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Show Summary
In this conversation, Bryan Carleton shares his insights on creative financing in real estate, discussing various investment strategies, the importance of community impact, and the growth of his property management business. He emphasizes the significance of networking, setting clear goals, and overcoming challenges in the real estate industry. Bryan’s journey highlights the value of a supportive team and the need for active involvement in managing investments.
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Investor Fuel Show Transcript:
Bryan Carleton (00:00)
We have a great opportunity to be at the VA loan. ⁓ And we knew we wanted to start doing investing, so we didn’t want to buy just a single family house. So like a lot of people, we house hacked a duplex. We bought that no money down and we rolled in the closing costs even. So when we bought that house, that duplex, we literally received money to buy that house.And it just kind of strengthened our belief in real estate. I know that that is a unique situation to receive money at closing, ⁓ it really gave us a lot of drive to keep pushing forward.
Michelle Kesil (02:08)
Hey everybody, welcome to the Investor Fuel Podcast. I’m your host, Michelle Kesil. Today I’m joined by someone that I’ve been looking forward to chatting with, Bryan Carleton, who’s been making serious moves as a real estate investor and runs a property management business. So, excited to have you here on the show today, Bryan.Bryan Carleton (02:29)
Hey, thanks for having me.Michelle Kesil (02:31)
Of course, think our listeners are going to take something away from all of your knowledge around different creative financing and all of the ways that you’ve invested before. So let’s dive in. First off, for those not familiar with you and your world, can you give us the short version of what your main focus is?Bryan Carleton (02:53)
Yeah, absolutely. ⁓ So I’ve been investing in real estate for about 10 years. Main focus for the first eight years was buy and hold, buy, fix and hold, and just a couple of flips, but I try not to do that. And then over the last couple of years, I’ve shifted into ⁓ adding property management, and now we’re looking at ⁓ a larger acquisition coming up in the next year.Michelle Kesil (03:18)
Awesome. And what markets are you operating in?Bryan Carleton (03:23)
strictly in Maine and I try to invest in mid-coast Maine and I try not to venture too far out of there although sometimes I do but everything is strictly been in Maine.Michelle Kesil (03:38)
Okay, cool. So how did you get started with investing?Bryan Carleton (03:46)
Yeah, so both my wife and I are Army veterans and we took the path that a lot of veterans take.We have a great opportunity to be at the VA loan. ⁓ And we knew we wanted to start doing investing, so we didn’t want to buy just a single family house. So like a lot of people, we house hacked a duplex. We bought that no money down and we rolled in the closing costs even. So when we bought that house, that duplex, we literally received money to buy that house.
And it just kind of strengthened our belief in real estate. I know that that is a unique situation to receive money at closing, ⁓ it really gave us a lot of drive to keep pushing forward.
And that’s how we started, was the duplex and the VA loan.
Michelle Kesil (04:31)
Awesome. How were your first investments? How did it go? What did you learn from initially getting started to where you’re at now?Bryan Carleton (05:32)
Yeah, so when we first started ⁓ everything was not all roses and rainbows butBut like I said, we did believe in real estate quite a bit. ⁓ And we learned that it was a lot more work than we originally thought. ⁓ Both physical and mental. We bought a place that needed a lot of actual work. So we spent a lot of nights there. ⁓ And we really got our hands dirty and did a lot of that work ourselves. We learned a lot there. And then as we went, and I think a lot of people run into this, it’s okay, you got the first one.
even if you’re not a veteran, even if you don’t use the VA loan, you’ll use the FHA probably, three and a half percent down. And that’s a loan that a lot of people can do and pull off and you can go up to a four unit with that. So then what we learned was, what everybody learns is how do you do the next one? ⁓ And then so we started looking into different creative financing and commercial loans and that’s ⁓ where we grew from there.
Michelle Kesil (06:36)
Awesome. Can you expand on some of that creative financing and yeah, like some of those solutions that have worked for you?Bryan Carleton (06:47)
Sure. So I’ll go VA long, duplex, and then our next one was FHA. So a lot of people might start there. We bought a four unit FHA. And then after that, I found a…a place that needed a lot of work. So we had recently listened to a lot of different real estate podcasts and we learned about the burr method and we did that. So we found a duplex, needed a lot of work and for that one we used hard money. ⁓ We raised money from two friends so we also had investors and that was basically our down payment. We used hard money for the rest of it and some repair costs and we did a very traditional burr over there where we completely renovated
one unit and then left the other one alone. We had a renter in there so they were covering our carrying costs which was great. Put a renter in the upstairs that we had just renovated and ⁓ refinanced out of it just like a very traditional burr. And the great thing about that was we pulled a lot of money out of it and we were still able to cover that mortgage. We paid off our two investors with a very good premium. I think we gave them 20 % on their money and it was under a year so their actual
I was probably I don’t know 30 % so they did really well they were very happy and I still hold that property today. So that was a burr I think a lot of people know about that one.
The next one we did was a six unit and we did a creative financing there by having a seller financing in a second position. ⁓ And I think that this is one that not a lot of people know about. So I went to my commercial banker and I said, we have this place. It was an even half a million dollars. said, I don’t have 20 % down. ⁓ Can we do seller financing for 20 % of it? And they said, yes, absolutely.
first
position 80 % and then the seller carries second position 20%. So that’s the only tricky part the seller has to be comfortable being in in second position. Everything with the seller is just completely negotiable between you guys. We ended up doing a 10-year loan, amortized 10 years and I think 4 % interest rate and then the bank at that time was four and a quarter so it’s kind of lined up pretty well.
And ⁓ we did come out of pocket, but not for the loan. So the loan is the interesting part. We did some renovations over there, but we’ve left that one alone. We didn’t refinance it, but we’ve gained a lot of equity on positive over there. ⁓ After that, we went back to the same commercial lender and did a few more interesting loans.
One was a no money down commercial mortgage, but it was for a three unit that needed a lot of work. And we just put together a package of saying all the renovations we were going to do and then coming up with an ARV and after repair value. And they are willing to loan you 80 % of whatever the ARV is has to be certified by an appraiser. But we were able to do that. We showed up with the appraiser and walked him through the building and told them all the stuff we were going to do.
We’ve a nice binder, we can show them all the stuff. And we can get a loan for 80 % of that and then you just subtract the purchase price and then that’s what you have left to do your renovations. And as long as you can do those renovations for whatever is left, ⁓ it’s no money down. And ⁓ I don’t know if they still do that. That was, you know, five years ago when the market was a little, when the banks were a little looser. I know that they’ve tightened up, but.
And then the other creative one was a flip. I said I try not to do flips, but same commercial bank ⁓ and same deal with the bank. But the other cool thing about that commercial bank was they’ll do 12 months interest only, even if it’s a flip.
So it’s just way better than hard money. It acts as hard money. It’s no money down. They give you the purchase price. They give you the renovations as long as you’re only going 80 % of ARV and sell it within a year and you’re not paying any principal. So that was really great.
Michelle Kesil (11:40)
Awesome. Yeah. Go ahead.Bryan Carleton (11:41)
⁓ There was one more, ⁓ but sellerfinancing that I think a lot of people knew how to do. Yeah, we had one more flip. was only one of, or we’ve only done two flips.
Michelle Kesil (11:47)
Yeah.Bryan Carleton (11:52)
And this one was seller financing, sort of. So he was willing, he knew I wanted to flip it. And he carried half of it, no interest, no payments at all. He said, just give me the other half when you sell it. So I went to the same friends as before, raised some money, and we just did the whole thing cash. I gave him half the purchase price, and then used their cash for light renovations, put it on the market, sold it. Everybody was happy.⁓ I think we paid similar interest there to my investor friends. We gave him a really good payday and the seller was happy because he was just sitting on the place anyway.
Michelle Kesil (12:30)
Amazing. Yeah, I love how you had so many different solutions and were able to really get those investments supportive for everyone that was involved.Bryan Carleton (12:37)
youYeah, yeah, it’s important, you know, and I’ve had the same people for a long time around me.
Michelle Kesil (12:49)
That’s awesome. So what do you feel are some of the main keys that have helped your business run smoothly?Bryan Carleton (13:01)
I…I gave up the idea that it’s passive income a long time ago. So I’m really, really involved even in my normal long-term rentals, which is what we aim to do is all long-term rentals. ⁓ I stay really involved. have ⁓ an inspection checklist. We do our normal biannually inspections. I’m very involved in my finances, even though everything is on auto pay. I track everything. And that’s really helped keep me
on track and I would definitely be remiss if I didn’t mention my wife who has put up with so much through all the investments. ⁓ I had to go away for some training for a while and she completely handled ⁓ the one that we did the hard money with. ⁓ So I put a lot of stress on her dealing with all of that but she has helped the business run smoothly ⁓ and given me that freedom.
Because she’s also a nurse and we have a family. So being a nurse, she gives us health care and that allows me to concentrate on real estate without having to come out of pocket for health care. And then I also have a very supportive family who’s helped me out a lot. Right from the first one, actually, I had my parents and my brother there. ⁓ Hang and sheetrock. So yeah, I have a very good support system around me, which helps a lot.
Michelle Kesil (14:33)
Amazing that’s so beautiful to hear. I love that so What are you most focused on? Solving or scaling next when it comes to your businessBryan Carleton (14:37)
Yeah.⁓ Yeah, so we are looking to scale. looking to purchase a trailer park coming up. ⁓ And it’s in Maine because I said everything I buy is in Maine, but ⁓ I can’t say exactly where yet because it’s not on the market. But we’re looking to close by the end of January. ⁓ So we’re putting together a purchase and sale agreement now. And we’re really, really excited about turning that around. And the things that we’re focused on.
is solving solutions for for our local communities and us ⁓ because i think that there’s a lot of potential here with this trailer parking we can we can actually add a lot of paths to it and add affordable housing to the community ⁓
And you know everybody wins just like before. know obviously at the end of a 25 year period I’ll own a trailer park free and clear and my investors that are coming along with me are going to get a very good return and the community ⁓ is getting more affordable housing and then obviously we’re growing the property management side at the same time.
Michelle Kesil (16:40)
Yeah, absolutely. Are you doing property management for other investors or what does that look like for you?Bryan Carleton (16:52)
Yeah, so I have self-managed for 10 years and you know a little over a year ago I started a property management company with my old ⁓ real estate investor. I’m sorry with my real estate agent. ⁓ We started a property management together company together and we do property management for other people and it’s growing really fast and I think coming from being a self-manager has helped a lot because ⁓It helps me know exactly what my owners are looking for because it’s exactly what I’m looking for as an owner. our interests are really, really aligned there.
Michelle Kesil (17:32)
Yeah, absolutely. That’s awesome that you were able to add that vertical to your businesses and really support people through their investments.So let me ask you this, every business owner has those moments where things get real, maybe a deal goes sideways or you have to pivot fast. Would you mind sharing one of those experiences for you and how you overcame it?
Bryan Carleton (17:59)
you⁓ yeah, so
Let’s see what went side. ⁓ yeah, actually have a very good one. ⁓ I attempted to start a ⁓ business doing exactly what I was doing before buying and holding. ⁓ I thought I could scale it by bringing in more people. ⁓ I thought I would have a person who just raised funds, a person who would find deals and kind of help us close them. Somebody else that would manage the properties and or find property managers. And then we had a legal person as well.
Michelle Kesil (18:12)
Excuse me.Bryan Carleton (18:39)
⁓ We were successful in forming that partnership. We were successful in finding a building and we almost funded it. So we had a purchase and sale and we were going through the process and we couldn’t cross the finish line funding wise. ⁓ So the way we pivoted…is that it might be very helpful to other people. ⁓ There’s a loan type called cross-collateralization. it just, what we did is I put up my own building, the equity that I have in another building, and that covered a lot of the down payment in building B. And we were able to cross the finish line there. ⁓
So yeah, that was the pivot and that’s how we crossed the, how we made that happen and we still own that building to this day. But it’s also still tied to my original purchase, ⁓ which was not the goal. We didn’t, we didn’t want to do that, but cross collateralization can be very, very powerful. Cause in my point of view, ⁓ it’s better than doing a refi and it’s definitely better than selling because you don’t have a lot of the fees and you can still use that equity to go on to the next one. ⁓
Obviously
the danger is they’re both tied. So if building B goes down for any reason, the bank is looking at building A, of course. But as long as you purchase right, ⁓ you’re okay. And the bigger you get, the easier it becomes, the less you care about vacancies. Once you cross…
Once you cross 15 units, I’d say 2, 3, 4 vacancies don’t really matter so much. You can still cover the mortgages. It’s not like when you first start and have a duplex. You have one vacancy, you’re down 50%. So yeah, just keep on pushing through and as you scale it, it actually gets a lot easier.
Michelle Kesil (20:34)
That’s awesome. Yeah, such a unique strategy. So that’s probably helpful for people to hear as well. So.Bryan Carleton (20:43)
Yeah.Michelle Kesil (20:46)
When it comes to growing your business, building your network, creating new relationships, what are some of those things that you feel have made the biggest difference for you?Bryan Carleton (21:00)
⁓ Probably local meetup groups have helped a little bit. I’ve met some really great people through there. ⁓ I met ⁓ my CPA now who is fantastic. ⁓ And then…There was this saying, I think on one of the podcasts, know, rock stars know rock stars. forget which one that’s from, but it’s true. ⁓ If you start to find people around you that are the best at what they do. ⁓
obviously ask them for recommendations for the other things. So I found my real estate agent, ⁓ so I always ask her for recommendations to meet other people. ⁓ And then continue to network, to find the best people, network through the best people that you already know. And eventually your network grows with the best people that you can find.
Michelle Kesil (21:56)
Yeah, absolutely. That’s so important to use the resources around you and ask those already in your circle and create new relationships that way.Bryan Carleton (22:09)
Yeah, exactly.Michelle Kesil (22:11)
Are there any goals that you have for where your business is heading or for growth?Bryan Carleton (22:20)
Yeah, ⁓ there is a book, I’m drawing a blank now, about setting your goals. Vivid Vision. I read Vivid Vision. ⁓about two years ago and it recommends you write out your goals. So, ⁓ highly recommend doing that. So yeah, my goals for the property management side, by the end of the year, we want to be up over 150 units.
And on the investor side, have stopped purchasing any small multifamily or anything. We’re just really focused on this one trailer park purchase. So I’ve kind of put everything else on hold. So yeah, that’s my goal. I want to close that by the end of January and I’ll be really happy. And then the goals following that are also probably going to be put on hold for at least six months and put all my focus and energy into the trailer park, assuming that we close.
If for any reason we don’t close, the goal will remain the same. We’ll be purchased something else larger, ⁓ maybe a 50 unit or so apartment complex in that kind of range.
Michelle Kesil (23:35)
Yeah, exciting goals, I love that for you. Awesome. So before we wrap up here, if someone wants to reach out, connect, collaborate, where can people find you and connect with you?Bryan Carleton (23:39)
Yeah, thank you.⁓ I’m on social media, but you can just send me an email [email protected] as in the state with an E.
Michelle Kesil (24:04)
Perfect. Well, listen, I appreciate your time, your story and your perspective. So thank you for being here.Bryan Carleton (24:12)
Yeah, thank you very much for having me.Michelle Kesil (24:14)
And for those listeners tuning in, you got value from this, make sure you’ve subscribed. We’ve got more conversations coming with operators just like Bryan who are building real businesses and we’ll see you on our next episode.
