Table of Contents - Financially Free by 29 with Kellan James
Dave Debeau [00:00:09] And everyone, this is Dave Debeau with another episode of the Property Profits Real Estate podcast today. It's my pleasure to be interviewing Kellan James, a young punk real estate entrepreneur all the way from London, Ontario. He's done some amazing things very, very quickly, reading through Kevin's bio and seeing what he's up to, very sharp real estate entrepreneur working full time. By the time he was the age of twenty nine, he was able to create a portfolio of over 30 doors. I believe it was. Is that correct, Helen?
Kellan James [00:00:44] Yeah. Yeah. It's thirty two doors.
Dave Debeau [00:00:46] Thirty two doors. Great. A full time income become financially independent of a multimillion dollar portfolio and quit the job at a very, very young age. So Kelin, welcome to the show. I'm looking forward to picking your brains.
Kellan James [00:01:00] Yeah, for sure. And it's good to meet you for the first time too, Dave. Appreciate it.
Dave Debeau [00:01:04] All right. Well, thank you. So you got started house hacking and you've moved in. It seems like your primary strategy is the birth strategy. So, first of all, tell us in your definition, what is house hacking and how did you get started with that?
Kellan James [00:01:20] Yeah, yeah. So it's pretty basic. Just the idea that you can live in a multifamily property or even just a single family property, you can sometimes rent out one, live in one room and rent out the other room. So sometimes people live in a student rental. Or you can if you want to have your own dedicated private unit, then you can live in one unit, rent the other one or two or three units, usually a duplex triplex or fourplex. In a perfect world, when all is said and done, the rental income from the other units is enough to pay for your mortgage, property taxes, insurance and utilities. And you're able to live for free in that property, which really helps your debt service ratios, helps you to continue saving your income from your day job or whatever it may be, and continue acquiring real estate from there.
Dave Debeau [00:02:00] Interesting. Yeah. So what did you do to house your very first house and what was it.
Kellan James [00:02:04] Yeah, so basically I was like a quick preamble of what. Like my story is I did computer science from my undergrad degree often sue Ontario. I moved down to London, Ontario, started working in the computer science field for a company called Cisco, which a lot of people know. And then another company after that saved up around one hundred and twenty grand just by living frugally, paid for my own school, all of that, and then bought my first property, which was the house back with five percent down. And so that was the property was one hundred seventy seven thousand. So five percent was like little over eight thousand dollars and I could have done twenty percent. But I really wanted to keep up my purchasing momentum. So I actually took twenty five thousand dollars out of my RRSP through the home buyers plan and I only used eight thousand of it for the purchase of the property, which is completely legal. And I was able to keep the rest of that money and planned on using it for either partly for some renovations, but also just for the next purchase. So it's kind of a nice workaround to be able to access some of your RSP funds on that first purchase and use it for more than one property. So I bought that property, lived in one half. It was a duplex in the West Village of one in Ontario, and I was living in there. The property, the mortgage was seven hundred dollars or something like that, and the tenants on the other side are paying nine fifty. So pretty simple situation. Side by side, duplex, dedicated front and back doors. And it was perfect. I was able to, if I wanted to, I could walk or bike to work from there. And my goal was to be able to buy a property that I could live close to work and close to downtown. And as it turns out, that's what a lot of tenants want as well. So I kind of worked out well.
Dave Debeau [00:03:41] So how did you get sparked about real estate in the first place? What was it that was like the light bulb moment for you? And at that point, were you thinking, I want to get the heck out of the whole job thing, or was it just like a sideline thing?
Kellan James [00:03:54] Yeah, no, that was laser focused financial independence. So I had read on financial independence, Subrata and Mr. Money Mustache and some of these online bloggers to talk about financial independence. And they're doing a lot of times through saving, living frugally, investing in index funds and talking about the four percent safe withdrawal rate from your RRSP and busses and whatever it is in Canada that you do. So I was looking into all that, saving up my money. My plan was, you know, ten, twelve years, maybe retire and that kind of just by living a frugal lifestyle. And then I was like, well, it makes sense that I could instead of renting, I could live in a duplex for free. So I kind of started looking to that. I started reading on bigger pockets. I ended up setting an alert on bigger pockets from my local city because the podcasts always said, do that. And I got an alert that somebody did, said, hey, like anyone else in London, Ontario, investing in real estate. And a few of us got together, there was no meetup groups or anything like that existed at the time. It was pretty quiet. And I ended up meeting up with guys like Matt McKeever, Jeff Libo and my friend Dylan McGlocklin. Mike Rosada ended up showing up a few months later and we all ended up kind of getting together. Eventually, the four of us started London on fire. And so that was London, Ontario. Financial independence retire early, and we've kind of grown a community here. Obviously, we can't meet up currently, but now we have like 40, 50 people coming out every month just coming out trying to learn about financial independence. And a lot of us are doing it to real estate investing. So it's all about quitting the day job creation
Dave Debeau [00:05:23] from that into like really rocking and rolling with the first strategy.
Kellan James [00:05:29] Yeah. So once I bought that duplex and I was living for free, I knew that now the plan was to buy the next property with 20 percent down and continue doing that refinancing. So I bought my next duplex in Soho of London, Ontario. I bought it for one hundred twenty seven thousand, which is a killer deal at the time, and especially now, of course, I ended up putting in and I was like twenty seven thousand dollars under the asking price. I put in twenty five thousand dollars. So I was in for about one hundred and fifty thousand dollars and it ended up reappraising at two hundred and fifty thousand. So I got all of my money owed plus tens of thousands and that really helped my momentum for the next purchases. And I've done deals similar to that since where I get all my money out plus more, which really helps keep up that purchasing momentum. And then along the way, if you do deals that are that good, you can also occasionally buy property where you don't necessarily get all of your money out. Maybe you're 30 or 40 grand out of pocket, but the property cash flows well. So I kind of built up my portfolio in that regard.
Dave Debeau [00:06:29] Very, very nice. So what would you say are some of the biggest mistakes you see people making when they start investing in real estate or they start trying to do what you're doing? What are what are some of the things people screw up at?
Kellan James [00:06:44] Yeah, so I think right now it's a lot of lack of patience and it used to be the exact opposite. So like the big thing three years ago is analysis paralysis and now it's completely opposite. People have the exact opposite of analysis paralysis. It's just it's mania. You know, people are buying X number of dollars and properties all at once. And they're doing it with all these joint venture partners and none of their own money. And a lot of times the properties I'm finding don't make any sense. Maybe sometimes they don't appraise for what they should or they don't cash flow the way they should or the air vs just not there because people are just expecting market appreciation and not understanding how to force appreciation. So I think that's one of the biggest mistakes I see now is just the lack of patience. I think I recommend people for their first deals, first couple of deals trying to do with your own money first and then learn how to take on that risk yourself. And once you're confident investor, you can start bring on joint venture partners. You can treat the deals as if they're your own. But honestly, if you do a couple of beers yourself and you get all of your money out or all your money and more or something like that, you're very quickly going to see that you have serious purchasing momentum and they don't actually necessarily need to bring on external capital and give up equity. I mean, like any business, ideally, the more equity you can maintain, the better. So if you can keep up purchasing momentum and maintain one hundred percent ownership, you have fewer relationships to manage. You keep a hundred percent of the cash flow appreciation and you just don't have anyone to answer to. If you have a renovation you want to do or if you have a unit that's vacant, you don't have a partner breathing down your neck trying to decide what you should do. And you can look at your portfolio as a whole and treat it as your portfolio as a whole rather than one property that's with somebody that you may need to treat with a little more favor.
Dave Debeau [00:08:22] Yeah, I that makes a lot of sense. And I mean, the way you have been doing it, putting in your own money and then rinsing and repeating. Right. So you're just recycling your down payment, recycling your renovation costs. You add the discipline to sock away a lot of cash at a very, very young age. Yeah, that completely makes sense. And I it's interesting. Yeah, I, I think when you start seeing people get into that manic stage of buy, buy, buy, that's when things get really dangerous because they're not they're not investing. They're speculating that they're hoping for massive market appreciation. You know, they they say that you've got to you've got to start being pretty careful when you start seeing the barista, the local barista at the Starbucks starting to buy real estate.
Kellan James [00:09:11] Exactly. That's it's like I mean, honestly, I went through Bitcoin mania myself and like, you know, I was really into it. I wasn't, like, putting a lot of money into it, but I was investing pretty heavily my time. I was investing my time pretty heavily into it, reading a lot. And pretty early on, back when it was under a hundred bucks and like before it hit the ten thousand plus. And at some point you're right, like my barber started talking about it, my mom started talking about it's like now this doesn't make any sense because clearly this is just pure hype train ride. And I think we're kind of getting there. I mean, we still are kind of getting there with real estate. And like for me, like kind of the turning point is like when you and I don't really know how to say it in a nice way, but like, you know, it should be intelligent people making good money in real estate. And if you see people who aren't doing it in an intelligent way, making serious money, that is something that's just not sustainable. So that lack of patience, the. We're seeing the bad deals people are doing and people still making money, that's clearly something that just won't last. You can't buy a property 20 thousand dollars over market value or and then a year later refinance out 50 grand, because the only way that happens is through market appreciation. And we have no control over that. So, I mean, it's the same thing is it's the greater fool theory, right? Like you're going to buy based on the idea that it's just somebody else is going to pay more. I mean, any investment like that is just not not the way to look at things.
Dave Debeau [00:10:37] Definitely. And it sounds like you've got a very long term perspective on things. You're not flipping properties. You're buying them, you're holding them. You're forcing up the value. In most cases, you're looking for long term growth. You're looking for cash flow and creating value there long term.
Kellan James [00:10:57] Yeah, exactly. So every property I buy at least meet the one percent rule or at least very close to it after refinancing. And it has to cash flow very well. I have to get ideally most of my money out, hopefully more in a perfect world. Not all of my deals have been that way. But like I said, sometimes I get all in more. Sometimes I leave some money in the deal. But that's kind of my criteria. Yeah, it's very important that the property's cash flow well after refinancing, because if your goal is to leave your day job and reach that financial independence and that's just the way it has to work, you have to have properties, the cash flow well and you have the properties where you can get your money back out and continue buying so that you can build that momentum and build a portfolio.
Dave Debeau [00:11:39] Excellent. So time flies. When you're having fun, you're going to want to. There's definitely one thing that I want to cover with you before we wrap up and. Sure. And that is what do you finding works best for finding good deals, because it seems like that's something that that you become very astute at. And I think you find a lot of off market deals. So it doesn't sound like you're at least completely reliant on realtors. So what are some tips?
Kellan James [00:12:06] Yeah, so more than half of my portfolio I've purchased privately, I think that a lot of people really rely on wholesalers. I think that we let a lot of people really should do is look at what the wholesalers are doing and do it themselves. Nowadays, wholesaling is very similar to MLS purchasing because they're sending out to a list of people just like realtors list and send it out to a list of people in the MLS. So when there's serious demand for this kind of thing right now, finding a deal of your own is the key. And you can kind of take on a strategy of buy the best wholesale the rest. So if you find deals and they don't work for you, you can always make some money on it. But if it works for you, you don't have a lineup of people competing with you just like you would on the MLS. So for me, one of the main tips is just people talk about networking and networking to find deals. I'll tell you, it's not about networking with real estate investors because real estate investors want deals, too. So it's about networking with people completely outside of the real estate world. They're going to be your junk removal guy, the pest control guy, your local post office worker, anybody in your local neighborhood talking to your neighbors, getting really targeted to a specific neighborhood. Those are the people who are going to be excited about you offering them a thousand dollar finder's fee if they bring a property to you. So I always tell people, hey, hang on to my numbers, shoot me a text. If you ever see someone selling something that wants to sell something privately, I'll pay a thousand bucks if I close on the place. And I've done that so many times now. It's one of the most powerful strategies.
Dave Debeau [00:13:30] Nice. Very, very smart. Now, do you are you doing stuff like bandit signs and vehicle signage and all that kind of stuff you're just basically relying on so first.
Kellan James [00:13:41] So it's mostly through referrals. I don't see bandit signs, mostly because they're not legal. Also, it's a little bit out, a little bit trashy, I think. You know, it's not it's a little messy. I don't like seeing them in my neighborhood personally. Yeah. It's mostly through like finders fees and networking through, like I said, networking with people outside of the real estate world. I actually did a video on YouTube channel about how I find off market deals, and I kind of went through a huge list of how I approached that. So, yeah, basically take all the strategies that wholesalers are doing and do it yourself.
Dave Debeau [00:14:09] Smart. So what does your portfolio look like today? If you don't mind sharing, go.
Kellan James [00:14:14] Yeah, sure. So actually I built that thirty two unit portfolio in two and a half years, left my day job, went on a three month van trip around the USA. My girlfriend, her dog and myself. We did like we sell like thirty something states like thirty thousand kilometers. And when we got back I ended up only purchasing one property since then. So it's been one year since I left my day job, been really working on my portfolio, getting the cash fill up. A lot of the units I renovate, the rent's double, so my cash flow just keeps going up, which is great. Purchased one property since now I'm learning the game of how to continue buying properties without joint venture partners, without a day job. So that's my new niche and really trying to figure that out. I think the commercial properties are going to probably be a route that will eventually start going in if I can find deals that make sense to me
Dave Debeau [00:15:00] of those eventual
Kellan James [00:15:01] or commercial large multifamily.
Dave Debeau [00:15:03] Yes, yes. Excellent Kalonzo. People want to find out more about you and what you're doing and watch some of your videos or what have you. What should they do?
Kellan James [00:15:12] Yeah, so Instagram is probably the first line of contact. I answered DM's. I answer every D.M. anyone sends me on there. So shoot me a message. I'm also on YouTube. Those are probably the best ways. Yeah. Yeah. Feel free to reach out
Dave Debeau [00:15:24] under Kevin James right
Kellan James [00:15:25] now. And James. Yes.
Dave Debeau [00:15:26] Some very good Carlin. Thank you very much. It's been a lot of fun.
Kellan James [00:15:30] Thank you so much. Good to meet you.
Dave Debeau [00:15:32] Likewise. All right, everybody, take care. Thanks for joining in. We'll see you on the next episode. Bye bye. Well, thanks very much for checking out the property profits podcast and you like what we're doing here. Please head on over to iTunes, subscribe read us and leave us to review it. Very, very much appreciated. And if you're looking to create a regular flow of inbound investor inquiries about your real estate deals, then I invite you to attend one of my upcoming live online demonstrations. And you can check that out at Investor Attraction Demo Dotcom Ticker.