BiggerPockets Money Podcast - 4 Ways to Make Passive Income from Real Estate (Don’t Quit Your 9-5!) w/Devon Kennard

Episode Date: October 11, 2024

Real estate investing is one of the best vehicles for building wealth, reaching financial independence, and saving for retirement, but you don’t need to become a full-time investor to reap the benefits. If you have no plans to leave your W2 job or manage rentals, there are several ways to use real estate for passive income! Welcome back to the BiggerPockets Money podcast! When Devon Kennard entered the NFL, he ran into more money than he had ever made. But with no guarantee of a pay raise or second contract, Devon forewent the flashy car and multi-million-dollar home and started saving and investing instead. Shortly after buying his first rental property, Devon realized that he was going to need passive or semi-passive income streams if he wanted to have success on the football field. He landed on four different types of passive investments that have helped him scale his portfolio to twenty-nine doors and over forty syndications! In this episode, Devon talks about the importance of increasing your income in your working years and why small wins make all the difference early on in your investing journey. You’ll also learn about the dangers of “shady” real estate syndications and how to properly vet an operator, as well as the differences between fast and slow money! In This Episode We Cover How Devon scaled his real estate portfolio while playing in the NFL Four passive real estate investing strategies you can use today Speeding up your financial independence timeline with real estate side hustles Fast money versus slow money (and which bucket you should be filling) The pros and cons of syndications and how to weed out “shady” operators And So Much More! Links from the Show Mindy on BiggerPockets Scott on BiggerPockets Listen to All Your Favorite BiggerPockets Podcasts in One Place Join BiggerPockets for FREE Email Mindy: [e-mail] Email Scott: [e-mail] BiggerPockets Money Facebook Group Support Today’s Show Sponsor, Connect Invest, the Alternative Way to Earn Passive Income Through Real Estate Buy Devon’s New Book “Real Estate Side Hustle” Property Manager Finder How to Make Truly Passive Income with “Syndication” Real Estate Connect with Devon (00:00) Intro (07:56) Saving $1M in 3 Years! (15:37) Making “Small” Bets (21:08) Passive Real Estate 101 (31:59) Devon’s Portfolio & Strategy (39:17) “Shady” Syndications (45:56) Commercial Investing (47:08) Devon’s New Book! Check out more resources from this show on BiggerPockets.com and https://www.biggerpockets.com/blog/money-571 Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [e-mail] Learn more about your ad choices. Visit megaphone.fm/adchoices

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 Kinnard 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 Bigger Pockets Money podcast. My name is Mindy Jensen. and with me as always is my non-NFL player co-host, Scott Trench.

Jeez, Mindy, that was a real kicker of an intro. Pagetockets has a goal of creating one million millionaires. You're in the right place if you want to get your financial house 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 Kinnard today. Devon Kinnard, for those who don't know, is a veteran NFL linebacker, played nine, ten 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 Conard. 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 Bigger Pockets Money. Super excited to get into it. 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 Conard, welcome to the Bigger Pockets Money podcast. I am so excited to talk to you today. Thanks for having me. I wanted to hop on this with you for a while, so I'm glad to be here. So let's jump right in. Let's address the elephant in the room. You were an NFL player, correct? Yep. I retired at the end of, at the beginning of 23. 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. You know, my back. story 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 at 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. So I think the term is not for long, right? The average NFL career is three years or less things. And that's, that for many athletes, that's peak earnings. right, of their lifetime or for for many years at least in there. Is that kind of the mindset you 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 is that, how close am I with understanding how that the

mentality of rookie athletes at that point in their career? Yeah, it's a, it's a very unique situation in that we're put in a position where you can make a good amount of money for that for your age, you know what I mean? You're $22 million, are 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 taxed to 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 contract. So when, you know, 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, this, even if I play for a few years, that money has to sustain me for a long time or it has to kind of like propel me into whatever I'm going to do next. And, you know, having that mindset and understanding is really important. Yeah, I think, you know, 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, you know, the post-professional sports career. Is that, is that right? Is that what you saw in the league when you were playing? 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, 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, you know, 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, you know,

just the stock market, whichever route you want to go. I think we have a distinct advantage in if you take advantage of it. 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? 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. You know, I drove, there's even an article in like CMBC 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 Sorrento 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

because they saw the article and they gave me, you know, a car to drive. a Kia Kedenza at the time for the rest of my time. So I was in a Kia for the first year, first four years in the NFL. And, you know, 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, D.K. pulling up in his, it is Kia, or, you know, 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 need, like, I 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. Was it hard to be surrounded by people driving way nicer cars than your high school car and still driving your car? Or did you, were you able to focus on the end result? I mean, it was hard at times. Like, it's, you're pulling up to different events or you're going to you know going to places and I'm seeing rose royces mercedes all these different cars and you know you know like I said my rookie year is literally a 2005 silver Kia Sorrento with like cotton or cotton seats like you know it was beat down but um I understood the bigger picture and I'm like it's it's not that I'm not going to get it

I'm just delaying it and I would tell myself that consistently and you know I'm thanking myself now full transparency. I'm driving the car that I want to drive now in 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. So would you mind sharing the details of that, you know, the high level details of your rookie contract? We have the mentality of saving that. And then what you did to it, from an investing perspective, during those four years with the giants. Yeah. So the specifics, I think my rookie deal, fifth rounder, I think my salary was like $800 and something thousand dollars. So, you know, 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 NFL, I 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 300K, 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, you know,

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, you know, in the offseason, I went back home, but I stayed with my parents or I would like kind of rent an Airbnb if I wanted to live on my own for a little bit. But I didn't like 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. Like I got kind of a basic, you know, standard apartment when I did, you know, 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 kind of grow that within the three years. But I, those decisions really propelled me because it's like, all right, 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 kind of double down. I'm having success. I'm going to make even more money than I made the last three years. You know,

so that's where I started like really listening to a ton of bigger pockets. looking at investment opportunities and was like, I did some stuff in the first three years, but it was time to kind of scale up at that point. So your $1 million net worth at year three, is that just saving your salary? Or is that investments too? So that was cash that I had in my bank account. So, you know, I had a million dollars saved essentially, but I was investing. So that's not including some investments. So I had, you know, I had my first property. I had, you know, 401k already stacking up because the NFL has that. And, you know, I had some stock investments. So that was kind of added on top. So look, 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, you know, 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. game. And I would love to hear how close I am there and, you know, that evolution from how you're

thinking about investing from the early party rookie contract to the late to the next deal. Well, that was kind of the point where it's like, all right, 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 what was looking at like if things go, and I have a good fourth year, I'm going to be able to get another contract, hopefully staying in New York, but, you know, 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 because you can't really do that

in football. Injury could happen or you could have a bad year. But I did know that I was going to be making pretty much like double what I made in the last three years in one year. So I'm like, okay, this is a great opportunity. And, you know, my mindset, with my rookie contract was like, if I save up enough, even if nothing else works out, I stop playing from here. I'm in a good position to kind of like have some momentum behind me. I was drafted at 23. So I would have 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, you know,

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. 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 W-2 job? Submit your answer in the Spotify or YouTube app. We'll be back after. quick few ads. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing. And if you're like most folks, it can be a little eye-opening. That's why I like Monarch. It helps you see exactly

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Kickstart your well-being journey with your first audiobook free when you sign up for a free 30-day trial at Audible. dot com slash BP money. All right, 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, right? So once I got my second contracts, you know, full transparency, I always wanted a range rover. But when I went to the range rover dealership, the like 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 like, I'm like, 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 like literally $60,000 more for like what they call the autobiography in comparison to getting the sport. So I bought the sport and, you know, it was one of those things again. Like people were kind of like, why did you get the sport and not the fourth? 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, like 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. Like, 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, you know, while I was in my dog days really trying to make it and put together a career. Because 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, you know, Arnold Sprits and our April Sprits and all of that. Like, I'm going to be locked in. And I think some people, like, in real estate specifically, it becomes a thing of like, oh, retire early and all that. And it's like, don't forget, like, 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. Like, 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 like, you have to pay me? In the early year of your, 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. When did that, you know, you, you know, 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 your, 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? It was, I was investing. As soon as my rookie season ended, I was investing, but the amounts were just smaller. Like, it was like, I was still figuring it out. My first property ever in real estate was an $86,000 property. I went in with a partner and we each put 12% down in Beach Grove, Indiana. Like, for me, it was like I wanted to start slow. And then I got into a syndication, but the first syndication I ever put it, got into was a debt fund and I put $50,000 into it. So it was like, I was making bets, but small and kind of learning the game, understanding how it goes, like 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 for you know in my stock exposure like what the cycles look like and you know what what are ets 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 accumulating a lot of knowledge from experience but also a lot of time reading books listening to podcast. 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, you know, I got my second contract. And it's like, man, I have some investments. I have some runway. I have capital saved.

Like, it's go time. And I can really start to do some things now. 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'm 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 Bigger Pockets Forum. 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, oh, 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. Absolutely. And I think, you know, 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 that with where I'm at, it's not going to end me. Like, I'm just going to be mad because I lost 12 grand. So, you know, 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, you know, a base hit deal, working with partners. And I feel like that deal, it turned out over, you know, the life of I own that property. Like I invested 12. $12,000. When we sold it, my partner and I both got $25,000 plus the cash flow 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. Yeah. I 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. Yeah, I was going to say, he's really good at blocking and tackling. 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 metaphor is better for this. But whatever. Well, I mean, and I think there's something to, you know, really be said about that. And for me, I really wanted to make sure that I didn't get over, you know, 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, you know, I think people are trying to hit for the fences are, you know, and are the hell merry in football terms. And I think that's the wrong perspective to have when you're getting started. Over this period of time, you really, it sounds like became an expert in 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? Yeah. So I started looking at like ways to invest passively because there's a lot of people out there who say that passive investing isn't realistic. You know, 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, you know, figuring out how to invest passively. So I'm like, I got to figure this out. And through 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 like 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 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?

Like, 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. Like, I can't do that. So that was kind of my 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. 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 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 like making yourself crazy and losing out on sacking 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? For different reasons. So one thing I would kind of add to that question is you really have to saw 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, you know, your job, you're getting paid every two weeks or every month, you know, 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 8 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. And 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 a capital to keep investing and living my life. So understanding that, I would say it depends what, 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 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 they already have, there's already property management in place. So you pretty much are buying the property and you start getting immediate cash flow. So those are the two ways that I kind of, you know, 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 and that aspect, 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. Awesome. We've just heard about how Devon Kinnard'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. Tax season is one of the only times all year when most people actually look at their full financial picture, including income, spending, savings, investments, the whole thing.

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One of the problems with simple interest, though, is that it's simple interest. that'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, you know, is 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?

Yeah, well, that's one of the negatives of private lending is it is tax as ordinary income. And that's why I will always coincide it with buying assets and, you know, investing in real estate. So I can earn X amount of money from from private lending and then go and offset that income with depreciation, cost segregation studies, and those things from my investment port. 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 seg studies. So I was able to, you know, go back and reopen my 22 tax year and get a large chunk of money back by qualifying for real estate pro and the cost segregation studies. So, you know, 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? Like for me, that's, that's, that wasn't a smart decision. It's like, let me build, 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, the extra hit, if you want to call it, in taxes while I was playing in, you know, the earned income to have a plan for my fast money once I was done. and I'm always trying to offset it with buying real estate.

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? I mean, you can earn more money investing yourself. So I think investing in, you know, 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% and 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 percent 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 percent. You know, like if an investor comes to me, I'll give a 10 percent return to my investors.

That's still good money for pretty much just investing. Like, you know, invest it. You get a monthly check. So when I first started out, I was doing it that way. And I was like, you know, 10% return on my money. they showed me, you know, their underwriting on how they, how they pick the deals, you know, 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. Like, is this something I could do? How do I systemize it? How do I build the SOPs out in 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 know, you have $100,000 and you can invest and make 10% on that $10,000 a year. And that starts to compound. And you can, you know, 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. 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? 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 them 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 $2.5 million of my own capital lent out currently. And, you know, 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, you know, employees or people that's helping me and let that business chug along and, you know, grow it that way. So that's what it's comprised of now. And my plan is, and 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 helox. So that's my fixed LTV, but I do have helox on a lot of my properties. And I could leverage some of that for lending. So, you know, my he lock is 8%, but I'm lending at 12 and 2. I'm making the spread on that money without taking out, you know, an higher interest loan right now. So I'm taking advantage of that. And that's how kind of I'm blending my lending business with my personal portfolio. So everything continues to elevate. Let me ask you about the syndications piece of this because, you know, we just launched a new product called Passive Pockets here at Bicker Pockets, which we're super excited about. And part of the deal there is people are getting crushed in syndications, right?

You know, we talk about multifamily. That's been, you know, 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 outpaced that. So, for example, in Austin, Texas, or Atlanta, Georgia, we might see even bigger. drop-offs in valuations. We're seeing rent growth very slow in the face of huge supply headwinds. And, you know, I'll sit here and say it, I'm going to do syndication deals and I'm going to get wiped on those. You know, you have a lot more experience, 40 syndications. You've been doing this a lot longer, starting with 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 in syndication in light of market

conditions. Have you been able to avoid most of that, those problems or any lessons learned? So one advantage I had is I got connected with a financial advisor that all he does is evaluate syndications and funds. Like he doesn't get his, 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 bring, you know, he would evaluate hundreds of deals a year and bring to his clients, you know, 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. You know, what's the typical fee structure you like? What's, you know, 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, you know, on track, on pace. I've had some dividends suspended to accumulate cash.

But across my portfolio of syndications, none of the, it's not, you know, 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 lessen to, other deals. And my main reasoning for that is not everybody has my risk tolerance. I just showed that my, 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 rather own, I 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. Yeah, I completely agree with that mentality. That's what I do with my portfolio. And, you know, I'm, I'm, I'm, you know, I'll go a little further. I'm, I'm scared, you know, of, of the market a little bit. You know, I'm, I have that fear at all times of like, things could go bad. Prices could drop, you know, all these things. And I'm not investing in, and in real estate to get to 150 doors. I'm investing to have a inflation adjusted at store of value and a reliable long-term income stream once the property is the levered or paid off over time. And so I completely appreciate that. And I'm, you know, I think that very few investors put a huge percentage of their net worth into passive investments. You know, I've talked to maybe less than five people who put perhaps more than 20% of their wealth into syndications. And, you know, but, but there is, 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 think like there's some, 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 the couple of markets that I'm in. I have good contracting teams I like working with, good systems in place. And then I believe in my underwriting and my lending company. And 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, you know, most of these deals, they have an IRA 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. I love that. What I'm hearing is, is you saying, I've looked into this and I've tried it out. There's a few people that I really like and will continue to invest with them based on, you know, 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 kind of 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'm, I like syndications for the diversification part. Well, syndications from a few years ago. Right now I'm not seeing any great numbers. Well, I mean, and what's, what's really important for people to know with syndications is track record is a huge thing, right? But you almost have to take track record from the last 10 years with a grain of salt. Like, you, you have people who are

very, you know, 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 going back and you're starting to see who was naked. And, you know, specifically, there was one deal that I did outside of my financial advisor. I thought, you know, 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 I, you know, full transparency. I put $100,000 with him. And that's the one deal that's for sure going bad. and, you know, 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, you know, I'll never, if I have that feeling again, I'll never do a deal with somebody

with that feeling. 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. there's 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 am really, 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 that's the same way. I wouldn't say the guy had too big of an ego necessarily, but, you know, the deal is 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 bigger pockets world, right? People build, become a successful real estate investors on bigger pockets 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 bigger pockets 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 bigger pockets. 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 will also have that shot at different returns, income, or potentially major upside with particularly skilled operators or better risk adjuster returns with certain operators. And people will try. I will try with five to 10 percent 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, taken away from what you're saying here. 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're only losing $100,000, which I fully recognize. what a stupid sentence that is. But like you're not losing a million. Yeah, it's like, it's like a range rover sport edition loss, not a full, not a full, the full price, the full size. Yeah. Exactly. And, you know, full transparency. I'm going to, if I really do lose it on, I'm going to be pissed because I've never like, I've been lucky enough to never have lost $100,000 yet. So that's

my, my first time losing that, you know, a six figure chunk of money. So I'm going to be pissed, but it's going to be that and not, you know, 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, you know, 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, you know, there's 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, you know, 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 that went well and not the two that failed, then for me, that's an automatic no. Like that alone.

Like if you're reporting and I'm only seeing the deals that did well, 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? 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 1031 into bigger and bigger properties and eventually get into probably some triple net commercial where, you know, 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, you know, 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, but big enough to where I can kind of buy off some of those triple net lease deals and have very stable, you know, returns from safe tenants like Starbucks, like Walgreens, like maybe it's an industrial building and it's ammo. So I think that that is kind of a growth play for me in the future and what I feel like fits within my strategy. Well, let's make sure, you know, 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? Yeah. So pretty much everything we talked about today is within the book. You know, I talk the book starts out real estate side hustle, the four strategies for passive investing and you know it's it's the things that I really believe in and I've done but uh you know it starts out talking about the spread uh between how much you make and how much you um you spend

and how you need to increase that you know as much as you can because if you're trying to invest passively the the the elephant in the room is you need to have capital like 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 can raise capital. You know, 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 kind of earn more at what you do and how I was able to do that within football and hopefully how it can translate to, you know,

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, you know, single family syndications, private lending and commercial. And really building out the SOPs to do it passively, because that's the key. And I kind of give out all the SOPs that I use for each, the softwares I use, the systems I put in place to streamline it. And, you know, to give me 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 because I do not want 100 deals. I don't want to 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 passably and the structures you need to put in place. Love it. Systems and reps, both kinds of reps here. Thank you so much for writing this awesome book.

For BiggerPockets money listeners, you can go to biggerpockets.com slash side hustle pod to get your copy and you'll get 20% off any format or addition of the book. If you go there, that's BiggerPockets.com slash 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. Thank you so much for having me. And I'll see you guys next time. Once again, we're super excited to partner with Devon Kinnard 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 slash 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 slash side hustle pod. Really awesome book, really awesome story from Devon Kinnard, really awesome expertise. and really admire the career that he had both in the NFL and in real estate. 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 patrillionaire, of course.

He's well on his way. All right, Scott, should we get out of here? Let's do it. That wraps up this episode of the Bigger Pockets Money podcast. He, of course, is the Scott Trench. I am Mindy Jensen saying goodbye, Cherry Pie.