4 Ways to Make Passive Income from Real Estate

Mindy:
One of the ways to speed up your financial independence timeline is to earn more money. This is where side hustles enter the chat, finding the right side hustle for you could supercharge your investments. Today we’re bringing on Devon Kennard to talk about four passive real estate investing strategies you could be using today to replace your W2. Hello, hello, hello, and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen, and with me as always is my non NFL Player co-host Scott.

Scott:
Geez, Mindy, that was a real kicker of an intro BiggerPockets as a goal of creating 1 million millionaires. You’re in the right place if you want to get your financial health in order because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting or how bad your field position is. We’re so excited to talk to Devon Kennard today. Devon Kennard, for those who don’t know, is a veteran. NFL linebacker played nine, 10 years in the NFL Absolute superstar, played for the Giants, played for the Lions, played for I believe the Cardinals at one point as well, just awesome career, made a large amount of money, but signed a relatively normal rookie contract and started his career without certainty around that, made a large number of great decisions and became a really strong real estate investor with a lot of deep expertise that he’s developed. We’re super proud to be publishing our latest book in partnership with Devon Kennard. It’s called Real Estate Side Hustle for Passive Investing Strategies to Build Wealth Beyond Your Day Job. And we’re going to talk about those four strategies and how he became a successful real estate investor today on BiggerPockets Money. Super excited to get into it.

Mindy:
Before we get into the show, we want to thank our sponsor. This episode is brought to you by Connect Invest real estate investing simplified and within your reach. Now back to the show, Devon Kennard, welcome to the BiggerPockets Money podcast. I am so excited to talk to you today.

Devon:
Thanks for having me. I wanted to hop on this with you guys for a while, so I’m glad to be here.

Mindy:
So let’s jump right in. Let’s address the elephant in the room. You were an NFL player, correct?

Devon:
Yep. I retired at the end of the beginning of 2023, so a little over a year ago. Last season was my first year out and this is my second season out of the league, so it’s kind of surreal. My backstory is I was a fifth round draft pick and for those who don’t know, that’s pretty low in the NFL draft. So there was no guarantee of how long I was going to play or how that was going to look for me. So for me it was like, okay, I want to start to figure out what I’m going to do outside of football while I’m still in it. And I had that mindset from day one. I

Scott:
Think the term is not for long. The average NFL career is three years or less things, and for many athletes that’s peak earnings of their lifetime or for many years at least in there. Is that kind of the mindset had at the time entering your career? Obviously it did not turn out that way and you became very successful as a star linebacker, but how close am I with understanding how the mentality of rookie athletes at that point in their career?

Devon:
Yeah, it’s a very unique situation in that we’re put in a position where you can make a good amount of money for your age. You know what I mean? You’re 22 million or 22 years old and the annual salary is over a million dollars now, so that sounds great, but there’s a couple of things you have to think about. We’re taxes W2 employees, so you literally have to cut that in half. I was drafted by the New York Giants, so literally in half we pay agent fees, which is 3% of your gross contracts. So when push comes to shove and you get to actually see what you take home, it literally adds up to about half of that. So putting that in perspective and understanding the average career is only three and a half to four years. It’s like, okay, even if I play for a few years, that money has to sustain me for a long time or it has to propel me into whatever I’m going to do next. And having that mindset and understanding is really important.

Scott:
Yeah, I think maybe a decade or two ago there was kind of this notion that athletes make all this money and blow it, and from my experience interacting with a limited number of athletes, that seems to be changing pretty dramatically and that finances are a major topic in terms of planning for the post-professional sports career. Is that right? Is that what you saw in the league when you were playing?

Devon:
Yeah, I would say when I first got into the NFL, it was definitely the case. You heard a lot of players going broke a lot, but things have shifted a lot by the end of my career and I still have a lot of friends in the league now. Investing is very much a part of conversations in the locker room. You see a lot of guys doing different things and I think it’s for the better because I think we have a unique position being professional athletes to where if we can educate ourselves on investment vehicles, we have capital, if we can gain the knowledge, we can have access to the right kind of resources and opportunities to where you could put the right formula together to become a very powerful investor in whatever, whether it’s real estate, venture capital, private equity, just the stock market, whichever route you want to go, I think we have a distinct advantage in if you take advantage of it.

Scott:
Awesome. So can you walk us through your mindset as a rookie and how that evolved as your career began to take off in the next couple of years there?

Devon:
Yeah, so when I first got in, I feel like I was the anomaly in the sense that I was not trying to spend a lot of money at first. There’s even an article in CNBC where I drove my high school car for the first year and a half. I was in the NFL, so it was a 2005 Kia Sorento and I took it out to New Jersey and I drove that and then even the rest of my rookie contracts, I ended up having issues with that car, but I worked with the Kia dealership, they saw the article and they gave me a car to drive a KIA cadenza at the time for the rest of my time. So I was in a Kia for the first four years in the NFL and I was having success. I ended up having early success in the NFL starting as a rookie and all that.
So I would get the jokes in the locker room like, oh man, DK pulling up in his Kia or his high school car and stuff. But for me it was the delayed gratification. It’s not like some people are like, oh, I’ll drive a Toyota Camry for the rest of my life. I don’t, can’t say I’m like that. I always wanted a nice car, but I was willing to do the right things and take the steps to invest first, and then I always wanted to invest and then let that extra income provide some of those extra things that I wanted, like a car.

Mindy:
Was it hard to be surrounded by people driving way nicer cars than your high school car and still driving your car or were you able to focus on the end result?

Devon:
I mean, it was hard at times. You’re pulling up to different events or you’re going to places and I’m seeing Roy Rolls Royces, Mercedes, all these different cars and like I said, my rookie year’s, literally a 2005 silver Kia Sorento with cotton seats, it was beat down, but I understood the bigger picture and it’s not that I’m not going to get it, I’m just delaying it. And I would tell myself that consistently and I’m thinking myself now because full transparency, I’m driving the car that I want to drive now and a car that I always wanted to, but I bought it with passive income and that’s a lot more rewarding to me than if I were to do it earlier in my career.

Scott:
So would you mind sharing the details of the high level details of your rookie contract? We have the mentality of saving that and then what you did from an investing perspective during those four years with the Giants?

Devon:
Yeah, so the specifics, I think my rookie deal, fifth rounder, I think my salary was like 800 and something thousand dollars. So you could kind of run the math and see what I netted, what I netted from there. But one, my claim of fame, which a lot of my teammates couldn’t believe, is after I finished my third year in the NFLI accumulated a million dollars net worth, which at the time was hard because of what the salaries were. Like if I’m making $800 in three, 800 k three years, but putting on top of your living expenses and all of that, it’s like a lot of guys had a lot less than that. They bought their mom a house, they bought a car. So the fact that I could say I actually had a million dollars in the bank after my first three years in the NFL was a huge accomplishment for me.
And it was just a testament to where in the off season I went back home but I stayed with my parents or I would rent an Airbnb if I wanted to live on my own for a little bit, but I didn’t try to go and I’m from Phoenix, I didn’t try to go and buy a really nice or rent a really nice place in Scottsdale. I got kind of a basic standard apartment when I did need to stay away from my parents’ house, I need some alone time, I would do that. Otherwise I would just sleep in the basement at my parents’ house. And that’s how I was able to grow that within the three years. But those decisions really propelled me because it’s like, alright, I have more money to invest and it put me in position. And then with the success I was having on the field, I remember that I hit a marker to where because I was drafted so late, I had bonuses if I was going to play a certain amount. So my fourth year the salary bumped up because of my playtime from the last three. So that’s when I was like, oh, I’m going to double down. I’m having success. I’m going to make even more money than I made the last three years. So that’s where I started really listening to a ton of BiggerPockets, looking at investment opportunities and was like, I did some stuff in the first three years, but it was time to scale up at that point.

Mindy:
Your 1 million net worth at year three, is that just saving your salary or is that investments too?

Devon:
That was cash that I had in my bank account, so I had a million dollars saved essentially, but I was investing, so that’s not including some investments. So I had my first property, I had 401k already stacking up because the NFL has that and I had some stock investments, so that was kind of added on top.

Scott:
So I want to go through two concepts here. One is the mindset and how you were already thinking about investment on this rookie deal. And then I think in year four, probably two things trying to get inside your head seemed to have happened. You tell me if this is right. One is you’re making more money, but two is you’re like, I’m going to get another contract and it’s going to be a lot bigger than my rookie contract and that’s going to change the way I play the game. And I would love to hear how close I am there and that evolution from how you’re thinking about investing from the early party rookie contract to the next deal.

Devon:
Well that was kind of the point where it’s like, alright, I’m confident in my ability anything could happen injury wise, but I’m going into year four, I know I’m about to make more money so I could essentially double what I made in the last three years just in this fourth year. So I saw that trajectory and then I also was looking at if things go well and I have a good fourth year, I’m going to be able to get another contract, hopefully staying in New York. But either way. So it was a weird kind of place to where I couldn’t count my eggs before they hatched on like, oh, I’m going to get a big deal. You can’t really do that in football. An injury could happen or you could have a bad year. But I did know that I was going to be making pretty much double what I made in the last three years in one year.
So I’m like, okay, this is a great opportunity. And my mindset with my rookie contract was like, if I save up enough, even if nothing else works out, I stopped playing from here. I’m in a good position to have some momentum behind me. I, I was drafted at 23 so I would’ve been 27 years old with hopefully 2 million after my fourth year and some runway to, okay, let me, I have some things to invest, I have some knowledge, I have some resources. So I’m like, okay, I’m in a pretty solid position. And that was kind of my mindset and gracefully I ended up having a good fourth year and by the end of it I’m like, I knew I didn’t know where, but I knew I was going to get a really nice contract and that’s where I was able to really kind of take off.

Mindy:
While we’re away for a quick ad break, we want to hear from you like Devon, have you started investing in real estate while working a W2 job? Submit your answer in the Spotify or YouTube app. We’ll be back after a quick few ads.

Scott:
Alright, let’s jump back in. You already broke the news here so I think I can share that you upgraded from your Kia to a Toyota Camry around that same time as well.

Devon:
So once I got my second contracts, full transparency, I always wanted a Range Rover, but when I went to the Range Rover dealership, the full body big ones were way more expensive than the sports. And I’m like, they’re just a little bit bigger. Why are they so much more expensive? So as soon as my fourth year was done and I knew I was about I’m, I’m healthy, I’m going to sign a contract, I just don’t know where I ended up buying my first Range Rover, but I got the sport I just couldn’t rationalize spending literally $60,000 more for what they call the autobiography in comparison to getting the sport. So I bought the sport and it was one of those things again, people were like, why’d you get the sport and not the full one? And I’m like, bro, there’s so much more expensive. I couldn’t rationalize doing it.
So I’m like, I’m still driving a range. I feel good about it. But I think the underlying to a lot of listeners, I think the underlying thing that I would want to make sure to share that many people forget is put yourself in a position to earn as much as you can in your working years. And for me during those years I was spending a lot of time, my focus was ball. I don’t get me wrong, I had some fun with my friends here and there. I went on a couple of vacations, but I wasn’t taking three week vacations to Europe while I was in my dog days. Really trying to make it and put together a career. For me it’s like they’re trying to replace me with somebody younger, cheaper, faster, better. And I’m not about to be in Europe for three weeks drinking Arnold Spritz or Afro Spritz and all of that.
I’m going to be locked in. And I think some people in real estate specifically, it becomes a thing of like, oh, retire early and all that. And it’s like, don’t forget you got to work hard and put yourself in a position to have enough money and that’s going to propel you into a lot of more opportunities. So that was my mindset in those years and it really kind of positioned me well, how can I earn as much as I can in these years by being as good at what I do as possible and kind of putting my boss’s feet to the fire of you have to pay me.

Scott:
In the earlier as your contract and your rookie deal, it seems like the mentality was there’s a little bit of investing and a lot of cash accumulation going on. One of the things we’re excited to talk about today is your book, real Estate Side Hustle here, which we’re super excited about. When did that begin to come into become a bigger and bigger factor in terms of what you were doing on the side with the dollars that you’re accumulating from these big deals?

Devon:
I was investing as soon as my rookie season ended, I was investing, but the amounts were just smaller. It was like I was still figuring it out. My first property ever in real estate was a $86,000 property. I went in with a partner and we each put 12% down and Beach Grove Indiana. For me it was like I wanted to start slow and then I got into a syndication, but the first syndication I ever got into was a debt fund and I put $50,000 into it. So I was making bets, but small and kind of learning the game, understanding how it goes in syndication world, reviewing ppms for the first time and understanding what a subscription agreement was and then in real estate going through the process of cash on cash and cap rate and the loan process and in my stock exposure, what the cycles look like and what are ETFs versus mutual funds.
So I was making investments but comparable to what I felt I was comfortable with and what my income was. And then as I was doing that, I was a accumulating a lot of knowledge from experience, but also a lot of time reading books, listening to podcasts. So I felt like I was getting real life experience and a lot of knowledge exposure and it propelled me at the right time for when I got my second contract and it’s like, man, I have some investments, I have some runway, I have capital saved. It’s go time and I can really start to do some things now.

Mindy:
I love that you didn’t jump in with both feet and just take that whole million dollars net worth and just throw it at something. I am shocked that you said you bought an $86,000 house with a partner. I love that because there’s so many people that I see in the BiggerPockets forums, they’re like, I’m going to buy this all by myself and I can barely afford the mortgage, but it’s totally going to be fine. It’s like, maybe not. I love that you’re learning. I think that’s so important that you get a foundation of knowledge before you jump in, but also you’re going to learn so much more by doing it and making mistakes and learning from those mistakes. The school of hard knocks is not just for the NFL.

Devon:
Absolutely. And I think making calculated risk with an amount that you’re comfortable with is really important. So my mindset with that first property was like, I’m going to be pissed if I lose $12,000, but at the end of the day with where I’m at, it’s not going to end me. I’m just going to be mad. I lost 12 grand. So I’m comfortable with this. And a lot of people aren’t okay with base hits. And I always have the mindset of I’m okay with hitting singles because I feel like those are going to accumulate over time and help me make better and better decisions to where I’m going to be able to identify the second base, the third base hits, and even the home runs. But especially starting out, it’s okay to mitigate risk with getting a base hit deal working with partners. And I feel like that deal, it turned out over the life of I own that property, I invested $12,000 when we sold it, my partner and I both got 25 grand plus the cashflow over four years. So it ended up an incredible investment for us, but the dollar amount didn’t necessarily change my life at that time, but the knowledge and the fact that it got the ball rolling for me in the investment world in real estate specifically, I’ll never forget that. I think that was my most important purchase.

Mindy:
Yeah, absolutely love that. Because so many people are like, oh, if it’s not a home run, it’s not worth doing. No, absolutely. Learn on the base, hit, get a single, like you said, learn on the single even though we’re mixing our sports metaphors.

Scott:
Yeah, I was going to say he’s really good at blocking and tackling.

Mindy:
Okay, you can’t get 10 yards until you get one yard. So get one yard, don’t go for the touchdown right away because you need to learn. And if you’re going for the touchdown and you’re only looking for the touchdown, you’re missing the two yard passes, you are missing the next down. I mean the two yard passes add up and then you get four more chances to get 10 more yards and you keep going, you keep going, I like baseball metaphors better for this, but whatever.

Devon:
Well, I think there’s something to really be said about that. And for me, I really wanted to make sure that I didn’t get over what I was comfortable with at the time. And how you do that is just making sure you’re making conservative choices while you’re learning and you’re going to be able to earn the right to take risk by getting in the game and taking shots and having the knowledge. And now I can take more calculated risk, I can invest in bigger deals because I understand that I have that foundation, but I think people are trying to hit for the fences or are the Hail Mary in football terms. And I think that’s the wrong perspective to have when you’re getting started

Scott:
Over this period of time really it sounds like became an expert and a master at investing in passive opportunities in particular. And you’ve developed a couple of frameworks that I’d really love to dive into here. One I think is the four passive income streams in real estate. Can you tell us what those are and how you came up with this?

Devon:
Yeah, so I started looking at ways to invest passively. A lot of people out there who say that passive investing isn’t realistic, you have to be active when we’re talking real estate at least, and I understand where they’re coming from with that, but my perspective was like I’m trying to sack Tom Brady on Sunday. I don’t have time to be an active investor, so my choices were figure out how to invest passively or don’t invest at all. And I felt like not investing at all was more risk than figuring out how to invest passively. So I’m like, I got to figure this out. And within real estate specifically, I found four vehicles that work passively and that’s investing in single family and smaller multifamily properties that’s investing in syndications, that’s private lending. And then you could get into commercial at scale eventually with triple net leases and owning commercial buildings.
But with those four vehicles you can do, and my kind of marker was like I have five hours a week in the season to focus concentrated energy on my investment portfolio and every decision I made was am I going to be able to do it within five hours or less? Is it going to fit within the timeframe that I have to focus on real estate? And if it wasn’t, I wasn’t doing the deal because I’m like, I could do this Airbnb and it’s going to make a ton of money, but at the time Airbnb property managers wasn’t as popular, how would I manage it? That would be stressful. I’m trying to sack Tom Brady and I got to worry about if they’re checking in on time on Sunday night, I can’t do that. So that was kind of barrier of like, okay, does it fit within the time that I have and structuring my portfolio to make sure everything I invested in would fit was really important to me.

Mindy:
I love that. Does it fit within the time I have? The short-term rentals are so sexy, but they take up so much time. If you have five hours to do real estate in a whole week short-term rentals are not for you. And I don’t think that your specific situation is all that different from doctors, lawyers, other high net worth individuals, or not even high net worth individuals who have these very demanding jobs and they’re like, oh, but I could make more money in short-term rentals. Yeah, you can, but if you’re giving up most of that because you’re hiring somebody to run your property or you’re making yourself crazy and losing out on stacking your Tom Brady because you had to get a phone call from somebody who can’t figure out how the keypad works, which is frequent, it doesn’t make any sense. So you just listed four passive ways to invest. What stream did you find the most success in and what was your favorite

Devon:
For different reasons? So one thing I would add to that question is you really have to solve for fast and slow money. And I didn’t realize this till I retired to be honest, because fast money is the money that you’re going to get back in a year or less. So your job, you’re getting paid every two weeks or every month. That’s fast money. You’re trading time and our capital for a fast return that’s giving you capital back within a year or less. Your slow money is your investments, your stock market. Oh, if you invest in the stock market over 10 years, it’s going to give you an eight to 12% return. Or if you invest in this real estate, it’s worth $200,000 today it’s going to be worth $500,000 in 10 years and the rent’s going to go up a ton. So understanding the fast and slow money, and when I retired I was like, I need to replace my fast money bucket because my fast money was my day job.
NFL, I’m making a good salary, that’s fast money and I’m able to use that money to invest in real estate. But what I found is I retired and if I don’t replace my fast money bucket, I’m going to run out of capital to keep investing and living my life. So understanding that, I would say it depends where you’re at and your life goals. When I was playing in the NFL, slow money was more important and I really liked accumulating rental properties and investing in syndications. Those were two things that I did kind of hand in hand. Syndications was extremely passive because I got to just underwrite the general partner who was putting the deal together, review the deal, and then I invest and I’m getting monthly or quarterly reports done with investing in syndication or investing in single family. I started out investing in turnkey properties, which is when you’re identifying markets and finding someone who is fixing flipping properties and you buy it from them or maybe it’s a new build and there’s already property management in place, so you pretty much are buying the property and you start getting immediate cashflow. So those are the two ways that I kind of started early on and then it kept evolving and building from there. And now because I needed more fast money, I’ve really leaned more into my private lending business in that because that sustains the capital I need to live my life, but then the extra capital so I can keep buying assets and investing in the slow money. So I think understanding where you’re at and what you need is really important.

Scott:
Awesome. We’ve just heard about how Devon Kennard’s defense led to incredible offense in the form of income generation and now we’re going to hear about special teams and how he builds Tax Advantage Wealth after this.

Mindy:
Welcome back to the show.

Scott:
One of the problems with simple, so I love your approach here. One of the problems with simple interest though is that it’s simple interest. It’s fully taxable. So when you’re making millions of dollars a year playing for the Giants, for example, let’s pick on New York again, they’re going to take half your income in terms of taxes, and so that 12% yield is really 6% after taxes, which is not that great at the end of the day. Is that part of the reason why this has shifted for you is because that private lending can generate enough simple interest to cover your expenses, but we don’t have the huge tax consequences of being in that NFL tax bracket. Is that part of the deal?

Devon:
Yeah, well that’s one of the negatives of private lending is it is taxes ordinary income, and that’s why I’ll always coincide it with buying assets and investing in real estate. So I can earn X amount of money from private lending and then go and offset that income with depreciation, cost segregation studies and those things from my investment portfolio. And a cool thing that I did for my last year in the NFL is I worked with my tax strategist and I was able to qualify even though I was still in the NFL for a real estate professional my last year in the NFL and I did cost sex studies. So I was able to go back and reopen my 2022 tax year and get a large chunk of money back by qualifying for real estate pro and the cost segregation studies. So some people shy away from income businesses like private lending because oh, it’s taxes, ordinary income.
But even while I was playing, yes, it’s raising my taxable income, but I wanted a soft landing for when I retired, so am I not going to start to develop another fast money vehicle for myself when I know that my career is coming to an end just because of the tax implications. For me, that wasn’t a smart decision. It’s like let me build my knowledge and the understanding and the infrastructure so when I’m done playing and my fast money from football is done, I have a soft landing and I already have another fast money vehicle. So I was willing to take the extra hit if you want to call it in taxes while I was playing in the earned income, have a plan for my fast money once I was done and I’m always trying to offset it with buying real estate.

Scott:
Let’s dive in one more question on this lending front and let’s talk about credit funds. You mentioned that you put money into a credit fund at the very beginning. It sounds like you’ve switched to being a direct lender with directly to clients. What was the catalyst for that evolution and why are you doing that Instead of investing in credit funds today,

Devon:
You can earn more money investing yourself. So I think investing in debt funds and credit funds is a great vehicle if you’re like, I like that business plan, but I’m not trying to do it myself. So here’s the real numbers. If you’re going to do it yourself, let’s just stick with my company. So we charge 12% in two points. The average deal is less than a year. So the two points I could really charge twice a year. So when you add fees on top of that, you can earn between 16 to 18% on your money if you’re investing your own money. So that’s a pretty good return if you were to do the same thing. Not pretty good. I mean I would say 16 to 18% is a great return annualized on your money. Now if you do the same thing and you’re doing it into a debt fund, you could earn 10%.
If an investor comes to me, I’ll give a 10% return to my investors, that’s still good money for pretty much just investing invest it. You get a monthly check. So when I first started out, I was doing it that way and I was like 10% return on my money. They showed me their underwriting on how they pick the deals, their business plan, I can do this, but the more I learned and grew, I’m like I could do it for myself and make 16 to 18. Okay, is this something I could do? How do I systemize it? How do I build the SOPs out and the software to where I don’t want to work 40, 60 hours a week, but I like the returns I can get on doing it direct. So for me it was like it’s worth the upfront work to build out the infrastructure to where I can lend on my own as opposed to getting the 10% return. But there’s going to be many who you have a hundred thousand dollars and you can invest and make 10% on that $10,000 a year and that starts to compound and you can double your money in seven years or less and be getting paid monthly. I think that’s an advantageous way to look at it as well.

Mindy:
So let’s look at what your investment portfolio actually is comprised of. How many units do you own either by yourself or with partners? How many syndications are you in? Do you have any loans outstanding right now?

Devon:
Yeah, so I own 29 units today and it’s all single family and smaller multifamily up to six units. I have invested in over 40 syndications, so I’m waiting for a lot of those to liquidate because I want to put ’em into my own deals and into my lending company. But a lot of those was stuff that I invested in throughout my career. And then I have my lending company and I have over two and a half million dollars of my own capital lent out currently. And I’m trying to grow that and starting to take some investor capital and growing that business. And my goal is to have a really good operating business where I have 10 to 20 million out every year and a very small team. It could be a very lean business, so have the right software, have one or two employees or people that’s helping me and let that business chug along and grow it that way.
So that’s what it’s comprised of now. And my plan is in my personal portfolio I have an LTV of about 50%, so a low LTV on my portfolio and that’s kind of my strategy with that. Now I do have HELOCs, so that’s my fix LTV, but I do have HELOCs on a lot of my properties and I could leverage some of that for lending. So my HELOC is 8%, but I’m lending at 12 and two, I’m making the spread on that money without taking out a higher interest loan right now. So I’m taking advantage of that and that’s how I’m blending my lending business with my personal portfolio. So everything continues to elevate.

Scott:
Let me ask you about the syndications piece of this because we just launched a new product called Passive Pockets here at BiggerPockets, which we’re super excited about. And part of the deal there is people are getting crushed in syndications. We talk about multifamily, we’ve seen a drop of 30% in terms of prices from peak on average in the United States with geographic devastation that can weigh outpace that. So for example, in Austin, Texas or Atlanta, Georgia, we might see even bigger dropoffs in valuations. We’re seeing rent growth very slow in the face of huge supply headwinds and I’ll sit here and say it, I’m in two syndication deals and I’m going to get wiped on those. You have a lot more experience, 40 syndications. You’ve been doing this a lot longer starting from your NFL career. Walk us through how you’re thinking about this pain and how you’re thinking about the next wave of incremental investments and syndication in light of market conditions. Have you been able to avoid most of those problems or any lessons learned?

Devon:
So one advantage I had is I got connected with a financial advisor that all he does is evaluate syndications and funds. He doesn’t get his clients into anything but syndications and funds. So he’s vetting underwriting deals all over the country. So oftentimes people don’t believe me when they say I’ve gotten into 40 syndications, but that’s why I work with an advisor who only does that. So he would evaluate hundreds of deals a year and bring to his clients the four or five best ones and kind of would give a full report of his underwriting on it. And with that, I made him teach me how he was underwriting deals. What’s the typical fee structure you like? What are you looking for? What’s the debt structure? So I have a couple of deals that aren’t looking too good right now, but for the most part of my 40, they’re all on track on pace.
I’ve had some dividends suspended to accumulate cash, but across my portfolio of syndications, none of it’s not performing bad at all. And I think that’s due to having someone like that. But I will say the more that I know and the place that I’m in now when a lot of those syndications go full cycle, I’m going to be putting a lot more into my own stuff and less into other deals. And my main reasoning for that is not everybody has my wrist tolerance. I just showed that my LTV on my personal portfolio is 50%. I hope to keep it there or lower for the rest of my life. I just like having low controllable debt. I’d rather get to 50 doors with the LTV of 50% than have 150 doors with an LTV of 80%. And that’s kind of my business plan and structure moving forward.

Scott:
Yeah, I completely agree with that mentality. That’s what I do with my portfolio and I’ll go a little further. I’m scared of the market a little bit. I have that fear at all times of things could go bad places could drop all these things, and I’m not investing in real estate to get to $150. I’m investing to have a inflation adjusted at store of value and a reliable long-term income stream once the property is delivered or paid off over time. And so I completely appreciate that and I’m, I think that very few investors put a huge percentage of their net worth into passive investments. I’ve talked to maybe less than five people who put perhaps more than 20% of their wealth into syndications, but there is this desire to put a chunk of your wealth in that on a long-term basis. Do you think you’ll continue to put 10, 15% of your position into these deals going forward or are you going to generally phase it completely out? I

Devon:
Think there’s some syndicators and gps that have performed incredible for me over the last 10 years. So as deals close, I think I’ll double down on just a handful that have just crushed it. Their business plan has been incredible. They’ve done well for me, but I feel like I have my own strategy that really works. I feel like I can buy single family and smaller multifamily properties in a couple of markets that I’m in. I have good contracting teams. I like working with good systems in place and then I believe my underwriting and my lending company. So I feel like it’s very risk averse and I could get, like I said, 16 to 18% on my own money to where most of these deals they have an IRR of 15 to 20%. So if I can get similar returns on my own and have more control, I feel like why would I continue to invest in a ton of syndications? So I’ll do a little bit for diversification to your point. So maybe it will add up to maybe 10 to 15% overall. But as a lot of the syndication exposure I have goes full cycle, I’m 100% putting it into buying my own deals and into my own lending company.

Mindy:
I love that. What I’m hearing is you saying, I’ve looked into this and I’ve tried it out. There’s a few people that I really like and we’ll continue to invest with them based on my experiences with them, but I also want to do my own thing now that I have the time, now that I have the more knowledge because you’ve been doing this for six or eight years, I also am agreeing with Scott, the syndication market scares me right now. I’m still reviewing pitches that come through, but I’m not putting money into most of them. There’s a couple guys. I will give them money for almost any deal. They throw my way because I like how they operate. I love how they communicate and those are the people that I trust with my money. But yeah, I can do a better job on my own, a better job. I have more control over what I’m investing in on my own, and I like syndications for the diversification part. Well, syndications from a few years ago right now, I’m not seeing any great numbers.

Devon:
Well, I mean what’s really important for people to know with syndications is track record’s a huge thing, but you almost have to take track record from the last 10 years with a grain of salt. You have people who are not very good at what they do, but they were still making money the last decade to where it’s like, yes, you want a good track record, but there was legitimately a 10 year run where if you started a syndication, you’re probably doing pretty well and now the tide’s gone back and you’re starting to see who was naked. And specifically there was one deal that I did outside of my financial advisor. I thought I kind of had my chest out, thought I was pretty, knew what I was doing, and I had a gut feeling that he gave me a little arrogant feel. He was like, oh, I turned these properties into AAA class A stuff.
And his return metrics over the last 10 years was incredible. I knew some people who invested with him who made great money and I didn’t love his personality and it didn’t jive completely with me, but you couldn’t deny his track record over the last decade. So I got shiny object syndrome and full transparency, I put a hundred thousand dollars with him and that’s the one deal that’s for sure going bad, and I’ll be lucky to get my capital back when it’s all said and done. And I’m like, it taught me a valuable lesson to where numbers are numbers, but your gut feel really matters. Does the person fit with your perspective, your viewpoint on it? And if I have that feeling, again, I’ll never do a deal with somebody with that feeling.

Scott:
I want to chime in here and react to this because I missed the episode, Mindy that you did with Jim Pfeiffer from Left Field Investors Now passive pockets, and we got some comments. Hey Scott, you’re really cautious about this syndication space. Why are we doing passive pockets? Well, I’m the biggest skeptic of this industry. Some of these guys in the industry don’t know what they’re doing. Some of them are going to be fraudsters, some of them are going to be unlucky. People are going to lose money. People have already lost money. You just lost money. I’m in a deal. It’s the same way. I wouldn’t say the guy had too big of an ego necessarily, but the deal’s going to get flushed. This is a scary place to go invest, and it’s been hiding in the corner over here in the dark with nobody shining a light on it.
And this is a part of the BiggerPockets world. People get become successful real estate investors on BiggerPockets and they go out and raise money from other people and there’s a light shown on them as they’re going up. There’s no light shining on them when things are going bad or sideways, and we’re going to do that here at BiggerPockets with passive pockets. And so I want to just kind of set the record straight there that this is not a pump up the syndicators play. This is a hold them accountable play at BiggerPockets. It’s a great potential asset class that’s also super dangerous. On average, the fees are going to suck return out of your life, but you’ll also have that shot at different returns income or potentially major upside with particularly skilled operators or better risk adjusted returns with certain operators and people will try. I try with five to 10% of my wealth, not the 90% by any means, sounds like you’re in the same boat and you’re almost always going to get a better return on an average sense on the businesses that you run. Or if you’re scared of both of those, don’t want to put in the work, go into index funds. So sorry for my little rant here, Devon, taking away from what you’re saying here,

Mindy:
You have to agree he’s right. I want to agree with you, Devon. You said that you should have listened to your gut and when you are going through these deals, these presentations, you should be looking for reasons to say no. It’s really easy to find reasons to say no. It’s also really easy to find reasons to say yes, and that’s not what you should be looking for when you’re looking at this. I love that you are doing small amounts relative to your net worth because then if the deal goes sideways or when this particular deal goes sideways, you are only losing a hundred thousand dollars, which I fully recognize what a stupid sentence that is, but you’re not losing a million.

Scott:
Yeah, it’s like a Range Rover Sport Edition loss, not a full, the full price. The full size. Yeah,

Devon:
Exactly. And full transparency, if I really do lose it all, I’m going to be pissed because I’ve been lucky enough to never have lost a hundred thousand dollars yet. So that’s my first time losing that six figure chunk of money. So I’m going to be pissed, but it’s going to be that and not, I’m not the kind of person. That’s also why I’ve invested in so many. I’m not the kind of person that puts a half a million bucks in one deal. I like to spread it out. And then if I see some success and I like how stuff goes, maybe I’ll slowly put more with that person over time. But there is going to be a lot of shady stuff going on in the future in the syndication world because some of these syndicators are failing now and they’re not going to want to include their past failures in their reporting on the next deal. You think they’re just going to stop putting deals together, they’re going to pop back up. So doing due diligence and really kind of looking into the people you’re working with is going to be really important because if they’re conveniently showing the deals that went well and not the two that failed, then for me, that’s an automatic no. Like that alone. If you’re reporting and I’m only seeing the deals that did well,

Scott:
I’m out. You mentioned that you’re in single family. We have 29 units, we’ve got the private lending business, we’ve got the 40 syndications, and I believe you mentioned a fourth stream, which was going to be the commercial assets, which I assume means smaller commercial properties that you own and operate directly. Is that right? Can you tell us a little bit about that piece?

Devon:
That’s kind of what I want to grow into. So my kind of thought is with my 29 units, I’ll keep buying more and more of those and 10 31 into bigger and bigger properties and eventually get into probably some triple net commercial where that’s extremely passive. If you could buy the right kind of deals, if I can buy a standalone Starbucks and my tenant is Starbucks for the next 20 years, I would love to evolve into that. And I know some people who do that, and my goal is to kind of build my portfolio up big enough to where I can kind of buy off some of those triple net lease deals and have very stable returns from safe tenants like Starbucks, like Walgreens, maybe it’s an industrial building and it’s Amazon. So I think that is kind of a growth play for me in the future and what I feel like fits within my strategy.

Scott:
Well, let’s make sure a lot of this awesome stuff that you shared is covered in the book. Can you tell us about the book, the writing process, and what you hope to put into it and what you hope readers get out of it?

Devon:
Yeah, so pretty much everything we talked about today is within the book. The book starts out real estate side hustle, the four strategies for passive investing, and it’s the things that I really believe in and I’ve done, but it starts out talking about the spread between how much you make and how much you spend and how you need to increase that as much as you can. Because if you’re trying to invest passively, the elephant in the room is you need to have capital, you have to have an advantage to passively investing. If you’re an active investor, your advantage is the time and knowledge you have. If you’re a passive investor, it has to be capital, and it doesn’t necessarily mean your capital. Maybe you could raise capital. There’s different ways you can look at that. But an advantage you have to have if you’re trying to invest passively is some amount of capital.
And I really dive in at the beginning of the book of how to earn more at what you do and how I was able to do that within football and hopefully how it can translate to every listener here on how they can earn more, which then propels them into some passive strategies. And those are the four strategies with the single family syndications, private lending and commercial, and really building out the SOPs to do what passively, because that’s the key. I give out all the SOPs that I use for each, the softwares I use, the systems I put in place to streamline it. And to give you an example with single family, when I’m on buy mode, I’m reaching out to my wholesalers and all the deal finders who are helping bring me deals, but I’m being very specific with what I’m looking for. I do not want a hundred deals.
I don’t want an inbox full with a bunch of listings coming up. I want four listings that fit my buy box that I can dive deep in and put offers in, and if I see 30 deals instead of four, I’m not going to underwrite them all. So there’s systems you can put into place to where you can streamline it and really make it efficient in each category. So I think that’s kind of the secret sauce of the book is not only the four strategies, but how to do them passively and the structures you need to put in place.

Scott:
Love it. Systems and reps, both kinds of reps here. Thank you so much for writing this awesome book, BiggerPockets Money listeners. You can go to biggerpockets.com/side hustle pod to get your copy, and you’ll get 20% off any format or edition of the book if you go there. That’s biggerpockets.com/side hustle pod, and that’s limited to the first 200 people who purchased the book. So get your copy today. Super excited to have you on the show. Devon, it’s great to chat with you. Awesome to hear about your career. Thanks for being so open and transparent. Congratulations on the huge success and the wonderful three-pronged, soon to be four pronged business that you’ve built, an empire that you’ve built in real estate.

Devon:
Thank you so much for having me, and I’ll see you guys next time.

Scott:
Once again, we’re super excited to partner with Devon Kennard to publish real estate side hustle for passive strategies to build wealth beyond your day job. This book is released on October 15th, which is four days from now. If you’re listening to this, when we launch this episode, this episode will go live on October 11th. You can go to biggerpockets.com/side hustle pod to get your copy on October 15th, and you’ll get 20% off if you’re one of the first 200 people to take advantage of that discount biggerpockets.com/side hustle pod, really awesome book, really awesome story from Devon Kennard, really awesome expertise and really admire the career that he had both in the NFL and in real estate.

Mindy:
Yeah, this was a great show. I’m so excited to have Devon on with us. I love his thoughts on syndications. I love his thoughts on just the passive income lending side. He’s going to go on to be a trillionaire of course. Well on his way. Alright, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
That wraps up this episode of the BiggerPockets Money podcast. He of course is the Scott Trench. I am Mindy Jensen saying goodbye cherry pie.