How Affordable Housing Real Estate Deals Still Pencil Near Charleston | Clint Kelly

Clint Kelly (00:00)

You’ve got two trains of thought. You like Robert Kiyosaki who says, “Borrow, use that to borrow,” or Dave Ramsey, it says “Get out of debt.” And they’re like, who’s right? And essentially at the end of the day, they’re both right. They’re just speaking to two different audiences. And I think that’s a very important distinction for people to make, whether they’re a real estate investor or somebody just struggling financially. I think you’ve got to look just because you see something on Instagram or TikTok or whatever else,

doesn’t mean you’re the intended audience. That just means the algorithm feds you what’s coming your way.

Dylan Silver (01:04)

Hey folks, welcome back to the show. Today we’re joined by Clint Kelly, investor and realtor in Charleston, South Carolina. Clint, thanks for joining us

Clint Kelly (01:13)

happy to be here, man.

Dylan Silver (01:14)

What types of deals are coming across your desk these days?

Clint Kelly (01:19)

right now I’m kind of focusing in on the single family, affordable housing stuff. I’ve kind of gotten out of the middle of the road tier stuff just because at the end of the day, I don’t want to be competing with big builders who are buying down rates. I don’t want to, get stuck in a kind of like a bubble of housing that is just

Either people are not moving out of or it’s unattainable because the same house that’s six hundred thousand here, somebody else has it for three hundred, three percent interest rate that they bought for three hundred grand. And I’m trying to compete with builders, so I’ve just left out the middle of the road houses and I’ve dropped down into the affordable housing stuff, whether it’s rents, sell, flipping, any of that stuff. I’d say easier.

People will have a tendency to fall out of price points and fall down into price points when interest rates are rising much easier than they’re climbing up out of them. So I’m really focused in on the affordable housing stuff, trying to get people housing in areas that are easy to commute to work, workforce areas and just, kind of dialed it in. I’m not really blanketing everything else. I’ve kind of just gotten hyper focused on that segment.

Dylan Silver (02:26)

affordable housing, there’s several different things that immediately come to mind. And there’s multiple ways where investors are solving this problem. On the single family side, I’ve heard of ADUs, and I think I heard you mention that in the green room as well. And then I’ve also seen folks that are doing build-to-rent communities and tiny home communities. Where do you fit into this matrix?

Clint Kelly (02:47)

Kind of all the above. So right now I’m not doing any of the massive developments. I’m finding little pockets of areas that I really like, trying to find really dilapidated houses. Or another thing I’ve had a lot of success with is just an example. uh Like if I can find a house for $25,000, $30, $40,000 and it costs me $100,000 to renovate it, its ARV is $250, $275. Then I have the option to hold it, rent it, or sell it.

So I’ve got the equity. I never do max leverage. A lot of people are getting bit in the rear by that right now. and it’s one I’ve really kind of preached against through the BRRRR method. I’ve said, look, it’s gonna bite you in the rear when rents come down and values level off and sure enough, taxes go up. so it has. But I always like two exit strategies. So if I can buy right on that side of things and renovate, then it works out.

And sometimes I’ll look for zoning is always a very big thing for me because if I can buy a single family house or duplex on half an acre or three quarters of an acre that’s zoned HDR, I can build another house or another duplex on it as long as I’ve got the lot coverage. this one I just bought, one of them I’m just working on, it had a house with a garage on it and the guy had built it over

two TMS numbers. So I bought the whole thing, tore down the garage, renovating the house, and now I’m gonna build a single family on the vacant lot, which I basically got, have free and clear after it’s all said and done. So I’m really trying to get creative zoning, lot size, things like that, I don’t want to overcrowd an area, but density is important when you’re trying to make numbers work, especially in a

rate environment.

Dylan Silver (04:30)

ground up construction. This is a beast that’s separate from fix and flip and that you see people try to make that transition and they have difficulty going over that hurdle. as someone who’s done both, what are the things that you think are most important if someone’s starting out in the ground up construction space?

Clint Kelly (04:49)

it’s easy for them to jump into a renovation, they watch HGTV and they say, that’s awesome. It looks fun. they’re smiling as they’re painting, and that it only takes 30 seconds for that smile to go away if you do it real life. they start off renovating and they’re like, God, this is a pain in the ass. Man, I didn’t see what was behind the walls. I didn’t crawl the house. Like, what a nightmare. so I think

It’s a natural progression for people that have done it for a long time. Once you renovated enough houses, then you’re like, okay, I’ve got this lot. I’ve got this house that I can renovate and sell. And then I can subdivide off some of this other stuff, or I can just start buying vacant lots. And the ground up construction is a lot easier. The hard part here for me is labor. there’s a shortage of it, there’s a shortage of good quality labor.

And there was so much new construction going on for a while that the big builders were hogging all of it. Now, as the builders have stopped building and everything else, I think the labor pool is gonna get to a point where I’m getting calls again from guys that I haven’t heard from in a while, and they’re saying, Hey, you got any jobs, you got any work? And I’m like, Sure. so I think finding a way to build efficiently where you buy the lot.

It’s zoned correctly. you’ve obviously got to find out water, sewer, tap fees, all this other stuff. I think ground up construction ends up for people that do really high volume, ends up being the easier of the two. And once you get into enough renovations and dealing with, if you’re downtown Charleston dealing with the BAR, you’re like, good lord, this is awful. Or you’ve got restrictions and municipalities and things like that.

So then you just start looking for the ground up construction and you really are hands off at that point because you literally see the process from beginning to ending. There’s no surprises. You get a bid, get a couple bids up front. And then eventually you settle into a contractor who, if you’ve got this finish level of let’s say you’re doing subway tile around a shower, and in the houses I’m doing, I always do things in a market that’s declining nicer than everybody else around.

I want it to sell because it’s nice quality and priced relatively close to everything else that’s not nearly as nice around it. So once you get a builder who you can say, like these deals happen so fast sometimes that I have to make a decision ASAP. So if I’ve got that price per square foot with a certain level of finish in a product, it’s easy for me to analyze a deal on the fly.

And make it happen and say, all right, here we go. And we’re off to the races. Now every time I buy a set of plans, whether it’s from a designer or architecture, plans online or something like that, I always get the unlimited plans. So I can like mass produce that more than once. And my builder and I have gotten to a point where, we’ll literally chat once

twice a week and we’ll hey, what do you think about this? What do you think about this? I’m rolling with this. What do you think about these plans for this? What can we do to streamline the cost? So just you’ve got to have a good relationship with somebody you trust. The Instagram contractor is not the way to go. You need to get references because these guys, a lot of these guys who, they were tile guys and then all of a sudden they’re whoring out somebody’s license to,

Build something and next thing goes sideways. and then they underbid jobs to get more so they can get draws to rob Peter to pay Paul. So you just got to really be careful. But I think the natural progression for me was these renovations, and I’m still doing both, but finding ways to build new construction that right now, if you can get it in the affordable, kind of price points, it’s really appealing.

Dylan Silver (08:17)

Look

at the value add rehab side, existing structure, and you’re looking at scope of work walking into a project. Is there anything that if you see it, your hands off, you’re passing on that deal?

Clint Kelly (08:29)

I think there’s a correlation between price and work. And I’m willing to do anything. Like right now I’ve got one on James Island just over the bridge from Charleston. And it was dilapidated, floors caving in. But the price relative to the work was great. Like for instance, I bought it for let’s call it two seventy-five. The renovation budget’s one sixty. Contractors signed, the ARV’s six hundred.

We put in 24 new piers all new joists it is, it’s gonna be all new everything. so for the price, it’s worth it. There really isn’t anything that I won’t do relative to the work being done unless there’s a B A R Architectural Review Board that’s really gonna drag out the process because if I use hard money.

Then my carrying costs are fixed at 12 to 13%. If I use private money, I don’t typically have to pay a monthly note on it, but it’s a fixed 10% or interest rate. sometimes I’ll do simple interest just to make it more appealing. but it really just depends. Like everything gets back to money and how it’s financed. It’s not just the deal because you can apply these same concepts to anything and make it work. So it just depends how I finance it.

Who I use, and go from there. So my hard money guys are great. They really make it easy on me. I’ve got a track record and rep in a relationship with them where I’m not even having to send them photos anymore. I can just say, Hey, I need a draw. And next day it’s in my account. So it just makes the process easy. the private money, it’s usually in one or two draws that just held in escrow by an attorney.

I’ve even helped some guys set up self-directed IRAs, which if you’re familiar with those at all, then they can use that money to lend and get a higher rate than they typically would elsewhere. private money allows me to not have the monthly outgoing expenses of, a note, a payment on a note. So it’s just every deal is structured differently. and I try and look at it from a creative standpoint of like, all right, this deal on the surface is good. what’s a way to make it great? And how to fund it, how to finance it.

I think there’s just so many different options right now. These DSCR loans to refinance out of, I think they weren’t there when I started, or if they were not as popular there as they are now. So getting the traditional financing hurdle out of the way has really opened up a lot of avenues for having two exits. And from almost every deal I do has two exits, a refinance and rent or a sell option.

Dylan Silver (11:34)

we’ve talked about value add reno, we’ve talked about new construction. for folks who are in a position as homeowners and as potential sellers where they’re negative equity, where they may be facing foreclosure, do you interface with those sellers directly ever?

Clint Kelly (11:51)

I don’t typically like I’ll just put out feelers and I’m not the guy out there drumming up deals. I’ve just been doing it long enough that if I put out feelers and say, hey, I’m looking, then deals just start falling in my lap. And I think is technology, one thing I’ve noticed over the last let’s call it 12, 24 months is technology, data. Google’s known the importance of data, Facebook, Meta, all these companies have known the importance of data.

So to an extent, so much more than all of us that once you realize our data is the value. now that wholesalers and whoever else can say who’s buying here, and then I’ve bought 10 houses over here. Now they’re coming to me first and saying, Hey, we’ve got another deal. So it’s even easier now with the data because they’re finding out who’s actively buying here, who’s actively buying there.

what are they buying? And they’re able to really dial in my buy box without me even telling them what I’m looking for. So it’s being active in these markets really made it easier. without trying. So it’s pretty good. deal flow never been a problem for me. really just having the labor to keep up.

with whatever I can get, because I can make a few phone calls and get the money. I can make a few phone calls and get the deal. But finding the reliable contractor who’s willing to do it, for something that is reasonable and do quality work is the tough part.

Dylan Silver (13:14)

pivoting back to affordable housing, there’s so many ways where investors and syndicators and private equities trying to inject themselves and solve for affordable housing. I’ve talked with syndicators who are building LIHTC low-income house tax credit, apartment complexes, ADUs, if you’re looking at the single-family space, if you’re a builder and you’re building a tiny home community.

you’ve also got so much interest in the mobile home park space because oftentimes these are mom and pop owned. And there’s a value add opportunity there. for folks in your neck of the woods in South Carolina specifically, do you see any one of these asset classes picking up more steam?

Clint Kelly (13:58)

locally, let’s call it the Tri-County area. a lot of investors here are jumping into the mobile home stuff. They have been for years. if you’re not grandfathered into a lot of areas here now, you can’t add it. they’re just not real high on it. Like if you pull a trailer off in some places, you can’t put one back. So people are moving further out to do that. They’re going to areas like you said earlier, Alabama, Louisiana,

places like that, some of the more rural areas where you can get more land, more bang for your buck, once they get the dealer’s license, then they’re getting it for a little bit over cost. I think that’s been very big, it’s not something that’s picking up steam here locally. If anything, it’s probably dying off here locally. People are, increasing doing value ads on existing mobile home parks, kind of in the North Charleston area and some of those like that. But

It’s not a real big growth sector here. I do think it’s a very big play elsewhere. and I’ve talked to several people have really made a lot of money doing that. ADUs from a Charleston standpoint if they’re zoned to do it, that has been a very big thing. And Mount Pleasant, they actually limit the number of ADUs you can actually build in all of Mount Pleasant. I think it’s down to I can’t remember how many permits they issue a year, but

I’ve got several rental properties that have garages on them that I’m just gonna do studio ADUs above them and generate more income. I just haven’t built them yet. but I think that’s a great way for people, especially primary residence owners, to essentially knock out their mortgage if they want to. because these equity lines, until they really jump through the roof rate wise, if you could build an ADU for, a hundred thousand bucks,

Rent it for twelve, thirteen, fourteen, fifteen hundred bucks and just knock down that principle so you don’t get screwed down the road. And then once it’s paid off in let’s call it five, six, seven years, then you just start knocking down your mortgage. And debt-free life it’s not something people actually even think about. but it’s something I’m a big proponent of for people, especially kind of uncertain economic times, inflation.

Things like that. So a lot of people here are investing in mobile parks, just not locally. ADUs are a big, big draw. Affordable housing people aren’t building a lot of it around here. Just once you’re on the coast, it’s like being in New York. you’ve only got so much land to go with and it’s got to go the other direction. So these master planned huge communities are probably what the big developers are kind of focusing on here.

And then the affordable housing is getting pushed even another thirty, forty five minutes outside of that. So my projects right now are forty five minutes from Charleston at least.

Dylan Silver (17:04)

So now when you’re looking that far out, forty five minutes, is that still considered a commutable distance or with traffic, can that get

Clint Kelly (17:13)

Yeah, very very much so because so you’ve got Charleston, which is pinned against the coast, Mount Pleasant pinned against the coast, West Ashley, just outside of Charleston, James Island, same thing, pinned against the coast. But once you move up towards Hanahan Goose Creek, Summerville all of that stuff you can’t find anything, under four or five hundred thousand there. and that’s

considered just, 20, 30, 40 minutes outside of Charleston. But there’s a lot of people that work in those areas that can’t afford to live there now. So I’m going 30 minutes outside of there. And these cute little towns. Like there’s one thing that I think the state of Georgia has done phenomenally around the city of Atlanta. Let’s call it like an hour and a half outside of Atlanta where people are just tired of the traffic. Like screw this. They’re taking these cute little towns.

That have two story brick buildings, let’s call it four or five square blocks, and they have revitalized these small towns and they are drawing people in from all over. they’re gorgeous. you’ve got Monroe, which is the downtown area of Monroe, Georgia, probably 30 minutes outside of Athens, where UGA is. Watkinsville, doesn’t have that downtown area, but it’s just gorgeous. And that’s what I’d love to see happen in South Carolina.

the problem I’ve seen most of that is infrastructure. there was an area, Holly Hill, which Volvo just built a big plant and it’s fifteen minutes from Holly Hill. It’s gonna be a great area to live in one day, but the town can’t get its out of its own way. They don’t have the infrastructure for anything. So the commercial aspect of downtown, because they don’t have the people living there, can’t actually thrive. There’s no business that’s gonna

outside of a loan shark or, a injury attorney that’s gonna be able to post up in one of these buildings because they don’t have the immediate population to thrive with. So I think once you can get the infrastructure in, and it doesn’t have to be massive just to accommodate, a few thousand homes. And I know it’s tough. Like anytime you deal with the government, the bureaucracy, the

incompetence, the anything and everything about it is difficult. So I’m not saying that there is an easy solution to that. I’m just saying that it has thrived elsewhere. and hopefully that’s gonna be something that happens here too.

Dylan Silver (19:31)

If someone wanted to put an ADU on their homestead in the Greater Charleston area and they’ve never done this before, they’re not an investor. this is their on ramp to investing. Is this challenging enough where, they might need, to reach out to an attorney? Are there a lot of hurdles in this process or is it fairly strange?

Clint Kelly (19:48)

Forward. I think the first, without really shooting yourself in the foot with costing a major expense, is make sure you get a survey on the property. too many people, whether it’s a fence, you get a nosy neighbor who you piss off, they say your fence is over the line or whatever else. I think getting a survey is the way to start. Now that’s probably gonna cost you 600 to 2,000 bucks, depending on where you are, but you’ll know where the setbacks are. You can figure out what your lot coverage rules are.

Then call the municipality, call zoning, see if it’s zoned appropriately. see whether your lot coverage with the house you have will actually allow you to build something. in some instances, if you have a garage, you have a footprint that they’ll let you work off of. But if you don’t have one, then they’re not going to allow you to add a non-permeable structure. So I think you gotta get the survey, go to your municipality.

Find out how it’s zoned, what is allowed, what kind of footprint you can have, and then how far off the setback, the, let’s call it the side and the back or setback you’re gonna have, you’re probably not gonna put it on the front. and then figure out if you can position it. And if you can position something, let’s say five feet off the left setback and five feet off the rear setback, and you’ve got room for a 15 by 15 garage or a 20 by 23 garage with an apartment above it.

You can build it for, depending on where you are again, a reasonable amount that definitely fits more than likely under what it would cost to build and get an equity line if you have that equity in your property. they’re huge. they’re a huge asset. And I think builders could really get a good niche if they said all we build is ADUs. We know the ins and outs. We’ve got a surveyor that’ll

knock one out for us for X. if you’ve got a turnkey builder, I think there’s a niche market waiting for somebody to just go in and essentially knock it out.

Dylan Silver (21:42)

Is Charleston landlord for

Clint Kelly (21:43)

friendly? South Carolina is a landlord-friendly state, yes. Yeah. So it’s a nice place to live. It’s a nice place to own. The tax situation makes it a little more difficult being that like for instance if I was owner occupied the taxes would be 600 bucks. as a non-owner occupied it is 1900 so a year. So

it’s a big shift, but it’s a very landlord-friendly state. I’ve only had to evict one person in 20 years, but if you do, you just gotta go by the letter of the law. You’ve got to send the letter certified. you can also put them, mail it normal, however you want. File for eviction, go through the process. unfortunately, a lot of

Renters that are not great renters know the process and know how to drag it out. But at the end of the day, the tenants will get out if you have to get them out. I tend to be able to work with them and sometimes I’ll let renters pay twice a month life’s hard for everybody. I’m not trying to make it harder. I just want to give people nicer house than they could afford for market rents, not trying to gouge anybody.

I’ve got a renter that’s still paying eight fifty a month because I haven’t raised rent on her in so long. Just a nice old lady. they wouldn’t have a place to go. So it’s just is what it is.

Dylan Silver (22:53)

So if someone wanted to rent a single family home, a starter home somewhere in the Greater Charleston area, what might they reasonably be able to expect for

Clint Kelly (23:03)

For rents. Depending on your level of safety, your safe risk tolerance, I would say probably two thousand bucks on the low end. I’ve got some areas, some houses that are, seventeen, nineteen hundred bucks. But if you’re a single young female, you may not want to live in that area. but otherwise you’re looking two thousand, twenty five hundred bucks within a thirty minute radius of Charleston if you’re in a safer area.

I’d say a safe bet would be twenty five hundred bucks. Apartments you can find for a couple grand, not in Mount Pleasant or downtown,

Dylan Silver (23:35)

That’s huge. you’re talking about being able to rent homes for, under two thousand dollars. Are you seeing outside investors, out of state investors now increasingly interested in these areas?

Clint Kelly (23:49)

Yeah, without a doubt. you’ve got money pouring in from all over, whether it’s second homes or investors. But I think now that the base level pricing here is so high, a lot of the out of town investors have shifted to other markets. like me. I’ve already shifted to other markets. I still own a lot of stuff here, I’m not buying a lot here. If I stumble across a deal, I’ll buy it. But it’s just really hard for me to make them pencil now because

the purchase price relative to construction, relative to rents or sell just doesn’t work too often. Now, there’s a lot of wholesalers and investors out there pounding the pavement and they’re finding deals. But one thing we talked about in some of these REI meetups and things is like if we looked around the room two years ago and we look around that same room now, the people in that room are different. there’s probably still

10, 15, 20% of the people are still there, but a lot of people have gotten weeded out. So I just think that for people that want to live here and focus here, it’s tough to really get a foothold on buying correctly here, in the Tri-County area. it’s just tough. Now there is downward pressure on the market and Charleston’s insulated. we’re not immune to downturns, but we’re insulated relative to some places in the country.

Which is also why I’ve started looking at areas like you said, Louisiana, Alabama. I like Missouri, I like Ohio, I like Indiana. I haven’t pulled the trigger on anything yet, because I’ve got so many projects going on here. I’m starting to research those areas and figure out, okay, what’s happening? and the shift during COVID that a lot of people went to kind of conservative areas or coastal areas just to get a better quality of life.

Now those areas are unaffordable. And I think we’re seeing another population shift to the Midwest and to affordable areas because it’s unsustainable and people don’t want to be house-poor

Dylan Silver (25:40)

Yeah, there’s no question about it. I think there’s a lot of fair concern of, what is going to happen with the price of these homes keep going up and up. Then you have an aging population. When does the next buyer pool come in? Are they gonna be able to qualify for these homes? It still feels like that’s not right on our doorstep, but that is gonna be happening sometime in the next

Clint Kelly (26:01)

decade.

Right. And I really feel like if you’re an investor and you can make it through this next year or two, I think we’re still in that shift where rates have not driven pricing down enough to justify this mass buyer. I always joke around if you’re Uber drivers, giving you investment tips, you’re probably late to the boat in that market. because whether it’s the stock market, real estate market, Bitcoin,

The people in the know got in and moved on or got out. Now the general public always trails those markets. So it’s like, okay, if you’ve got everybody and anybody trying to jump into an investment class, like any of those three, just for example, is it time to exit or is it time to just pump the brakes, see what happens what’s the next move? so that typically means it’s inflated.

Dylan Silver (26:50)

We are coming up on time here. anything that you’re working on new projects or activities these days, also anything you’d like to mention directly to our

Clint Kelly (26:58)

audience?

I think one thing I love to reiterate to people right now there’s a lot of people struggling financially. Inflation through the last let’s call it COVID and everything else has not been great. And you hear people that want to jump into real estate or they’re worried about financial

planning or whatever else. And it’s like

You’ve got two trains of thought. You like Robert Kiyosaki who says, “Borrow, use that to borrow,” or Dave Ramsey, it says “Get out of debt.” And they’re like, who’s right? And essentially at the end of the day, they’re both right. They’re just speaking to two different audiences. And I think that’s a very important distinction for people to make, whether they’re a real estate investor or somebody just struggling financially. I think you’ve got to look just because you see something on Instagram or TikTok or whatever else,

doesn’t mean you’re the intended audience. That just means the algorithm feds you what’s coming your way.

so I think as people kind of work through these, struggling times or inflationary periods, I think you just got to look at what path you need to take. If you need to get out of bad debt, which is credit cards, student loans, whatever it is, figure out a way to do that. Dive into Dave Ramsey or combine two and say, all right, I’m gonna listen to Kiyosaki or some of these real estate investors.

And I’m gonna build an ADU which can add value to my property, as well as give me another income source. So I think it’s important for people just to kind of focus in, don’t get blinded by the overload of information that we see everywhere, and kind of really focus in on what you need to do moving forward to kind of insulate your family from downturns. And I think that’s probably

best advice I can give anybody right now.

Dylan Silver (28:39)

Clint Kelly, thanks for joining us today. Thank

Clint Kelly (28:41)

Yeah, man.

Dylan Silver (28:43)

you.