Today, Kenny Simpson and Krystle Moore have amassed a sprawling real estate portfolio across San Diego — where they reside with their two daughters — that spans 47 units and is worth a combined total of $19 million.
From the outside, the 42-year-old Simpson and 38-year-old Moore make it look easy. It took them less than ten years from the purchase of their first investment property in 2012 to get to where they are now, which includes owning several multifamily residential apartments, vacation rentals, and an industrial cannabis manufacturing warehouse, details of which Insider verified via title documents. The couple estimates that their investments net them over $360,000 in annual cash flow.
But by no means has their journey been without its fair share of obstacles.
“Along the way, we made a lot of money and we probably lost seven figures,” said Simpson in a recent interview with Insider. “We tried to chase sexy things instead of just sticking to the bread and butter of multifamily.”
Detailed below are the nine pieces of advice, pulled from their own experiences, Simpson and Moore shared to help beginning real estate investors avoid their same mistakes and other common pitfalls.
The most important thing to do when first thinking about venturing into real estate is to get educated, said Moore. “You have to know about the thing that you’re investing in, especially if you want to protect your investment,” she explained.
Simpson recommends consuming as much content as possible through books and YouTube videos, and for additional help suggests joining a masterclass or getting a coach. But he also emphasized being wary of fake gurus. “Just make sure the person that you’re learning from has a good track record,” he said.
Simpson and Moore joined a group course with coach Brad Sumrok to add to their knowledge base of real estate syndication, asset management, and investor communications, in order to supplement their existing expertise in property operations, renovation, buying, and financing.
Through the syndicates they joined as part of this course, Simpson and Moore have invested around $350,000 in a total of 259 units, which they estimate nets them nearly $24,000 in annual cash flow. But anyone wishing to participate in these sort of passive investments must first qualify as an accredited investor, which requires meeting certain criteria like making at least $250,000 per year and having a net worth of at least $1,000,000.
Like other investors, Simpson and Moore emphasized the value in expanding your network to connect with others interested in real estate investing.
“There’s a lot of network meetups that are free and you can meet a lot of great people that are like-minded,” said Simpson.
Besides the syndicate deals they’ve joined, in their first few deals Simpson and Moore partnered up with some other investors because they simply couldn’t afford to buy an apartment building alone. While the other investors primarily provided financing, Moore and Simpson were given the leeway to oversee project budgets, costs, and renovations. Finding these hard-money private loans can be an option for any investors who may not have enough capital on hand to buy a property completely on their own.
Just like saving for retirement, investing in the stock market, or starting a business, mindset also matters when it comes to real estate, said Simpson.
Before investors even begin, he suggests they sit and write down their “whys.”
“Why am I doing this? Is it for extra money for retirement? Is it to fire my boss? Is it to leave it to my kids or build generational wealth?” suggested Simpson. The answers to these questions will provide guideposts that can help a new investor determine what they really want out of real estate investing, and assist in determining the direction of their efforts.
According to Moore, investors often “get too confused about where to start.” One way to avoid this is to educate yourself as much as possible, but another is to have a clear-cut business plan and budget in mind before you go too far.
Once you’ve answered those mindset questions, the next step is to figure out how much you’d like to make per month in cash flow, whether it’s an additional $2,000, $5,000, or more. When you have that number in mind, you’ll be able to figure out how many deals you’ll have to buy and how much you’ll need on hand for down payments.
“Answering those couple of questions makes it easier to get started and not overthink things,” said Simpson.
From there, you can start saving, find partners, or raise the money you need to get started in the buying process. “Put together your business plan, know what you can qualify for, and buy something based on all of those factors,” said Moore. “And if you don’t have the money, your biggest thing you have to figure out is how to make more money. How can I cut my budget and how can I make more money so that I can then have enough money to invest?”
Investors often make the process too complicated by trying to enter hot housing markets like Austin or Phoenix, but another way to cut down on confusion is to start in your own backyard, said Simpson and Moore.
“Where you live, you know it better than any place probably on the planet,” said Simpson. Investing locally also helps you avoid potential emergency travels to an out-of-state property in the case of anything going wrong, and saves you the headache of having to network with other real-estate professionals in an unfamiliar area.
“There’s plenty of deals here in my backyard that I can just buy, so I don’t have to worry about flying to Phoenix and getting to know the brokers and building the relationships, because this is also a relationship business,” said Moore.
When investors are in the early stages of the real estate investing game, Simpson and Moore recommend they start small.
“Maybe just buy a four-unit for your first deal if you’re young, and start there. And then once you buy your first deal, your mindset will change because what’s best for you might be different for somebody else,” explained Simpson.
Practically, starting small also makes sense because beginning investors are naturally more limited in their options, since they might not have enough savings to make a huge down payment. At a smaller scale, it’s also easier for investors to really understand the numbers behind their deals.
Simpson also warns investors not to get overly ambitious in the beginning — don’t make your first goal to one day have 1,000 units, for example. “I think you should start with your first deal, get into it, live it, learn it, run it, and make sure you really want to do this before you try to go too big,” he said.
“It’s a long game, not a short one,” added Moore.
It’s particularly important to be fluid and adaptable to any sudden changes in the early innings of a real estate investing career, since things don’t always go as planned and investors might not always land their ideal properties right away, said Simpson and Moore.
When they first began searching for investment properties in 2011, the couple had the original intention to buy a fourplex, live in one unit, and rent out the other three. But the market was relentlessly competitive and flooded with house-flippers, and they were unable to find anything within their budget.
Instead, they eventually bought a single-family home in 2012 before flipping it two years later — getting married right before the sale closed to take advantage of a capital gains tax benefit on their half-million-dollar profit.
As investors figure out their niche and strengths over time, Simpson and Moore recommend sticking to the things you know you’re good at.
Along the way, the couple have personally lost an estimated seven figures in bad investments, including a housing construction project in Los Angeles that “just went over budget and over time,” and several marijuana properties that dragged returns.
“Why did I need to feel like I was wild and crazy for a minute with my money? That was stupid,” said Moore, who emphasized that the couple have never lost a single dollar on their multifamily apartment investments. “You can chase these things that seem a little more sexy and cool and fun to talk to people about, but if it’s not your expertise, you’re probably putting yourself in a very risky position.”
“If we just took all that money and bought apartments, we would’ve had well over a hundred units by now,” added Simpson.
As their final piece of advice, Simpson and Moore recommended that after getting their feet wet, investors should transition to multifamily properties with more units.
That’s so they can take advantage of the “huge benefit” of economies of scale, said Moore. Practically, this principle means that vacancies and tenant turnover will decreasingly begin to negatively impact cash flows as investors scale to larger buildings.
But although economies of scale — while daunting — are a smart principle to apply in the long run, Moore advised investors to not let any fears or apprehensions stand in their way of diving in.
“Start where you’re comfortable,” she said. “Just get started — that’s the first step.”
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