While it is true that investing in real estate gives you the freedom to still have a day job, the thought of doing it as a side hustle can still feel very daunting. Someone who has done that successfully is Kendra Barnes. Kendra is an Economist by day and Real Estate Investor by night. She created The Key Resource to change the perception of what a real estate investor is supposed to look like. In this episode, Kendra shares with us the wisdom acquired from her experience of doing the real estate side hustle. She talks about how you can get into real estate investing and look for properties. Get some of Kendra’s great advice, tips, and tricks on doing real estate and more in this conversation.
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Real Estate Investing As A Side Hustle – Interview With Kendra Barnes
On this show, we bring you interviews with amazing women real estate investors and Kendra Barnes is no exception. Kendra is an economist by day and real estate investor by night. She created The Key Resource to change the perception of what a real estate investor is supposed to look like. Kendra owns and manages four properties. They have eight rental units in total. She’s on a mission to empower and educate Millennials about building wealth through real estate investment. She has the heart of a teacher and I love it. Kendra has been featured in Forbes and Black Enterprise Magazine. When she’s not working or looking for a next investment, she is thrift shopping, baking gluten-free goodies, and binge-watching Netflix with her husband. Welcome, Kendra.
I love your story because they’re what you’re able to do. You have a day job and real estate investing is your side hustle, which is cool and you help people do that. How did you get started in real estate investing in the first place?
It’s crazy. I had a super random start. I’m sure you’ve heard of that game called CASHFLOW. I played the game CASHFLOW a few years ago, but up until that point, I hadn’t ever considered real estate. My husband and I owned a house at the time. Honestly, it’s crazy looking back but I had never pictured us buying any other property. After that, I was like, “We’re going to live here forever.” I had no real estate aspirations, but after I played CASHFLOW, I realized that the only way to win the game was to buy real estate. You cannot win without real estate. I looked at that, “If this game mimics life, then I’m not winning in life if I don’t have real estate.” It catapulted from there.
That’s why Robert Kiyosaki created that board game, to show people how to win the wealth game and to do so in a way where you’re not losing large sums of money. You can lose the game, but just in the game and you’re prepared for life. What was your first investment?
We bought a duplex and it was maybe half a mile from our house. We played that board game and the next day, we started looking for our first rental, which is crazy. We didn’t do any research. I didn’t have anyone I knew that was doing it. We just jumped right in, which is why I’m passionate about teaching people what not to do and how to be prepared when you start because we weren’t. We have the duplex.
You’ve got three more. You said that you learned a lot about what not to do. We learned so much from our mistakes. What was one of your biggest mistakes in your real estate investment career?
We started randomly that I knew owning a real estate is a way to get out of the rat race and win the game of life, but I didn’t realize the sacrifice it takes to build wealth. We bought that duplex and we used a conventional loan, so we had to put down 25% because we weren’t going to live there. At the time, my husband was like, “If we live in it, we can put a lower down payment.” I was like, “I’m not moving into this one-bedroom unit and this duplex. I had two degrees and I have a Master’s. I work hard every day for the government. I’m not sacrificing.” In hindsight, we wasted a lot of money because I was not willing to sacrifice for a year. If anyone’s familiar with how the FHA loan works, you only have to make it your primary residence for a year if you’re house hacking, which is buying multi-unit property living in one and renting out the other. That’s a big mistake that I feel like I want people not to make. I want them to get in the mindset of short-term sacrifices for long-term goals.Owning a real estate is a way to get out of the rat race and win the game of life. Click To Tweet
You wish you had moved into that property for the year and been able to save and put 3.5% down. You would have saved quite a bit on the deposit.
We put down $52,000 and that is a lot of money. We could’ve put down maybe $17,000. That’s a huge gap. The thing is because we had not been saving for real estate, we played a game and jumped into it. We ended up borrowing that money from our retirement, which is a huge no to most financial gurus. They will tell you, “Do not borrow from your retirement.” I would say for anyone who is interested in doing that to definitely consult a financial expert or your retirement consultant. It ended up working for us because the money that we took from our retirement, we made that back. It paid for itself. We made more money on that money by taking it out and putting it into that investment, but it’s not going to work like that for everyone.
If you did a self-directed IRA, you could have done self-directed funds essentially since you weren’t living there and getting a personal benefit. Did you look into doing self-directed IRA or you borrowed and took a loan out from the 401(k)? How did you go about using your funds?
We took a general-purpose loan from our 401(k). I didn’t even know about self-directed IRA. We did not know what the heck we were doing. We bought the property and we were like, “How do we find tenants?” We bought the property, got the keys. We were like, “What do we do next?”
Was it empty when you got it?
No. This was our game plan. It had a tenant in one unit and one unit was empty and we’re like, “The mortgage can be paid off. We’ll break even by the rent we’re getting from the one tenant, so we’re good. We’ll take our time and we’ll figure it out. We’ll renovate a little bit.” A week after we got the keys, that tenant moved out. He just up and was like, “I’m out of here.” We were left scratching our heads like, “What are we going to do?” What we decided to do since we were scrambling to make sure we had the mortgage covered was we put it on Airbnb. That’s something that if we had done an FHA loan, you can’t do short-term rentals. That worked out. We put it on Airbnb and we made so much money because it was in DC and it’s a tourist capital of the US. It was amazing. We made them a good return doing that.
It was a happy accident that the tenant left. What are some other lessons the top three lessons that you’ve learned that you now teach and share with other people?
One of the things is we bought that duplex and it was occupied already. Some people will shy away from occupied rental or if they do find an occupy rental, they don’t know the questions to ask. We sure did not. We didn’t ask that guy how long did he plan on living there. Did he like it? Did he have any issues? We didn’t ask to see the lease before we bought the property. One of the things I tell people is if you’re buying an occupied rental property, you need to see the lease. You’re buying that contract. You’re inheriting the contract they signed to live there and it’s important that you understand what you’re getting. That’s one thing.Get in the mindset of short-term sacrifices for long term goals. Click To Tweet
Oftentimes, people will shy away from properties that have been sitting on the market for a while. I have people that say, “That property has been on Zillow or whatever for 150 days. There must be something wrong with it.” That’s not always the case. Every property we’ve ever purchased has been on the market for over 150 or 200 days. There are many different reasons that could be like maybe someone was under contract and they’re financing, maybe the description is written up wrong or maybe it was meant for you. I think in that way.
Don’t shy away and make sure that you do your due diligence. Have a great agent or if you’re representing yourself, do your due diligence. One, don’t shy away from occupied rentals and be prepared. The other thing is if you see a property that’s on the market for a while, don’t shy away from that either and be open-minded. There are many ways to get into real estate investing. You don’t even have to be a landlord. That’s another thing I didn’t know. I didn’t know about wholesaling, private lending, real estate investment trust and things like that. That’s what I love about real estate. There are many ways to get in. It’s beautiful.
That’s like what Warren Buffett says, “The more you learn, the more you earn.” Education is definitely important when people are doing real estate. I know that it’s a myth because a lot of people were like, “Real estate, it’s common sense. There’s nothing I need to learn. You buy it, you have a tenant, they pay rent and that’s it. That’s all there is to know.” No, there are many things and nuances. The more you know, the more that you can earn and the more opportunities you can spot, the more mistakes you can avoid. It’s important. You can find out by doing it like you did and going, “I could’ve done it this way. I could’ve done it that way.” You can learn from the beginning and do it right.
I definitely suggest the latter.
Those are mistakes, but what are you most proud of?
I’m proud of the fact that I’m able to let other people learn from my mistakes. I’m able to be what I needed at that time. You can read Rich Dad Poor Dad and you can play CASHFLOW. Having an example of a real estate investor that looks like you is invaluable. I love that I can be that representation that people need to see, even for my tenants. Most of our rentals are in low-income areas and for my tenant’s children to say, “She’s young, she’s African-American, and she’s a woman. I can do that.” I love that.
As a teacher and as an investor, I love to be able to be a model because you’re in this game and if you go to real estate conferences, 90% plus of the room are men and often 90% plus of them are white. I feel we’re like unicorns. We stick out. It’s nice for people to go, “I could do this, too.” They look like me. It’s great to have that example. To what do you attribute your success?
I’m the person who’s like, “I’m going to try it and if I fail, I’ll pick myself up and try again or regroup.” I don’t want to ever sit back and wonder, “What if?” I understand that with real estate, there are risks, but there’s so much reward. I’m that go-getter. Once I have an idea, I’m all in. That’s helpful. I’m like, “I’m going to do it and whatever happens, happens, I’ll pick myself up.”
What advice would you have for a woman who’s just starting out?
For real estate investing, I feel like there are many gurus out there who make you feel like there’s only one right way to invest. This is for anyone, not just women. That’s not the case. Do what works for you and your market, and remember what your goals are. Don’t be a real estate investor because you thought, “Kendra and Monick are real estate investors.” Be a real estate investor because it’s getting you prepared and leading you towards your financial goals. That’s important. Stick to it and keep your head up.
Real estate investing is not one size fits all. There are many different ways of playing in this game. It’s important to know what’s important to you, what your goals are, where you want to end up, and then you can make a plan that gets you there.
There’s room for all of us to win. That’s why I don’t mind sharing what I know and lifting as I climb. Think about the real estate spectrum. If someone’s wholesaling and they fit into that niche, they can wholesale a property to someone who flips. I don’t wholesale and I don’t flip, so that person who puts the property, they’re going to sell it to a buy and hold investor. That’s me. I don’t need to compete with anyone else because there’s always going to be room for everyone at the table. That’s the beautiful thing about real estate.
It’s an abundant universe. It’s important to have an abundance mentality. I always speak to my partner or work people that think that way because a lot of people who are zero-sum mentalities, they lack in limitation and are competitive. It’s not a way to be successful long-term in this business because real estate is everywhere, but there aren’t that many people playing in this game. Your reputation is probably the most valuable asset, but it’s something that you could win quickly. People learn who is gracious, great to work with and who isn’t. Your philosophy will serve you well. I know that’s probably why people want to learn from you because of that. That’s great.
Thank you.The beautiful thing about real estate is how there are many ways to get in. Click To Tweet
What do you wish you’d known at the beginning when you were first starting that you now know?
I wish I had put some thought into how my credit score was going to affect me buying a home. Even before real estate investing, when my husband and I bought our first home, my credit score was not all that great. I was living for the moment. I was living well, but I was not building wealth. I didn’t even think about it. No one ever told me. The mortgage that we got on our first house, I feel like I’m still paying for the mistakes that I made in college. Your interest rates, your debt-to-income ratio, and your credit score are one of those things. I feel like we could’ve gotten a better rate if you think about the money I’m paying over time because of that rate. I always joke about the last credit card I had with J Crew’s credit card. There’s a piece of clothing that I will never get rid of from that time in my life because I feel like it’s the most expensive piece of clothing I own because I’m still paying for it. You’re going to bury me in this blazer because that mortgage we have on that house is a direct relation to the credit card that I had and I abused.
Did you try to refinance?
It’s not that bad but no, I haven’t. We will soon because there’s a whole bunch of new development and we have good equity in it.
When did you purchase it?
The rates were low in general.
They were. We’re thinking about instead of refinancing, we’ll be doing a heat lock or do a rent to own and sell it to the tenant. Either way, we’re going to come out good because it was a short sale. My husband used VA loans and we didn’t even have a down payment. There were some good things about it too. I’m being extreme about getting buried in that blazer but no one told me.
You did better than an FHA loan. You’ve got a VA loan.
That was for the first house.
Do you mean the owner-occupied?
It’s not your own, it’s other properties. It’s important. When you’re doing 1 to 4, your credit is crucial. When you get into commercial properties, it’s not quite as important, but it’s still helpful to have great credit. Before we go into the trinity, what’s the best way for people to reach you and find out more about what you do?
If you go to my Instagram account @TheKeyResource, you can find everything you need there via the link in my bio, my website, and everything. Find me on Instagram, DM me, and reach out. I look forward to chatting with each and every one of you.
It’s time for our famed end of show trinity. That’s a brag, a gratitude, and a desire. What’s one thing you’re celebrating? What’s your brag?
I’m celebrating that I’ve been featured in Forbes and Black Enterprise. I’m proud of that.
What’s one thing you’re grateful for?
I’m grateful for the opportunity to have this class form. I know that sounds cheesy, but I’m extremely grateful that I get to change people’s perspective on building wealth, the people I’ve worked with and the people that follow me on Instagram. I’ve seen people go from, “How do I get started? What do I do first? I’m on my third property?” Nothing makes me happier. It’s amazing.
What’s one thing you desire?When investing in real estate, do what works for you and your market, and remember what your goals are. Click To Tweet
I desire to get into the commercial real estate business. I want to be like you when I grow up.
So shall it be or so much better than you can imagine under grace and in perfect place. That was awesome. Thank you, Kendra.
Thank you for this opportunity.
Thanks for coming on and sharing your inspiring story. I love how you took such quick and massive action. If anybody takes anything away from this conversation, is that she plays this game once. She realizes, “This is how you build wealth,” and then she goes out the next day and then start doing it. What it takes to be successful is the action part but you don’t have to do it alone. I wouldn’t recommend that you do it without getting educated first. Kendra has a program and here at Real Estate Investor Goddesses, we have a program called Wealthy Goddess Program.
If you want to learn how to get started in real estate investing in a way that is feminine, and honors the woman that you are, then go to RealEstateInvestorGoddesses.com and click on Programs. It shows you how to get started, how to come up with a plan and to do it in a way that fits you and your goals. You’ll find out all the information about that. That’s going to get started in January 2019, so check it out there and check out Kendra. We’ll talk to you guys for another Real Estate Investor Goddess interview.
About Kendra Barnes
Over the past four years I’ve built a Real Estate portfolio that generates over $150,000 in rental income per year.
I help beginner Real Estate Investors learn how to make passive income with Real Estate (even if you don’t want to be a Landlord!).