: Yeah, yeah. Yeah. I mean, it comes down to their wants and needs, and are you meeting them? And do they trust? You know, is there a trust behind you versus the other guy? What are you doing differently to stand out? You know, like you said, there are sellers that you just can’t get through to them. Like, they’re all about the money and they’ll find out down the road. And those people you just keep following up with until it sells. You know, maybe they’ll come back. But yeah, it’s somebody many variables in this. And a lot of it’s just finding out what they want, and trying to meet those needs, and if you can’t, just move on to the next one.
Mike: Yep. Yeah. Speaking of moving on to the next one, let’s go on to case study number three.
Kyle: Cool. So, let me see. Let me look at this one. Yeah, so this particular house, we had a distressed seller. Same situation, there was a ton of other buyers that were interested in this house. She had like a stack of mail, which we took actually for ourselves to look at the competition. But she had this whole stack of mail. She had a bunch of people through her house. And, you know, her main thing was that she wanted to stay in this house for two years until her daughter graduated high school.
So, she needed to sell. She was distressed financially. She needed the money really bad, had a ton of equity, and really, the only thing that mattered to her, price did not matter. It was just staying in that house and her daughter going to the same school and graduating from the same school with all her friends, that was the most important thing to her. Where all the other buyers failed was they didn’t find that out. You know, it was simply, it was just money, you know, “Hey, I can offer you this. Here’s the money, I need you out. I’m going to flip this house. See you later.” And that’s not what this lady wanted.
So, we came in. We bought the house. Another situation where we probably could have wholesaled it and found a buyer to, you know, sit on it because of the equity there and wait for two years. But we decided to buy the house, we gave her, you know, a lease and let her stay there for two years. So, we signed a two-year lease. Yeah. That’s what she wanted. Like you have to meet their needs, right?
Mike: Well, she’s paying. I presume she’s paying a decent amount of rent so you’re not just like floating it for two years or anything, right?
Kyle: Yeah, yeah, she covered her holding costs really, is all it was. So, the rent was less than market value and that was kind of another thing. You know, she needed it to be at that price, but it was enough to cover our holding costs that if we needed to, we would just sit on it for two years and just wait, you know, and hope the market keeps appreciating. Luckily, we didn’t have to do that. So, the plan all along was to buy it and then find another investor that wanted to buy it and sit on it for those two years. And, you know, at the end of that two years, they’re going to have six figures in equity and then they can come in and fix it up if they need to, and sell it and make even more.
That’s what we did. So, we bought this house and gave her that rent back or lease, whatever you want to call it and just either for two years. This particular house, this this lady was a little kooky, for sure. And so, she wasn’t the ideal tenant by any means. I mean, we put this thing on the market. So, we tried to sell it off market to the to our wholesale list and do all that and nobody was really interested.
Mike: So, you put it on the . . . you’re trying to sell it. And then, obviously, with a tenant in place, so they have to abide by the agreement to lease it up till the end of that term, right?
Kyle: Exactly. Yeah. So, we put that on the MLS and we put that in the listing description, you know, the least amount of time that’s on there and what the rent rate was, and honestly, it was really hard to sell this house just because this lady was so kooky. Like I remember one situation, we had buyers come in to look at it and they were like, “Hey, do you know she has like a smoke tent in her living room?” She set up a tent, and was going in there and smoking in the tent.
Just weird stuff like that, you know, and so we had to put a stop to that right away, you know, get that thing removed. But there’s just a number of things like that. She was kind of like a semi-hoarder, I would call her. Like, you know, one of the rooms you couldn’t even walk into. So, it’s just a weird house. But at the end of the day, we did find somebody that wanted to buy it. It took us nine months, so it was a long one. You know, it was a long haul.
Mike: You took nine months to sell it and then truthfully that buyer probably, was it an investor or somebody . . . ?
Kyle:It was an investor.
Mike:I mean, really it’s not a typical owner occupant deal but . . .
Kyle: No, no. Yeah. It was an investor. So, this guy, he exactly what we thought, you know. It somebody wanted to buy it, and just wait that time and then, you know, at the end of that cycle, he would fix it and sell it. But, I think, when we first put on the market, you know, seeing that long two-year lease with those under market rents scare people off. And so, it did take nine months to sell this thing. And you know, at that point there’s a little over a year left and at the end of the day, we did well on the thing. It was our biggest profit that we ever had on a deal. We cleared 144 grand on that . . .
Mike: Holy cow.
Kyle: . . . one house. So, it was a good one.
Mike: About half of the houses I’ve ever done, I have an ARV of about that much.
Kyle: Exactly. Yeah. Yeah. Yeah.
Mike: Depends on what market [inaudible 00:27:38].
Kyle: No, I mean, so it was a good one. You know, and again, a lot of people gunning for that house, but nobody was listening to what she wanted except for us.
Mike: It’s kind of unusual that a seller would call you and they really want to sell it in two years. Even like, usually people are like, they need to move faster, you know. But so, maybe give a tip here while we’re on this. Like, what kind of questions do you have ask to pull that out of somebody?
Kyle: “What do you need? What are you looking to?” You know, that . . . And then just listening? “Hey, what’s your goals here with this house?” Because we tried the whole, “Hey, I’ll give you X amount of dollars, which is way more than we were offering to sit on it.” And, you know, she just pretty much straight up said, “No, that’s not going to work. I need to stay here.” You know, so, it’s just listening to those needs.
Nobody else was even entertaining the idea. So, when she first said it, you know, obviously, there was a lot of negotiating back and forth on how it’s going to be structured, how it’s going to look. We even had a lawyer come in and draft up all the docs to make sure we were compliant and doing everything right since she was staying in the house and, yeah, just listening, you know, and then figuring out what they want, and trying to give that to them the best way possible.
Mike: That’s great.
Kyle: That’s a win-win for everybody.
Mike: One of the things that John Martinez teaches is a question is to say, “Paint me the perfect picture of what you’d like to see happen here.” Like, what’s the perfect scenario, like, just tell me the story of what the perfect situation is for you. And you learn a lot about people in that, because they’ll say stuff like that, “You know what? I really would like to do is stay here for a couple years.” Like that’s rare, but nobody asked questions to pull that kind of thing out of somebody.
Kyle: Exactly. Yeah, I mean, it’s just listening, or another John Martinez question, “If you were to take $1 or less than what you’re asking, why would you?” You know, that’s another good one. And they’ll tell you why. And it’s like, “Okay, cool. I can do that.” You know, get a cheaper.
Mike: Yeah, that is a killer profit, man. That is awesome.
Kyle: Yeah. It’s a big one.
Mike: Yeah, that’s great. And we said we’re splitting everything on your deals, right?
Kyle: Yeah. Yeah. I’ll send you a check.
Mike: Okay. Okay. Well, hey, let’s go on to the next one. Case study number four.
Kyle: Yeah. So, this one was a wholesale deal. This house was actually about an hour away up north, and so not where we primarily do our deals at. So, we don’t have a huge buyers list up there. But we found a deal in this area where we do some marketing too, and we thought, “Okay, we don’t want to mess with this thing. We don’t we don’t want to fix it up. It’s an hour away. I don’t want to drive back and forth and manage the rehab and don’t really have a whole ton of contractor contacts up there.” And so, we tried to wholesale it and market it out, put it on all the different local Facebook channels and blast it to the list and all that good stuff. And we marked it up 20 grand and we had a bunch of low ball offers, like way under what we even had under contract for. Nobody was into the house.
And so, we looked at and said, “Okay, well, I guess we’re just going to have to bite the bullet on this one. Come in, we’re going to rehab it. We’ll want to find some contractors to do this thing and just get it done.” Like we knew there was money there. And so, we bought it, just like the other ones. We actually came in and bought it. And I think we put, I want to say we put 17,000 into the house. It was a really light rehab. So, we just painted the cabinets, put some cabinet pulls on, left the countertops, left all the tile. I think we put carpet in it. It was a true lipstick. We didn’t do a whole lot to the house.
Mike: You could have done more. It was really more of a wholetail or kind of a lighter version of the rehab than what you could have done what you’re saying?
Kyle: Yeah, it was one of those deals where it’s like, we don’t want to mess around doing a full rehab on this thing. It’s an hour way, too much work. Let’s just, you know, put lipstick on a pig and put it on the market and see what happens. And doing that, you know, instead of making 20 grand wholesale, we made 65,000 on that in profit in that house.
Mike: Wow. That’s awesome.
Kyle: Yeah. I mean another 3X return just by buying the deal, taking it down and doing a little bit of work. You know, we made that much extra that somebody else didn’t see. You know, I don’t how they didn’t see it.
Mike: And the way, and just, correct me if I’m wrong here, because this is what we’ve been doing a lot of like wholetailing the past couple years is, and I always do that, when we do houses on the outside of town like that are on the outskirts is the expectations out there are just different, right? Like, you don’t have to do a top of the line rehab because you don’t have as much competition usually, right. People are just, I don’t know how to say this, that’s politically correct. But people just have lower expectations when you’re more in the outskirts of town. If you’re out in the country, like people don’t expect like a high-end rehab like they would inside of an inner city like a hot area, right?
Kyle: Yeah, 100%. Yeah, definitely lower expectations. Totally different buyer.
Mike: You don’t have as much competition. Like, you know, there’s probably not a lot of houses that are for sale that are totally rehab like that. So, that’s, you don’t have to take it to that level.
Kyle: No, you don’t. You really don’t. I mean, it’s just, it’s getting it presentable and clean. Like, yeah, they’re like you said, their expectations are completely different than in the city. So, you could do less.
Mike: Right, right. It’s like, I have these a totally non-PC like, examples of things going on in my head. Like, you know, if you were on a desert island, and there was like, one man and one woman like, you don’t really care that they’re not the most attractive person. It’s like, it’s a member of the opposite sex. So, the expectations are just different, right? I didn’t really have to add the part, did I, but I did.
Kyle: I know what you’re saying, and you’re spot on. Yeah, it’s just a different breed out there. That’s all you can say.
Mike: And even inside the city, I mean, what we’ve been doing for the past couple of years is because inventory is dipping down so low, I don’t have to be the prettiest house on the street. I just have to have a house available on the street. Right. And so, that’s the beauty of a seller’s market that we’ve been in is, you don’t have to be the best-looking house. Like maybe you just have a good enough house with a good enough price, right?
Kyle: Yeah. I mean, if we would have came in and tiled the shower and went all out, we would have made less money than we did. That’s really the reality of it. Sometimes doing more is doing less, right?
Mike: Yeah. No doubt.
Kyle:So yeah, it’s really, it’s looking at each deal and saying, “Okay, what makes sense here?” It’s being creative. You know, you got to look at it, you got to understand your area, and not everything fits into the standard mold. Like, people think rehab, and it’s, “Oh, I’ve got to, you know, totally gut and replace everything and make it brand new.” And that’s just not the case in a lot of a lot of deals. You just don’t have to do all that. You’re hurting yourself, you know, like the holding cost, all the issues that can come up from sitting on a house, doing a long rehab, the city’s messing with you with permits and whatnot. It’s not worth it a lot of times.
Mike: No doubt, no doubt, no doubt. Awesome, man. So, one more, let’s go over the case study number five.
Kyle: Yeah, yeah. So these, these two, these were two, four-unit buildings that we had down in Colorado Springs, actually. So, another area that we usually don’t do business in, but just had found these deals and kind of went outside our box to make it happen. You know, and I think that’s another little side lesson, you know, look for opportunity in other areas too. Like, you don’t always have to, just like the last deal, like, you don’t always have to be in your little area. You can, if you see a deal somewhere else, it’s an hour away, or two hours away, go do it. You know, as long it’s a sound deal, go an hour away if it’s a deal. Why not?
Mike: Yeah, yeah. So, we’re ultimately, I’ve said this many times, when I first started investing, like, my wife and I, we carved out this, like two little suburbs of Dallas, and was always going to focus on these suburbs. And then very quickly, we realized, like, “I’m in the opportunity business. I’m going to go wherever there’s an opportunity,” and now we’ll go anywhere for the right deal. But that’s . . . it depends on your goals, personally, and lifestyle things. But if you’re in this business, you need to be open minded to opportunities, you know, regardless of where they’re at.
Kyle: Yeah. Always, always, yeah. So, this particular, both these buildings, we bought them around the same time, two different sellers. Both of them were four-unit. They were two bedroom, one bath unit in each one. You know, we . . . another kind of like the last deal, just putting lipstick on a pig, you know, we came in, there were some crappy tenants in these that we’re under rent. So, we got rid of those tenants. They weren’t a month-to-month lease. So, either we came in, said, “Hey, this is this is your new rent. This is what it’s going to. You can pay this or you can leave. You know, there, there’s the options for you.” And a lot of them actually did stay, but some of them left and went wherever. And so, we put new tenants in there, raised the rent, which automatically raises the value of the property. You know, it’s bringing in more cash flow.
And when we got rid of those tenants, we came in and spruced up the units as well. So, there was like, some 1970s, you know, features that were not very good-looking. So, came in and got rid of all those or fixed that stuff up, put carpet in, paint, really just the same type of thing. It was a lower income area, so you don’t got to do a whole lot to impress those people really. You know, some paint goes a long way and fresh carpet, people value that, I mean, feels new. So, we were able to get these brand new tenants in there and raise the rents, make the building a little bit better, you know, and did that relatively quick. It didn’t take a long time. But just doing those little things, you know, each of those buildings pulled over 100K profit each, you know.
Mike: Wow, that’s awesome.
Kyle: Yeah. Just doing those minor things. And I’m sure . . .
Mike: Because when you sold it to somebody, they’re looking at a multiple of rent, right? So, you were able to make improvements, raise the rents up. That’s the beauty of kind of multifamily, right, is you’re not looking at retail comps. You’re looking at it as a multiple of rents usually, right?
Kyle: Exactly. Yeah. I mean, they’re looking at the cap rate and what’s the thing making, and that’s how you value those is totally different than single family. And I see a lot of guys doing it right now. They’re killing it with doing that exact same thing, buying a building, coming in, and raising rents, doing some upgrades, and, you know, they’re making millions extra on top of these buildings within three to five years.
Mike:We’ve done some shows . . . Actually, I told you as I just closed on a multifamily deal with my buddy Corey Peterson. We actually have another one we’re closing next month, which is cool. And the whole play is these are actually pretty nice properties that are cash flowing really well now, but it’s they’re all value add. Like, there’s always a way to, like, improve vacancy rates and some other things and so we can increase the value quite a bit.
But I had somebody on the show here recently, I can’t remember who it was exactly. I can’t remember exactly which guest that was. But one of the things we talked about is, there’s I think there’s a misconception for single family investors. That multifamily is like, always run perfect and efficient, because it kind of seems more like, “Oh, that’s a big business.” But the reality is, is all those properties are owned by individuals as well. And they still, you know, they get sick, they get divorced, they’ve got issues going on in their life, or they have a mindset of like, they might just be a terrible manager and they just don’t they mismanage properties. So maybe share, like, I don’t know if you know who the seller was, not their name, but just like a situation of why they didn’t just fix this up themselves. Like how did they mismanage that to create the opportunity for you?
Kyle: Yeah. The one guy, I remember, the one was from a wholesaler actually so, you know, not really too much of a story behind that one. But the other one was an investor here that was in Denver and he just, you know, he was up here. He didn’t have property management, he was doing himself, he wasn’t paying attention to the place, and I think it was a headache for him. You know, he was getting calls, you know, whatever the toilet is broken, whatever is happening. And I think he just was sick of dealing with the place being an hour and a half away and, yeah, he just didn’t put enough attention into it really.
I think if you don’t have property management and you’re an hour and a half away, it’s just inevitable, that stuff is going to happen. Like you’re going to come up and if you’re not on top of it and your units going to go to shit and you’re not going to be putting enough effort into it, right?
Mike: Yeah. And some people too whether it’s single family or even, you know, certainly multifamily. Sometimes people, you can never figure out the psychology of how people come up with, how they justify things, right? But like that guy, I don’t know the situation, but we’ve had people like this that say things like . . . Because Colorado Springs is on fire too, right? That’s been on fire for a while.
And so, in his mind he might be thinking I’m just going to sell this thing and I know it’s, maybe it’s at a discount but I at least doubled my money. Like maybe, you know, he’s justifying it based on what he bought it for maybe or we’ve had people that like we bought the house from somebody that lived there for like 40 years and they literally, “We have a house recently we closed on,” and they said this. This was the ARV was like 120, the house was like a hoarder house so it needed a lot of work and needed a ton of updates. But we paid, we negotiated the price, but we bought it for like $30,500 or something. And we offered like a little bit below that and they negotiated us up.
And when they negotiated us up, the specific number 30,500 for them was that’s what they had bought it for 40 years earlier. So, they literally said this, and so, “That means we got to live here for free for 40 years.” Now, I’m thinking, I mean, they clearly weren’t doing any maintenance, but, you’ll get property taxes and lots of other things. But that’s how they justified it in their mind is, “Wow, we lived here essentially for free for 40 years.” And so, you know, whatever the justification is, if you can make it work, just go with it. But it’s just funny how people justify things in their mind, right?
Kyle: It’s crazy. Yeah, I mean, I love those people. You know, I want to buy more of them.
Mike: I love you.
Kyle: Yeah. I’m your best friend. Do you have more friends like this that have houses?
Mike: Right. Who else thinks like you?
Kyle: Yeah, yeah. Yeah. I mean, that’s just kind of how it is. People just neglect things for certain point of time, and they get to a certain point, they’re like, “Oh, wow, I’m really up. This place is crappy, I know it’s crappy, but you know . . . ” Then they come up with this price, and it’s like a great price. You meet their needs. So, I need to find more of them, honestly. I think it’s easier . . . You’re right. You know, you’re saying these people in multifamily they’re making a ton of money finding these opportunities. You know, my mindset is single family right now, and I think I need to start transitioning a little bit more to multi-units.
Mike: Truthfully, a little. I mean, I don’t focus on this or I haven’t, but I know some people that have done pretty well with focus on smaller multifamily. Like most of the big guys that are looking to multifamily are looking for $10 million plus deals. And most of the single family people are looking at four units or under, and there’s this kind of above four units up to 20 units. There’s a lot of properties out there and not very many people are targeting those people just from a competition standpoint, you know.
Kyle: Yeah, and those are the mom and pop operators as well, the ones that have owned it forever, it’s passed down in their family, and yeah, they’re neglected. You could see those in every city. You just drive around and . . .
Mike: Yeah. No doubt.
Kyle: They’re easy to pick out.
Mike: Yeah. No doubt, no doubt. Yeah. Awesome, man. Well, these are some great cases. I appreciate you sharing them. Hopefully, everybody listening got a lot of value out of it. Maybe, let’s kind of just do a quick summary on the lessons learned from these deals that a lot of times, it looked like, you know, you couldn’t get because you weren’t price competitive initially. But there was something other than price there, or deals that the average wholesaler would have just walked away from because they couldn’t make it work. Maybe just kind of share, like, the lessons learned from deals like this for people that are listening.
Kyle: You know, I think you just have to have the mindset of make it happen. If you have a deal and you know the numbers like that wholesale one, you know, nobody was willing to buy it for my 20K markup. And in my mind, I’m not going to let that go. Like now I do a lot more than just wholesaling, but my primary thing was wholesaling, I’m going to and I know it’s a deal and nobody wants to buy it off me, I’m going to go out there and make it happen regardless. You know whether that’s going to find a partner, getting hard money, anything like that, you just got to get out there and make it happen, you know, because there’s opportunity.
And if you’re walking away from that just because you couldn’t find a buyer, you’re letting money on the table. You know, and I think that’s the biggest thing, just have that mindset, look at look at every angle of a deal. We get deals all the time and they don’t make any sense with what the seller is saying, but we’re looking at other angles, you know, what’s the zoning here? What’s the, you know, what could we do owner carry? What can we do here to make this thing happen to profit off of this deal? When you get creative like that, you can make big spreads.
Mike: Yeah. No doubt. There’s a lot of ways, I mean, you know, I’m guilty of keeping it simple and not you’re not getting overly creative, but when I look back in hindsight, I could have bought hundreds more houses than I did just from having some creative solutions in place, and it’s just not something we really focused on, but when I look back now, you know, especially around properties that we could have kept as rentals, like sub twos, and I’m not a big fan of sub twos, but when I look back now, it’s like, you know, what I would do differently if I had ’08 to ‘012 back, you know, it’s just. Of course that’s hindsight, right? But the question is how do you learn from that and apply it going forward, right?
Kyle: Yeah, exactly. And then I’ve done the same thing, I’ve looked back at some of these deals and that I passed up on, and I see what the guy made on it, and I’m like, “Man, how did I not see that, right?” And it keeps you up at night sometimes when you see those big deals and you just got to take those lessons and learn from them and not do them again and look for that opportunity. You know, so always have your eyes open. I think that’s one thing that I’ve learned. I’ve missed a lot of deals myself and you learn from that and keep hunting, you know, and get better.
Mike: Yep, yep. No doubt. Awesome. Hey, Kyle. If folks want to reach out to learn more about what you’re doing out in Denver or even if they have any deals that they might want to partner up want to do with you at Denver, where do they go to connect with you?
Kyle: Yeah, yeah. Probably Facebook is the best, you know, just look me up, Kyle, K-Y-L-E, Doney, D-O-N-E-Y. Yeah, in Denver, Northern Colorado, Southern Colorado. I’m always looking for deals all around here. So, if you don’t know how to work a deal, or maybe you just want second eyes on it, hit me up, I’ll take a look at it, and see if there’s anything to work there and see if we can work together.
Mike: Awesome. Awesome. We’ll add a link for your Facebook profile in the show notes here. So, thanks again for sharing all these case studies with us and for spend some time with us today.
Kyle: Yeah. Thanks, Mike. Appreciate you having me on.
Mike: Awesome, awesome buddy. We’ll see in a couple weeks at Investor Fuel.
Kyle: Look forward to it.
Mike: Yeah, yeah. Hey, everybody, thanks for joining us for. This is episode number 436 with Kyle Doney, crushing it out in the Denver area. Hope you got a lot of value out of these case studies. I think we’re going to do more case studies like this. So, going forward, I think it’s a great way to learn and we can share, like, real world examples with you. So, appreciate you being with us today.
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