Co-Living Real Estate Investing: Turn One House Into 12+ Rental Rooms

Kyler Keel (00:00)
If you are after cash flow, but you don’t want the risk of Airbnb, I strongly suggest co-living because you get most of the cash flow you would from Airbnb, but it’s not nearly as overregulated as Airbnb, and you get a lot more control over who is in your unit. And one star rating will not put you under.

Now, I would strongly suggest if you want your business to go forward and hit the stars, create a positive experience and build your brand and never let go of it.

Dylan Silver (02:12)
Hey folks, welcome back to the show. Today we’re joined by Kyler Keel, an Oklahoma-based investor and owner of Lucky Save Rental Properties. Kyler, thanks for taking the time here today.

Kyler Keel (02:24)
Yes, sir, it’s my pleasure.

Dylan Silver (02:25)
Now, what types of deals are coming across your desk these days?

Kyler Keel (02:31)
I am usually looking for co-living, nothing below thirty-five hundred square feet. I’m not really worried about the bed count or the bathroom count. I can create those. As long as it’s got thirty-five hundred square feet, I can usually come up with somewhere around somewhere between, depending on the exterior walls and load-bearing walls, I can make roughly twelve to thirteen bedrooms out of it.

Dylan Silver (02:55)
Let’s talk co-living. First, for those who may not be familiar with it, what is co-living?

Kyler Keel (03:01)
Co-living is, it’s a number of things. It depends on the investor and what they’re trying to, where they’re trying to go with it. Me, I’m trying to create a community living where it actually brings people together, simplifies their life, and allows them to deposit what they’ve got left after their rent besides food and transportation to get up in life to where they can buy their own home, get to the point where they can afford to rent their own place out, that’s a whole house, and do the traditional method. And it’s an opportunity to get lonely people that are new in a town or just down on their luck to where they start socializing and helping each other build up the morale.

Dylan Silver (03:50)
Amen to that, honestly. We need more people who are looking at community building as investors. You’re in central Oklahoma, if I’m not mistaken. So when you’re looking at deals, what are the towns or cities that you’re looking at or around?

Kyler Keel (04:05)
I’m looking around Moore, Norman, Shawnee, Yukon, and Mustang.

Dylan Silver (04:11)
When you’re looking at these deals, are you looking for opportunities where there may be distress? Either, you know, someone that’s looking to sell for cash, are you looking on-market, off-market? Are these ever like pre-foreclosure deals? What is the scope of where you’re finding these opportunities?

Kyler Keel (04:28)
Now, most of my look is done on the MLS, especially since I’m a realtor on the side. But I do associate with a lot of different investors in Oklahoma City area, especially through the Oklahoma City REIAs and the MP REIAs and, yeah, different associations I got around here. Which opens up a lot of possibilities for off-market, but a lot of the off-market that I’ve noticed that are investor-friendly are usually going to be smaller homes between 800 to 1,500 square feet, which is obviously not big enough. Now, if you can get in to where you got a lot of networking going on with other realtors that are in the area, other investors that have a house that they felt was too big, I’m right there to scoop it up.

Once I scoop it up, I start, or before I even scoop it up, I start looking at not just the pictures, but I want to see the schematics, because that’s going to tell me where your load-bearing walls are at, where the plumbing is already located, where I can get creative, where I can create bathrooms, bedrooms, and living areas that they typically call common areas in code. Now, once you figure that part out, if you’re not ready to manage it, you need to, before you even start in this area or this scope of investing, you need to make sure that there is property management in the area, which in central Oklahoma, there is one or two, but they’re relatively new and not well known. So there’s no doing research on them to see if they’re good at it or not. So you could lose a lot of money at it. But if you’re willing to put in just a little bit of work and once you start to figure it out, the co-living method is actually less risk, because when you rent out a whole house, you’re dependent on one tenant, one door. They leave, you’re out, and you’re paying that mortgage, paying the taxes, you’re paying the insurance, and you have nothing coming in to replace it. When you do the co-living method, especially when you’re looking at deals like what I’m looking at, which are thirty-five hundred plus, I can lose three or four tenants and I’m still cash flowing, as long as—well…

Dylan Silver (07:42)
When you mentioned losing tenants, right, thirty-five hundred square feet, how many tenants would be able to fit in a property that size?

Kyler Keel (07:51)
It depends on the schematics of the house where the load-bearing walls are at and where the plumbing’s already at, depending on what you want to put into the rehab. But you can put anywhere between 11 and 12, maybe even 13 if you get really creative, tenants inside there. And you can have anywhere between 11 and 13 bedrooms and anywhere between four and thirteen bathrooms with them, depending on what you’re wanting to do.

Dylan Silver (08:21)
When you’re looking at that, would this be a situation where you’re buying it and it’s already zoned like multifamily, or would you have to be changing the zoning in order to get that into…

Kyler Keel (08:34)
Had one where the zoning wasn’t correct. And it wasn’t very hard to get it fixed because the cities in this area love it when you’re trying to build up communities. They love it when you’re creating jobs, creating communities, and when you’re giving people a helping hand. And so it’s not very difficult to get it registered as R-3 or possibly even commercialized, depending on the neighborhood.

Now, you want to avoid HOAs, because HOAs will fight you the entire way. So that’s another thing that I look out for is I need to make sure there’s no HOA in the area. I need to make sure that the city is friendly towards co-living, which the cities that I’ve gone into are very friendly towards it.

Dylan Silver (09:25)
Wanna pivot a little bit here and talk about what the full cycle from acquisitions to fully occupied looks like. When you’re acquiring these properties, are they typically in a single-family capacity and then you’re having to rehab it and add the, you know, however many rooms to get to eleven, twelve, or thirteen? Or is it already a co-living situation and then you’re creating, you know, value-add opportunities there?

Kyler Keel (10:34)
Two of them were regular single-family. And the last one that I just bought, I got lucky and it was already taken care of for me. It’s already registered for multifamily. It’s registered as R-3 in the city of Shawnee. And after I got into it, which my realtor at the time, because I’m a relatively new realtor, she knew exactly what I was going for. And her name’s Alexis Nero, very good realtor for investors. She knew exactly what I was looking for, found it for me, and I got it. And what I got was a main house that was 2,400 square feet with a mother-in-law suite sitting on top of a garage. And that one was 700 feet. Now the garage, once I get all the way through everything, I’m converting the bottom part of that garage apartment into another apartment where it’ll be two more bedrooms. I’ve got a four-bedroom house over here in the main house that’s got the possibilities to create another bedroom inside of that one. So what I was looking for was anything at that time, I was looking for nothing below 2,500 square feet. I took it up to thirty-five hundred square feet because I got my feet wet and I’m ready to do bigger deals. But…

Dylan Silver (12:03)
When you mentioned, you know, working with this realtor and then also the type of deals that you’re looking for and increasing the square footage, one of the things that ran across my mind is, you know, when folks are looking to get into co-living, are there any immediate like red flags or mistakes that they could make being a novice?

Kyler Keel (12:23)
Absolutely. Especially when you start trying to skimp on the expenses for furniture, doorknobs, thermostats, anything that can raise your net expenses. Anything like leaving the control of the HVAC system, leaving that to where it’s not monitored, you’re gonna have them starting to fight over what temperature the house is.

And then you will have tenants—and I’ve had this situation happen to me, it’s been a learning curve—where they will turn it on the on mode and they’ll leave it on that for eight months and it never shuts off. Well, after it got really hot outside and they left the heater on because they were gone for about two, three months, because I wasn’t monitoring them and making sure that they were still in the house, they left it on, never said anything to me, but they kept paying the rent.

So I had no reason to go over there. Well, once that happened, I went over there because they gave me a call and they said, “Man, it is just hotter than all get out in here. We need you to do something about this HVAC.” Well, got in there, got my HVAC guy, which is another thing. You need to have investor-friendly contractors everywhere, not just one set, you need two or three sets of them. So when one pulls up sick or one decides to retire, you got one to lean on. But as soon as he got in there, he said, “Yeah, your circuit’s fried, the fuses are all gone, and we gotta replace the coil.” And I was like, no. So that one tenant that did that to me cost me more than she made me inside three months.

Dylan Silver (14:12)
That’s a crazy, crazy story. And we think about having a heater and the heat now competing with the AC. You don’t want that, that’s for sure. There’s certain considerations that I’m thinking about as well. You mentioned doorknobs being one. You know, what about simply like access to the property and safety and security, right? You have to have the ability for people to have the same key or keep a door or access open. What’s been your approach there?

Kyler Keel (14:45)
Well, I got Wi-Fi Smart Philips electronic doorknobs. I can reset codes from my cell phone, no matter where I’m at. And I did that because I had one tenant that said she lost her key while she was hanging out with some guy that apparently scared her. And in the middle of the night, I had to make a trip down to the hardware store, which inevitably ended up being closed. It was hopeful, maybe they’re still open. No, not still open. But very next day, changed out the doorknobs. I said, “Man, I can’t let this happen again.” Started paying attention to a guy named Sam Wegert. He does a lot of co-living. And that was one of his little tidbits that he threw there was electronic Wi-Fi operated doorknobs. And so every doorknob got switched out within a couple of days of that.

Dylan Silver (15:39)
I wanna ask you about a similar type of deal or a similar type of asset class, which is these co-living situations that are short term. We had the CEO of PadSplit, gentleman’s name is Atticus, on our show here. And you know, they might do a PadSplit for a property near an airport, to give one example, right? So transient people in and out. You might have lots of people living in the same place. If folks are looking at more of a short-term co-living situation versus let’s say a year-to-year lease, do you have a perspective on who’s gonna be the right investor for something more short term versus who’s gonna be the right investor for something long term, year-to-year lease?

Kyler Keel (16:26)
If you do short term, you need to get ready for a lot of footwork. You need to have good cleaning people that are ready to clean the room out, get everything situated. You’re gonna need to know how to do a quick turnover, get deposits sent back out on the regular. You’re also gonna need to have a very good system for doing move-in inspections and move-out inspections. Because in the state of Oklahoma, it’s very hard to charge the tenant for anything in the common area, because they can sit there and say—it becomes a he-said-she-said deal because you got several other people in the area. Now you can remedy a lot of it by putting cameras into the unit, into the common areas and on the exterior. But the problem is with that, especially in Oklahoma, because it’s such a new idea for co-living to be out here, you will lose a lot of your tenant base just by putting cameras in the common areas because they don’t like seeing it.

Dylan Silver (17:33)
When we look at opportunities to create affordable housing, I’m actually shocked that there’s less people or not as many people talking about co-living. You hear people talking about like mobile home parks, RV parks, workforce housing, and affordable housing and LIHTC housing. Co-living, though, is a great opportunity. Do you think we’ll start to see maybe more investors in this space, or do you think people have their attention at other segments of real estate?

Kyler Keel (18:07)
I believe that once I can get really rolling with it and get about ten more of them, and I can show other investors how well it’s paying off and about the risk being not neutralized, but just about neutralized, ’cause I’ve had a lot less problems out of my co-living units than I have had out of my traditional method living units. Because, as I said earlier, a tenant leaves, you’re holding the buck. You have one tenant leave in co-living, well, you’re still cash flowing, and you’re cash flowing good. And the last OKC REIA I went to, which is a Real Estate Investors Association meeting, several of them were just absolutely turned off to it. Now I had one guy in there that he started actually listening to me. I started showing him where the numbers were at.

And he said, “So how many evictions have you gone through?” And I said, “I’ve gone through two.” And they were quick, they were easy, and it was cheaper than a regular eviction would take. Because especially once you can get large enough and the state and the city and the local municipals, they don’t want to lose your tax dollars. So the moment you start showing that you have some real footing in the area, they start to loosen up on you and they’ll start working with you. You can start turning some of your co-living units into rehab facilities, halfway housing, all sorts of things. The possibilities for co-living are endless.

Dylan Silver (19:50)
Let’s talk about that because you mentioned, you know, not wanting to lose your tax dollars. That’s sometimes one of the barriers to some of these other affordable housing models. Like people talk about, you know, why aren’t there more mobile home parks being built—and hardly any. And one of the reasons is, well, not always the best stigma, and then also, too, it’s not like it’s a huge source of tax revenue in many cases. But with a situation of co-living, it is really a net, net, net positive, right? Because you have not a huge disturbance to the community. It’s not like you’re building a multifamily apartment complex, you know, $50 million apartment complex. In many cases, you’re able to reposition existing structure. Then you’re able to provide affordable housing for people in a community setting and tax dollars for the community. I mean, as an outside perspective looking in, it’s a win-win-win.

Kyler Keel (20:48)
Yes, but when I talk about tax dollars, the more people that I can pull off their system, the welfare system, because the method or the route—

Dylan Silver (20:59)
Yeah.

Kyler Keel (21:00)
—the route that I take with it, it becomes so affordable for people. It’s still cash flowing, and its cash flow is amazing. So don’t get me wrong, I’m not cutting a dime for myself to save someone another dime. I save them a dollar, and I make me about five.

So, but it’s so affordable for them, because now instead of having to worry about 10 different bills, three different utilities, a rent check, and you’re having to worry about paying for your paper towels, your toilet paper, and all your necessaries in your house, you’ve got one bill, housing, which takes care of all your utilities, takes care of your paper towels, your toilet paper, your laundry soap, your dish soap.

And you don’t have to worry about buying your furniture, including your bedrooms. You don’t have to worry about getting kitchen utensils or the cookware or any of that stuff. It’s all set up for you. You got one easy bill and now the only other things that you’ve got to worry about is paying for transportation if you’re not within walking distance of where you need to be, which is usually where I try to buy, is within a reasonable walking distance of a main area. But, and then you gotta pay for your food.

Dylan Silver (22:16)
When you’re looking at new opportunities, right, and you’re looking at the scope of work that may be required in order to create additional rooms and the timeline in order to get this thing up and running, it’s gonna be different on each property, but are you trying to acquire property and have it fully occupied in a certain period of time?

Kyler Keel (22:39)
I prefer to get everything rented out no later than September. And that is going to be because no one really wants to—no one’s looking during November, December, January, or February. And so I could be sitting holding onto a room vacant for prolonged amounts of time. Now, usually even in the winter months, I will, because it’s fully furnished, there’s no move that they gotta take care of.

But most people aren’t even looking during those months. So I could be sitting on a vacancy for a month and a half. And which isn’t a big deal because I’m still cash flowing, but that’s another individual that I could have helped. And in return, they could have been helping me by creating more cash flow.

Dylan Silver (23:27)
So really, you know, if you’re looking at deals, a great time to buy would be end of spring, beginning of summer, have that thing, you know, fully occupied going into September. Yeah, that’s the rhythm there. You know, when folks are purchasing deals that are thirty-five hundred square feet and they’re making it into a single family, at what point in time is a good time for them to look at co-living? Do you have to be a co-living operator, or can someone go from, you know, single-family long-term rentals to then say, “You know, I’ve got this home, it’s a larger home, I’m gonna transition it into co-living”?

Kyler Keel (24:04)
That’s what I did. I started out in single-family homes, and I was cash flowing about anywhere between two hundred and fifty to five hundred bucks a month. And that is not a route to pull out of your W-2 income, because that can take ten to twenty years. And at that point, you’ve already got a retirement coming in. So I was like, I need to scale, scale faster, but safely. Because if you scale too fast doing most methods, you’re gonna catapult, you’re gonna scale right into the ground.

Yeah, so, but the co-living method, if you just do your research, learn how to operate it at least sufficiently to where you got the doorknobs in place—and my gosh, biggest heads up: don’t try to ChatGPT your own contract. My gosh. Someone looked at me—I was sitting here and I was talking to somebody that was jumping into that field, and I looked at him, I said, “Man, you know, OREC, which is Oklahoma Real Estate Commission, they’re all about traditional family rentals. And I like to get all my forms from them up until I went into co-living. And unfortunately, they don’t have a co-living tenant agreement.” So I started asking around, who’s got agreements, who’s got lease agreements, and this one guy said, “ChatGPT it. That’s how we do all of our contracts.” And so what I did, because I’m not, as I said, a tech connoisseur or anything like that, I ChatGPT’d it and came up with a lease agreement. I set up an appointment with an attorney, and I saved it and I put it in front of the attorney. I said, “Will that work?”

She had this look on her face like I was a dumb puppy. And I was like, “I haven’t done it yet.” And she said, “Well, if you do this, your name’s not even on there. And what if they’re late? That’s not even in there.” And then she started bringing up article after article after everything that was wrong with it. And I was like, so these people had told me to do that, they’re looking at a lot of trouble, because some of that stuff in there was illegal.

Dylan Silver (26:31)
How much, you know, if you’re looking to have an attorney-written co-living lease, what’s that gonna run you, you think?

Kyler Keel (26:38)
It ran me, because that’s the route I took, it took me about thirteen hundred dollars. Thirteen hundred dollars, and I’ve got a contract that is malleable, and I can use it over and over and over again. Now, eventually, once I get more than—I think the number that I got told was once I get about 15 doors, I’m gonna wanna change the whole game up.

And that’s going to be, I need to hire property management. I need to set up a lease agreement with property management. And then the property management team is actually going to set up what’s called club membership. Once you have the club membership, you’re no longer dealing with tenants or lease agreements. Everything’s a membership base, which astronomically lowers your risk. Because if you had a tenant that doesn’t want to pay, it’s just like a gym membership. If I don’t want to pay the gym membership, the code won’t work no more. So…

Dylan Silver (27:35)
That’s really interesting.

Kyler Keel (27:37)
…into it, and I’ve talked to more than one attorney about it. And they said, “You’ll be jumping into a gray zone. I would strongly suggest, out of respect to the court, go ahead and do an eviction, but you’ll never lose the eviction.” So…

Dylan Silver (27:48)
Very interesting, right? And then you also might have people who say, “Yeah, I haven’t paid. I’m just gonna leave on my own accord, because, you know, this is a club membership and not a traditional lease.” Very, very interesting. We are actually coming up on time here, Kyler. Any new projects or activities that you’re working on these days? And then also anything you’d like to mention directly to our audience here?

Kyler Keel (28:11)
If you are after cash flow, but you don’t want the risk of Airbnb, I strongly suggest co-living, because you get most of the cash flow you would from Airbnb, but it’s not nearly as overregulated as Airbnb, and you get a lot more control over who is in your unit. And one star rating will not put you under.

Now, I would strongly suggest if you want your business to go forward and hit the stars, create a positive experience and build your brand and never let go of it.

It’s just like my Lucky Save Rental Properties. I want my tenants, every single last one of them, the good ones, the not-so-good ones, all of them—I want them to feel like they were lucky when they found me and I saved them from whatever financial situation they found themselves in.

Dylan Silver (29:09)
Amen to that. Kyler, thank you so much for your time today. Thanks for joining us.

Kyler Keel (29:13)
Appreciate you, too. Thank you.