February 21, 2018

JF1268: Being Boss Through Residential Real Estate Investing with Kathleen Shannon

Kathleen is an entrepreneur, podcaster, and real estate investor. We get to hear entrepreneurial tips from her as well as hear an investor story of buying residential real estate. She prefers to buy houses that are move in ready, and rent them out to decent tenants in decent areas. Her strategy is that she only buys homes that she would want to live in. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!

Best Ever Tweet: 

Kathleen Shannon Real Estate Background:

-Co-owner of the branding agency Braid Creative

-Co-host and author of Being Boss a podcast (and now book!) giving advice for creative entrepreneurs

-Invests in residential properties with her husband as a way to slowly build their wealth and retirement

-10+ years Agency & Entrepreneurial experience

-Say hi to her at www.braidcreative.com

-Based in Oklahoma City, Oklahoma

-Best Ever Book: Daring Greatly

Made Possible Because of Our Best Ever Sponsors:

Are you looking for a way to increase your overall profits by reducing your loan payments to the bank?

Patch of Land offers a fix-and-flip loan program that ONLY charges interest on the funds that have been disbursed, which can result in thousands of dollars in savings.

Before securing financing for your next fix-and-flip project, Best Ever Listeners you must download your free white paper at patchofland.com/joefairless to find out how Patch of Land’s fix and flip program can positively impact your investment strategy and save you money.


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any of that fluffy stuff.
With us today, Kathleen Shannon. How are you doing, Kathleen?

Kathleen Shannon: Good. How are you, Joe?

Joe Fairless: I am doing good as well, nice to have you on the show. A little bit about Kathleen – she is the co-owner of the branding agency Braid Creative. She is also a real estate investor, she invests in residential properties and she is the co-host of the podcast Being Boss, which is a podcast for creative entrepreneurs, as well as the author of the book Being Boss, which is a book, I imagine, for creative entrepreneurs. She is based in Oklahoma City, Oklahoma, but soon to be a resident of Detroit, Michigan. With that being said, Kathleen, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Kathleen Shannon: Yeah, sure. So I own my own branding agency, Braid Creative, and I went to school as an artist, thinking I would be a painter, and never imagined that I would be investing in real estate. Before I came on the show I was thinking about the fact that I think so much identity is wrapped up in our homes and the homes that we buy, and it keeps a lot of people from buying homes, and I feel like I was able to kind of like make that leap, and make it happen.
So other than Braid Creative, my branding agency, I also co-host the Being Boss podcast where I’m talking about advice for creative entrepreneurs, and there is a huge overlap between entrepreneurship and investing in real estate and how you manage it and your different approach; everyone has a different approach, right? So it’s all very personal, but it also comes down to numbers. That’s kind of where I’m at…

Joe Fairless: I’d love for you to elaborate on the first part that you mentioned where you said “So much of your identity is wrapped up in the homes, and maybe the result of that might be people don’t buy as many–” will you help me understand that a little bit more?

Kathleen Shannon: Yeah, sure. Buying your first house is a huge milestone. I think that it is wrapped up in the same vein as getting married or having a baby, and it’s not a decision that most people go into lightly; it’s incredibly personal and emotional, and whenever you’re buying your first home, you want it to be just right. If you’ve ever watched any HGTV, people just get so wrapped up in the emotions of it, and I think that you have to really take that out of the equation whenever you start investing in real estate… Because it really is a numbers game and it really is about building your wealth and building your retirement, and I just think that a lot of especially creative entrepreneurs, which is my audience – I think a lot of them don’t think of themselves as someone who could be investing in real estate. I think that a lot of them may have the impression that you have to be a millionaire to invest in properties, and that’s certainly not the case, especially if you know your area and have a unique situation, kind of like Oklahoma City has.

Joe Fairless: If I were a guest on your podcast, and we were talking about investing in real estate, knowing your audience, how would you position that conversation so that it resonates with them and they’re empowered to then go buy real estate?

Kathleen Shannon: You know, I would probably start with the first smallest step. So what is the first thing that you can do to start stepping into a future of owning real estate and investing in real estate? The first thing you would wanna do is get qualified for a loan, right? And I know it sounds really simple, but that’s the kind of thing that people — I would say lean into it by researching the market, getting a loan, figuring out what you can afford, really crunching some numbers… And I would say start with your own first home. So whenever you are buying your first home, don’t think about buying your forever home. I think that a lot of people really overextend themselves with their mortgage by buying the kind of house that they think is gonna be one and done, and that’s it.

Instead, I would buy something that is a good starter home that would make a really great investment property in a few years. So that’s what I would tell people – start with your first home, the one that you actually live in for a couple of years, because then you’re gonna get better finance rates, you’re going to get the feel for what it’s like to even manage a property… So just the little things, like all the repairs that come up; you start to understand the expenses associated with owning a home, and then from there I think that a lot of people think about renting out their home to someone who wants to destroy it.

I feel like the biggest fear whenever it comes to residential property is, “Well, what if someone just trashes my home?” And that is a relevant fear and it does happen, but just like entrepreneurship, you have to trust that you can handle things that are thrown your way. You can get a clean-up crew and for $500 your house is looking good again. Or someone skipping out on rent, or not paying rent and having to evict someone… I think that people go to all these worst-case scenarios, and it overwhelms them and they don’t wanna do it, when in reality, yes, you’re going to have hiccups, but it’s just one at a time, and trusting that you’re going to be able to handle it along the way goes a really long way.

Joe Fairless: Is that how you got started with your investing, that thought process?

Kathleen Shannon: Definitely. I got started with investing though actually by living in a house that my parents owned. Whenever I was going to college, they had bought me and my siblings a place to live in, and whenever I moved out of that place, I managed the property for them. I figured out how to get people in the place, which is just asking your friends, “Hey, do you want a cool place to live in?” Or your friend’s saying, “Hey, I like your place. If you’re ever renting it out, let me know.” So it really is this organic and easy.

So just like creative entrepreneurship, it’s about getting that first client.  Whenever it comes to investing in real estate, it’s about getting that first house, and it’s about getting that first tenant. If you can get a really good one, it will get you started on a really good foot.

So that’s how I started – I was just managing my own friends who were living in my parents’ property, and from there seeing “Okay, there isn’t some nebulous, faceless enemy wanting to destroy the place…”, and from there, I’m trying to remember… Because I married my husband and he was impressed that I was able to manage my parents’ property, and he owned a house, so whenever we moved in together, we were like “Well, hey, how about — let’s just rent out your house.” So that’s the way that we started there together with investing in real estate.

Joe Fairless: Okay, you rented out his house that he owned.

Kathleen Shannon: Correct.

Joe Fairless: Were you also managing your parents’ property?

Kathleen Shannon: By that point I was no longer managing my parents’ property. I think that they were managing that themselves.

Joe Fairless: They wanted to get in on the fun.

Kathleen Shannon: Right… [laughter]

Joe Fairless: Okay, so you have turned over the reins to your first management job — and by the way, this isn’t your full-time job, it’s something you’re just doing on the side… And now you and your husband have decided to rent out the house that he had… And then what?

Kathleen Shannon: Then that was a crash course in having that disaster tenant. So we had a couple of tenants, and I swear I think the house was cursed. I actually recently sold it. I don’t usually sell properties; I’m like a long game kind of person whenever it comes to my properties, because my own goals for having investment properties is for retirement. Being a creative entrepreneur, I don’t have a fat pension or a 401k — I do have a 401k, but I think that investment properties is a really great way to have a long-term retirement vision… So I recently sold the place because every single tenant was just a little bit of a nightmare as far as kind of trashing the place, or not paying rent and having to evict someone, and learning how to do that for the first time, learning how to garnish a checking account, which is never fun… There’s nothing about that that I like doing.

So I managed that property, and then I bought my second property. This was a super cute house — this is also my policy, I always buy houses that I would be willing to live in myself. I’m not willing to slumlord it… And obviously, as I get older, my taste is a little bit more elevated… I probably wouldn’t live in the places that I have now; I would, it just wouldn’t be my first choice I guess is what I’m trying to say.

But I bought a really cute house, and was super stoked to do that, and managed that property. So now with two properties, with one of them kind of attracting bad eggs, I decided to hand over the management. I think it was after that first eviction I was like “This is just too hard to do on top of having my own business that I’m trying to grow.” So my husband’s mother ended up retiring and it was a really great job for her to do part-time, so now she’s managing the properties.

Joe Fairless: Okay. The numbers on the second house – do you remember what you bought it for and what it rents for?

Kathleen Shannon: Let’s see… I bought it for 65k, and I’m always putting down 20% on all of my places, and I think now I have enough that I have to put down 25%, which is also great for — you don’t wanna pay PMI on an investment property… And I think legally we have to have 20% down on an investment.

Anyway, so that house I bought for — I have the numbers right here… I bought that one for $63,800, and the mortgage is $432, and my rent is $830. So typically I like to make about $400 profit; that’s not pure profit, because there’s some expenses involved, of course…

Joe Fairless: Paying mom-in-law, things like that.

Kathleen Shannon: Exactly. So I like to make about $400 on the property to cover expenses, and that’s actually worked out pretty well. We haven’t ever been at a loss, we’ve always been able to really fill all the properties. We’ve had just enough money in the bank account to mess with my taxes at the end of the year…

Joe Fairless: Yeah, that’s good, and that means you’re lowering your taxable income because of depreciation, is that right?

Kathleen Shannon: That no, but I’m being taxed — I have enough income on the property… Yeah, there’s enough profit that I’m paying taxes.

Joe Fairless: Oh, the opposite.

Kathleen Shannon: Yeah, opposite.

Joe Fairless: Oh, okay. Got it.

Kathleen Shannon: Yeah, and I feel like — this is a whole other ball of wax, but I feel like it comes out of my paycheck, because my income is the most variable, being an entrepreneur…

Joe Fairless: Yeah. All this hard work…

Kathleen Shannon: I know, I promised myself I would never complain about taxes again, at the beginning of 2017. I was like, “You know what, I’m fine.”

Joe Fairless: Okay, so 65k… Did you have to put any money into it in order to get it move-in ready?

Kathleen Shannon: I didn’t. So most of the properties that I get are practically move-in ready. Sometimes I’ll throw up a coat of paint on it, or… You know, just even in the inspection process if there’s a few things that need to be repaired, but maybe a couple thousand dollars at most to get them ready.

Joe Fairless: Okay… And you bought the second house — is that in the same area as the first one, or a similar area?

Kathleen Shannon: No… You know what’s funny – that first one was in Norman, Oklahoma, which is where the University of Oklahoma is, and that was a 3-bedroom place, the one that was never doing well for us… So my strategy with all my other properties moving forward is that they’re in Oklahoma City, they’re on the edges of historical neighborhoods, so they’re not actually in the historical neighborhood, but right next door… And they’re usually somewhat near either a highway or a university, so like good locations.

Joe Fairless: Okay. How many homes do you have.

Kathleen Shannon: I have six rentals, after selling that seventh, that was the bad karma house…

Joe Fairless: Yeah, after selling the ugly, [unintelligible [00:14:36].00] bad karma…

Kathleen Shannon: Yeah. [laughs] So I have six rentals and one primary.

Joe Fairless: Six rentals, one primary. For each of the rentals, did you put down 20% and used the same type of loan program, or did you change it up?

Kathleen Shannon: Yes, I think. My husband and I also have a strategy where we each buy the houses in our own names, so we kind of alternate every other one so that up until five each, we only have to put down 20%. Then after five, we have to start putting down 25%, and the loan structure was the same on all of them.

Joe Fairless: Okay, 20% down, 30 years…

Kathleen Shannon: Yes, 30 years, fixed rate, and I have actually refinanced a couple of them whenever the rates have gone down low enough to make it worth it.

Joe Fairless: Okay. And are you using a local lender, or someone national?

Kathleen Shannon: I’m using a national bank, but I’ve got a local guy.

Joe Fairless: Got it, cool. Alright, which of your homes is the least profitable and which one is your most profitable, not including the bad karma house?

Kathleen Shannon: Right… The most profitable house is the house that I lived in. So I bought a house in Oklahoma City and I blogged about it. It’s a house that I was married in, that was featured on Glamour Magazine’s blog, and it’s the house that my son was born in… So this house is kind of internet-famous, and that’s the one that makes the most profit. That one makes around $550 in profit.

Joe Fairless: And that is before expenses and paying mom-in-law?

Kathleen Shannon: Yes, correct.

Joe Fairless: Okay, that’s basically — income minus mortgage is that $500.

Kathleen Shannon: Exactly.

Joe Fairless: Okay. And then what about the least?

Kathleen Shannon: The least profitable house — I make about $375.

Joe Fairless: Any lesson for us as listeners that we can take away from the most profitable versus the least profitable that you’ve identified?

Kathleen Shannon: Hm, interesting… I would say even my least profitable house feels profitable enough. I like the amount of profit that I’m making on it and I don’t think that it’s because of the house necessarily. The house that’s internet-famous – yeah, if you went to build up a blog around your house and live life into it… I think that breathing life into your homes – and that’s why I like to buy homes that I would personally live in –  I think that that’s really helpful. So having a personal brand is also really helpful for filling your homes with good people that you like. But other than that, I really don’t see a huge difference between then other than my house that’s the most profitable – it is a 3-bedroom, even though my strategy for the rest of my homes, which all of them make between $350 and $450 a month in profit before all the expenses of property management and repairs… So I think that all of those homes – the strategy that I’ve taken is that these are long-term investments; I wanna hang on to them for as long as possible, especially while Oklahoma City has seen so much growth, and really just maintaining them, keeping them nice. So I don’t know that there is any lessons between the two.

Joe Fairless: You mentioned having a personal brand that’s helpful for filling your houses, and that’s just right up your alley – you’ve got a branding agency… How does that help you fill up your homes?

Kathleen Shannon: I don’t really know how to say it other than if  you have 10,000 Instagram followers and a lot of them live in the city that you live in, and then you have a house available for rent, you can throw the house up on Instagram and say “Hey, I’ve got a space.” And then people start knowing you for having these really cute, cool houses.

I have people year-round asking me “Hey, do you have anything available?”, and usually not; usually my places are filled, but then whenever I do, I just throw it up on Instagram, like in an Instagram story (I’m not even posting it) and people are really excited, and usually I get a good lead that way.

Joe Fairless: Wow. So you have a social media following and you post about it, and then people who live in that city are interested and then they end up renting from you.

Kathleen Shannon: Correct.

Joe Fairless: Wow, cool.

Kathleen Shannon: I see people do this with Airbnb’s in kind of more destination places, and this isn’t something I would do if it were my full-time job. If it were my full-time job to manage properties, and even now as I’m looking for a place to rent in Detroit, I’m seeing how far really good photos and just a little bit of aesthetic — like, don’t go for the five-gallon bucket of the cheapest Band-Aid color paint that you can find… Whitewash your house; make it beautiful and clean and airy and bright, take your photos during the day, hire a photographer… It is worth thinking of your house as a brand, and treating it as such in order to get good tenants, and maybe a couple hundred extra bucks a month in rent.

Joe Fairless: Oh, yeah, that’s great advice, and I sincerely appreciate you giving that. We’re gonna dig even more into this, because I’ve got the question that I ask all my guests, and that is “What is your best real estate investing advice ever?”

Kathleen Shannon: I would say buy properties that you’d be willing to live in. I think that there’s so much integrity in that, especially for my audience. I know a bunch of real estate dudes that are making good money on these huge properties that are kind of gross, and I don’t know… To me – no offense if this is you or any of your listeners, but I started to think “Okay, maybe I need to do what the millionaires are doing”, right? But to me it just doesn’t feel quite aligned, at least right now, with my goals and really what I’m wanting out of this. So for me, whenever it comes to the brand that I have and the brand I’m trying to carry out through everything I do is just a reputation of a cool place to live in, or a cool branding agency to work with, and that’s really what I’m trying to carry through.

So be willing to live in the place that you would purchase, and manage it with integrity. If the A/C breaks, fix it the next day… Which is also why I like to manage my own properties, or have my mother-in-law do it, because I like to treat my people good. So that would be my biggest piece of advice, truly – be a good person, buy good properties.

Joe Fairless: I don’t think anyone would argue with that or want to publicly argue with being a good person is not the right approach, so I wholeheartedly embrace that. Are you ready for the Best Ever Lightning Round?

Kathleen Shannon: Yes, let’s do it.

Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.

Break: [00:21:26].10] to [00:22:18].05]

Joe Fairless: Alright, Kathleen, best ever book you’ve read?

Kathleen Shannon: Daring Greatly, by Brené Brown.

Joe Fairless: Oh yeah, she’s got a good TED talk. She’s got a couple TED talks, doesn’t she?

Kathleen Shannon: Yeah, one of the most watched.

Joe Fairless: Yeah, I think she’s a professor somewhere in Houston; I think she’s Houston-based.

Kathleen Shannon: Yeah, she’s an author and researcher in Houston, and funny enough, I blogged about that book and she ended up hiring me to do her personal branding before she went on Oprah.

Joe Fairless: Holy cow! That’s pretty cool.

Kathleen Shannon: Yeah, yeah. But it is an incredible book just as far as showing up and being seen… It’s a must-read for everybody.

Joe Fairless: Best ever deal you’ve done that you and I have not talked about yet.

Kathleen Shannon: Like business deal?

Joe Fairless: Anything. It could be one of your homes, or it could be a business deal, however you wanna interpret that.

Kathleen Shannon: Well, I just wrote a book, and it is being traditionally published, and going through that deal feels huge. That was such an honor, to be able to write a book and to be picked up by Running Press.

Joe Fairless: Wow.

Kathleen Shannon: That’s a pretty cool deal.

Joe Fairless: Outstanding. Congrats on that. What are some takeaways, or what would be the reason why we read it?

Kathleen Shannon: A lot of people ask me “How do you get it all done? How are you doing it all?”, like running Being Boss, which has become a chart-topping podcast, how am I running a branding agency, I have a toddler, I have investment properties… So I get asked all the time, “How do you do it all?”, and all of my tips and tricks and mindsets and habits and routines are all in that book.

Joe Fairless: What’s a mistake you’ve made on a real estate transaction?

Kathleen Shannon: Renting to people whenever my gut said no. I don’t even know if that’s legal to say.

Joe Fairless: No, there’s always legal ways you can turn people down if —

Kathleen Shannon: I had a gut-check — I think I was so desperate to fill my first space that I rented to the first person who came along, and now I know better. And there were some red flags that I can mention, like essentially saying “Can you not call my current landlord?” and “Here’s the deal, I need to give you $40 today, and then I can give you the other $80 on Friday.” Just stuff like that.

Now I know better, so trust those red flags and trust that you’re gonna find someone else to rent your place.

Joe Fairless: Best ever way you like to give back?

Kathleen Shannon: I love generously sharing my gifts of knowledge on things like this podcast and my own podcast. I love mentoring college students who are freaked out about being artists for a living… So I love giving back in that way, but of course, picking some of my favorite charities and organizations that I believe in, and giving my time and money to those places as well.

Joe Fairless: How can the Best Ever listeners purchase your book and listen to your podcast, or just connect with you?

Kathleen Shannon: Oh yeah, so the podcast is called Being Boss. You can listen to that wherever you listen to podcasts, and you can learn more about the book at beingboss.club/book. You can also buy it wherever books are sold.

Joe Fairless: Kathleen, thank you for being on the show and talking to us about how you have built your real estate investing business, and also from a creative entrepreneurial standpoint, for any or all Best Ever listeners who are creative entrepreneurs, because we are all entrepreneurs… As real estate investors we’re entrepreneurs, but from a creative entrepreneur standpoint – not all of us will identify with that, but some will, and for those of you who do identify with being a creative entrepreneur, sometimes perhaps the worst-case scenarios come to mind for what could happen, and as you mentioned, know there are solutions to the worst-case scenarios and they might not even come up, even if they do.

Kathleen Shannon: Totally, and even more than that, just trust that you’ll be able to deal with it. That usually even the worst-case scenario isn’t that bad.

Joe Fairless: And then the first step is — just focus on the smallest first step, as you said, and that’s just get qualified for the loan, and then continue to go from there… As you just said, trust in yourself and in the process. Other people have done it before you, you’ll be able to do it too, with the right mentality and tactics.

And then also, as you mentioned, having a personal brand is incredibly helpful for your bottom line from a real estate standpoint – filling the vacancies at your properties, as well as your overall approach of, well, being a good person (first and foremost), and then from a more tactical standpoint, having beautiful, clean, airy, bright homes (to use your words) so that you’re proud of the product that you have and you’re able to be consistent throughout all your businesses that you’re involved in with your overall approach.

I’m really grateful… Congrats on the book; we’ll have a link to your website in the show notes page where everyone can get the book. I hope you have a best ever day, and we’ll talk to you soon.

Kathleen Shannon: Thanks so much.

    Get More CRE Investing Tips Right to Your Inbox

    Get exclusive commercial real estate investing tips from industry experts, tailored for you CRE news, the latest videos, and more - right to your inbox weekly.