Bo Kim – Buying 60+ Units in Less Than 3 Years Ep. 230

Synopsis

It’s every real estate investor’s dream to grow their portfolio and exponentially increase their passive income. For one investor based in Southern California, it took only 3 years to build a portfolio of 60+ out-of-state properties. Bo Kim, the host of the Bigger Cash Flow Podcast, shares how he scaled his Midwest portfolio by switching from conventional financing to private money.

Key points

How Bo Got Started

Bo came from an immigrant family from South Korea. Growing up, his parents instilled in him a strong work ethic but mostly lived with having a saver’s mindset. He read the book Rich Dad, Poor Dad by Robert Kiyosaki when he was young. But it wasn’t until after he got married in 2016 that he read the book again and was finally able to connect the dots.

Bo and his wife bought their primary residence in 2017. It was a 3 bedroom, 3 bathroom house. Having an extra room, he ended up renting one room for $700. That additional income made Bo realize that not only were they benefiting from reducing their out-of-pocket for their mortgage, but they were also getting equity and tax benefits.

But Bo knew that he wouldn’t be able to do more of that in Southern California because house prices were too high and landlord laws weren’t favorable. So he decided to invest in turnkey properties in the Midwest instead.

The Power Of Passive Income

Bo’s background was in accounting, and he works a full-time job for a startup software company. So he’d usually spend his nights and weekends working on real estate. Since he started doing real estate investing 3 ½ years ago, he has bought rental properties and fix-and-flips.

What Bo loved about investing is how your passive income can snowball. Renting out the extra room at their house was something that happened naturally. That first source of passive income accumulated over the course of the year. This helped them buy their first turnkey property. From there, it just snowballed to 65 rental units in the Midwest.

Getting Over The Fear Of The Unknown

Do a lot of research. Bo believes that if you learn and increase your knowledge, it’ll mitigate your fears. Bo consumed a lot of content available from BiggerPockets’ books to podcasts. He even picked and messaged around 5 to 6 investors daily. These investors were ones who were already doing what he wanted to get into.

Bo chose the Midwest because the area had favorable landlord laws and a high rent-to-value ratio that will let him cash flow. He also looked for lots of activity on the vendor side.

When it came to choosing the third-party turnkey vendor to work with, Bo found that the execution part was very crucial. He needed to make sure the provider would do the rehab correctly and not just put on a fresh coat of paint.

Bo checked that the provider has a good track record. He also went and talked to referrals, other investors, and other third-party like inspectors and lenders to verify any information.

Buying 4 Properties In A Year

In his first year alone, Bo bought 4 turnkey properties from different vendors. The first was in Kansas City. The second and third were in Indianapolis, and were a duplex and a single-family house. And the fourth was in Little Rock.

How Bo Financed His Deals

With his and his wife’s jobs, they tried to live off just one of their income. This allowed them to save up to 40-50% of their combined income.

Bo and his wife used their savings to make the down payment for the first 4 properties they bought. They took conventional loans of 20% down payment for single-homes and 25% down payment for duplexes.

But Bo knew that they would tap out from the savings they had eventually and needed other sources of funds. Their first property lost them money, but the other 3 were high-performing. They were making around $600-800 net from the 3 properties

Bo came around the BRRR strategy and liked the idea of recycling the same capital. He had already hit it off with his Indianapolis turnkey provider who was offering a one-stop-shop. This provider would find him the wholesale deals on distressed properties, do the construction, and offer their in-house property management service. Bo only needed to get the capital.

Luckily, Bo had already built genuine relationships with other investors who started around the same time. He told him he was looking for someone to finance a deal – his first BRRR on a $30,000 property. It was estimated to be worth $75,000 after rehab with rent at $825.

Someone got interested and financed the $30,000 purchase price. Bo covered the $15,000 needed for rehab, closing, and holding costs. The private money loan had a 10% interest rate and was secured by rental property. There were mortgage and promissory notes, but Bo didn’t need to pay for points or fees.

Scaling His Private Money Deals

Usually, in order to refinance, Bo would have to wait 6 months before getting his money back. But since he had a good relationship with his lender, he was offered conventional delayed financing, which he could take after the rehab of the property and a tenant moves in.

But it would only cover 75% of the purchase price, so Bo got $33,000 and paid back his private money lender. Later on, he met someone from church who had a lot of saved-up capital from his business. The guy wanted to get into real estate investing. Bo suggested that they can become partners. The partner fronts the money, while Bo runs the operations.

Out of the 65 properties in his portfolio, 30 are owned by Bo and his wife, while the other 35 are on a 50-50 ownership with his partner.

The Benefits Of Building Relationships

Bo has been blessed to have good relationships with the people who have helped him build his portfolio.

His Indianapolis provider currently manages a total of 230 doors. Thirty-four of those are properties Bo owns. So Bo has become a very significant client to them. They also earn from agent commissions, wholesale fees, construction fees, and property management fees.

The Mental Barrier To Long-Term Partnership

When it comes to equity partnerships, Bo believes this isn’t for everybody. In this kind of partnership, the partners are attached on the hip whether they’re on an upside or a downside. Compared with a debt partnership, the private lender has no direct ties to the actual property. So if the project fails, they’ll still get paid.

For a long-term partnership to work, it’s best to set expectations with the equity partner. Talk about the risks and ask what they’re looking to get out of this. For partners looking to get out in the short-term, a flip might be a better option than a rental partnership.

As for Bo, having the confidence in what he is doing and being more disciplined helped him get over the mental bump. He didn’t allow his emotional investment on a property to affect his decisions. This required more effort on his part. The upside is he bought properties for 40 cents to a dollar and nets around $30,000-50,000 per flip.

Had Bo used a hard money lender, he would have earned 30% more. But he believes that an equity partnership is great in that he could benefit from having someone with complementary skill sets. In his case, he won’t need to worry about financing.

Red Flags From His $10,000 Loss

Bo’s first turnkey property brought in a ton of problems. At that time, he didn’t do a lot of diligence. He also tried to haggle from the $70,000 purchase price. The owners eventually lowered it to $66,000. And the property was appraised for $72,000, so Bo already made $6,000 on equity on day one.

Bo made sure to have a lot of the long-term maintenance issues taken care of during rehab. But when it came to renting the unit out, that’s when all the problems came.

The first red flag was that the property management company had grown from 200 doors to 600 doors in a few years, but kept only a staff of 4. On top of that, most of the staff were new.

The company offered a first 90 days turnkey guarantee and rented out his property for $850 a month. At first, it was doing fine, but there was a high turnover among property managers. By Bo’s third month with the company, he was already with his third property manager. This was the second red flag.

And just when the 90-day guarantee had passed, his tenant stopped paying. Another month passed, but the tenant kept making excuses. It wasn’t until Bo was with his fourth property manager before filing for eviction was suggested.

Now, Bo realized that he should have filed for eviction after the first month of rent was unpaid because the entire process took some time. But that wasn’t the end.

After the eviction was filed, the tenant realized he was serious. So the tenant paid $200 of the $2,200 outstanding rent. Bo accepted the money not knowing that this would suspend his eviction process in the court.

Eventually, after 4 months in, Bo got the judgment to remove his tenants from the property. By then, he was already out $3,000 for the rent. In 2 weeks, the tenants were escorted out by a sheriff. They were upset. In retaliation, they damaged the property. Adding up the eviction costs, lawyer fees, and getting the property rent ready, Bo had to shell out $3,500.

But the tenants weren’t done. The husband actually came back, broke into his property, and stole all his appliances.

In the end, Bo lost a total of $10,000 from his first property. But he did learn a lot of important lessons.

Bo’s Motivation For His Bigger Cash Flow Podcast

Bo started his podcast 2 years ago when he reached 20+ properties. He loved listening to podcasts and learning from other investors, so he thought about making one himself.

But his main motivation was to leave this as sort of bread crumbs for his future kids. Bo wants to make sure that he’ll be able to instill a strong work ethic in his kids. So by documenting his journey, the way he views money, investing, and philosophical thoughts, he hopes they’ll be able to learn.

Bo also wants this podcast to become his way of representing the community he was a part of – the Korean-American community. Becoming a real estate investor is a grind, and Bo wants to do this to share his knowledge and give back to the community.

What’s Next

Bo has no plans on leaving his job soon because he loves it. But he wants to be prepared since he plans to start a family soon. Bo hopes to become the dad who has time to go to his kid’s sports games and activities.

With investing, Bo is looking to buy more small multifamily properties and scale up that way.

He is also thinking about making more content like an ebook to share and give back to the people.

References

More from our guest

• Tune in to Bo Kim’s Bigger Cash Flow Podcast.
• You can also check out his website, Bigger Cash Flow, where you can learn how to get started in rental properties with his 7-step guide.