Not long ago, I met a guy from my church named Caleb VanTimmeren. We got connected because one of the pastors here knew that both he and I were active in the real estate space, and figured we should meet up and get acquainted.
I had lunch and with Caleb and he told me his story, and I was kind of blown away because he and his business partner Kyle Aho have been able to reach the dream that so many aspiring real estate investors are after, and they did it relatively quickly, all during a time when the competition has been very high and real estate prices have been insanely expensive.
Today we’re going to talk about how they both did this while working full-time jobs, how they found deals that could actually cash flow, how they found the money to make it all happen, and a lot more.
Before and After Pictures
Part of the reason why these deals worked is that both Caleb and Kyle understand construction and they were willing to do a lot of the improvements themselves.
Here are a few before-and-after photos to show you the transformation that took place.
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Links and Resources
- FixerYoopers on Instagram
- Rich Dad Poor Dad by Robert Kiyosaki
- Alma College (where Caleb and Kyle met)
- Frontline Community Church (where I met Caleb)
- Marquette, Michigan (where Caleb and Kyle’s properties are located)
- What Is the 1% Rule?
- EOS Operating System
- Profit First by Mike Michalowicz
- Blog Post: Profit First Changed My Life. It Will Change Yours Too.
- TenantCloud (this episode’s sponsor)
Share Your Thoughts
- Leave your thoughts about this episode on the REtipster forum!
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Help out the show!
- Leave an honest review on Apple Podcasts Your ratings and reviews really help (and I read each one).
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Thanks again for listening!
Episode 108 Transcription
Seth: Hey everybody, how’s it going? This is Seth Williams, you are watching and listening to the REtipster podcast. Today is kind of a cool opportunity. I get to talk with these two gentlemen, Caleb and Kyle. It all started a few months ago when I met Caleb for the first time. And Caleb was somebody who I had sort of seen around. We both go to the same church. That’s actually where we’re filming this right now.
I’d seen Caleb around for years, but I didn’t really know him. We had a mutual friend who introduced us. It’s actually our pastor. He knew that Caleb was in real estate and that I was too. And he’s like, “Hey, you two should probably talk.” Caleb reached out to me on BiggerPockets of all places and we got together and had lunch.
In that process, I learned a lot about his story and it was really cool to hear what Caleb has accomplished with his partner here, Kyle. They both have been working together on this. I’m not going to give away too much of the story until we start talking, but what I really liked about it is that they both started from a place that a lot of people are at. It’s not like they did some crazy thing and took these ridiculous risks or anything. They just were smart about it and put in a ton of work that made it happen. Anyway, we’ll jump into the conversation here and find out more.
I think you’re going to see if you’re somebody who wants to move on from your job and be truly financially free and do your own thing, there are a lot of lessons that we can pick up from this. So welcome guys.
Caleb: Thanks for having us.
Kyle: Yeah, thank you.
Seth: Yeah. You bet. So, Caleb, I guess we’ll start with you and I’ll just ask you both this question. When did you figure out real estate was something you wanted to do? How did you decide to go in the direction that you ended up going?
Caleb: Yeah. I was working as W2 after I graduated college. I started working in the fruit industry, actually in the apple packing facility. We packed for grocery retailers. I did that for eight years and I didn’t feel fully satisfied in my job and wanted something else. I was actually talking with this guy and we were on vacation together and kind of put a bug in my ear, started reading some books, listen to podcasts, and then read like probably a lot of people, Rich Dad Poor Dad, which really changed my perspective of just money and make the money work for you.
At that point, he actually challenged me with a 90-day goal to buy a place. I bought my first property at the end of 2019. And then we partnered up in 2020. So, it’s been about a year of being together. It was really just a “want” for something more and something to basically call my own work for ourselves and to price on for our family.
Seth: And you guys knew each other from college? Was that how you first met?
Kyle: Yeah, we were college teammates. We both went to Alma college, both play basketball there. And so, that’s where we knew each other. We roomed together then, and probably should have purchased that house, if we were a little bit wiser, instead of renting.
Seth: And then, Kyle, what’s your story?
Kyle: I started in September of 2011. It was my first purchase. And I started a little bit differently where I heard my parents talk about it off. They had invested in mobile homes specifically even when I was young. They were completely out of it by the time I would have been like a teenager. But I heard a gentleman one time bring it up. And in the lumberyard, he said, man, I’m going to sell a house for $20,000. And he wasn’t even talking to me. And I still remember going home that night and thinking, “Man, it’s going to take me six years to save that amount of money to buy that house.”
Then I started reading and I started asking more questions. It took me a full year, a year later, same lumberyard after I went to college for a year. I came back and a different gentleman was selling a house for I think $29,000 at that time. And it was a duplex. It piqued my interest early on, especially having grown up around it and growing up around the conversation. And from there, I just got the edge and really realized how much you could do with this and how much freedom you can achieve.
Seth: Yeah. Awesome. And this was 2011?
Kyle: Yeah, that would have been the first purchase, September of 2011. That was the year before my sophomore year in college, I think was my first purchase.
Seth: Gotcha. Yeah. Similar to myself and a lot of people who were in it back in 2011, like you’ve seen property prices just change a lot and competition change a lot. Where are all your properties?
Kyle: They’re all in the upper peninsula of Michigan. Let’s see, the other half of Michigan. They’re all near Marquette, which is the major city out there. They’re all centrally located. They’re all within striking distance of me being able to do all the work to myself, and now Caleb and I. That’s what made a lot of this possible. We could get to a property and didn’t have to travel far distance. We could really change the culture of these places. So, they’re all right there local.
Seth: Gotcha. Yeah. I don’t know anybody until I met you guys who do anything in the upper peninsula. It makes a lot of sense, especially right now when in the big cities the prices are going nuts. Have you found our price is more reasonable in a place like Marquette or are they still going nuts in that city as well?
Caleb: I would say they’re definitely climbing. There’s a lot of major old metropolitan cities. It’s tough to find even a 1% property. I mean, even here where we live in Grand Rapids is tuff. There are still deals out there, for sure, when you can make money. But it just hasn’t caught up there. In the direct Marquette area, it’s a little higher price, but overall, there are definitely still properties to find to make good cash on. And especially if you’re willing to buy one that’s a value add, a fixer-upper, you want to put some time and some sweat equity in it, there’s a big possibility for some good returns.
Seth: Yeah. And I’m curious about this property that you bought in 2019 on this 90-day challenge. Even in 2019, prices were up there. Was it hard to make this happen in 90 days? Where did you find this deal?
Caleb: I actually found it on the MLS, through a realtor. It was a duplex. I basically made my mind up that one way or another, sink or swim, I was going to buy a property. I had to jump in at some point. They always say the hardest one to buy is your first one. And so, I actually put the offer insight on scene. I put a few offers in prior to that, but they didn’t get accepted. But I did the due diligence and ended up going through with it. It’s been an awesome property since. And to be honest, I wasn’t nervous. I remember calling my wife and saying, “I put an offer on a place.” “Are we moving in there?” she says. I said, no, we’re not moving there.
Seth: The whole eviction moratorium. Has that affected you guys at all? Has it been a thorn in your side or is it not a problem at all?
Kyle: Yeah, it hasn’t changed things too much for us. Partially because we had quite a few tenants that were cooperative and were able to make it. So, I think that’s the most important part. We had a good group. I think it’s a little bit different because we are hands-on, people realize that we are not a large corporation, at least at this point. And so, there’s probably a little bit of a difference compared to some of your larger companies that are having a difficult time collecting. We may have had one or two tenants that weren’t able to make it and unfortunately chose to move out at that point instead of pushing the issue. So, we really have not struggled at all with the eviction moratorium.
Caleb: Yeah. And we understood that some people are going to have a hard time. And so, we were a hundred percent willing to work with them. We set up a few payments plans for a few people, but overall, yeah, it wasn’t as bad as what some landlords had it, or it made out to be.
Seth: How many total properties or doors or units do you guys own right now?
Caleb: Right now, we have right around 103 units. That’s not counting the vacant lots and the mobile home park. That’d be ones with tenants filled in.
Seth: So that’s two apartment buildings and one mobile home park.
Caleb: Yeah, together, we own two apartment buildings and then the mobile home park. A 15-unit, 16-unit, and then 114 pad mobile home park.
Seth: Gotcha. And then you both also own your own individual rentals as well.
Seth: Gotcha. How many do you have, Kyle?
Kyle: Privately, we have 24 units and then what we have together.
Seth: And you just have that one duplex.
Caleb: Yeah. Just that one duplex.
Seth: Okay, cool. And that’s enough to sustain both of you guys full-time, right?
Caleb: Yeah, it is. And this is probably the coolest part of all. We are even in W2 and we jumped in on this. We really traded what would probably be for both of us, a pretty good paying W2’s and what we were doing for a construction and property management job. We’ve done every facet of it at this point. And most people probably could get into it a little bit sooner and have a little bit less risk if they’re willing to do those tasks, that they’re just difficult to ask. They’re not the most fun.
So, we’ve traded that part. And it’s easily sustainable, at least with that amount of property as long as you’re willing to be the property manager and be the construction guy and the DIY guy, which we have no problem doing right now.
Seth: And how much time elapsed from when you guys both said, “Hey, let’s partner together,” to putting in your two weeks and quitting your job? Was that a quick process?
Caleb: Yeah, it sure did. Yeah. To back up a little bit in 2019, when we kind of talked, I said I’d give myself like a five-year window. Like I want to leave my job in five years. And then we ended up partnering up and buying the first part of the building. That was on June 18th, 2020 when we bought the first one together. And then fast forward to where we’re at now, both left our W2’s less than a year after that.
And partly because we knew the potential there. And at some point, we would’ve been hired out, or we would be going to do it ourselves. It’s like you said, we kind of traded one job for another. So right now, I wouldn’t call it passive by any means. We are hundred percent active in the business and working in and on the business. So, we got a good team around us. That helped. We have two people that are on as employees, including our wives that help.
Seth: Kyle, you live up in Marquette, and Caleb you live in the Grand Rapids area. So, for you, it’s a six-hour drive one way to get there?
Caleb: Correct. It’s about a six-hour drive. Yeah.
Seth: So how does that work? How do you guys divide responsibility and how often are you up there and how long are you up there?
Caleb: When we decided to do this and we decided that we were both going to leave our W2’s and I was particularly being the long distance. I and my wife had a couple of pretty honest conversations and we were a hundred percent committed to it. So, we actually bought a travel trailer and we were parked at their place for the summer. For this summer, for the stable future, we’re up there quite a bit. Just because we’re active in the business right now. But when I’m not there, usually I’m doing phone calls. My wife does all the QuickBooks and does the accounting portion of it. So, there are some remote tasks, some leasing stuff, screening tenants. So, we’re doing it all ourselves in-house. And so, we try to somewhat divide that up. His wife hands our social media, does some leasing. We try to divide it the best we can but right now we’re both up there full-time.
Seth: Wow, man, do you guys have kids?
Caleb: We do, yeah. Both our kids are actually within a month of each other. I have a little girl and Kyle has a little boy.
Seth: So, your kids come up with you in the travel trailer.
Caleb: They do. They do. They are new best friends.
Seth: Wow. Is that hard or disruptive or is everybody just kind of going with the flow? I mean, it’s a personality thing.
Caleb: To be honest, we were really good friends before this. We played basketball together. Our wives are really good friends. Both of them played college sports too. And so, we’ve gone on trips together, it was a really easy transition. And we knew there weren’t many other people that we’d want to partner with besides each other. It was really a seamless transition and they were gracious enough to open up their house and their yard, I guess.
Seth: Oh, man. That is such a gift to have somebody that you trust that much, that you just know what’s going to work. When I think about partnering with people, I’m not saying I’ll never do it, but I’m like, super slow, especially with the people that are my good friends because I don’t want to ruin that relationship if something goes wrong. Does that ever cross your mind or do you just kind of know we’re mature enough to work through this somehow?
Kyle: We did spend a considerable amount of time prior to partnering that I think is critical. I think if anybody’s going to do it, that’s a crucial step before partnering. We don’t want to make it sound like this went from being a friendship into a partnership without any conversation. We had a lot of tough conversations for probably almost a year leading up to it.
In a way, we were accountability partners leading up to it where we’d call each other every couple of weeks, probably every two weeks, and ask, “What are you doing on your side? What are we doing on our side?”
So, we made sure that prior to what we talked through, almost everything was possible. Even met with an attorney and made sure we talked through some of the worst-case scenarios, some of the stuff that you’d never hoped to happen. I do think that’s a critical step before partnering and we knew that both of us have the characteristic that we’re going to figure this out and make it work.
Seth: Yeah. Why don’t we transition a little bit into these specific deals, maybe the first apartment building that you guys bought together, how did you find this deal? Was that hard to find? Where were you looking to find the opportunity?
Kyle: Yeah. So, all the deals actually came off-market. And I think just like you alluded to earlier, markets have changed so much and they become so competitive that I think you have to source your deals off-market in order to find something with the opportunity to say, leave a W2.
So, all three of them, including this first deal, were off-market. This particular property, that’s 15-plex, we looked at about two and a half years prior to 2019 or probably 2018 end of it. At that time, it was uninhabitable. I think there was maybe like a 20% occupancy. They had electric heat. So, anybody that knows at cold winter months, electric heat is very expensive. So, it definitely wasn’t something we could even budge on or even thought twice about at that point.
The COVID crisis happened. And that was right around the point of March of 2020. We both had a little bit of turbulence and again, that accountability partnership, we chatted on the phone and I said, “Hey, let’s go after this apartment complex.” We had talked long enough at that point, we felt confident enough, and said let’s try this small deal together. And called the realtor actually that at that point had listed it a couple of years prior. Cold called him. The gentleman was great. He was extremely receptive to us pursuing this again. And he said, “Hey, I’ll call the guy.” He didn’t sell it. Actually, the deal fell through, and he gave us a shot at it. So, we waited until the day that you could travel. Caleb and his wife traveled up that day.
Caleb: Whenever the government restrictions came off for the COVID thing.
Kyle: Yeah. Traveled up that day and looked at it and did our due diligence that day, underwrote it, pretty much had the whole thing wrapped up within that weekend, at least knowing that we were going to put in a solid offer and make sure we land this deal. So, that’s where the first one came from.
Seth: Yeah. Did you guys have it in cash? Did you get bank financing? How did you finance it?
Caleb: Yes. What we both did, we both had lines of credits. Mine was personal. His was on a portfolio loan he had through his other properties. And we used that to both put our money in to close the down payment on the property. And then the bank actually gave us a line of credit to use for the renovations. So, we purchased it, used it for the renovations, and then refinanced it four or five months later, right?
Kyle: Yeah. We did a complete turnaround in four or five months.
Seth: What was the purchase price of that? And then how much money did you have to put into the renovations to make it better?
Caleb: We did it relatively inexpensively, partly because we did it all ourselves. I use PTO time. I think three, four weeks that summer to travel up there. I always joked that we are on vacation to work. He took time off and actually we have an awesome supportive family. They came up and helped a little bit while we were there. And so, we did it really inexpensively for labor. We had no labor charges. We weren’t taking a wage at that point. We put roughly $30,000 into it, probably. And we bought the property for $240,000. So, all in, we were in for $270,000 roughly.
Seth: For a 15-unit building?
Caleb: For 15-unit, yeah. There were six units that were occupied and we bought them. So, we renovated 9 units from June 18th through the beginning of September and got them fully rented out. Then refinanced them for $750,000. And so, at that point, we pulled our cash back out that we put into it. So, at this point, all the deals that we’ve done so far with the other apartments and mobile home park, we have zero home cash invested in any of this.
Seth: Wow, man, that’s amazing. It kind of reminds me of a typical wholesale house where there is only one type of buyer for this and that is an investor who is willing to get their hands dirty and fix it. Like the retail buyer is not buying this thing. Is that what sort of this was?
Kyle: It was, it was. And a lot of people face this, especially maybe in your first couple of deals where the institution that landed on it probably wouldn’t have been likely to lend on it if they didn’t know we had a backstory of fixing properties like this. At that point, I think there was 20% or maybe a little more, around 20%, 30% occupancy of that 15-plex, where most institutions wouldn’t lend on it. And this one said, “Hey, give it a shot.” They were local. It was a credit union. And we hear that so often in the community that if you want something done like this, sometimes your smaller local places are a little bit better to source that funding.
Seth: Yeah. And did you know what that second appraisal was going to come out at? Or did you know how much you’d be able to increase the rent? I know in hindsight it seems like “Man, what a great opportunity, what an obvious investment.” But when you don’t know on the front end, were you confident that, “Yes, this is a good price. Yes, $30,000 is a great deal. Yes, it’s going to end up at this value?” Or was it just like, “I don’t know, let’s just do this and we’ll see what happens.”
Kyle: Yeah. We definitely knew that there was a huge value add. Just educating ourselves well enough, we knew the potential was there. Caleb knows the numbers a little bit better on that side.
Caleb: Yeah. We ran numbers really conservatively. And in all our properties we’ve underwritten. So, we’re not going in blind at all. We know the market well, especially Kyle, who is living up there. We really underestimated what we thought we could get when we started renovating these. We rented them for more than we expected to. And we were redoing everything. We put in new floors, new appliances, countertops, and bathrooms were updated. So, we were doing it pretty nice. In the area, it’s one of the nicer places.
And so, we ended up getting, like I said, more than what we even thought we could. We actually passed what number we thought we would refinance. And so, when the appraisal came back, we were both pretty excited because we knew it was definitely a nice springboard in the future deals for us. But we also knew the amount of work that was going into it. It wasn’t like these were turnkey at all. Some of them were bare bones. Some of them were filled to the brim with stuff.
Seth: If you had hired some general contractor to do all this, how much do you think it would cost?
Caleb: Yeah, we talk about that often. It would be tough to put a number on it because of how bad in shape they were. We’re also fighting the COVID crisis at the same time. So, the lineup contractors right now, and everybody’s dealing with this, it would have been either really overpriced to land the work for it, or we’d have held that property for a year probably to be able to renovate it on their time.
Seth: Yeah. So, it sounds like your ability and willingness to do the work, which I don’t have this ability. If you give me a hammer, I’m going to just ruin everything. So, it sounds like that skill is a pretty big deal in terms of your ability to do this.
Caleb: Yeah, absolutely. I would say for sure. And I would say it’s almost something that, I won’t say sets us apart, but gives us a little edge that we’ll tackle these deals that other people don’t want to. We’ve heard multiple times, like, man, you guys overpaid for those buildings. Maybe it’s just our knowledge or just hearing what other units across the country are listening to different podcasts, reading books. But like, man, I think we under-paid for these. We just knew what value was and there’s a commercial appraisal, so they’re going on the numbers. We knew what will get for rent and what we’ll bring in monthly. And we thought, even if we totally screwed this up or got way less rent than we thought we would still be okay and still be able to make the payment.
Seth: Yeah. It’s always interesting to hear what are person’s unfair advantages. Like what is that edge that they have that nobody else does. Like maybe to the average person who doesn’t know how to do this, you did overpay, but your ability to make these changes, that changes everything.
Caleb: Yeah, absolutely
Seth: Basically, you got this thing refinanced with a higher appraisal, and then you took that money, and then you bought property number two. Is that what happened? Or what did you do with that money?
Caleb: That’s kind of what we did. Yeah. We refinanced and we only did a 60% loan to value. We didn’t want to get over leveraged, especially being our first deal, but we knew we wanted some capital to be able to buy another deal when it presented itself. The commercial lender we were working with is kind of how we somewhat got the next deal for the apartment building.
Kyle: Yeah. We took that 60% and without a deal in mind, just knowing that as well as it went, that we envisioned this was going to continue to grow. We would foster this kind of slowly and see where the next deal was at. A commercial lender brought up by, he said, man, as well as you guys did this in this small community, he said there’s another property that’s in worse shape. And he meant that sincerely. And it really was. I said, “Hey, how about reaching out to this guy?” And that again comes from just being willing to be in a niche that nobody else was in. This property, much like the first apartment complex, was really run down. Having the capital available, we just pursued that next deal. We said, “Well, let’s try it. Let’s start the conversation. Let’s see where this takes us and see if it makes sense.”
Seth: I’m curious about the tenants. You end up having to boot a lot of these tenants because they can’t afford the higher rent or they choose to move out or are they overjoyed that somebody is finally fixing the place? And also, when you’re making the renovations, do you have to wait till the units are vacant or do you just do it while the people live there?
Caleb: When in this situation just given the condition and the shape of the property, we knew it would be really tough to do it with people living there. We had water damage. I mean, you name it, it was in there. We had holes in the floor, obviously holes in the wall, we had a leaky roof at one point. We had just a lot of issues that were going to be really tough to do with tenants in place. And so, when we bought it, we just said, “Hey, we don’t think this is livable in the way it’s at, and we don’t feel comfortable with you guys living here in a property like this and then being an owner property with someone living there.”
What we did was give them a 30 days note and vacated them. And some people held out a bit longer, but most people did leave. They knew what kind of shape it was. And at that point, then we started working on renovations. And we just did eight units first, and then we were jumping into the next eight units after that. And so, we’re going to clear both buildings and fully renovate both. It’s really the best way to do it and the only way we think that’s possible to do a good job.
Seth: Yeah. What is the housing supply like in Marquette? Is it the type of situation where it’s like, if there are vacant units on the market, they’re going to rent like that? Or are they going to sit vacant for a while? What’s that like up there?
Kyle: Probably like a lot of markets right now. It is extremely difficult for people to find housing. Much like Grand Rapids. We haven’t had to post the property in quite a while. We take, maybe, I would say, probably three to five phone calls a day and direct them over to the website just to apply. So, there’s that type of demand, unfortunately. And especially in affordable housing. Marquette being a college town and also a growing area of the upper peninsula, it’s definitely put some significant demand on affordable housing up there.
Seth: Yeah. So, I guess that it makes me think of another thing. Are you guys managing these yourself? Like you don’t have another property manager between you. It’s just you’re talking directly to the tents.
Kyle: Yeah. We’ve opted at this point just because of the state of the properties, we are going to do all of the property management during this optimization phase until we feel comfortable enough that the culture has changed, the living conditions have changed. And now is a community that can be run by a property manager that we can kind of put the systems in place.
We talk daily about implementing our systems and that’s where we’ve gone. So much of this property management is pretty seamless. It’s pretty hands-off at this point from what we have to do on sale. Like the tenants that we’ve already placed. So really much of our time and focus is spent on renovating units that are empty right now. But the property management end of it takes, I would say 5% to 10% of our daily time.
Seth: Yeah. How often do you have to evict tenants for nonpaying? Have you been pretty good at finding good tenants who pay and that kind of thing?
Kyle: Yeah, we haven’t had to go through that fortunately, part of it being the eviction moratorium was on for most of this past year. We didn’t have that availability to evict. But fortunately, we haven’t had to do that. It wasn’t an option and maybe we would have tried to evict if it was in place, it may have been a tenant or two.
The tenants we’ve placed, we’ve set very specific criteria, and at this point of here’s what you have to make, here’s what you really have to fulfill and check these boxes. And we had not had a single issue that I can think of in tenants we’ve placed.
Seth: Gotcha. Just to review the timeline. So, you bought the first apartment building in what month and year was that?
Caleb: June of 2020.
Seth: Okay. And then you bought the second one when?
Caleb: That was February something 2021.
Kyle: February 10th, 2021.
Seth: And then did you do the same thing with that where you renovated it and refinance it, the same kind of thing?
Caleb: Yeah, we’re in the middle of that project. So that one’s still under renovation. That first 8-plex is almost completely renovated, but it is filled. But in between those two deals, we did land on another significant deal. And that would’ve been December 1st, 2020. So, right before the new year. And that was the mobile home park. That was probably our largest purchase together.
Seth: Now let’s talk about that. That’s pretty interesting. Like how much land, how many mobile homes were there when you bought it, and are you renting just the lots or do you actually own the mobile homes themselves?
Caleb: Yeah. So, it is close to a 30-acre parcel. It’s a 114-pad mobile home park. When we bought it, it wasn’t very occupied, I think it was 26% occupied. So only 33 tenants. There were maybe 40 trailers there, some vacant. So really, we came into a property that we knew had a lot of upside but also had a big project for infill.
When we first started discussing this mobile home park, it was new to us. And so, we both dove into readings and podcasts and did as much as we could to learn about the industry. But the opportunity was there and so we took it and we’ve already brought in some used homes. We’re looking at bringing in some new ones.
Seth: When you say there is a 33% occupancy, does that mean of the land or of the existing homes that were there?
Caleb: Of the existing lots. 33% of the lots were occupied. So, 114-pad park, somewhere around that ballpark. But then to answer your question about the park versus tenant-owned homes, most of them were tenant-owned homes, which we prefer to kind of do and stick with, but there were three parkland homes that we rented out for volume when we purchased it. And then right now we’ve added, I think, two or three more that we’ve rented out since then.
Seth: These used homes that you’re looking to buy or the new ones, is the plan for you to own those and rent the entire homes out or sell them to the people?
Kyle: Ideally, we would like it to be tenant-owned homes for a couple of different reasons. I think pride ownership is much more important or probably much more fulfilled when they own it themselves instead of renting it. And then you can create a community atmosphere. So, we’ve noticed just in the short time that we’ve been there, the people that live there and are owners, they just respect and treat everybody a little bit better, the neighbors and the people around them. So, we would like to continue in that avenue with people purchasing them.
Seth: In the homes that were there when you bought it, were they kind of ratty, nasty ones? Or were they in decent shape? How nice were they?
Caleb: Yeah, they definitely needed some work. The park was built I think in the late 70s. And then there are some nicer ones. There definitely are some probably 2000s, maybe later than that. We brought in a few that have been some late 90s, early 2000s, mid 2000s. What we don’t want to do is bring it worst homes. But at this point with how tough used mobile homes have been to come by, just finding them, we’ve been bringing in really stuff that we know we had to renovate. And then to be honest, what we’re going to do probably is to try to flip these mobile homes and put some work into them. And that’s when you make a big buck on them, but at least you’ll be able to sell them and what we put into them, to be able to rent that lot out and that space out.
Seth: Gotcha. So, you bring the home in, renovate it, sell the home itself to the tenant, and then they keep renting the land from you.
Caleb: Correct, exactly.
Kyle: So, ultimately the goal is for us, at least, not saying everyone, but for us is to just rent the lot itself where everyone owns a home. So, your maintenance is very minimal. You don’t have as much CapEx besides the infrastructure and roads, plumbing pipe, and that kind of stuff.
Seth: Cool. If some of the homes are in terrible shape, how do you make that work? You have the horrible-looking ones on one end of the park and the nice ones on the other end? Or are they just kind of mixed and intermingled? You can’t make a person improve their home. How does that work?
Kyle: You can, you can in a way.
Seth: Oh, really?
Kyle: Yeah. We want them to have a place to live. We definitely don’t want to see people pack up and move out. There is definitely a better sector of the park. It’s a big park. So, there are a couple of streets that are with new homes and then there’s a sector, a small section there with the older homes. So, we’ve even gone as far as to offer help. Especially with the skirting issues, with freeze-up prevention, and that type of stuff. So, we’ve brought dumpsters and we’ve offered to help clean up. We’ve picked stuff up ourselves. So, that part of all, we really are going to try to help out and try to help those people that may have what would be an eyesore, try to help them clean it off.
Seth: Does that mean doing it for free? What does that mean to help them?
Kyle: Yeah. If it improves the overall picture of the park, or if it improves just the overall community, we’ll do it on our dollar. We’ll get in there and put the equity in ourselves. Because of the eventual return, we take phone calls now all the time with people complimenting, “Hey, I like what you guys are doing. We want to move a home into the park, or we’d like to pursue purchasing a new one from you guys.” And that’s all just the effort to clean the place off.
Seth: Yeah. The dynamics in a mobile home park, it’s kind of weird. Is a tenant more permanent just because it’s not easy to move a whole home in versus if you’re renting an apartment and you just leave? So, you don’t really want to get a bad apple because they’re going to be stuck there. And maybe I’m wrong. I don’t really know what I’m talking about, I’m just imagining.
Caleb: You’re a hundred percent true. Yeah. Some of these residents probably have been there. So maybe not quite that long, but versus foreseeable future, when someone moves in, you kind of figure they’re going to be there for a while, especially if they purchase a home. They know that and we know that, and that’s why we prefer to do these tenant-owned homes. They’re going to treat it like a house, like something that they own and something that they can have pride in. And I think it goes long a way too. Like you said, we’re in there, we’re bringing dumpsters there. We’re helping them clean trash up. And there were a few times we’re in there seven, eight o’clock at night. I think it motivates the people themselves. I’ve seen some people come out there, mowing their lawn, picking trash up with us. And so, they see us working hard and I think they say, “Hey, if these guys can do it, I can help them. I can do my own lawn.”
Seth: That does say something. It’s kind of like when you have a coach who runs laps with you. It just kind of gives you more built-in respect because you see him doing it.
Caleb: For sure. Yeah. That’s a good point.
Kyle: Your thought is correct too on the vacancy part, compared to the apartment complex. We have noticed that part, the tendency to move out after a year, try to move up in an apartment complex is definitely greater. It’s expensive. It’s $4,000 to $5,000 just to move a mobile home and that’s just to pull it. So that doesn’t include any hookup costs or what you need to put in sewer and electric and gas. It’s not cheap.
Seth: So, this is probably a novice question, but if a mobile homeowner stops paying the rent for the lot, do you just take possession of their house or they got to figure it out? Because they don’t have money, you got to come up with $5,000 somewhere to move the thing out. How does that work?
Caleb: Since you’re on the lease, it’s not like an apartment where they don’t pay rent, you can evict them right away, you can send someone else to vacate them. And what it is with a mobile home is three months in a year period if they don’t pay rent. So, we don’t want to do that. We don’t want to kick anybody that is living there by any means. They know where we’re coming from and we’ve had no issues so far. I think they see the work we’re putting into it and try to make improvements. And I think even small rent increases aren’t going to have a big impact. I think they’re going to see that we’re improving stuff.
Seth: So, three months in a year, like that’s the soonest window you have to evict them or get them out of there. Is that what you mean?
Caleb: Yeah. We haven’t had anybody press that. We haven’t had any issues with collection. And I think it is because we’ve got pretty fair rental prices and we try to keep a community that people want to be in.
Seth: Yeah. So, this is an entire 33-acre parcel, it’s what you said it was?
Caleb: About 30 acres, it’s what it is.
Seth: Okay. Is it all developed from the standpoint of roads and utilities? Or do you have to add that stuff if you want to expand?
Caleb: No, it was all developed. It had poured concrete pads, had the pedestals there with electric and power risers with the water coming up sewer. That was there. There were some minor infrastructure issues. And when I say minor, we dealt with a few water leaks out at some point. I think every mobile homeowner does at some point. But also, we had some risers that were broken when the water comes out that we’ve had to replace. Sewer lines have been blocked. There are problems that come up. It’s just a matter of solving them.
Seth: So, if a problem comes up, you’re not like throw yourself on the floor. “I just give up, everything bad happens to me.”
Caleb: Yeah. I think you get a lot of people say that, right? As real estate investors, you’re a problem solver. If you can, that’s where the benefit comes from.
Seth: Yeah, absolutely. Does that mean that at one point this was fully occupied? If there’s like pads everywhere, and people moved out. Do you know the history?
Kyle: Yeah, it was. This mobile home park was fully occupied. It would have been around probably the late 80s, early 90s. The local area took a hit with the closing of a nuclear base and Air Force base in the immediate area. So that was around the mid to early 90s. It did see significant change. And whether or not it could have been sustained if the maintenance was up kept, things were up kept a little bit cleaner. And if there were new homes coming in, it’s hard to say what that would’ve looked like. At least from a market comparison, the rest of the surrounding area of Marquette, the parks are full. And there are even some large investment groups that have purchased in the area. So at this point we know the model is there, that there is plenty of room for another full mobile home park.
Caleb: Absolutely, the demand is there.
Seth: When you talk about Marquette, like in my mind, I sort of thought of Marquette as like, “Oh, that’s just totally different than the rest of the country. It’s a small city in the UP.” But it sounds pretty similar to a lot of cities where it’s still super competitive. There’s still a housing shortage. Prices are still going up. So, it almost sounds like you could do a very similar thing in any city if you are able to just identify, “Hey, that apartment building is looking terrible. Maybe they’ll sell it.” Do you think that’s accurate? Are there a lot of crossovers between Marquette and other cities around the country?
Caleb: I would say there’s no way that one market stands alone. There are plenty of other markets I would say that have deals like this where there’s a mobile home park that’s run down. It’s just about finding those. And then if you’re willing to take the time and put in the equity or put in the sweat equity to do it and put in the time and the work that it takes, I think there are definitely deals out there and that’s what we’re willing to do. And then people know that. So, I think if there is another property like that, someone might say, “Hey, these guys might do that. I don’t want this, but these guys might do that.
Seth: Is it safe to say that around these two apartment buildings and mobile home park, is it otherwise a good area?
Caleb: It is. Yeah. I would say the rest of the area surrounding is a pretty good area. And I think like in any market, I’m sure there are areas in Grand Rapids, there are areas of every city that people tend to hang together. And so, I think by cleaning these up, you disperse these people into different neighborhoods or they go somewhere. It’s just better for the local community that they’re not all in under one roof or all on one street or one city block.
Seth: Yeah. If I wanted to find something like this in Grand Rapids right now, what would I be looking for? Do I basically just drive around and looking for buildings that look on the exterior, like they’re in rough shape? Is that essentially what you did on this one?
Kyle: Both the apartment complexes were off-market and both of them were properties that people knew and needed something to be done. Whether it was from the exterior or even the interior, or just getting to know the local environment. And so, I think the first place you would start is just either cold calling or just having more conversations, networking pretty seriously with people who are hanging around these areas.
And a lot of times it’s just going to come from the locals, I would say. As long as you’ve got somebody’s boots on the ground probably doesn’t even have to be yourself, but somebody’s boots on the ground in the area that can tell you, “Hey, this property has been run down. It’s sitting 20% occupied or 30% occupied.” That’s the first one I would go after or that we would go after together.
Seth: Those boots on the ground, is that like a local realtor or something?
Kyle: It could be. I think a lot of times in commercial, at least, a lot of times these guys hear about things a year before there’s ever going to even be a potential sale. This gentleman in particular that sold the second one, he was a profitable business owner. He had done a really good job in the construction industry. The commercial lender, he brought it up probably a year or two before this gentleman was even interested in selling.
So, I think that’s who you would start with, at least in any open market. I would start with these guys that have a potential for a pocket listing or Joe Schmoe is getting up in age and he’s probably going to sell in the next couple of years. His kids don’t want to take it. And this will be the property to go after.
Seth: Yeah. And as you had mentioned earlier, it was sort of a cold call. Does that mean you literally found this owner’s phone number and picked up the phone and called? Or you had just heard from somebody on the street?
Kyle: Yeah, yeah. It was a literal cold call. I grabbed his cell phone number, gave him a call, and just introduced myself and our company and what our mission was as a team. And he was extremely receptive to that. It probably took three to six months of conversation. I won’t make it sound like this was a pick-out call phone, five-minute conversation and it was a done deal. With that, with the mobile home park and the apartment complexes, it was a lengthy process of just forming a relationship and making sure that they were comfortable selling to us.
Seth: Where did you get this guy’s phone number?
Kyle: Good question. I asked the lender. I asked the commercial lender. It happened to be a gentleman he knew and I think there are a lot of different statistics out there, but we’re only like one or two people away from the connection to somebody. So, if you want to meet somebody, you got to ask enough people and they are going to know them.
Seth: Yeah, that is true. There are certain people that just by the nature of their job, they know lots of people. Like lenders and agents. And just thinking like anybody listening to this or watching this who wants to get started right now, who’s the first person they should call? Just like, look up a commercial lender and call him, “Hey, tell me where your distressed properties are at.” They give you the name and you call them. Tomorrow night you got a deal that you’re closing, the next day you’re financially free.
Kyle: I don’t want to give away all of our secrets, but that’s where I would go. Especially coming out of this COVID crisis, there are a ton of properties, all sorts of properties, hotels, apartments that are in foreclosure or in forbearance. That’s probably where I would start. I would start with those lists.
Caleb: Yeah. And I would say too, just going through COVID, there are probably some landlords that experienced some kind of tenants who stopped paying rent, and maybe they were debating about selling before and now they know they want to sell, like after going through this. Especially people that are getting up there in age. There’s a huge opportunity there to jump in and even put out a land contract. They still got that residual income coming in and it can be a benefit to all parties.
Seth: Yeah. That is one thing, it’s like, you just never know what the person on the other end is going through. Like they could have cancer, they could be going through a divorce. They could just be too busy with other stuff. On the surface, it makes no sense why they would be willing to part with the property. But there is a reason and you got to get them at the right time.
Caleb: And I think sometimes certain property owners after, say you own a property 10, 15, 20 years, you are always at the point where you’re just content, you’re not making improvements. You’re not doing a good job managing it and it probably starts deteriorating. At that point, that’s what I think, that’s where these properties are at. It was kind of a second thought pushed aside. And at that point, it probably didn’t need the income because they had other streams of income or they were just financially. And so, for them to part ways with, it was almost not even a second thought. Or it’s just not even second thought, but they were a lot more willing to. And the only way you’re going to get those deals is to revisit them. If you’re not constantly in communication and that’s what you were doing, staying in communication with them.
Seth: I know something that I have experienced. I think a lot of active real estate investors are experiencing, people sort of see you from the outside. They see that you’re doing great things. You’re making money. They don’t really know how to do it, but they sort of want to get into the action. Have you guys had people offering you money to do this stuff? Is that a common thing you’ve come across? Like friends and family? Like, “Hey, you need investors? Take my money.”
Kyle: It is, a little bit. And that’s one of the things that comes with growing as quickly as we have is that the community definitely recognized that we’ve had quite a few people reach out and said, “Hey, are you interested in having a private investor or can we inject capital?” And I think it’s easy to see growth and not understand that there is a ton of work that comes into the backside of this behind the scenes. So, it’s definitely something that we welcome and we always say, “Hey, it’s going to be somebody that fits into our team and it’s going to be a relationship that we have much more than it is going to be like, we need the money or we want to take some capital.” And we definitely welcome relationships for sure. But it is an extremely selective process for sure.
Seth: Yeah. Are there a lot of these rundown apartment building-type properties in Marquette? Could you take your pick on the next deal you do and the next one? Are they all over? I don’t know, is that a common thing?
Kyle: I don’t think so. There’s just not a high volume of properties anywhere that are in this current state. I don’t want to make it sound like this is the hidden jam or fantasy island in real estate investing. But it does come with just doing your homework and likely if you didn’t know that these weren’t occupied and you didn’t spend time in the local market, the exterior of that 15-plex was okay. It wasn’t like it was an eyesore. It sat on a major highway. So, I would say there are probably just as many deals anywhere in any market. And it just comes down to doing your homework and having some sort of due diligence or somebody there that can look into it for you.
Seth: Do you guys have before and after pictures with all this stuff?
Caleb: We do. Yeah.
Seth: If you guys want to check out the show notes, retipster.com/108. If I can get some of those from them, I’ll post them there just so we can get a feel for the transformation. That might be kind of cool.
Caleb: Yeah, absolutely. We will definitely get those over to you.
Kyle: We post them pretty regularly on FixerYoopers on Instagram. Yeah, we do document it pretty well. And that’s where a lot of people from the community have reached out, through Instagram.
Seth: Cool. I’ll link to their Instagram page as well, again, in the show notes retipster.com/108. Now this whole thing of quitting your jobs. I know that sounds like the long-term goal, but it happened faster than you thought. Was that a nerve-racking experience? Was it hard for you or your wives to get on board with that? And how did you know it’s like, “Okay, now we’re ready”? Was there a certain monthly income number you were looking for or amount of savings? Take us through what that was like.
Caleb: Yeah, for sure. In a way, a leap of faith at the same time, and we both knew this was our goal. And so, that’s what we were going for. But it definitely was some long conversation with my wife. I’m getting her on board and going through the numbers and rightfully so, making sure financially we can afford it. We didn’t want to jump into a ship while it was sinking by no means.
But we also knew that to really do this and do it right without hiring out, we had to jump into a full-time. I spent a lot of time really thinking and praying out and knew that was the decision I was at peace with and felt like was the right time to do it. And it was really to the point where it wasn’t fair to our families. We were working at a W2 job. I would just come home at night and be answering emails, answering phone calls, going on weekends to start fixing it up, same with you. Basically, we were working 40-50 hours at W2 plus put another 15-20 hours in real estate, if not more. Staying long nights up.
And so, it’s just got to the point where it wasn’t fair to them to keep going that way. And the reason why we got into this is ultimately because we want freedom and have time with our family. We want to be able to grow up with our kids and have that time, flexibility, and not be limited to having two weeks of PTO. We want to coach our kids’ sports teams and do that kind of stuff.
Seth: Yeah, yeah, totally. What about you?
Kyle: Yeah, it was probably a little less labor-intensive. My wife’s not quite as analytical, as Caleb’s wife is a math teacher. So, in that part, there wasn’t a certain number. We had lived off of what we were making on the rental side of it for quite a while. And my wife had left a corporate position like two and a half, three years prior to just doing what we were doing. We knew the model was there.
And so, it really came down to how much were we willing to sacrifice and how long can we hold on sacrificing the time at home with family. At the time we both had a one-year-old. And we continue to resonate that daily. We continue to talk over and hold each other accountable between Caleb and I. We are letting this balance swing a little bit too far, like now is the time.
Since that purchase, the mobile home park in early December, we ran that mobile home park for six, seven months, or even eight months prior to even making the decision to finally leave our W2. So, there were some long nights for sure. So, it was the tipping point where “Okay, we’re no longer willing to sacrifice so much time for the family or away from the family.”
Seth: Yeah. As I’m sort of reflecting back on the things we’ve talked about so far, maybe I can just summarize this and you guys can let me know if I’m missing something. But it sounds like there are a number of things that allowed this to happen, the way that it did.
One of them was you guys knew each other and you trusted each other. You were both in a financial situation where you could chip in the amount needed to get going. You both have the construction background of knowing how to do that stuff. And that is something that a lot of people don’t have or aren’t willing to do.
You also knew how to identify and find the deals. The market is also such that it’s just going up and up and up and its supply-and-demand is there. And I’m just trying to think, would this work in 2011 with the way things worked then? Or would it have just taken a longer time? What do you think?
Kyle: Yeah. That’s interesting. We’ve talked a lot about this. I think we could have grown it a little bit faster, sooner. One of the things we say that Caleb and I both have talked about is if you want to go fast, you go alone, but if you want to go far, you go together. So, if we would have partnered earlier and or had the capital available, we probably could have grown this much faster in 2011 than we could now because the prices and the competition are there and the market’s tightened up a little further. So much like when you got into it. The opportunity, the iron, was hot for sure at that point. And now it’s been a little slower process.
Seth: Maybe you have a slightly different story, but it sounds like your spouses are both cool with it. They might not have been like, “Yes, let’s do it,” but they weren’t like, “No, I won’t allow you to do it.” For a lot of people depending on their situation, if they’re married or where their significant other is, like, that can be a big factor in this. Like some people will say, “No, I forbid you to do this.” And others are the biggest cheerleader and make it happen sooner than you would otherwise have. My wife is similar to yours, Caleb. She’s super analytical and it had to be a really sure thing before she was totally on board. Would you agree? Do you think that’s an important thing in this?
Caleb: Yeah, absolutely. And I think what it comes down to is trust. It’s having a relationship where you guys trusted a hundred percent. If the two things are right for our family, this is what we can do. And ultimately, same with us. We have trust for each other. There’s not one second, I would doubt the decision he would make and probably vice versa. Even our wives are both actively involved in the business. And so, it’s been an awesome opportunity. To work with your spouse, to work with your best friend and grow that. But at the same time, without Denae my wife, I would run it by anything. And so, she raised me in good, which is what you need. You need someone to be with you. You have some strengths and then you have a lot of weaknesses, at least I do. And so, she compliments those really nice. The same Kyle does.
Seth: Yeah. It makes me wonder how you find people in life that you trust implicitly, where it’s like, I trust that you can make the right decision? Maybe it goes both ways. Maybe it’s my problem that I don’t trust people that much. I’ve met enough people in my life where at first glance, they seem super trustworthy, but when you follow them long enough, they do things that are like, “Oh, maybe I don’t trust you there.”
So, to be able to find somebody that you can really be on that level with is an amazing gift. But I wonder if there are some kind of personality tests you can run a person through to know “Okay, yep. I can trust you now”? You can’t manufacture that trust. You just have to know a person for years. And that was your situation, right?
Caleb: That was, yeah.
Kyle: Yeah. I would say we had talked. It definitely wasn’t something that just transpired overnight. And I think you end up knowing somebody’s true character over the course of time, much like any relationship and before jumping in with a spouse. And people do make it work if they jump in quickly. Probably is better with fostering a little bit of time. And so, we just knew that one another came from the same background. We came from a work ethic background. We came from a very faith-driven background. There were definitely parts that we knew were going to waiver as hard as much of a challenge as we were going to face. And that part was critical. So, we would always have our core values. We’d always stick to that part. And we agreed there first. And so, whatever this looks like, all difficulty it gets, we’ll be able to press on.
Seth: Yeah. Gotcha. Now it seems like you guys are sort of good at a lot of the same things. Are there areas of expertise that you have Kyle that Caleb doesn’t have and vice versa? There are other jobs that come up and it’s like, “Oh, that’s Kyle all the way. That’s not Caleb’s job,” and vice versa.
Kyle: Yeah. So, I would say the biggest thing and probably the most beneficial thing I ever did was partner because Caleb’s got an amazing ability to manage a lot of people. And when we’re property managing a hundred and some tenants at this point, he has the ability to communicate, I would say, very effectively and have a little bit more, I would say, of the aggressiveness that you need to get people to do things. He comes from a background of managing way more employees than I was managing as a clinic director. And so, he isn’t afraid of a little bit of confrontation where I would say I tend to have a significant weakness there and probably let things slide a little bit too far. So, he’s been a blessing to the company and to grow it that way. And it probably wouldn’t have been possible to get to where we’re at without having that, somebody to complement my weakness personally.
Caleb: And that’s the whole thing, you want to find somebody that complements you. Construction-wise, we are both hard-working but in Kyle’s situation, he’s like the epitome almost of a visionary where he’s always looking in the future, what are we going to do in five years, where we’re going to be in 10 years, where we will grow on this thing. So, he’s really driving that business forward. He’s a super likable guy. He won’t meet many people that don’t get along with him and you can’t fit in with him. And so, you got to find somebody that complements you. And whether it’s a relationship with your spouse or business partner, that’s the key to go a long way as you said earlier.
Seth: Speaking of the future vision, where are you guys going to go? What do you see happening in the next year? It sounds like a ton has happened within like 24 months ago. Imagine what could happen five years from now? Where do you think it’s going to go?
Kyle: We use iOS, the operating system. We have talked over our 10-year and 5-year goals. Probably most importantly, is that we just don’t want to grow this for the sake of growing. A book like Profit First is a great example. And too many businesses probably try that too quickly. See how large we can get. We’re going to try to stick to our core values of having our family be first. And that’s a critical part. So, whatever happens from there, we can grow it as it is, but we want to keep that as our cornerstone.
So, I think if I had to give you a 10-year goal, we know very realistically we would like to exceed 1,000 units together. And the units have zero relevance to how much we can make on a gross revenue and has much more to do with how many people we can impact now at this point. We’ve got two great W2 employees. We have already grown our team to six of us, really six full-time employees. And I would say they’re probably two of the best team members you can have. We would like to feel like we’re helping people in the community. And, hopefully, with being able to get to that thousand-unit mark or exceed that in a 10-year vision, we could then start a nonprofit, we could then give back a little bit more to the community. And so, that’s where we’re headed as a team and is our direction as a team.
Seth: Yeah. That’s awesome. That’s basically 10 times the number of units you have now.
Kyle: It is.
Seth: Would that be in the same market? Are you looking at other states or where do you think that would go?
Caleb: Yeah, we thought it was quite a bit. We’re not dead set on we are going to buy a mobile home next or we will buy an apartment next. No, if there is a value-add component there, I think we’re willing to jump on it. And even out of state, right now we found our niche in the market we’re in, and we’ll definitely pursue that until it runs dry or we need to move on to somewhere else. But we definitely do want to expand it for markets and be able to impact Northern markets too and create affordable housing.
One thing we’re not trying to do here is price-gouging rent or just increase rents every single year. We want to keep attainable, affordable housing for people that is also a nice quality place for them. That’s ultimately our goal. And so, if we can move that to a different market, wherever that is, we’d definitely consider that. And then probably we’ll have to at some point for sure.
Seth: Yeah. I probably should ask this earlier, but what is the employment base of Marquette? Are there a few big employers there? Is it the kind of thing where if one of them went under, the whole town is done? How does that work up there?
Kyle: Great question. Because that’s probably the most critical part for us continuing to invest there. We feel like there’s stability. There is a diversified economy. There is a lumber industry. There is a mining industry that’s very strong. The two largest employers would be in the hospital system, which is a large hospital for the upper peninsula. And then the university. They’ve got a large university there as well.
Seth: Is that Michigan Tech?
Kyle: Northern Michigan.
Caleb: In today’s day and age, especially when COVID happened, there are so many more jobs remotely. And so, the amount of calls that we get from either out of state or from downstate here, people look into to move up. We’ve heard it so many times that we can’t even probably remember it, but I’m just trying to get out of the hustle. I can work remotely. And so, I think a lot of people are moving up there to that area, just being immersed, it’s an awesome town but housing is expensive there. So, being a little outside of town, it’s only a 20-minute drive to the lake, to the big lake. And also, it’s really a beautiful spot for them to move in.
Seth: Yeah. Is the cost of living more to live up there or less compared to the lower peninsula? Like gas, food, groceries, and that stuff.
Kyle: Yeah. It’s comparable, I would say. It just depends on the area of the lower peninsula. It probably resembles much more closely than the Northern lower peninsula in terms of say, pricing on just product and services. It’s going to be a little bit less than Grand Rapids or Metro Detroit, for sure. But pretty similar to a lot of these local smaller communities in the lower peninsula.
Seth: Is there like a Chick-fil-A up there?
Kyle: There isn’t.
Seth: Why would anybody live up there?
Caleb: Right. No doubt, no doubt.
Kyle: Sounds like an opportunity.
Seth: Suppose somebody out there is listening to this and they’ve got nothing. They don’t own any properties, but they see what you’ve accomplished or just this idea of using real estate to quit their job and do what they want in life. Are there any general principles or suggestions or ideas or anything that you would say to those people?
Kyle: Yeah, think bigger sooner, honestly. And I’ve heard it a ton of times and I wish I would have taken that advice early on because it is so achievable. And I don’t want to make it sound simplistic or easy, but if you take the actionable steps, if you make sure that you give a call and you make sure you could do your due diligence, you break those into small, simple tasks, it is totally achievable to be where we’re at in probably the same amount of time or less time. So, think bigger sooner. I’m not exactly sure who said that. If it was Brandon Turner himself or I’m not exactly sure, but that is the advice I’d give to any newbie starting out.
Seth: Cool. Awesome. So, the final three questions. At the end of a lot of our podcasts, I in this case will ask three questions that have nothing to do with real estate. It’s just to get to know you guys better. The first question Caleb, we’ll start with you is what is your biggest fear?
Caleb: I think my biggest fear is failure honestly. That’s what drives me. And good or bad, I’m a very competitive person. And I think it just motivates me to, I won’t say win, but succeed in whatever it takes. If it’s going to be grinding and working longer hours, doing what it takes not to fail at what I’m doing.
Seth: What does failure look like to you? Is it like losing money? Is it having to go back to a job?
Caleb: I think a lot of people struggle with what’s their calling. And so, for me having something that I feel called doing, something that I feel that’s successful and succeed in that doesn’t necessarily mean money at all. Neither of us got into this for the money. It’s more like, can we make an impact in the community? Can we use this to spread the gospel in some way? Or be a positive light to someone’s life. And so no, definitely not money, but something that we feel that we’re making an impact in more than just our immediate lives and the community around us.
Seth: Yeah. Cool. Awesome. What about you, Kyle? What’s your biggest fear?
Kyle: I would probably say it’s very similar parallels with what Caleb said. I don’t want to ever regret at the end that I didn’t live a fulfilled life, that I wasn’t able to do everything that I was settled and called to do. And whether that has impacted as many people. And it probably won’t just be housing. We talk about this endlessly that I’d love to start a kid’s foundation or start a child foundation and see how many people we can impact. So, to not fulfill that potential, I think, would be my biggest fear.
Seth: Yeah. In terms of impacting people through just the properties that you guys are buying and renovating, what does impact mean? Just kind of given a better place to live? Is that the idea or is there anything else beyond that?
Kyle: Yeah, I think the easiest way is to be firm and be fair and remain consistent in everything. And Caleb alluded to this in what we do. Everything is brand new. Because we’re doing it ourselves, we’re able to charge 60%, 70% of market rent on something that’s brand new. For a lot of people and myself included, this is nicer than what I’m living in currently. And maybe that’s just because I’m frugal, but the reality is for someone to walk in there, a lot of times the first thing they say is, “Wow, look at this.” And so, that’s something special.
Seth: Caleb, with you again. What is something you’re most proud of?
Caleb: I can’t say it’s my most proud of right now, but hopefully in the future it’s raising a family and having an impact on kids and teaching my kids possibilities that they can have. Whether it’s real estate or whatever they want to do. And then hopefully be able to get involved in coaching and somewhat. We both love basketball and we talked to coaches in the past. I’d say that I would be able to create a place where my wife doesn’t have to go back to work and can stay home and raise the kids and then live somewhat of a free time.
Caleb: Yeah. Cool. What about you Kyle? What are you most proud of?
Kyle: Yeah, I think at this point it’s probably that we’ve created a team and created a destiny on our own, off our own sweat equity to be able to work alongside one of my best friends and work alongside my wife who was able to step out of a corporate job and really be able to raise our kid as we see fit and have that opportunity. So, I think that’s probably what I’m most proud of at the moment.
Seth: What is the most important lesson you’ve ever learned, Caleb?
Caleb: I would say I once had a former boss that mentioned this that I used to work for. He said, the harder you work, the luckier you get. And I am basically saying that, I mean, people from the outside see, like they might see what we’ve done in a year and say, “Wow, how do they do that?” They don’t see everything we did. They don’t see us climbing under a mobile home. They don’t see us at eight, nine o’clock at night still laying flooring. And so, I think there’s a lot to be said with that. There’s no really luck involved. I’m not really a believer in luck necessarily, but that you do make your own destiny. By perseverance and hard work, you can get there.
Seth: Yeah. Awesome. Cool. What about you, Kyle?
Kyle: Probably being a team guy and having played sports my whole life and having a mentor that ingrained this in me. If you want to go fast, you go alone. If you want to go far, you go together. And I believe so firmly at this point, that this partnership over the last year has been the best thing that we could have done from overall happiness. And so, that’s probably my most important lesson, if I could share that.
Seth: Yeah. Awesome. I should have asked this earlier, but when you think of everything you guys have done over the past year or so, does anything stand out as just a horrific story or anything that you had to endure? Like dealing with a tenant or discovering something nasty in the property? Has anything just been like, “Wow, that was horrible”?
Caleb: We’ve dealt with it all. We clogged, obviously toilets, we walked into parts that have been, we had to fill a 40-yard dumpster up. Probably one of us, it was a Sunday morning. It was the coldest day up there, like in February. And we got a call on Sunday morning. I was getting ready to go to church and got a call that we had a lake of water in the mobile home park. And we had a water main break and we had probably two or three feet of water in there just spewing out of the full main.
Kyle: Right on the city streets. It flooded the city street on February 13th or 14th.
Caleb: Yes. It was negative 28 that day.
Kyle: Yeah. About negative 20.
Seth: So that’s what caused it to break.
Caleb: We think.
Kyle: Yeah. The break was probably there and it pushed the frost line deep enough that finally caused a little larger rupture and finally went off instead of down.
Seth: So, who fixed that? Did you have to fix it?
Kyle: Yeah, we did. When we say DIY, we really mean it. And not that we had to, but we wanted to learn exactly what it was going to take. The first call was an emergency call, basically how do we shut this off because we’re hooked to a city water sewer. The second call was to one of the gentlemen who work for us. My dad is one of the employees, a great waterworks guy, and plumbing and electrician. So that was the second call.
And then we jumped on and we started pushing two and a half feet of water into a sewer system and ended up back into the city sewer. I think after that it was a call to one of the large excavating crews that I had gotten to meet through my past work. It was a Sunday and around 10 o’clock at night. And he answered the phone and very sincerely he said, I’ll see if I can round up the troops and we’ll be there as quick as we can. And them guys had plowed all night too. We actually got a snowstorm the night before. And so, he called back shortly and he said, man, I can’t pull it off today. It’s going to have to be tomorrow morning.
And from there it actually worsened for a while. And anybody that knows mobile home parks, we had to shut the water off. So, the pipes instantly freeze within 15 to 30 minutes, we had five freeze-ups on that one stretch of street that we had to shut off.
Seth: You mean the pipes in the people’s homes have frozen?
Kyle: Yeah, unfortunately. We spent all of Sunday, the coldest day of the year, all Monday, digging that hole and replacing that water main. I think it was a 12-foot piece we ended up replacing.
Seth: Were you up there when this has happened?
Caleb: I wasn’t. I was actually downstate here. And so, I didn’t go up.
Seth: So, you were like, “Oh, Kyle, that is too bad.”
Caleb: I’ll tell you this though. I was willing to make the drive if I had to. It’s one of those things where hopefully I can maybe put it back, but at this point it wouldn’t have been helpful.
Kyle: Especially with road conditions and everything else. It’s one of those moments where you’re like, “Man, I would rather you be safe, stay down there and we’re going to get this.” And I knew it probably hurt him worse to be home than it would have to be there and work.
Seth: Was that super expensive then?
Kyle: Not really.
Kyle: Yeah, it really wasn’t. The water bill was, obviously, running city water in the ground. I think it was like 15,000 gallons a day there for a couple of days. That bill was a little bit expensive but the excavating work was not too bad. I think it ran us $4,000 or $5,000 total to repair that. And you just chuck it up as a cost of doing business, essentially. It’s just part of the back.
Seth: So, you basically just have to put the line deeper so that it wouldn’t do that again?
Kyle: Well, it’s at six and a half feet. So, it’s below line. And the infrastructure is actually done extremely well. It’s probably deeper than we would have even done it if it were up to do it now. So, we buried it at the same depth. And what we expect is that there was a crack in that pipe that worsened over 30, 40 years. And so, it hit a tipping point. It happened to be one month or two months after purchase. And that is having cash reserves and having some flexibility. But we did the same. We put it right back in the same spot. They did an awesome job. It was in and out probably I’d say like 8 hours, 10 hours.
Seth: Crazy. Well, again, if you guys want to learn anything more about Caleb and Kyle of what they got going on, they’ve got an Instagram page. What’s it called again?
Seth: How do you spell that?
Kyle: Yoopers is just a slang term in the upper peninsula. It’s Y-O-O-P-E-R-S.
Seth: This is a thing that only we Michigan people know. I’ll link to that in the show notes, retipster.com/108. And thanks again guys for sitting down. It was really cool to hear more of your story and I hope you guys at home enjoyed it as well. Thanks for listening.