Multiple Income Streams in Real Estate: Multifamily, RV Parks and Event Venues | Kathleen Petty

Kathleen Petty (00:00)
real estate is actually agree with Pace Morby when he says you’re you’re solving a problem. It doesn’t matter what the problem is, you’re you’re here to solve a problem. And there might be challenges in the way, but you’re here to solve a problem. I’m s trying to solve a problem in my community, in my region for those that have developmental disabilities. There’s people out there who are doing veteran type homes. There are people who like foreclosures, like Caroline Cain, who is trying to do the best she can to help

people not be kicked out on the street. We have enough homeless as hopeless homeless enough enough. There’s people who do pad splits for different reasons. There’s many reasons you can do a pad split or co-living situations.

Dylan Silver (02:14)
Hey folks, welcome back to the show. Today we’re joined by Kathleen Petty, owner operator of Magnolia Farms, a northeast Texas real estate entrepreneur exploring commercial and multifamily opportunities through partnerships with syndicators. Kathleen, thanks for taking the time here today.

Kathleen Petty (02:30)
Thank you for having me, Dylan.

Dylan Silver (02:32)
Now we were talking in the green room about the current project that you’re working on. Tell us a little bit about Magnolia Farms and what ⁓ this project entails.

Kathleen Petty (02:41)
⁓ basically to sum up, the farm is quite a few acres. We have a multifamily, it will have a ⁓ pet care business, RBB slash R V park and a venue of you know, whether it be wen wedding or, you know, concert, whatever kind of a venue. ⁓ and these kinds of projects a lot of times the the there’s funding that goes short, so you have to have some other

streams of income and they all work together as like a kind of a partnership more or less and and because they are on a farm and there’s a lot of people who would like to have a farm experience. So they come there and there’s people that like to have you know, they’re really c country and cowboy and so they like to, you know, be out in the country and have their weddings out there. And it’s right off thirty where the properties I’m looking at are right off our thirty. So you could ⁓

It would just be easy access and you could have if you just want to get off the freeway and rest if you’re an R Ver, that you could do that too. And ⁓ it’s just a great opportunity because it’s all integrated so other people in the community ⁓ including the ones that have a developmental disability can work there on the farm and have a job and then and we can make adaptations, whereas the world might not always do that.

No. No.

Dylan Silver (04:04)
When you were looking at this deal, talk us through acquisitions. How’d you come across this deal? ⁓ and then without giving away all of the gold, you know, what did the capital stack look like financing this deal?

Kathleen Petty (04:15)
It that is the biggest challenge I’m having as far as like the ca f the capital stacking. If those out there who are interested in s something like this, you we can give you our my contact information, can talk you can contact me.

But basically you’re looking at you know security and accessibility. It there is there are a few challenges in that. They’re not overwhelming as far as that goes, but you know, there are some challenges. And so I think we could do partners. We could also because this is a charitable organization, those that need to ⁓ do some charitable things, they would be very welcome in this setting to to have opportunity to help.

and leave a legacy because really when a person that comes to live in a group home, regardless of whether they’re renting or not, that is their home forever. That is their attitude, that’s their my mindset. So it is, you know, it is a good investment, but it also you’re doing something for someone that can’t do something for themselves completely. So we ’cause we believe in independence. My mission statement is to to build a farm for those that have developmental disabilities to live

work and thrive in a positive community that fosters independence. And so we we work on those kinds of skills and help them to become more independent in a positive way.

Let’s

Dylan Silver (05:40)
Talk about the partnerships and finding people to join on these deals with. How are you able to find partners ⁓ who will be a good fit when you’re looking at these deals, whether that’s a capital partner or more of an operator?

Kathleen Petty (05:56)
So on the capital part, I am looking for ⁓ I I look for in my community. I’m part of the sub two community. There’s quite a few thousand people there that I network with, and so most of it has been done by networking. ⁓ the other part is as far as operators look I am looking for operators that have experience in general management that will also

be able to run like a pet care business. I’m looking for someone that has done Airbnb slash RV parks. They’re a little bit different, but they’re they’re kind of mixed in this area. I’m looking for someone that knows about event planning and wedding weddings and different things like that. You know my whole goal would be to have housing for them also as part of the employment pack package. And they’d they

would be more of like a pioneer mindset because starting we would still have to get, you know, we have to go out that we have to find those things. And it wouldn’t it wouldn’t become it would be all at once.

We’re doing this in phases. We’re gonna do the housing part of it first, because that makes more sense to start with you have to have a place to live and you have to have somebody there. And then we’ll start with the the other businesses that we’ll come we’ll build and bring in. But it you know, it is ⁓ it is a multifaceted

And it will you know, i it will be an amazing project when it’s f complete. I’m looking for those that like volunteerism with the I don’t want warm bodies. Warm bodies don’t work. And let me explain a warm body. A warm body is just someone who’s like, ⁓ I’m here for a paycheck. That’s not gonna work with this kind of project or with these people because you know, they are one of the they are the most vulnerable people in society.

And if you don’t enjoy working with them, you’re not gonna be enjoying the job and then you won’t be very effective. You need to be able to be effective. You need to be able to to enjoy this. You need to be like in the caregiving business. So let me define that. If you are a nurse, if you’re a caregiver already it to anyone and you enjoy being with those that have a devent developmental delay or a disability, or

you are in the teaching field or something to that effect, those are the ones I’m looking for. And those would be the ones that we would most h likely hire. And on a permanent basis. So it would I’d be looking for those also to volunteer, the ones that are in college that need time and experience and hands-on type of activities so that they can further their their career.

I will say just a a quick story and a little insight. I have a sister who has a developmental disability and we lived in Flagstaff and we had a young lady, she was phenomenal. And I’m gonna sh tell you why so you can kinda see what I’m looking for. This person she already ha had two sisters with a developmental delay and or disability. So she understood that what it took

But she would come to work. She was happy and joyful. She really, really loved my sister and her roommate. And because they live in an apartment complex. But anyways, they really, she really loved them. And she thought they were sometimes funny. They were she was so compassionate towards them when they were having some issues, whatever they those were. And it just was really heartwarming. People just loved her.

You know, it wasn’t just my sister and her roommate. Everyone loved her. She had a good head on her shoulders, very common sense, and just had the best interests of the those whom she served. And that’s really who I’m looking for, whether a volunteer or an employee. I want if you any of you seen the book go or read the book not seen the book, read the book, the go giver.

That is what I’m looking for. And I highly recommend it because it changes the way you do business, regardless of whether you’re gonna do what I’m doing or something else, quite frankly.

Dylan Silver (10:56)
Yeah, we’re big fans of the go giver at our show here and we utilize that phrase all the time. You know, and I think it’s one of the great things about being a real estate ⁓ investor and and operator is that these relationships nurture with time and oftentimes in unforeseen ways where it it has a compounding effect, especially when you’re constantly providing great value to folks. You know, you mentioned the right fit for the role.

I want to talk about the other side now though. As an ⁓ investor looking at these deals, how do you see return on on these deals when in many ways they’re they’re for public good, right? How long are the hold times and then what are your projected exits? How do you underwrite these deals?

Kathleen Petty (12:13)
So I also am working on the in underwriting part of this, but I look at it either if you’re donating then you you donate and I would be happy to put a plaque somewhere to notate your legacy there and and an angel donor. But if you’re not, I would I always think it we could do something working something three to five years in a balloon payment and then a percentage of what we get on the profits. ⁓ I do have a couple investors who are extremely

extremely in ⁓ interested in this project. I have one she not only wants to be a an investor, but she’d like to come and help run the horticulture end of of this these things too, because she loves horticulture culture. So and I have someone who, you know, a lot of the people who I’m in contact with already have family members that are have developmental disabilities and are concerned for their future because there’s only so long

a person can caregive for their family. So this is such an important and valuable asset. If not maybe in in dollar amounts in s society, you know, a lot of times we forget to invest in society. So this would be a way to do that. But I I would think that, you know, you know, we could pr do anything between 10 and maybe 50%, depending on how much is donated.

as far as an ROI on their their investment. But we would have to look at the numbers par individually and see what what we can come up with.

Dylan Silver (13:43)
pivoting here, ⁓ Kathleen. You’re an investor in some other areas as well. You mentioned Arkansas in the green room when we were talking. ⁓ your experience as an investor going from, you know, certain asset classes into larger deals. Walk us through, you know, your history as as an investor and how that’s changed over time.

Kathleen Petty (14:04)
So I’ve done a lot of deals and and have a lot of experience. But here’s the thing, and I’m gonna preface this, and a lot of the most experienced investors will say this. Sometimes the deals you do, or the best deals you do, are the ones you never did. Because there have been deals that I’ve worked and walked into that were not really deals after doing the due diligence. And I think, you know, doing the due diligence is key because you

Nobody and I mean nobody wants to be stuck in a deal that that’s really bad. So, you know, you have to look at look at your your investment things. There’s been a lot of things that I have done as far as deals and worked on. I’ve come close to closing on a couple of them and they haven’t closed. And one was like a tree. Seriously, I I’m not a j even joking about this. A tree fell on the house.

three days before supposed to close. And then then an illegal didn’t have any ID. So we couldn’t close on that. So there have been there have been a lot of those that have happened with with me. But you know, the experience I’ve had in finding the deals, doing the comps on the deals, you know, taking them to to get ⁓ in s the houses inspected and whatever else that I have to do have been valuable. And I’m grateful that

you know, whether I had a have a deal that went through or not, but I’ve had the experience in in doing it and I think that’s really super key. And the people I’ve worked with said, you know that Kathleen, that is super key because, you know, you’re being wise in in what you do acquire.

Dylan Silver (15:39)
You know, one of the things that is a huge bottleneck for all investors is a capital stack. And so when you’re looking at acquisitions, really in any asset class, that’s going to be something that comes into play. Now, if you’re doing subject two deals, you mentioned being part of the sub-2 community, it’s going to look a little bit different than if you’re doing ground-up multifamily construction, of course. But nonetheless, that capital stack is so important. I’d like to get a little bit granular talking about these creative deals.

You’re in the sub to community, you’re looking at creative deals all of the time. What are those conversations like when you’re talking with sellers and distress sellers, right?

Kathleen Petty (16:56)
So when I’m looking at at those things, one of the th biggest things that I when I was working I did work with for Caroline Cain in in sub two with ⁓ foreclosures. And you know, in I and I agree with her approach, ’cause in my world, if you’re losing your house, that is so monumental. And I don’t think somebody should just go in there and go, Hey, you know, I’ll just take your house and

Buy kind of a thing. And there have been I’ve worked with investors when I think in particularly who who didn’t really care about the the seller. You know, the they’re these people are in distress. They’re h they’re going through a lot of things. And it some of them are medical issues, okay? That, you know, sh they got sick and they couldn’t work and they couldn’t pay their mortgage. It’s not that they’re lazy bums. It’s more sometimes things happen to you in life that

that happen. And so Carolyn Cain’s approach, and I love it, the first thing she asks when she talks to the homeowner is not, well, how much you want for your home? Her first response is, are the lights on? Are utilities on? ⁓ are you eating? Can we help you find the resources or otherwise? I mean, she usually there’s sometimes she’ll pay for it herself to make sure that

things are on and that they’re eating and that they’re okay. Before she even goes down the road of that. And even before she asks about that, she she says, okay, let’s talk to the bank together. Let’s see what we can do for you as a seller. And a lot of times, actually most of the time, unfortunately, you’re not going to be able to to help them because it’s a lot of majority of them, they are so far behind that even if they did a ⁓

I’m trying to think of the word. It’s kind of like a refinance on the house where they put all the arrears on the back end of of things. Your payment’s gonna go up and that’s not gonna help them. So that’s gonna be difficult. Or I don’t know, sometimes they’ll do a forbearance, but a lot of times it’s just not gonna work. And so what she also likes to do is she likes to give them an option, it depends on the situation, of let’s see.

If we can put some money in your pocket so you can start over again. And let’s also ⁓ we might do moving expenses. We might just give you some money so you can start over to at a new house. And then she still makes money on the pr on the deal, but I find that a lot less greedier. I find that a lot more compassionate than say saying, Okay, you know, you’re out of here.

Get the heck out of your ho out of your house. I’m gonna take it over, or you you’re just gonna lose it and I don’t even care. So no, no, you know, let’s be human here. Let’s have a little compassion, yes. And some people I would say this, some people have done the foreclosure out more than one time. But you don’t know them and and you don’t know the circumstances, and so that’s you’re not gonna be able to get to really know them except for this this end of their life.

And I would rather be a a help than a hindrance, personally.

Dylan Silver (19:58)
that approach where you’re asking about themselves and really understanding, you know, how they’re coping and surviving and trying even I like calling the bank because you’re doing a service to them. If they’re they’re able to work it out with the bank, then great. But if they’re not, and in many cases they they won’t be, then you have an alternative for them. Hey, here’s a cash off or hey, we’ll assume the payments on your home and ⁓ you know the home won’t go it to to the auction, right?

This is a different type of approach and I I think that’s wonderful, you know, especially for folks who are looking for something else other than, hey, we’re going to and I’ve done this myself too. Hey, we’re just gonna make a bunch of offers on homes and and catch what what falls into the net, what what sticks here. We are actually coming up on time here though, Kathleen. Any ⁓ closing remarks or any thoughts for our audience as well, you know, anything you’d like to mention directly to folks listening.

Kathleen Petty (20:51)
Yeah, a real estate is actually agree with Pace Morby when he says you’re you’re solving a problem. It doesn’t matter what the problem is, you’re you’re here to solve a problem. And there might be challenges in the way, but you’re here to solve a problem. I’m s trying to solve a problem in my community, in my region for those that have developmental disabilities. There’s people out there who are doing veteran type homes. There are people who like foreclosures, like Caroline Cain, who is trying to do the best she can to help

people not be kicked out on the street. We have enough homeless as hopeless homeless enough enough. There’s people who do pad splits for different reasons. There’s many reasons you can do a pad split or co-living s situations.

So again, people aren’t out in the street. I think it’s really important to to look at the human aspect of it because when you do that you’re

you are more valuable as a real estate individual, you know, the go giver. The go giver attitude with, you know, it this is not necessarily just about me. And if you’re doing it in for for just you, then you know, okay, that will work for what for a while. But in the end, y you will find you will have problems in the end.

Dylan Silver (22:05)
Kathleen, thank you so much for your time today. Thank you for joining us.

Kathleen Petty (22:09)
Thank you, Dylan. I appreciate your time too. Thanks for having me.