The Keith Andrews Podcast

Active Duty Passive Income | Tim Kelly E14

• Keith Andrews • Season 1 • Episode 14

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On today's episode, Keith sits down with Tim Kelly, a seasoned Navy veteran who has successfully transitioned to a real estate investment and education powerhouse. Tim, a best-selling author and a respected figure in the Active Duty Passive Income (ADPI) community, shares insights from his journey from military service to managing a multimillion-dollar portfolio that includes apartments, mobile home parks, and storage facilities. Discover how Tim leverages his military experience to teach and inspire both veterans and civilians in achieving remarkable success in real estate investing. This episode is a treasure trove of strategies for using military benefits for investment leverage, understanding the nuances of large property investments, and the importance of education and networking in the real estate industry.

Connect with Tim:
Instagram: @thetimothykelly
Website: https://thetimothykelly.com/
ADPI Education & Resources: https://www.activedutypassiveincome.com/

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Connect with Keith:
Instagram: https://www.instagram.com/iamkeithandrews
TikTok: https://www.tiktok.com/@iamkeithandrews
YouTube Channel: https://www.youtube.com/@iamkeithandrews

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If you need to go raise 500K, you could literally get 100K from five different people and you're offering them an opportunity because in exchange for that 100K, they're going to get incredible returns and they're going to be an owner in the property. Those limited partners own more of the deal than the general partners who are doing most of the work. Welcome to episode 14 of the Real Estate Junkie podcast. Joining us today, we have Navy veteran Tim Kelly. Tim isn't just any real estate investor. He literally wrote a bestselling book on military house hacking and since then has leapfrogged from house hacking to owning a multimillion dollar portfolio of real estate that includes apartments, storage facilities, and mobile home parks. He's also the head of education and co-owner of Active Duty Passive Income, also known as ADPI, where he teaches both active duty service members and veterans on how to build and grow successful real estate portfolios. All right, Tim, man, I'm so happy to have you on this show. How are you doing? Outstanding, man. I've been looking forward to our conversation, man. I'm doing great, man. I just literally got in the door from walking a nightmarish property and considering rehabbing it. But that's another story for another day, Tim. Let's talk about you. You're a Navy veteran. So let's start there and tell the people that don't know about you a little bit about the backstory. Your journey into the Navy maybe even why you joined the Navy in the first place and then how you eventually bumped into real estate specifically House hacking because you you ultimately wrote the book on it. I think Before anyone was even calling it house hacking So it's it's a pretty incredible story and I can't wait for you to share it with our listeners. Yeah, man. This is awesome. Thanks. I joined the Navy because I one of my best friends who had the idea of joining the Marines on a buddy program. And I was like, dude, that sounds cool. You know, at that time I was just like working job to job. I didn't really have like a dialed in vision for where I wanted to go, what I wanted to do. And so I tried to join the Marines, but because I literally had a pending court date for like a speeding ticket at that time, they wouldn't take me. And so I went next door to the Navy recruiter and then I discovered the Navy SEALs and the Navy SEAL support and the special teams and I was like, man, this sounds awesome. So that's really what attracted me to the Navy. I ended up joining the Navy when I was 21 under the SWIC program. I was contracted SWIC, Special Warfare Combatant Crewman, which is like just SEAL support. Back in 2011, when I was stationed in the Virginia Beach area, I had a single family home, used my VA loan to buy it. And there was a master bedroom upstairs, master bedroom downstairs. I was staying upstairs and I rented out the lower master bedroom to some friends. And then I just kept that, you know, rented out, especially when I was on deployment to pay most of the mortgage. So like, I was like, this seems like a cool idea, but I never really like leaned into it. And so I was on a long deployment. in 2014, I was like nine, 10 years in. That's when I got the real estate bug. I just brought a bunch of books, you know, about money, about, I had super curious about building wealth, financial freedom, how rich people got that way. And I just saw this trend of real estate investing. And then I got orders to Pensacola, Florida. Before I even got there, I connected with other investors, people who are, who are getting in, I was leveraging the bigger pockets community at that point. And then as soon as I moved that month. I actually closed on a fourplex with the intentions of house hacking. And then six months later, bought a 42 unit apartment complex all while I was still active duty. And then six months after that, purchased and partnered on a mobile home community, which actually we just sold like two weeks ago, which was awesome. And then after that, bought like a triplex that I ended up moving into to house hack. Pivotal point for me in 2018, during that whole time. I had the opportunity to be a guest on the BiggerPockets podcast and I was able to share my story. And that's when the founder of Active Duty Passive Income heard me. I left my cell phone number on the podcast. He called me. And since that point, mid 2018, I've helped build the number one and the premier military real estate investing education platform, Active Duty Passive Income. Now I'm a co -owner and a board of director. for that incredible community. We have like 80 ,000 members in our Facebook group. So that's like my main focus right now outside of investing and some of the things that I'm doing is building that community and adding a ton of value to that where we're helping past and present military members and their families create wealth and financial freedom, owning more of America, man. So hopefully I served up what you were looking for, but man, where do you want to take it from here? Well, yeah, I'm gonna kind of go back to some of the things you talked about. because I think it's really powerful. First off, everything that you guys are doing with ADPI is just incredible. I think just the network that has been put together, it's a shame because in the military, you have so much opportunities out there when it comes to real estate that normal people don't have. And most people don't even realize it. And I'm not just talking about... The VA loan. I'm talking about the fact that you are getting stationed in many different parts of the country and having an opportunity to tap into these markets. And at the same time, being able to purchase a primary residence there, right? Like you could be stationed somewhere and then a year later you get stationed somewhere else. I could go buy another primary residence and it can be up to a fourplex. So that's like a huge, huge advantage that like, I know when I was in the army. I had no clue. In fact, I remember like I heard about the VA loan and I thought, great, one day when I'm an actual veteran, I could use my VA loan. I didn't realize I could actually use it while I was in. No one was talking about that. I didn't realize too, I like, I had house hacked before as well and I didn't even know that that's what I was doing, but it's, it's kind of funny. But what I really want to talk to you about today is how you took that leap from, you know, most investors get caught. caught up with just single family, small multifamily, but for you to make that jump into large multifamily and mobile home parks and to do it so fast to a lot of people, that's just like, it seems so far out there. like I'm going to need tons of money and like, how do I even start? So maybe you can touch on that part. How were you able to do it? What would you recommend for somebody that is. I mean, like myself, I'm doing pretty good. I have 12 rentals in Colorado Springs, a couple in Georgia, and I have my money in some syndications and some larger apartment complexes, but I've never tackled like a large multifamily or a mobile home park or anything like that, which even me, it's like, where do I even start? So maybe you can share that part of the story. Yeah, you're already there, man. You're in as a limited partner on a syndication. Like, you know, I'm sure you've had a lot of lessons learned and. with your experience already in just residential, you're at a big advantage. And what I wanna really highlight is really maybe thinking about it differently for the listeners, just reframe. So many people are held back by the way they think about things in their mindset. And so I think that's where one of my maybe advantages were. I didn't really see it. as a big jump from going from residential to commercial. It's just a different route to financial freedom. That's all it is. And that's like a huge misconception. And really the biggest myth that I wanted to spell is like, you must have all this experience in real estate before you could even consider investing in or being a general partner or a joint venture partner for a large... commercial deal like an apartment complex, mobile home park, RV park, self storage. And you don't need to have all kinds of money in order to do it because you raise the capital through friends and family and accredited investors and non -accredited investors that are looking to park money. Like you, you're a limited partner. You are looking to park money in these deals. So you don't need to be a mathematician in order to learn how to analyze the deals. It's just, you're just learning a different approach instead of owning 100 % of a small residential property, you're owning, you know, a smaller percentage of a very large commercial property that's more scalable with more doors. A lot of pivotal moments for me were due to reading certain books. And so I read the book, the ABCs to Real Estate Investing by Ken McElroy, rich dad, poor dad. Robert Kiyosaki's real estate advisor, Ken McElroy, but the ABCs of real estate investing didn't really know a whole lot about it. I just kept hearing recommendations for it, but it breaks down commercial multifamily investing into very simple terms. And that's what got my gear spinning. And I realized a very simple five step process on how these deals are analyzed, how they're managed, how people structure them. Like, so I learned the process enough to like fuel. my impatience, like I don't want to do one deal at a time and manage these single families. And that's not a bad way to go about it. It's not, you know, you can testify to that. There are people who are very successful in real estate. And, and for me, I almost wish I continued building my small residential multifamily portfolio as I was pursuing the large commercial real estate. If I went back, I wouldn't have stopped doing that. I would have continued. putting systems in place for twos, threes and fours, building that out while I was continuing to pursue because that is, could be a cashflow machine. They appreciate, you could realize appreciation a lot easier. You can get better debt on those. And so that locked in for 30 years, right? But I was really attracted to the art of A, I don't want to do everything myself. And for commercial multifamily, you're part of a team. Let's talk about a mobile home park. The idea of... just owning the land and someone paying you a lot rent versus having to deal with toilets and everything else that comes with, you know, residential real estate. and I'm feeling it right now. We just had this major windstorm and like I lost a roof on one of my properties, fences are down, like just all kinds of damage spread across my portfolio. Thank God for insurance. They're in business to not pay out, by the way. Yeah. Your insurance companies are in business to not pay you like that. exactly. I mean, I couldn't believe it. I won't mention the insurance company's name, but they were trying to deny my claim because they said the roof was put on wrong on one of the houses where the roof practically blew off. But the thing is, is I bought that house with that roof on it. So like, how are you going to hold that against me? Like, You gave me a policy. You even came out and inspected the house and you're saying that the roof was put on wrong. So you're not going to, you're going to deny this claim. It's ridiculous. Anyway, I fought it and I won the four point and win mitigation studies out there. Like Florida does. They don't know inspections that need to be done before the insurance company could even insure it. So it's like documented. And that's one thing in order. The inspector has to look at the roof and how it's secured. Like, yeah, they need to do that. But yeah, they definitely should do that out here. But anyway, I got it worked out and at the end of the day, in the big scheme of things, like the money that I'm having to pay out right now is nothing compared to the equity that I've built in these properties, and the cashflow and everything else. But I do like the idea of, Hey, if something goes wrong on the property itself, it's the, the person that's at the tenants responsibility, not mine. So that's why mobile home parks, especially in the case where you have maybe city. utilities and everything else where you're really just responsible for the grounds and that's it. I really, really liked that idea. Maybe you can speak on that. Cause I know you have experience with that and you said you just sold a mobile home park, right? Yeah. The very first one that I bought, with some partners back in, in 2018, well, yeah, it was just sold when we buy parks, there's going to be a mix of tenant owned homes and park owned homes. Like you were saying, you don't want to own any of the homes. It's not always the case, but nine times out of 10, most investors, the goal and the intent is to buy a park and eventually convert it to or buy it as 100 % tenant owned homes. If you, let's say, buy a park where 50 % of them are tenant owned homes and the 50% are park owned homes, there's always a process to convert those park owned homes to tenant owned homes. Sometimes it's not easy. Sometimes it is a lot easier. One of the best ways to do it is you literally are gifting that unit to the tenant for like a dollar and you're raising the lot rent, right? Up to market rent as long as you're not going beyond market rent. And trust me, those people, even though they live in trailer parks, they know what... the trailer parks around are charging for lot rent, right? So there's ways to convert them from park owned homes to tenant owned homes. Sometimes it's actually a benefit to own the homes if they're newer, nicer, if they're above like 12, 14, $1 ,500 a month that you can get where the expenses might offset and add to your cash flow. you know, that's not a bad idea to hold on to those park on homes. But if they're older 70, 80, 90s models homes, you know, that don't have the vinyl siding and pitched roofs, those are like 2000s and newer, you might consider holding and those are the mobile homes that have, like I said, look like actual homes, like vinyl siding, pitched roofs, the older ones are going to take a lot more maintenance and they're going to just going to be a headache. So those are the ones that say, Hey, we're going to give you, we're going to make you a homeowner. You're going to own your own home. And all we're gonna do is raise it up to lot rent. Average lot rent's probably around 400 bucks a month at this point right now, but the best opportunities in mobile home parks are parks where the lot rent is like 180, 200, 220, but market rent is like 350. And that makes sense, especially when lenders are lending on these assets. They don't capitalize the units rent, they only capitalize the lot rent. So the best thing you can do to add value, Is increase the lot rents across the board and not own any of the units because they are depreciating assets like vehicles They are not appreciating assets like homes. So I have a question real quick. Is there a tax advantage when you do that when you gift it to the the tenant again, i'm not just Disclosure i'm not a cpa. I'm not a tax advisor but the tax advantages on mobile home communities are unique. The units themselves are not depreciable, right? Because they're not actual real property. You know what I'm saying? The ground is and the infrastructure is. So you could depreciate mobile home communities, but it doesn't work the same way as apartment complexes and mobile home parks. You still definitely get tax benefits, but it's not the same. So. I'm not going to say that there are tax benefits to gifting other than just improving operations and improving cashflow for the long term. Okay. Okay. That's right. And you're essentially adding value. The more tenant owned homes you have on the property and the higher your lot rent is and closer it is to market rent, that's what improves your net operating income, which improves the value. You know, so, I think what the biggest struggle for a lot of people is, is the money, right? I mean, you could use your VA loan. It's zero down. You could pick up to a fourplex, but if they wanted to have that bigger vision, right? Like, Hey, look, I want to leapfrog past these little single family homes into something that, especially if you're in the military, you do want something that's pretty passive, right? So if you could figure out how to play into that, the money part is the struggle, right? For a lot of people, how do you get over that, that hurdle? So where does the money come from? You don't. need a good credit score to invest in or operate a large commercial multifamily property. One to four units residential, it all boils down to your debt to income ratio, your personal debt to income ratio, and your credit score and your credit worthiness, right? Your ability to pay that debt based on the other credit that you have. For large commercial, It has nothing to do with him. It's all based on the operations of the property and the team's capacity to execute the business plan. The money is usually raised through passive investors, right? That is how these big deals are done. It's not like one person or two people are like partnering on a deal and they have all the money themselves. No, you leverage a mortgage just like you do for a single family home. So you get commercial debt. And commercial debt, you can get 60%, 65, 70%. 75 % of that total purchase price could be leveraged using commercial debt. And the larger deals are actually easier to finance. And they're called something called non-recourse debt, where if the loan defaults, there's no recourse on the individuals that signed on the debt. It's just the bank just takes over. Smaller... loans that are in commercial property, just like your own home. If you fail to pay the debt, if there's going to be a foreclosure and there's going to be recourse, you're still going to owe that amount. Right? So that's the difference. I don't want to get too complicated here, but when you do larger deals, it's non-reforce debt. And so let's say the bank puts$7 .5 million down. They give you a mortgage of $7 .5 million as long as you could prove that the operations could pay that debt service, right? Based on the numbers that you were given. And this is how you have to learn how to underwrite and analyze these deals. But then now you have to come up with $2.5 million to pay for that $10 million property because they're lending you 7 .5. So now the cool thing about commercial real estate is that you can get creative. Right? It's not like you always have to go put down that $2 .5 million because guess what? A lot of these properties, the seller is maybe just old or they're just tired or they're just, they don't have the time, but they really like the asset. They're just ready to sell. Maybe they still want to be part of it. That's where you can take advantage of seller financing where you could like tap into the seller, get their appetite for it. And maybe they're willing. to lend you $2 .5 million of that 3 .5. And that'll just be added to your debt that you pay back every single month, as long as the numbers work. So then you really just have to raise 1 .1 million bucks, you know? And that's where you can go to people like Keith. There's a lot of high earners that are professionals that work 70, 80 hours a week, but they know that they want to invest in commercial real estate. So it's just all about finding those individuals, not asking them for money. This is a capital raising 101, like big time nugget that took me a while to realize is that when you're raising capital, you're not asking for money. You're literally taking this opportunity and you're offering it to investors who already want it. So you're offering an incredible investment opportunity. You're not asking for money. Even when like friends, family, accredited investors, whoever. You're not asking them for money. If you need to go raise 500K, you could literally get 100K from five different people and you're offering them an opportunity because in exchange for that 100K, they're going to get incredible returns and they're going to be an owner in the property. Those limited partners own more of the deal than the general partners who are doing most of the work. For instance, Let's say you raise that $1 .5 million on this particular deal. These are funded and structured. It's a split between general partners and limited partners. And the general partners do all the work. They found the deal. They did the due diligence. They ran the numbers. They raised the capital. They're operating. Those are the general partners. They might own anywhere from 20 to 30, maybe to 40 % of the deal. But those limited partners who invested are going to own 60 % 70 or 80 % of the deal. So it's not a bad position to be a limited partner. By the way, you don't do any work. You literally collect mailbox money. Keith, you're an LP in a syndication. So you could testify to that. I'm an LP in syndications and that's where I'm at right now. I don't want to spend the time being a general partner anymore. It's not where my time is. I like spending my time. I want to be a limited partner and because I know how to analyze deals. analyze teams, analyze markets. So once I do my due diligence, I park money and I don't have to worry about it. I just receive updates every month from the general partnership team. Yeah, no, it's definitely a good position. If you have the money to participate as a limited partner, it's definitely the best path because you'll get all the benefits that come with real estate from a tax perspective. You'll get monthly cashflow and you'll get that return, whatever the exit strategy is. So yeah, it's, it's definitely, truly passive, right? Being a limited partner versus being a general partner or actually, you know, wholly owning, you know, residential rentals, or something like that. Well, I'll tell you what I really do admire everything that you've done. and especially what you're doing with, active duty, passive income and the education and the network that's there, connecting service members together. you know, mentoring them and offering these programs to kind of just get them out of, or just to educate them and expand their, their horizons. Because again, I touched on this in the beginning, you know, as, as a veteran, as service members, we do have an edge over everyone else. when it comes to real estate. And so the more, that we can educate people on that, the better. I mean, we're just improving the lives of, of everyone that's out there. So I do commend you for that. maybe I can ask you like looking back at your journey, to the, to where you are today, what, what are some of the most important lessons you've learned? And if you have any tips for our listeners who might be active duty right now, wanting to kind of follow in your footsteps, What would you say to them? Yeah, man. That's a great question, man. so if you're active duty, or a veteran or a family member, definitely just check out active duty, passive income, go to the website. the Facebook group has like 80 ,000 members. It's a private group. you gotta go through a couple of screening questions first. happened to that. It's just a free group, tons of like, it's a really high engaging group. And there's a bunch of free resources on our website. The Military House Hacking, best seller on Amazon, that's free to download. You could go to our website and download it, Military House Hacking. You can even just go to militaryhousehacking .com and it'll just bring you to that. It'll bring you to our website. And there's a handful of other books on. But I wrote personally on personal finance, an all -in -one credit guide, and like a first time home buyers. And I also wrote like a 13 week action journal for personal growth and success, like for goal setting. And all those could be accessible on our website, but man, there's academies, like I mentioned before, and masterminds with small cohort groups that go through the academies together where you find partners. We have... Meetups all over the world where a lot of military bases are we have an annual conference every year ADP icon actually in Denver this year cannot wait We have some incredible keynote speakers that were just announced and if I were to kind of like Go back to the person I was when I first got the real estate bug I would go before that and and like hand me military house hacking book like while I was in high school, you know, I I would just want to know this information sooner so that I could take action quicker because time is your best friend. When you're trying to compound wealth and you're trying to build financial freedom, it takes time. If you're trying to get rich quick, stop. There's only scams, it's not sustainable. You have to be okay with the long game, be a long -term visionary thinker and you know. You're already setting yourself apart if you have these large goals. So understand that success is defined differently by every single person. You have to define your own version of that. You have to create your own definition of success. But either way, let's say you're here and success is here. It's not a straight line. I mean, it's going to go boom, boom, boom, like backwards, all, like it's definitely not a straight line, you know, and be okay with that. Have contentment and have faith. that is part of the process. That's like just, and the people are kind of filtered out when they give up during those valleys. And whenever there's a valley, it's like just before the peak because it's not a failure. It's not like a dark valley. It is a lesson learned. And then you'll be even better on the way out because you're growing through that whole entire process. Mindset is everything. So understand how successful people think. while you're learning all the mechanics and like the how to's of, of how to be a real estate investor, continue your own personal growth journey. Cause your income and abundance will only grow to the extent that you grow as a person. Right. so man, like you have to surround yourself with the right people. you are the product of your environment. I can go down a rabbit hole right now, but you are the average of those five to 10 people. that you spend the most time with, evaluate their personal finances, their happiness, their net worth, how much they give, the quality of their relationships, their health, their fitness. Like whatever that average is, is you. You're at the bottom of that. So be very mindful on who you are surrounding yourself with and be very intentional with what rooms you're putting yourself in. Because now it's easier than ever to put yourself into a room of high achievers who just want to help you. and wants to reach down and pull you up to their level. That's what masterminds are all about. And that's why, that's what ADPI is all about. Like iron sharpens iron, let's help each other out. And we're all about helping past and present military members and their families create wealth and finance free and through owning more of America. Yeah. You know, though you, you, you hit on a few things that it's so powerful and it's so true. And since I started this podcast, it's a reoccurring thing. I keep hearing from every successful person that I've interviewed. is the key to all this is real simple. It's surround yourself with the people that you want to become. It's that simple. If you surround yourself with people that are doing large multifamily, you're going to go buy a large multifamily. If you're, if you're surrounding yourself with people that are already doing it. So that's the key. And that's what's so great about ADPI is if you get plugged into that community, you're plugging yourself. And do a whole network of folks that are trying to do the same thing you are. So you guys can grow and learn from each other. So that is just incredible. Again, I commend you for everything that you're doing with, with ADPI. And I think your journey is definitely something that we can all learn from. So I really do appreciate this, this interview today, unless you have something else to say, I think that's it. I think we did it. Yeah, I just you know, if this resonated with you, you know, I would I would love to just have a conversation with you and help you I'll give you a free one on one call. You know, no obligation, whatever. And just literally, I'll give you myself a number you just shoot me a text. Let me know you you heard me on Keith's podcast. And we'll hop on a call. And you know, whether you're past present military. whether you're not, that doesn't matter. Coaching changed my life, so I love helping people one -on -one unlock their potential and find all new levels of just, you know, vibrancy and performance and confidence and influence and really what separates high performance from everyday else. So, like I said, if this resonated with you, I love, Keith, what you're doing, so just shoot me a text at 847 -910. 9161 and we'll set up a call. Yeah and I'll put that up as well. Thank you so much Tim. It's been fun to everyone else out there. Until next time, God bless and peace out. you you