Anyone can create passive income and build wealth with real estate investing. But what do you need to navigate into the real estate industry successfully? In this episode, joining Chris Seveney is Tim Kelly, a real estate investor and educator, a best-selling author, speaker, and high-performance coach. Tim shows the role of mindset, education, and motivation to succeed in building his wealth and creating passive income with real estate investing. He explains how he got the mindset of being a high performer and what expedites him on his journey to success. Learn to drive yourself towards success in building wealth and creating passive income with Tim today. Tune in to this episode now!

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Mindset, Education, And Motivation: The Three Keys To Success In Real Estate Investing With Tim Kelly

I am excited to introduce Tim Kelly from Active Duty Passive Income. Tim, how are you doing?

I will not complain. I appreciate you having me on. It’s a pleasure. Let’s get into this. Let’s have a good conversation and add some value here.

We are going to dive in and talk a little bit about passive income and some high-performing psychology. We’ll also talk about Tim’s transition from residential to commercial real estate, which I know a lot of people are looking to do. They probably might think it’s simple on paper, but personally having been on both sides of the business, I know it’s not. Let’s see what Tim has to say about it. Why don’t you tell us what’s going on?

I’m based out of the Tampa Bay area, if anybody’s familiar, specifically in New Port Richey, Florida. I spent about fifteen and a half years in the Navy. I was last stationed in Pensacola, Florida. To give you an idea of when I got and how I got my real estate bug, I ended up getting out of the military in November 2020. I had this curiosity. I was on a long deployment in 2014. I had a curiosity about personal finance and building wealth. I read a bunch of books. I got opened to the idea that anybody could invest in real estate and anybody could create passive income and build wealth. I had a-ha moments and epiphanies.

I got off that deployment all of 2015. I went on a journey and learned as much as I possibly could about real estate investing. I quickly gravitated to the commercial multifamily. I did a little bit of residential. I ended up house-hacking my VA loan in 2011 and turned it into a live-and-flip and all that. I didn’t get the bug until 2015. I dove right into commercial multifamily. I was still on active duty and still focusing on commercial multifamily, both apartment complexes and mobile home parks.

There was a wrench thrown in there because I was on the BiggerPockets podcast back in 2018 as a featured guest. I shared my story. I was still on active duty. The cofounder of this incredible military real estate investing community that I’m a co-owner in and one of the board of advisors is Active Duty Passive Income. It was a small community with one course and a small podcast. It has exploded ever since. I’ve helped build that.

That’s why I got out of the Military for fifteen and a half years. I decided investing in commercial multifamily was a lot more aligned with my goals and building this huge education community to help other military members achieve financial freedom. Owning more of America was a lot more in line with my passion and my goals. I’m at the point where I’m focusing a lot of time and effort on building the education community, specific to the coaching program, masterminds, and education.

I’m also investing mostly passively. I’m looking to get a little bit more active. There are tons of deals coming across my desk. You have to be a little bit more open. I had to open my buy box a little bit because of the state of the market and the interest rates in the economy. I’m not specific to certain markets, the Midwest and Southeast as I was before, specific to apartments and mobile home parks.

I open that buy box up to more markets and more asset classes. I also do high-performance coaching one-on-one. I’m a certified high-performance coach. I love helping people, one-on-one crush through their goals and get over their self-limiting beliefs and everything like that. I know that’s a lot, but I’ve given you an idea of a little bit of the journey and then where I’m at.

A lot of it interested me but the 2 things that popped into my head were 1) You give back, whether it’s business coaching, personal coaching, the passive investing community, and educating people on that. That is imperative, especially in making sure you are investing in the right deals. 2) Taking your VA loan, flipping it, and then jumping right into commercial, let’s talk a little bit about that. You said it very nonchalantly, but that’s like going from high schools to the professionals doing something like that. Tell us a little bit about the mindset you had going into it and about one of your first deals or how you approached it.

Breaking it down will help. I didn’t have the real estate bug. I was looking for a home. In 2011, I was stationed in the Virginia Beach, Norfolk area. I wanted to use my VA loan, which is an incredible benefit for past and present military members. It is a 0% down loan. You could get a fourplex. It’s like an FHA or residential loan. You could get up to 4 units as long as you live in 1 unit.

I didn’t know that at the time. I got a single-family home. Luckily, for me, there was a master bedroom on the upper level and a master bedroom on the lower level. I ended up house-hacking the lower-level bedroom. I’m like, “I have this lower-level bedroom. I don’t think I’m going to have family coming in too often. Plus, there’s another bedroom for them to stay. Let me go ahead and rent this out.”

Most of my mortgage was covered through that, so I did the house hacking thing before I knew it was even a go-to strategy for a lot of people. It’s an amazing way to catapult your wealth and catapult you into the real estate game. I was house hacking, living in 1 unit, and renting out the other 3 for those who were unaware. Even if it’s a single-family home and you’re renting out 1 or 2 of the bedrooms, you’re immediately a homeowner, investor, and landlord if you choose to be.

House hacking is a go-to strategy for a lot of people and it's an amazing way to catapult your wealth and into the real estate game. Share on X

I got the epiphanies and the education back in 2015 after I went on that deployment. Commercial multifamily made a whole lot of sense to me, but I did do a couple of residential deals, the small multifamily. The big picture was I wanted as many doors under one roof as possible. I ended up getting a fourplex. The minute I got orders from Virginia Beach to Pensacola, I immediately started connecting with people in Pensacola who were the agents who could help me and multifamily investors.

I stumbled upon this fourplex. I wanted to house hack, but I was still focused on the large commercial and multifamily. I ended up house-hacking that fourplex, and then I ended up house-hacking another triplex using the VA loan. It was a VA rehab loan. It’s similar to the 203(k) loan if you’re familiar with that. It’s an FHA loan. It’s the same loan that I used for the fourplex where we could wrap the cost of rehab into the loan.

I was reading and gathering as much information as possible about all the different ways people can get into real estate, create wealth, and build passive income. This was hugely important for me. I made the decision to focus on commercial multifamily even before I had any experience. I heard a couple of people say, “You don’t have to get 1 property then maybe a 2-unit, then maybe a 4-unit, and then maybe an 8-unit. Eventually, one day, you don’t have to do that.” It’s not a bad way to do it, so I listened. I took that advice. I’m like, “I’m going to go straight for the large stuff.”

Even though I got the fourplex and then the triplex, I closed on a 42-unit apartment complex with some friends that I met in the local RIA in Pensacola when I started networking. Before I even got to Pensacola, I reached out to people. I got orders and nine months later, I ended up moving. That month, I closed on the fourplex. Six months later, I ended up closing on that apartment community at that point. After that, I closed on a mobile home park. From there, that was my focus for a while.

That transition for me was unique. I wasn’t focused on residential investing almost at all. I was focused on getting as many doors as possible as my primary residence. That happened to be a small multifamily. I didn’t let it hold me back thinking that I couldn’t do it because I didn’t have a ton of residential experience. I went straight into commercial multifamily and met a lot of people who have done it similarly. I help people go through that transition because most of it is mindset.

 

When you were acquiring all these assets at the time, did you have property managers to manage your properties for you and so forth, or did you try and do it all? Did you hire people that you buy it, get it, and then hand it over to somebody? It’s a little bit more passive, but you’re active in that whole mix. I’m curious how that came through.

I self-managed the four-unit property with the intent of understanding how it all works so I could hire the right property manager. I knew I was going to end up hiring the right property manager, but I wanted to do it myself a little bit. I managed it up to the point where I got it completely occupied, the four units. I had some software that I used for easy tenant screening and all that submitting their maintenance issues and stuff like that.

I self-managed for about six or so months. I got it completely occupied and managed it a little bit, and then I started interviewing property managers because I was still on active duty. I did have a full-time job at the time. I didn’t get into real estate to manage tenants and properties. I got into real estate to slowly build passive income and generational wealth. Ever since then, I’ve had a property manager. I’ve never managed any of my own deals.

That’s interesting. That hit me when you were mentioning that. Most people would immediately go to the property manager and say, “I don’t want to deal with this.” You took the time and spent six months. You were like, “Let me figure out how this is supposed to work so then I know enough to get myself in trouble when I go to hire the property manager on how to interview them properly.” That’s one of the biggest mistakes people make. It is when they go to hire a property manager, especially if you’re a newer investor, you don’t know the questions to ask. You don’t know what is a good answer, or it’s tough to see if someone’s giving you a load of BS or how things work.

I had a BS radar. If I didn’t, I wouldn’t know any better. I was thinking my BS radar was in place because I took that time. It was super helpful, for sure.

You took advantage of some of the offerings you had through the VA to acquire these properties and so forth. You moved to a mobile home park and bought a mobile home park. Was that something you bought individually? Did you team up with investors? Did you raise money for that? How’d that go down?

During that time, it was the end of 2017 or early 2018. As I remember, apartment complexes at the time started getting a little bit more difficult to buy, not compared to now, but the cap rates were squeezing a little bit. Interest rates were still pretty low. The market was thriving, so cap rates were squeezing a little bit and it was harder to find deals. That’s when I decided, “There are more mobile home communities available with a higher cap rate and probability for cashflow. Let me shift this.”

The best thing that I did was get educated, work with coaches, and get into masterminds to understand how to speak the specific language of apartments and mobile home parks and find other people who are doing it. You also find your potential partners. I found a couple of partners. We did a joint venture on that. It was local to where I was stationed, which was North of Mobile, Alabama. I was in Pensacola, Florida at the time still. It was about an hour away. It was the same with the apartment complex. It was about an hour away outside of Mobile, Alabama. It was two different partnerships. The syndication is how we acquired the apartment complex. The mobile home park was a joint venture deal between myself and two other partners.

 

On any of those deals, was there any type of seller financing involved as well or any type of creative financing or was it more straight-line conventional?

No. We got a good deal on the mobile home community. We paid cash for it. We didn’t have any bank financing. On the apartment complex, we were borderline going to do seller financing but it didn’t work out. We ended up working with a local bank. We got some solid commercial financing with the bridge and IO for two years in order to get a bunch of rehab done. It was bank financing on the apartment complex and then on the mobile home park, it was a joint venture where we split the purchase price three-way between myself and two other partners.

What asset class do you love the most between multifamily or mobile home parks? Is there one you like over the other?

There’s a lot more to consider. At that time, I liked mobile home parks. Truth be told, through the whole pandemic and all this, anybody who was holding large assets created a lot of equity. There were a lot of millionaires that were created during the pandemic whether you were holding apartment communities or mobile home communities because rents kept going up and all that.

Through that, the mobile home parks in my portfolio thrived more than my apartment complexes. There’s a special place in my heart for mobile home parks. Taking into consideration self-storage and maybe parking lots, car washes, and RV parks, there are a lot of other assets that I’m looking at but mobile home parks are probably still my favorite asset class out of all of them.

Moving forward, in the next 24 to 36 months, what do you see yourself doing? Where do you want to be over the next few years?

I’m meeting with a couple of partners. There are a lot of opportunities. I’m here in a market that has a lot of benefits. In the Tampa Bay area, many people migrated to this area through the pandemic. Even before that, there was more migration here than almost anywhere else, considering all things maybe Austin, Texas, and Boise, Idaho. People are moving away from Boise. People are still influxing to the Texas markets, but Tampa Bay is thriving.

We’re looking at car washes potentially developing. I’m always on the hunt and I see mobile home park deals come through all the time. Probably if I had to choose any specific asset class other than mobile home parks, it would be car washes. I would like to get into the development of car washes. I don’t anticipate interest rates going down. I’m not an economist in any way, shape, or form and I don’t have a crystal ball, but I don’t think anybody should expect or even hope that interest rates go down. If they do, that’s great. If anything, they’re going to go up. This is our new normal where we’re at. With all things considered, I’m most excited about developing car washes and markets where there’s a demand.

I bought my first house in 2001. My parents, when they quoted me a 6% interest rate, were telling me that I’d be the dumbest person on the planet if I didn’t lock that in because that would be the best rate I’d probably ever see for a decade. Historically, rates are 5%, 6%, 7%, 8%, or wherever they are. We had that stretch where they were artificially inflated so low.

I’m not an economist either. I don’t have a crystal ball. There are people expecting them to go back down to 2.5% or 3%, which is where I’ve got some of my assets in my primary sitting. I’m not going anywhere anytime soon, but when I look to acquire things, I’m back to thinking, “This is probably the norm.” If it goes back down to 5%, I’m going to think, “That’s awesome.”

It will be cool, but you can’t expect it at all.

Let’s pivot a little bit. You mentioned high-performance coaching and the psychology behind making that initial leap and continuing to grow. You mentioned you’re a part of some masterminds and other groups. A lot of people will say you’re the average of the five people you surround yourself with. Let’s talk a little bit about that. Is that something that you learned from the military or family? That mindset of being that high-performer that a lot of athletes have, where do you think that you got that from?

There’s a lot that I took away from my military service. This is why I love building a community of past and present military members, their families, spouses, and everything. You learn about commitment, grit, integrity, hard work, leadership, and discipline. They’re great investors and employees. That’s why a lot of people are trying to hire people coming out of the Military. It’s ingrained in our DNA, all that stuff. There’s a lot that I learned from that, maybe the continual growth and stuff like that.

During that time, I gravitated to professional development. I was like, “How could I be better and add more value and increase my level of clarity, confidence, influence, or whatever?” That’s when I immersed myself in a lot of different podcasts and books while I was learning about real estate, the mechanics, and the how-to. I was learning to speak the language. I was equally learning about how to master my investor psychology and learning how successful people think, what separates them, and what makes them different.

There’s so much out there in books and podcasts alone. It’s not like you’re reinventing anything. You could read some books and listen to some podcasts or YouTube videos and understand how successful people think. If you could equally balance out your personal growth and the time that you’re educating yourself in both real estate, mindset, and success, that’s what helped expedite my journey to success. The more I learned and I was able to implement, the more attraction and momentum I got.

If you could equally balance out your personal growth and that time educating yourself in both real estate and in mindset and success, you can really expedite your journey to success. Share on X

Even when I was starting to learn about real estate, I kept hearing from people I was listening to and influencers that I would listen to who were very successful in real estate. They were also harping on the importance of mindset and the importance of mastering your psychology and learning how successful people think.

That led me to become a certified high-performance coach. I learned the different pillars that high performers focus on. When I work with my high-performance clients, what are the pillars that I focus on? What are those micro action items and tasks that have to be done to develop that specific pillar? There’s a lot that we could peel back in order to break that down, but did that answer your question, first off?

It did give a lot of good insight. One of the last things I want to talk about is you have this passive income group from Active Duty Investors. Many of us in the real estate game could agree that from 2017 to 2021, real estate was like shooting fish in a barrel. You had the appreciation happen. A lot of people made a lot of money. Sins could be forgiven during that time as well.

Times have changed. The interest rate environment has put a lot of hurt on a lot of people, whether it was short-term rentals or multifamily. If I were a passive investor, what would be the 1 or 2 things you would tell me if I want to say, “I’m thinking I want to passively invest. What do I need to look for? What are some tidbits you think off the cuff that are mistakes you’ve seen people make or things people should further their education on as passive investors?”

From a high level, you have to get educated. The level of education that you have is equal to the ability for you to decrease your level of risk and the more competent you are on specifically 3 different things or maybe 4 as a limited partner. Number one, the team. If you’re looking at a specific deal, don’t even look at the deal. Look at the team. Who are they and how many times have they taken a deal full cycle where they hit the metrics and provided the returns that they projected to their investors?

If you don’t understand what full cycle means, you purchase a property, add value to it, and it’s stabilized. Whether you hold it and maybe refi or sell, that’s a full cycle. There are projections that investors are looking to hit for their passive investors. How many times have they gone full cycle on the same asset class, maybe even in the same market?

The cool thing about these private equity-type deals or these syndication deals, 506(b)s and 506(c)s is there’s a good chance you could talk directly to the general partners. You could get on a phone call with them and get to know them personally and what their goals are. You get to know a little bit about them and maybe their family. You get to know their level of ethics and morals. Know the team. You also have to know a little bit about the local market, the building itself, and then the numbers. You have to get educated on all those things.

I don’t know if there are specific courses that will take you through all that education from an LP perspective, but if you’re going through commercial multifamily or syndication education of some kind to give you a good overview of all that stuff, then that will decrease your level of risk. Knowing how to analyze the market, how could you tell that this asset that you are looking to invest in is on a predictable path of progress? It is understanding what are those major metrics, the population, the median income, and the average home value. These are all very important metrics.

With the building itself, what year is it built? What other assets in the area are similar in how they perform? There are all kinds of other metrics to look at when you’re analyzing the actual structure itself and the dwelling. There are the numbers. Maybe you could see that the cash-on-cash is 10%, the IRR is 16% to 18%, and the equity multiple is 2%. What do those mean? Does the NOI reflect that? Does the cap rate and NOI match up?

It is understanding. It’s all about your education. You can then understand all these things that I’m talking about. For those of you who do, that should give you a good overview of the four things. Before you get into a deal, you should understand the team, understand the market, understand the structure, and understand the numbers. That should give you enough to make a decision on whether it makes sense to move forward.

 

Something popped into my head when you were saying that because I love multifamily. I have a good amount of background in it. You hit a lot of great points. One thing that people miss the boat on, especially early on, is when they’re not doing everything you said about some of that research, they’re looking at the numbers.

To me, it’s almost like dating. When you’re first dating somebody or you’re hanging out with buddies or having a drink, it’s like, “Let’s go do this.” Those numbers, sometimes, you have to look at them to understand. Are those the drinking buddies that are like, “This is what we can do,” type of thing, which you probably could never do or is it like, “That’s realistic,” and understand the risk profile involved?

I looked at a deal because I had some IRA money I wanted to invest. Unfortunately, I can’t invest it in my own fund. I went to put it in there and said, “Send me some of the numbers on it.” I’ve underwritten hundreds of multifamily deals back in my W-2 day. I’m like, “Your rent seems a little bit aggressive.” They’re like, “It’s based off of this building.” I’m like, “That building looks like it’s a class above yours. They’re getting $1,500 but they’re also giving 2-month concessions. You’ve got no concessions and you’re getting the same amount. Something is not jiving here.”

For the people reading, a concession is something like two months of free rent. Instead of a 12-month lease, they give them 14 months or they stay for 12 and they last 2, 3, or whatever. That’s for people to understand that. Those are some of the things that the more education you have, the better off you are. With our fund, we try and educate our investors as much as possible. I know you’re a partner with the Kelly Housing Group. If you syndicate, I’m sure you probably try and educate those investors as well.

The Kelly Housing Group is my own personal entity that all my investments go through. The Active Duty Passive Income is a separate entity of community and the education that we’re building for the military. How do you master that stuff? You learn about it, do it, and then teach it. If you’ve ever heard, “Educate to dominate,” not only are you obtaining mastery in whatever you’re learning, implementing, and then teaching, but you’re also seen as the authority.

It is why a lot of people have education and have a podcast. They share education. Not a lot of people are willing to do that. When you educate, you also are seen as an authority or thought leader in that space. You’re also giving your followers or audience information that’s valuable that they could use. Education is so important. It’s crazy.

As we wrap up, what’s the best way for people to reach out and learn more about everything you’ve got going on? What are the ways to follow you?

Thanks. There are a couple of different social profiles. Most of the handles are @TheTimothyKelly. On LinkedIn, I’m most active on @TheTimothyKelly. It is the same thing with Instagram, @TheTimothyKelly. On Facebook, I’m @TheTimothyKelly. My personal website is TheTimothyKelly.com, the Active Duty Passive Income platform for past and present military members. I’m in there a lot. We’re on our own separate off-Facebook platform called ADPI Campus. I do a lot of that if you’re a past or present veteran or military member. If any of this resonates with you at all, shoot me a text. We’ll get on a call. I’ll see if I can help you. Maybe we’ll partner on some deals or maybe I could give you some insight based on my experience. You could text me at (847) 910-9161 and we will schedule a call.

Thanks for coming on. It’s been great. It’s a pleasure having you on the show.

It was great coming on. Thank you so much for having me.

 

Important Links

• Active Duty Passive Income
• TheTimothyKelly.com
• @TheTimothyKelly – LinkedIn
• @TheTimothyKelly – Instagram
• @TheTimothyKelly – Facebook

 

About Tim Kelly

Tim is a Real Estate Investor & Educator, a Best-Selling Author, Speaker, High-Performance Coach, and sitting on the Board of Directors for Active Duty Passive Income (ADPI) and recently separated from the US Navy as a Chief Petty Officer after 15 years of service.

Tim achieved financial freedom investing in real estate and businesses and he created enough passive cashflow to leave service just over 4 years before his pension would have kicked in, so today, he can fully pursue his dream of owning and operating multi-family real estate and dedicating most of his time helping others realize their financial freedom goals.

Tim has been investing in real estate since 2011 when he purchased his first single-family residence with the intention of forcing appreciation and flipping for a profit. That property also turned into his first “house-hack,” and he quickly learned buy and hold real estate were much more aligned with his goals. Tim has built an incredible network of real estate professionals, owns, controls, or has directly been involved in nearly 2,000 income-producing units, to include apartment complexes, mobile home communities, RV parks, storage facilities and car washes.

Through his years in the military, Tim not only learned the power of high-level leadership, teamwork, discipline, and grit; he became a certified Command Financial Specialist, educating hundreds of Sailors and Marines on personal finance and creating financial freedom… Tim rapidly found another life passion.

As a member of the Board of Directors for the online education community, Active Duty Passive Income (ADPI), he helps other past and present military members on their paths to financial freedom through financial literacy and real estate investing education – owning more of America – the land they swore to protect and fight so hard for! Tim also co-authored the #1 Best Selling book with ADPI titled: Military House Hacking and has written others covering basic financial education, all-things credit, home buying, and commercial and multifamily investing.

Tim earned a Bachelor’s degree in Organizational Management from Ashford University while serving on active duty. Tim is now a Senior Managing Partner of both Kelly Housing Group and ADPI Capital where he and his partners invest in and syndicate multifamily property in the affordable and workforce housing spaces with a focus on apartment communities, mobile home communities, RV parks, storage facilities, and car washes.

Tim also loves to pursue philanthropic projects related to homeless veterans, playing shows and drumming with his band, seeing live music and concerts, scuba diving and traveling the world!