If you are in your 20s, dreaming about retiring early and living on a yacht sailing the coast, but you are not a child of a millionaire and you’re not a big risk taker, how would you go about it?
In today’s episode, Lauren and Kyle Clugston, DIY investors and the stars of The Bigger Pockets Rentals to Wealth series, share their journey and lessons learned from their first three years of investing in single-family and multi family homes in the South Jersey area.
Doing everything by themselves, from management to renovations to finding the properties, Lauren and Kyle have acquired a rental property portfolio of 4 properties and 7 units. You’ll hear about their plans to scale and go beyond the DIY investor’s mindset, as well as about the audacious goal they’ve committed to achieve by The New Year’s Day, all while playing in the current crazy market!
2:45 - How Lauren and Kyle got into real estate investing.
5:37 - How they split the work between themselves.
7:20 - The benefits and pitfalls of the DIY mindset.
12:40 - How to grow from doer to leader.
14:40 - What Kyle and Lauren’s next step is in evolving as investors.
16:20 - How to avoid the trap of ‘hunting’ for deals and buying emotionally.
21:45 - The importance of spending time in building a team.
24:20 - The challenges of investing out of your area.
28:05 - How to stay patient and observe real estate market cycles.
32:20 - The pros and cons of investing remotely and hiring a management agency.
40:15 - What has been the biggest challenge for Lauren and Kyle in building their portfolio.
43:49 - How to overcome the fear of the unknown on the investing journey.
48:20 - What Lauren and Kyle’s next big goal is.
Steve Rozenberg: Everyone, Welcome to another episode of The Myndful Investor, I am Steve Rosenberg, Head of Investor Education for Mynd Property Management. And the reason for this podcast show is very simply to talk to fellow investors, to get an understanding of what they do, why they do it, reasons they wake up in the morning, and reasons sometimes they just don't want to continue on because of trials and tribulations that we all go through as investors. And Mynd Property Management is gracious enough to give us the opportunity to let people in and their voices be heard. Mynd Property Management is in over 19 markets nationwide. If you want to know more about Mynd, you can go to the website at mynd.co, so it's mynd.co and you can talk to someone, you can also look up their software to see if you can find a property with them, which we help people all the time, invest in other markets outside of their own, so this is geared specifically for the investor. I'm an investor, I own real estate, and I have my good friends, Lauren and Kyle on today. Guys, thanks for joining me, I appreciate it.
Lauren Clugston: Thank you so much.
Steve Rozenberg: Yeah, so we know each other from before. We've done some Instagram stuff together. Obviously if you're not familiar with Bigger Pockets, these two are the latest up and coming stars of the Bigger Pockets series. They're basically going and showing people what they do and how they do it, and the trials and tribulations. So first of all, just tell everyone a little bit about yourself, your background, and then how you morphed into real estate.
Kyle Clugston: Yeah, so we are DIY investors, we invest in residential multi and single family homes, we do everything from management to the renovations, and to finding the properties.
Lauren Clugston: Definitely, and we started about three years ago with a house hack down in the South Jersey area, and we just felt like that was a really great way to set us up financially, even if the house hack was the only thing we did real estate wise for the rest of our lives, we just felt like it was a good, smart financial decision. And then obviously we got bitten with the bug, and had a really good time doing it and decided to keep going. So that's where we are now, we're at four properties, seven units, currently renovating one right now, then we'll be house hacking again, and
also transitioning maybe a little bit out of the DIY investor mindset, and trying to run this thing like a business we could scale and really reach our goals.
Steve Rozenberg: That's good. Just two things - can you tell everyone, was real estate something you had a bug for, or was it something all of a sudden, like you watch TV and they have these shows you like, and go yeah that'd be interesting?
00:02:48.750 --> 00:02:54.810
Steve Rozenberg: What got you guys thinking about real estate, as opposed to the traditional 401K and that kind of stuff?
Lauren Clugston: I was always super frugal growing up, and had a decent chunk of savings after college, and then after getting my first big girl job and moving back in with my parents, and I literally just Googled ‘investing in your 20s,’ like what's the smartest thing that you should be doing, and I found Brandon Turner's old blog, pre-BiggerPockets, Real Estate in Your 20s, and I basically just binged the entire thing. And I was like this is genius, this is what we're going to do, this is super smart. And it just so happened that my boyfriend at the time was the most handy person, and I was like this is a good like skill set match for both of us.
Kyle Clugston: All the money that Lauren had coming into our investing is the amount of debt that I had coming into our investing.
Steve Rozenberg: So it balanced each other out.
Kyle Clugston: We do balance each other out pretty well, because I handle the renovation side and she handles a lot of the management and the logistics side, so it works out really well.
Steve Rozenberg: That's a very interesting dynamic that a lot of people don't realize. There's a great book out there, I don't know if you guys have ever heard of it, it's called Rocket Fuel, and it talks about a visionary and an integrator. And every successful business out there has two people just like you. One has a great skill set in one thing, has no desire to do the other person's job and vice versa. And really, I can tell you, as you grow and scale what you do, I have found, especially when I grew my business, that staying in your lane really is one of the best things you can do. Now, coming together and having the board of directors meetings, and making sure each other are accountable - absolutely, but staying in each other's lanes. And me and my business partner from my old company, I was the visionary, he was the integrator. He was like Lauren probably, the one who actually runs the operation, make sure it functions, and I was the face of it, and I was one bringing in all the inbounds, and you’re making sure all the properties are functioning, and that they're maintained and built up the way you need. But what's great is learning the respect of the other role, and not be like what do you do, you just hammer nails, like that's easy, anyone can do that, or you're just pushing paper, so I think that as your roles grow, my advice, just a quick sidebar, is to make sure that you really respect what the other person does. You don't have to really know in depth what they're doing, but having an understanding of what their lane consists of will give you more understanding and a daily knowledge of what's happening. So it's like, okay,
that is in her ops specs, that's what she does, or you know what, that's not in her role. So I think that's great, did you guys plan it that way, or was it just like I'm doing this, you're doing that, and let's see where this goes?
Kyle Clugston: We kind of just fell into that, mostly because Lauren had done a lot of the research prior to, and I didn't have that base knowledge that Lauren had. I had more of the renovation knowledge, so we kind of just fell into those roles, and as we've now more recently began to scale, I do find value in me having some knowledge on her side, especially if we're asking for private money and we're getting into conversations with people, I don't want to come off as a dope.
Steve Rozenberg: Right.
Kyle Clugston: I want to be knowledgeable in that aspect as well, so when I'm having these conversations I do get them a preface conversation, and then refer them to Lauren for further conversation.
Lauren Clugston: So we definitely naturally happen, but for a while, because it's so new and exciting, we both wanted to be in both parts. I'm going to go shopping for all the materials because that's fun, and I want to help out and swing a hammer too, and he wants to come look at the properties and screen the tenants, so for the first couple of years, while we were aware of who had what, we were still doing everything, and realized that wasn't sustainable. And also, it wasn't very good for our relationship either. You mentioned trusting and respecting other people's decisions in the lane that they're in, and being the logistics and the planner, and the organizational person, it took me a little bit to trust that if he said the contractor is going to show up on this day, that he was going to. And we started implementing weekly meetings, and that gave us the safe space where we could talk about the schedule and what's on track, and that has helped me a lot to give him the respect that he needs, because I know he knows what he's doing. I just need to trust him.
Kyle Clugston: Especially with the renovation portion, DIY-ing was huge, because we already have a laundry list of prices that we know what our materials go for, so that when we are now scaling and general contractors are giving us numbers, we know if that's like a BS number, if that's a padded number, because we have that knowledge now that we wouldn't have had if we didn’t do a lot on our own.
Steve Rozenberg: Even if you go to a new market, let's say you finally say you know what, we're going to divest a little bit, and our strategy takes us somewhere else. You can say, okay, maybe it's not the pricing, but someone says it's $2,000 to lay this tile. And you say okay, how many hours is that? And they say it's going to take me 10 hours, and you're going 10 hours to lay tile on one room?? I don't think so. Try again. And they go, well, maybe I can do it in five. Okay, five. So that means I'm paying you $500 an hour. All of a sudden, you put it into realistic terms, and then they're, oh yeah, maybe that's a bit overpriced. But sometimes if you hadn't done these things you'd be, oh, that seems like a fair price, I don't know. So again, I think there's a lot of value to learning things on your own, I think sometimes we go down a path of, and I don't think you're this way, Kyle, but a lot of times we think, oh, no one can do it better than me, so get out of my way. I'm just going to do it, step aside. Maybe you do, but that is something that I think a lot of people do, it’s like I learned this, I bled it, I breathe it, so just get out of the way, it's quicker for me to do it than for me to explain it. But really, that's not a scalable model because if you are trying to invest in another city or state, you can't just say get out of the way, you’ve got to have the processes and procedures, and the reality is, and I know your goal is to, live on the yacht and sail the East Coast, you’re not going to want to do those things. After a while you're gonna be like, why do I have to keep calling these people. You actually trained them that way, you did it because you taught them, you know what, if we just screw up enough, Kyle is just going to jump in, so we'll just keep waiting and waiting and then out goes the cape, in jumps Kyle and gets going. So is that something that you struggle with Kyle?
Kyle Clugston: Yeah, so our first foray into using a contractor, we made a couple mistakes. We chose the cheapest of the contractors’ quotes that came in. It was a one man show, so he worked a lot slower than I would have worked. And then we could have saved some money and gotten a tenant in there quicker, and offset that with earlier rent, than going with this guy with cheaper labor. So we made a couple different mistakes at first, but now that we're trying to scale and I've made those mistakes, it's becoming a little bit easier, knowing that we want to do a couple more units of properties a year than we are now, so that's only going to get done if somebody else does the work also, so I'm kind of coming to that realisation.
Lauren Clugston: And we've still both worked full time jobs, so to be doing these renovations ourselves seems like a significant amount of time. We've been on track for four to five months per property to fully renovate it. We want to do a lot more than that a year. Someone told us a quote recently and it was basically what got you here will not get you there, and it was mind blowing. I was yeah, yeah, that's true. And I think that allowed us to give up that past and move onto something that's gonna be more efficient or work better for us and our goals.
Steve Rozenberg: Well, I think a lot of times what happens, when it comes to finances retirement, it's such a grey area, inherently because we're not really taught that in school and we're trying to learn it ourselves that it becomes this gauge of ego, pride, education, knowledge level, self worth. So we don't want to look dumb, the last thing you want to do is not have money because that's a gauge of how stupid I am in finances, so instead of doing that and trying to expand a little bit we kind of contract and hoard it in because we don't want to look dumb. We don't want to lose money because that's something that it's not really talked about, we're doing it on our own and figuring out as we go and nobody wants to look dumb and ask questions. And the reality is, when you look at something, your most limiting two things always are going to be your time and your knowledge level. And other people purchase out of state, and I said okay, so you could do this here like you guys in Jersey, but could you do this in Atlanta, Phoenix, Houston and San Diego all at the same time, and have more hours in the day to do what you want to do? It's done, people do it, we know it can be done, but what's the difference? The difference is they're utilizing other people as leverage and a lot of times when we don't know, it gets to the point that we want to push it off to someone and we say, okay, just do it and we shun our head away and then it's not done right, and you're like, oh, that didn't work, I've taken it back because you just can't do it as good as me. But really it comes back to the leadership. And I think that what you guys are learning is that as you grow, you actually do a shift and you go from the doer to the leader, and you start going from working in the business to working on the business. It's either a natural evolution that happens to people that end up growing, or they just stay in that cycle and eventually they're finding that cycle or they just get beaten into submission. And they’re like this is horrible, I don't have time to deal with this. My life is going past, you start questioning whether or not it makes sense for you to keep going because you're so busy being busy, and I remember looking at other people and they'd have 50, 60 properties, full careers and I'm thinking, how does this guy do it, and he's like well I get a smaller piece, but it's a smaller piece of a much bigger pie.
And I’ve learned that the hardest thing we have to do, you don't just snap your finger and become a leader. A leader is educated, It's bred, it's created by your environment, and no one's born to be a leader. I mean you have to become that person to know how to vet the contractors, set proper expectations in the beginning, do all those things. And what I've learned is, a lot of times when you trace back to where people throw up their hands and they're like, this isn't working, if you actually traced it back, you would see there were steps that were missed that actually go back to the leadership. They say the fish stinks from the head down, and I think a lot of that is, well if you didn't tell them, and you didn't let them know exactly what your expectations were, what the timeline was, what the penalty was, all those kinds of things, is there really anyone to blame but you? And again nobody likes to be blamed, especially when it comes to losing money, but I think a lot of times that happens. So, where are you guys going now from here? What is the next step in your evolution?
Lauren Clugston: Well, we're in the process of creating all the systems and processes so that we can delegate, outsource and be a little more hands off, and that next step is really just within our next property. We're gonna be doing a lot of delegating, we’re going to fill out for ADC, we’re not gonna be doing a single part of the renovation ourselves.
Kyle Clugston: And hopefully not using any more money.
Lauren Clugston: Yeah, definitely all private money. And normally, when we get a new project, we don't start looking for the next one until we're finished with that one. We're just never going to stop looking for new deals, we’re just going to try to keep it going, so that's really just one of the biggest changes I think for the next few months is, we're just gonna keep everything rolling.
Kyle Clugston: And we've been really focusing on lining up financing prior to even finding the property so Lauren created an example deal based on the market that we invest in, and we handed that out to some people that have expressed interest in private money so basically, if a property like this comes up, would you be interested? So that gives them time to talk to their wife, talk to somebody and free that money up, because a lot of times the investors are people our age that don't have money sitting in the savings account, it's out invested somewhere so it may take them a minute to get that liquid available.
Steve Rozenberg: That's good. A couple things that I would think about. the first thing is, the one challenge I would say Lauren, is you want to be careful of falling into a trap, and I fell into this trap, that's why I know, when you start becoming this aggressive buyer, everything’s a deal. It's almost like the thrill of the hunt. You just want to negotiate it, and if you get it, boom, you're moving forward. And sometimes that feeds our ego. And then when other people find out that oh, Lauren and Kyle are buying properties, I'm going to send them my deals and almost approve that you are legitimate, you may move forward on a deal because you're saying, you know what, yeah, I'm a buyer, I'll show you how serious I am. Show me a deal I'll buy it. It's almost like a test. And you buy it and all of a sudden, it's no longer their problem, it's your problem. And the one thing I would say is, and I don't know if you guys have had any problem properties, but getting rid of a bad deal is probably three to four times more time, energy, costs, and the most important part is the stress level of undoing something that you did. Now Kyle's questioning why did you do it, why did you do that deal? Well, the numbers made sense. Well, that's not part of our plan, so my point is, it's kind of like driving really fast in a car that the steering wheel moves ever so slightly. Your parameters should be so tight that as you're picking up speed, you're staying in your lane, because people will bring you deals. Now all of a sudden you guys are on the radar, you’re on the map, you're buying deals, and all of a sudden you think, oh yeah, we could do that, or maybe, instead of a three month window, maybe we could do it in two months. But the numbers and everything is clearly dictating three and again, now you are accountable and you have shareholders, when you borrow money at some level you're accountable to them. And you want to be inclusive of them because the goal is to keep that money moving, you want them to reinvest that money with you. It's not a one and done, you already spent the time to acquire that client to feed you revenue or money. The goal is, how do you surpass that, how do you wow them, so they go, holy moly I'm doing that again man, these people are awesome. So that's the only thing I would caution is, you want to go from fifth gear to seventh gear without a doubt, but you want to make sure that you've got to be hyper focused on what you're doing and not get out of that lane. Have you seen that at all? I see you smiling so I'm guessing there's something behind that.
Lauren Clugston: I am, because we are speaking about this, we're not going to be doing property every six months or every year. We do want to scale, and that requires more deals, and so it's like, what is the line between us being adaptable, and flexible, and creative, and sticking in our lane and sticking to our parameters. And so we're still trying to figure out the target area we look for, should we look at the town over? We normally look at three bedrooms, should we be looking at two bedrooms, or four bedrooms? Should we be looking at higher price properties now? So we definitely have been having those questions, and I think that is a good conversation that we're having, and I think it's okay to push ourselves out a little bit of our comfort zone, to adapt to the market that we're in right now. But exactly what you said, we're really trying to stay focused and not get caught up in the speed that we think we need to move in.
Steve Rozenberg: So I'll give you an example. When I was helping a gentleman purchase a bunch of properties out of state. We were trying to identify the city. So the first thing we did is I said okay, you have to identify the city and here's all the parameters I want you to use, so we use the parameters based on data, there's no motion, never been to any of these cities, and he came back and I said, okay, now you have to defend to me and explain to me why you like these cities? I gave you the information, now you have to tell me why it makes sense. We are business partners and Kyle, I would suggest to you the best thing you could do for Lauren is have Lauren write down why she likes a certain idea, property or whatever. Without the emotion, because once you write it down, the emotion fades and then you guys have almost like a board of directors meeting and saying okay, I, Kyle, I'm going to ask some questions and you have to justify them. It's not an interrogation, but it's more of a tell me why this makes sense, why does this align with our goal? Why is this part of our strategy? And if it's not, you can change it but it can't be just because. Just because is not an answer, and so you can be the accountability side of saying, okay, this is why this makes sense. You have to be able to point to the actual paper of the documents, and say this is why ,this is the data that's telling me why. And so when I did it with this gentleman, we actually spent the majority of the time, once we identified the city, then we had to identify that area that made the most sense. And, whether it's 100,000 or a million dollars, really it's just an added zero. I mean, it may make us breathe a little bit differently, but at the end of the day, you’re not taking a million dollars from your pocket, the same as you wouldn't take $100,000 from your pocket. We don't even see money nowadays. So the lion's share of the time was actually built on finding the team. So if you're thinking of going to another area or another market, once you identify it, justify it, if you spent the majority of your time building the team up, interviewing, having conversations, then the last piece of the puzzle is the actual property. Because once you have the team now they're helping you get you to the goal, whether it's a property management company, realtor, all the people that are going to be in the GC, all the people involved, having the proper expectation, conversations with them and then going from there. Now you say, okay, now I've got a trusted team. Now it's just a plug and play. This property works based on numbers. Let's do it. This property works, and you just start dropping them in and like I said, I referenced the guy that I helped, he got one in Atlanta, Georgia. Never purchased one, never been there before, didn't know anything about it. We found it, identified it, purchased it, put a renter in it and he's still never seen it. And this was all during Covid so it just happened. Now he's got a six plex on the radar. So all of a sudden, they're bringing him deals and his job, as you guys will soon learn sitting on your boat, enjoying your vacation, is looking at the numbers, and you look at the numbers and say, okay, let me throw it into my matrix. If it works, then we'll go forward. If it doesn't work, we're not going forward. It's not like, oh man, I gotta go out there and I got to look at it and I got to this. And actually investing out of your area sometimes is the biggest stress test you could do for your business model to see, do I really have a business? Can I do this without walking on to that property? And that's how you can see, okay, well this is a weakness. This is what we need to work on, we don't have that and we don't have this, and okay, that's something I didn't ask and then you learn. And then the next time you're okay, now we've got one more additive. What are your guys's thoughts on doing it that way?
Lauren Clugston: Definitely makes a lot of sense. Yeah. One of the things I was thinking about a little bit prior in this conversation is Kyle, having a lot of renovation skills, while it's super valuable in the beginning, it's almost a detriment now because exactly, if renovation becomes an issue, he knows he could just run it and go do it. If he had zero renovation skills we would be forced to figure out other ways to take care of it. So I feel like going out of state or treating it like a business
is a little bit similar. When you're put in that position where you can't just drive down there to go look at the property, you have to think about creating a solution in a different way, just challenge you to think a little bit differently and make it more efficient. So you can do a little bit less work.
Steve Rozenberg: So you said that you're thinking of investing in different types of properties. What's different, what are you not getting, are you seeing your market drying up or why are you thinking of going out of your area?
Lauren Clugston: It's getting competitive I would say… I don't think we're at the stage right now that we're looking out of our market area, but the avenues that we use to find the properties are becoming different because things on the MLS are just going above, asking within days, within the past couple months due to the Covid... and we're talking rundown crappy properties, we run the numbers on it and they must just not care about cash flow whatsoever because they're in the red in most of these deals. Right now it's trying to get creative in how we find off market deals and really just waiting it out and not overpaying. Yeah, cuz I'll be honest, our properties to this point we've found rather easily. It was like, okay, we're ready to start looking, and then like within a month or two, we'd find a great deal. And we had multiple to choose from at that point. And now we're at the point where that's not really the case. So we're doing direct mail marketing and we're getting those properties and new leads from Driving for Dollars or expired listings. We're working with agents on the MLS. We're also working with wholesalers. So we're trying to find lead sources in a lot of different areas.
Kyle Clugston: Yeah, I like the expired listing one probably the best because at least the owner has, at some point, thought about selling.
Lauren Clugston: We've had that mindset and we did get a call back on one. Covid is making it tough because trying to get in there and see the property, a lot of them have tenants in there right now. So it's tough to get in there, some tenants don't want people in the house.
Steve Rozenberg: My opinion of what we're seeing in this window of time, is sometimes there's the time to be aggressive in purchase, sometimes there's a time to hold back. There's times there's cycles, real estate goes in cycles. Now statistically, real estate normally operates in about a seven year cycle. It goes up, and then it goes either sideways and it goes down, and then it goes again. So If you look back, today’s September 11, if you look back at the tragedies of 9/11 we had a run until 2008, and then it dropped off. Then we had another run till about 2014 and then we had oil and 140 bucks a barrel ,and then it dropped off. And now if you look again, now this was not systemic. This was obviously something else, you call it whatever you want, it’s a seven year cycle. And so it goes in cycles. And so, some days it's a buyers market. Some days, it's a seller's market and the smart money knows what side of the fence you should be on. My opinion right now is this is very much the way I said it to someone the other day, it’s like the grand finale at Disneyland for the fireworks show, it's just going crazy. It's just going berserk with everything. And eventually the fireworks are going to end. And it's going to go dark and right now I believe that people are buying on emotion. It's almost like a shark frenzy right now. And I think what's going to happen is it's going to go dark and when it goes dark, people that know what they're doing, that had been waiting, that have been getting capital short up, they’ve been ready to purchase. They put on their night vision goggles and then they go hunting when it's dark. And so, the only thing I would say is to caution you guys not to get caught up in the emotional frenzy of well, everyone's buying so I better buy because I specifically remember this very same thing in 2008. It's almost identical. You're like, oh my god all the houses are going to be gone. I better hurry up, because even though it doesn't make sense, I better get on the bandwagon because they're all going to be gone. I think what you're going to learn, which I learned, is the four walls and a roof. The house, it doesn't go anywhere, it's still there, it’s just going to change ownership, and it'll probably change ownership again when somebody buys something and they go, you know what, this is stupid and I'm not gonna do it. I'll just walk away from it. I'll let it go, I'll sell it. I don't care. And so right now you have that emotional frenzy going on in this timestamp of a window. Once it goes dark, you don't want to be out of money going like, man, why did I buy all those properties? Now nobody has money and I can't do anything, as opposed to having the money, being ready, having your team, knowing exactly what you want. It's like going hunting, just waiting and waiting and you've got everything set up so that as soon as it's hunting season, you're off to the races. So, that's the only thing I would say is that I wouldn't base my opinion based on a current market environment of what you're seeing, because that's not reality and that's going to change. Look in six months, we've seen a change. It's going to change again and I tell people you know ,you get these unprecedented times, you can call it whatever you want. It's a cycle. It's a correction of the market. And you know what, right now people are overpaying and at the end of the day, there's going to be a huge windfall going the other direction. It's a pendulum that swings both ways. It's swinging one way right now. Don't try to catch it, just wait for it to come back the other way because it always does. And you know what, when you think about it, I was talking to someone in Maui yesterday, and they were saying there's no deals. There's no deals or there's no good deals to find and I said, how many deals do you think are closed in an average month in Maui? And so I would ask you guys, how many deals do you think are closed on an average month in your market? Probably hundreds or thousands. I mean that buy and sell, whether it's retail, wholesale, whatever. There are transactions that happen, hundreds if not thousands, depending on the size of the area. So just like I explained to this other person, I said the deals are happening, you just may have the wrong focus and you may have wrong goggles on. Just because it's a deal it doesn't mean it's a deal for you, and it doesn't mean that it's a deal for your strategy, and you don't always need to be going gangbusters. Sometimes waiting, and just waiting and waiting and waiting for that right moment. Maybe you'll buy three at one time when the market is right and I firmly believe that there will be more wealth created in the next, I would say six to 18 months then in the last 10 years, because it's going to redirect itself. The market, that's what it does, it cleanses itself and it re-corrects. So I think you're doing the right thing. But I think you should focus on building the team. This is the time to rebuild your structure so that you can go back and be, okay, now we're ready to rock and roll. We got everything teed up, we are ready to go. Again, that's just my opinion, but it's just something to think about as you're evolving into this new realm that you're doing.
Lauren Clugston: Yeah, I definitely like that setting up the GC is getting them like what's your schedule looking like because I would hope within the next month or two, we can get one of these, but we get a lot of questions on our Instagram that exact thing, we're having trouble finding a deal, do you have any suggestions or anything like that? And we always tell them don't be led by emotion, run the numbers, get the number that makes sense. Submit your offer, and if it gets shot down, it gets shot down, you move on to the next one. Our agent just texted us during this and said, because we put an offer yesterday, he said hey I spoke to the listing agent he said, there's a few other offers on the table that are higher than yours. Do you want to increase yours and I was, nope, because we ran through that, it’s legitimately the highest that it could be. So if somebody wants to overpay, it's good for them and good for the seller, I guess.
Steve Rozenberg: So, what are your thoughts on investing remotely? What comes to mind if I were to say hey, why don't you guys go to another market, do what you're doing, in whether it's, up north or down south, and when I say another market I'm thinking out of state. So tell me your thoughts on doing that, yay, nay, scary…?
Lauren Clugston: So we definitely had this discussion because like you said, if we're going to start treating this where we live like a business, then if it's out of state, maybe it's not as different. I don't know, I would say, we definitely were not fans of it maybe like six months ago, but we had a lot of mindset growth over the last little bit, so it's definitely something I think we're considering.
Kyle Clugston: What was tough for me at first was, how can I justify using a management company for 10 properties? But when we are using a management company, what's the difference between 10 properties and 100 properties? So that's been the biggest kind of shift for me mentally, is we can just continuously buy properties.
Steve Rozenberg: Yeah, and that's a good point and a lot of people ask that question. I know when I own my company and people say what do you do, and I say, well, it reminds me of being a pilot, you're not paying me when things go right, you really pay for when things go wrong. So for example, when you have a tenant in the property, especially with all the ever changing laws and stuff, and the tenant says, hey, I lost my job and I'm not leaving, what do you do, what are your rights? What can you do, what can you say, what should you say, and the challenges is, it's a very litigious society. And so anything you say can be twisted, turned, text messages and that. And all of a sudden, now you're a lawyer. Now all of a sudden you're interpreting the law in South Carolina and saying what can I do, and I didn't know that I couldn't advertise this property this way, as opposed to that way. And a lot of times I've learned that a lot of people don't think of that as building the team, and my analogy is, imagine going to the nursery ,doing all your homework on the best kind of fruit that you want to buy at a nursery. You go to the nursery, you find the tree. It's a little tiny tree. You think that's the one, that's what we want. You buy the tree, it's the best tree in the lot you buy the best fertilizer, you go home, you dig the hole you plant the tree, do all this stuff. It's there, and you never water the tree and the tree dies and it never bears the fruit that it promised, just because you buy a deal based on numbers. If you don't run the business correctly, which is the water, it’s never going to bear the fruit and give you the returns that the spreadsheet promised and, I'm a big believer that real estate is four walls and a roof. I know many, many people that bought a great deal on paper and ran it right into the ground, into bankruptcy. But I also know many people that bought a bad deal on paper and had a better business model and made a lot of money with it. So to me, I looked at that and said, okay, what is the difference? It's four walls and a roof, so there's something different to it. It's like, okay, it's the actual business model running inside that four walls and a roof. Something that I don't necessarily want to learn, I don't need to learn. So why don't I just let someone else do it, and I can just reap the rewards by getting the benefit. And so when you start thinking about that you go, okay, well, what's that worth? How do I quantify that amount? There's a set amount as a percentage or whatever you want to call it. And sometimes, as we know, going cheaper is not always cheaper. So I've got two analogies that I would say that for people thinking whether they should or shouldn’t, the one is if you were driving down the street and you saw a doctor with a sign on the side of the road that said 50% off surgeries today. Would you be, that's where I'm going, he's cheaper than everybody else.,I’m getting my surgery done by that guy, I need to get an appendix taken out, I’ll do it? Probably not, you're going to go, no way. That's stupid. I would never do that. But that's kind of what people do when it comes to their retirement and to their assets, they go you know what, I'm going to go with the cheapest person because that makes sense, because I'm saving money, and as we all know, you're really not saving money. The other analogy is let's say you and Lauren decide you're going to go to Hawaii on vacation, and you're all excited to go to Hawaii. So you have two options, you could learn to fly a plane, you could learn how to fuel a plane, flight plan it, load it, learn all about whether to jump in this little plane and head off to Hawaii and maybe you'll make it, maybe you won't. I've bet on the latter but, you never know. Or you can say, you know what, I'm just gonna buy a ticket, and I'm going to pay a fee, and I'm going to get there. And do I want an airline that says we may make it, we may not, we’re not really sure, I haven't had good luck this month with maintenance, but we're hoping this is going to be a good one? Or are you going to go with one says, hey, we know what we're doing, we do this all the time, this is a no brainer, we’re going to get you there safe and sound? And so when you put it in that perspective, that's what we're doing with our finances a lot of times. Do we want to do it ourselves, are we even qualified to do it? Do we know all the laws of fair housing discrimination? And is the company I'm hiring able to do and know all those things? Just because they manage properties, doesn’t mean they know what they're doing. That's an assumption, but at the end of the day, if there's a lawsuit, your name is on that lawsuit. People say oh, I give it to the management company, you still own the business. They are an operating model of that business and it's your job to use the checks and balances, making sure that they're aligned, and making sure that they do what they do. Now, we MYND, 19 markets, we know what we're doing, manage over 8000 properties, so we have systems and procedures in place to make that happen. And I'm not saying a small boutique is better than a large operation. You just gotta say, okay, what matches my goals, and are they aligned with me. Are they going to help me get me to where I want to go, or am I just a customer client relationship and that's it? And I think as you guys grow you're going to learn that this is all built on relationships, it's all conversations. It's relationships. And once you start getting that team underneath you, when you think about it, the only difference is the stress tests on your business structure. What have you built? Could it withstand 10 miles? Yeah ,10 miles we could do. Okay, could it do 50? Could you do 500? Could you do a thousand? All of a sudden, now it's the same thing. Now you just have to copy paste repeat what you built, and my advice to you guys is as you're doing this you want to actually be building your processes and procedures. Because now you just slap Alabama on it, you slap North Carolina, Florida, whatever. It's like, same thing, page one. What is the market? What are the numbers? What is the team, and it almost becomes a boring model which is good. You want boring. You don't want fires every day. Kyle's got to put on his cape, rundown and fix something because the tile guy messed up because whatever problems. Do you guys agree with that, or is that something that's not in alignment with what you're thinking?
Lauren Clugston: No, I definitely agree. Yeah, I think it's the trajectory that we're on. And it took us a while to let go of the control that we want over things, but speaking with you Steve offline, we realized that the goals that we have in mind are going to require different path than the path that we thought we were going to take, and I think once you kind of realize that what we're doing wasn't going to work, we started accepting things that we need to do to make it work. Yeah.
Steve Rozenberg: So what do you guys think has been the biggest challenge so far to building your portfolio? You got seven units, congratulations. I mean, most people never even crossed the starting line to even get there first. So you are doing it. You are making it happen. What is the biggest challenge you've had so far, and advice that you would give to other people?
Steve Rozenberg: Careful, Kyle. She's sitting right next to you.
Lauren Clugston: So it's tough because goals are so different from person to person, at least for us that we know we want to develop a large real estate portfolio. Honestly, for me, just because I'm on the project management side, finding a general contractor that I trust that's going to show up on time, and developing those teams, so when we do get these properties, it's able to be scaled. That’s been on my side, at least. And anytime anyone asked us about either getting started, or we know we want to get to where you are, what do you recommend? And we really just say you just need to take action. I think when we first started, there's lots of fear. We decided real estate was the way to go in 2015, and we didn't buy our first property until 2017. There was analysis paralysis, and we had it hard. We just realized that the fear is never going to go away and the only way to combat that, is to just take action and move through it and it took us a while to figure that out. But just to see the emotional growth and the skill set growth from the first property is mind blowing. Even just little stuff like we were talking to an off market potential seller last month, and he had a mortgage on the property, and someone recommended why don't you try a subject to financing deal? I've heard of it, knew nothing about it. Alright, so in the matter of 24-48 hours I read as much as I could about it. I talked to somebody I met on Instagram, who does it all the time. We had a conversation, he taught me everything I needed to know that I could learn in two days. And, we went back to the seller and we presented that and we didn't get the deal. But if that didn't come up, I would have never learned subject to. And so the only way to learn I think is through action. So we just say, I know you're scared, but do it anyway.
Steve Rozenberg: Yeah, I hundred percent agree. I look back at all the different tactics I learned, and options and wholesaling, and all the different double closings and stuff. And I think to myself, god, what was I thinking? I just did it. I had no idea that, just do this, say this. I'm like, Okay, this, this and this... I'm sitting with the contract in my hand and I'm like, I can't believe that worked. When now we got to go sell it, okay, what does that mean? You got to do this, this, this. I'm like, okay, don’t ask, just do. And I remember one of the first people who mentored me. never met him, he was in California, it was all phone calls and I paid for him to mentor me, and it was on double closings and stuff, wholesaling and he said he used to hate to coach and mentor people that had already been doing real estate, because half his time was actually undoing what their thought patterns were, to retrain them to do it the way he told them. And he said the first time you tell me I know or you disagree and we're done. I'm like, well, I've got nothing to base it on, so you're not going to get that for me. And so he said, we'll see. And so I did everything he said and it worked. Let me ask you this. How many of those fears you had for two years, analysis paralysis, what if this went wrong. I'm guessing a lot of your conversation was not what could go right, I’m guessing the majority of those conversations were what could go wrong. This could go wrong, that could go wrong. How many of those things actually ended up happening, things going wrong.?
Lauren Clugston: None… Well, we went a little bit over budget on the first property, and over schedule. But it was our home also, so really it wasn't that big of an issue. And we had a tenant down. Yeah, I think the main fear was that If you grew up in a family where no one ever goes to college, going to college is scary. I grew up in a family where college was like, you went, so college has never been scary. So real estate investing, no one in our family did this. You know, you read these things from these strangers online and you think that sounds like a great idea, but it wasn't something that was normal to us. I think what was most fearful, it was so unknown, and we didn't have the Instagram community we have now. We're on BiggerPockets and we're on the forums. But again, who are these people, we don't know their background? So I think it was the fear of the unknown, and there were a lot of what ifs and I'm just one of those people who I hate saying if I knew I would do something differently. We'd look at a deal and okay what does it look like in two months? What does it look like in four months, six months a year, seven years before you know it, someone else already put an offer in and we lost it. Yeah, so it's just the unknown and we move through it. You gotta be starting off, I would suggest being okay with the uncomfortableness of the fear and just battling through, and doing it ,because it's the only way you're going to learn. The only way to learn is from your mistakes, and then you're going to meet people that are gonna give you suggestions on the other one after that.
Steve Rozenberg: Yeah, those are great, I really like that advice. I used to always say if you told 10 people, 10 people that you knew in your circle that you were going to buy real estate, nine of those people would tell you not to do it. And one person would actually say, good for you, go get it. And if you actually identified those nine that told you no, statistically seven of those people never have even owned real estate or know anything about it. The two maybe know someone who did or did it themselves, and those two, statistically, if you trace back where they failed or where the person failed, it’s because they weren't running it like a business, they didn't have systems. They didn't understand leverage. They caused their own demise. The one person is probably the one who's successful, that runs it like a business or knows someone who does. So it's funny. I always tell them to be very careful about the advice you get from people, and who you ask opinions of, or you want that self affirmation to say, I'm doing the right thing and you're trying to look for that because you assume everybody wants Kyle and Lauren to do good. I don't know them... I'm just we're talking, why wouldn't you say, hey, good for you, go get them. But that's not the case. The reality is, not everybody thinks that way and they think oh, you're going to deal with toilets, tenants, turmoil, the 2am wake up call that I've never once had over 20 years but everyone always tells me that's why they don't own real estate. I'm like what if you just don't answer the phone at 2AM. That's an option. I had a house burned down one time. I woke up, I had like 16 missed calls and I'm looking, this is after the hurricane and all the stuff is going on. So I'm thinking when you see 16 missed calls from the same number in the middle of night that can't be good. They're not calling you from the bar, there's something bad that happened. And so it turned out that the house burned down, and everything was okay, they were safe and everything, but you get through it. The sun comes up and the sun goes down. Yeah. You keep working through it, you find solutions. And you know what, 10-15 years later, it’s just a blip of memory, and you sometimes think, wow how much time did I lose by not taking effective action when I knew that I should have, and I let all these exterior forces talk me into, it’s like crabs in a bucket. The crabs pull you back down. It's a lot harder to pull a crab back up than it is for them to pull you down. And I think that’s unfortunately what happens. And so, I think what you are doing is awesome. I really commend you guys on doing what you're doing. You are taking the right steps. What do you think is the next step for you guys? What will we hear next? This is what I want to know, what is the next thing I'm going to hear that you guys did that was successful?
Lauren Clugston: I would say to renovate and run two properties... I want to utilize a GC to renovate two properties that we have no dealings in at all, utilizing private money. And then we refinance it six months later, we pay them all back and we're going to go do it again. That's it.
Steve Rozenberg: Alright, here's my challenge to you guys. My challenge Kyle, is that you write that down. Write down what you just said on a piece of paper. And the bigger challenge is we have to restrict how many times you actually go to the property, so maybe you only go once per month. They can do a video. They can video you, but you can't get in your car and go there, and that's how you learn to get out of your comfort zone to go okay, now I've got to work on my leadership skills and the right team and right person. So, let's put a date on it, I want you guys to come back on the show. Let's put a date when this will happen. I mean, you said two properties. At the same time?
Lauren Clugston: At the same time. So, I would like it to be before the first of the year. To have two completed.. and to have two renters...
Kyle Clugston: We have to buy it within the next month, we have to buy two... Well, okay.
Steve Rozenberg: You guys tell me, I'm just saying you're gonna write it down and mail it to me. I want you to send it to me, so I have it. And then we're going to come back and go, did this work?
Lauren Clugston: ...It has to be the New Year's Day... So we did get a call back from an off market deal, and it just so happens to be attached to a city owned vacant property as well. So we have had... we've been in talks with the city, so if we could do a double purchase on both properties, that'd be great. And I haven't been going to the properties, I've been asking for photos for the people doing the work, so I don't have to go there. Well, just like little stuff. I know we're kind of wrapping up, but we hired out a repair and the guy needed pink to repaint the wood that he replaced. And Kyle was like, all right, yeah. So I'll shoot down tomorrow. I'll run to Home Depot and I'll get the paint there from the next day, so he could do it on Saturday. I was like, okay, hey, just go buy the paint is cool. We're just trying to think one step forward, but now I gotta teach him to take good pictures because how am I supposed to post this on Instagram... The guy got like a flip phone
Steve Rozenberg: Yeah, it's an evolution. It's an evolution.
Lauren Clugston: That guy actually is now our maintenance guy. He was the GC that we ended up letting go, and he was a perfect example of the right guy in the wrong seat. He just couldn't do that larger project. So we were like where could we use him, we need a handyman, he lives locally, somebody that can go relight a pilot light. Little things like that. And now he's our guy.
Steve Rozenberg: Would it make sense, just to get him an iPhone? Get him a good phone. Now you may go, I'm not buying this kind of phone, but think of what the advantages it gives to you by doing that. How much headache and frustration could you save by going, you know, we're going to upgrade your phone for whatever it is. Now all of a sudden, how much time are you saving, how much headache, frustration, back and forth conversations ,go take it again… Just a thought, just something to think about. Or just a quick phone with an SD card that he sends you at the end of the night. I mean, there's other ways to do it, but okay. So as we wrap up, two properties, completed.
Kyle Clugston: Right.
Steve Rozenberg: Yep, rented.
Lauren Clugston: Yeah yeah..
Steve Rozenberg: Kyle, if you can see her face on my side.
Kyle Clugston: I don't know why she's making that face because we've been grinding hard to find these new deals, so I don't know why she should make it a face. I think it's totally doable.
Steve Rozenberg: Look, we know people do it. People do it all the time. Deals are going to be happening. The question is, are they going to be happening by you? So it's like any kind of game right now, we're in the championship of the game, and we got the timer on, so before, you guys didn't have a timer before you're just, oh, we're gonna shoot some balls... Now it's like the clock's ticking. Now we have to get serious. Once you're serious, you know you can find the deals. We know it can be done right, you've got four months. Could it be done in four months? Absolutely. Could you guys do it? Absolutely. You have to convince yourself that you can do it and you gotta start taking action. So if I say by tomorrow, by the end of the week, I want you to have 20 deals lined up as potentials, I bet you will, I'll bet you'll have 20 deals lined up, because you gotta have that accountability on it. So if you say you've got a week to get 20 deals teed up, ready to go, you’ll have it. And it's like pkay, what happens next? What I would suggest, so we know the end date, start working backwards. That means we have to have the property rented by this time, it's got to be advertised by this time, make ready has to be done by here, we’ve got to close by here. Start working it backwards.
Lauren Clugston: But we would have to buy it last month,
Kyle Clugston: No, I know I know. We’re going to reverse engineer, we're gonna make it happen. So yes, we will follow up. What are we saying, New Year's Day?
Steve Rozenberg: New Year's Day. All right. I like it. Alright guys, well, listen I love talking to you, you are an inspiration. And please keep going. You are doing all the right things. So just don't stop. If somebody wants to find you on social media, how do they get ahold of you?
Lauren Clugston: Instagram is the best spot, we are at @rentalstowealth, will answer any DM, are on there all the time and that's the best place to reach out to us. And if you want to come along on this ride with us, we have a YouTube series of BiggerPockets, it’s just the Rentals to Wealth playlist on their channel, and we are bringing you along in our renovations and our property management, whatever we're doing we're bringing you with us. And it's not all before and after photos and cash flow, there's a lot of other stuff in there too. So definitely check that out.
Steve Rozenberg: Awesome. Well thank you so much. For those of you watching, If you're interested in talking about property management, you can reach out to MYND Property management. It's mynd.co again, MYND is in over 19 markets, managing almost 8000 properties nationwide in the most investable markets, whether you're in Atlanta, Houston, Dallas, Phoenix, Vegas, LA, San Francisco, Seattle, Portland, and many, many others. Give us a call, or take a look and see if you want to build your strategy, and you want to have the right people, this is the place you want to go. So again, on behalf of MYND Property Management, myself Steve Rozenberg and Lauren and Kyle, thank you for watching. Please make sure that you like, comment and subscribe to this show, so there are more of them in the future. I'm Steve Rozenberg with the Myndful Investor. Thank you for watching. We'll catch you guys next time. Bye bye.
Lauren and Kyle Clugston are a young couple of DIY investors from South Jersey, eager to make the most out of their lives. Their goal is to build long-term wealth through buy and hold rental properties, and retire by 2044. Lauren and Kyle’s journey through renovating and managing rental properties from start to finish is featured on The Bigger Pockets Rentals to Wealth series.