- Today, Kenny Simpson and Krystle Moore have amassed a 47-unit real estate portfolio valued at $19 million.
- But along the way, they’ve lost an estimated seven-figure sum in failed investments.
- Here are her top nine tips for beginners to avoid common pitfalls.
Today, Kenny Simpson and Krystle Moore have amassed a sprawling real estate portfolio across San Diego — where they live with their two daughters — that includes 47 units and is worth a total of $19 million.
From the outside, Simpson, 42, and Moore, 38, make it look easy. From purchasing their first investment property in 2012, it took them less than 10 years to get to where they are now, which includes owning multiple apartment buildings, vacation homes, and an industrial cannabis manufacturing warehouse, details of which insiders verify by title has documents. The couple estimate their investments bring them over $360,000 in annual cash flow.
But by no means was their journey without obstacles.
“We made a lot of money along the way and probably lost seven figures,” Simpson said in a recent interview with Insider. “We tried chasing sexy things instead of just sticking to the bread and butter of apartment buildings.”
Below are the nine pieces of advice Simpson and Moore shared from their own experiences to help aspiring real estate investors avoid the same mistakes and other common pitfalls.
1. Educate yourself
The number one thing to do when first considering venturing into real estate is to educate yourself, Moore said. “You have to know what you’re investing in, especially if you want to protect your investment,” she explained.
Simpson recommends consuming as much content as possible through books and YouTube videos, and suggests attending a master class or finding a coach for additional help. But he also stressed to beware of false gurus. “Just make sure the person you’re learning from has a good track record,” he said.
Simpson and Moore took a group class with Coach Brad Sumrok to expand their knowledge base in real estate syndication, wealth management and investor communications, and to complement their existing expertise in real estate operations, renovation, buying and financing.
Through the syndicates they joined as part of this course, Simpson and Moore have invested approximately $350,000 in a total of 259 units, which it is estimated brings them nearly $24,000 in annual cash flow. But anyone looking to engage in this type of passive investing must first qualify as an accredited investor, which requires certain criteria such as earning at least $250,000 per year and net worth of at least $1,000,000.
2. Network with like-minded investors
Like other investors, Simpson and Moore emphasized the value of expanding your network to connect with others interested in real estate investing.
“There are a lot of free network meetups and you can meet a lot of great people who are like-minded people,” Simpson said.
Aside from the syndicate deals they joined, Simpson and Moore teamed up with a few other investors on their first deals because they just couldn’t afford to buy a home on their own. While the other investors primarily provided financing, Moore and Simpson were given the leeway to oversee project budgets, costs, and renovations. Finding these hard money personal loans can be an option for all investors who may not have enough capital to purchase a property entirely on their own.
3. Put yourself in the right mindset
Just like saving for retirement, investing in the stock market or starting a business, mindset matters when it comes to real estate, Simpson said.
Before investors even get started, he suggests they sit down and write down their “why.”
“Why do I do this? Is it for extra money for retirement? Should I fire my boss? Should I leave it to my kids or build generational wealth?” Simpson suggested. The answers to these questions provide roadmaps that can help a new investor determine what they really want from real estate investing and help direct their efforts.
4. Come up with a strategy and figure out your budget
According to Moore, investors are often “too confused about where to start.” One way to avoid this is to do as much research as you can, but another is to have a clear business plan and budget in mind before going too far.
Once you’ve answered these mindset questions, the next step is to figure out how much you want to earn per month in cash flow, whether that’s an extra $2,000, $5,000 or more. With this number in mind, you can figure out how many listings you need to buy and how much you need for down payments.
“Answering these few questions makes it easier to get started and not think too much,” Simpson said.
From there you can start saving, find partners or raise the money you need to start the buying process. “Put together your business plan, know what you can qualify for, and buy something based on all of those factors,” Moore said. “And if you don’t have the money, the first thing you have to think about is how to make more money. How can I cut my budget and how can I make more money so that I then have enough money to invest? “
5. Start in your backyard
Investors often overcomplicate the process by trying to get into hot real estate markets like Austin or Phoenix, but another way to avoid confusion is to start in your own backyard, Simpson and Moore said.
“You probably know where you live better than any other place in the world,” Simpson said. Investing locally also helps you avoid potential emergency trips to an out-of-state property should things go wrong and saves you the headache of having to network with other real estate professionals in an unfamiliar area.
“There’s a lot of listings right here in my backyard that I can just buy so I don’t have to worry about flying out to Phoenix and meeting the agents and building relationships because that’s a relationship business, too,” Moore said.
6. Start small
When investors are in the early stages of the real estate investing game, Simpson and Moore recommend that they start small.
“Maybe you just buy a four-pack for your first deal when you’re young and start there. And once you buy your first deal, your attitude will change, because what’s best for you might be different for someone else,” Simpson explained.
As a practical matter, it also makes sense to start small as beginners are of course more limited in their options as they may not have enough savings to make a large down payment. On a smaller scale, it’s also easier for investors to really understand the numbers behind their deals.
Simpson also warns investors not to get too ambitious at first — don’t set your first goal of having 1,000 units one day, for example. “I think you should start with your first business, commit to it, live it, learn it, execute it and make sure you really want to do it before you try to get too big,” he said.
“It’s a long game, not a short one,” added Moore.
7. Be flexible and adaptable
It’s especially important to be fluid and adaptable to sudden changes in the early innings of a real estate investing career because things don’t always go as planned and investors may not always find their ideal properties right away, Simpson and Moore said.
When they began looking for investment property in 2011, the couple originally intended to buy a fourplex, live in one unit and rent out the other three. But the market was relentlessly competitive and awash with house fins, and they couldn’t find anything within their budget.
Instead, they ended up buying a single-family home in 2012 before flipping it two years later — marrying shortly before the sale was completed to take advantage of a capital gains tax benefit on their half-million-dollar profit.
8. Don’t chase “sexy” investments
As investors discover their niche and strengths over time, Simpson and Moore recommend sticking to what you know you’re good at.
Along the way, the couple has personally lost an estimated seven-figure sum on bad investments, including a Los Angeles housing project that “just went over budget and overtime,” and several marijuana properties that produced returns.
“Why did I have to feel wild and crazy with my money for a minute? That was stupid,” said Moore, who stressed that the couple never lost a single dollar on their multifamily investments. “You can chase these things that seem a little bit sexy and cool and it’s fun to talk to people about, but if it’s not your expertise, you’re probably putting yourself in a very risky position.”
“If we’d just taken all that money and bought apartments, we’d have well over a hundred units by now,” Simpson added.
9. Scaling to apartment buildings
As a final piece of advice, Simpson and Moore recommended that investors, after getting their feet wet, move to multi-unit multifamily homes.
This allows them to take advantage of the “huge advantage” of economies of scale, Moore said. In practice, this principle means that vacancies and tenant turnover have less and less of a negative impact on cash flows as investors scale into larger buildings.
But while economies of scale — albeit daunting — are a wise principle in the long run, Moore advised investors not to let fear or apprehension hold them back.
“Start where you’re comfortable,” she said. “Just start – that’s the first step.”