Kay Kay came to the U.S. to pursue the American Dream and work full time as an engineer for Microsoft. Unfortunately, he lost his job, fortunately he found a great business in the gas station niche. Kay Kay grew that portfolio to 15 gas stations before being approached to buy a 33 unit portfolio of single family homes. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!
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Krishan Singh (Kay Kay Singh) Real Estate Background:
Came to US as a Microsoft Certified System Engineer
Shortly after arriving in the US, he was in the gas station business and grew to 10 gas stations in 15 years
Real estate career began when a church member offered him a portfolio of 33 SFR’s
Based in Ft. Wayne, IN
Say hi to him at email@example.com
Best Ever Book: Multi Family Millions
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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, Kay Kay Singh. How are you doing, Kay Kay?
Kay Kay Singh: I’m doing great, and I’m thrilled to be here on the Best Ever Show, and thanks for having me.
Joe Fairless: I’m grateful that you’re on the show as well, and it’s our pleasure. A little bit about Kay Kay – he came to the United States, and shortly after arriving, he was in the gas station business and grew the gas station portfolio to ten gas stations in 15 years. He came to the U.S. as a Microsoft Certified System Engineer. His real estate investing career began when a church member actually offered him a portfolio of 33 single-family rentals. He’s based in Ft. Wayne, Indiana. With that being said, Kay Kay, do you wanna tell us a little bit more about your background and your current focus?
Kay Kay Singh: Sure. My background is in gas stations, as you said. I came to the U.S. as a Microsoft Certified System Engineer to pursue the American dream in 2000. Immediately after I came here, on 9/11 I lost my job and landed in the gas station business. I did my gas station business for about 15 years, and in 2015 my real estate career started at our church when an 82-year-old landlord walked up to me and said that he wanted to sell his 33 rental houses to me.
I had never thought of this and think that I was gonna buy the rental properties, but he said that he wants to sell them to me, and then he gave me another push by saying that he will help me for a year, and also he won’t charge us anything for a year.
I liked that idea, and I started thinking, and I asked him to give me a day to think over and get back to him. I came home and started doing my research on the computer, and starting comparing with the gas station business. He gave me a pretty good deal, and we decided to buy.
Joe Fairless: Wow.
Kay Kay Singh: The next day I called him in the evening and told him “We’ll buy your properties. Let’s sit and talk about it a little bit.” He came to my house and he brought some paperwork, and he showed me some paperwork which I didn’t know how to look at, and do any underwriting or anything… But I decided to sign the purchase agreement, so that’s how I bought these properties.
After a few days of the purchase agreement he changed his mind and he said that he can’t do a loan for a year, but he will still help me manage the properties for a year. I had to go to the bank, and see how we can get a loan. I went to two banks, and both of them approved me for the loan, so we went ahead and bought these 33 properties in about a month and a half.
Joe Fairless: Wow… We’ve got a lot to talk about here. Just to back-track a little bit, you lost your job initially when you came to the U.S., and then you got into the gas station business. How did you just get into the gas station business?
Kay Kay Singh: Well, I had friends in the gas station business. I got a 40% share in the gas station, and I agreed to manage the gas station. So I didn’t have to put much money into the gas station, because they brought the money in, and I managed the gas station.
Joe Fairless: If you did not have an existing relationship with that person, just purely looking at it from a numbers standpoint, would that have been a good deal for them to offer a 40% share in order for you to manage it? I’m not aware of how operations work for gas stations…
Kay Kay Singh: Well, I knew that person; I went to college with them, so he knew me well, and he decided to put the money down, and I decided to work, so that’s how I got into the gas station business.
Joe Fairless: Was it a good deal for them to do that, or were they just doing you a favor?
Kay Kay Singh: Well, it was a good deal for them because they were passive investors, and I had some money too out of that… And it was a good deal for them because they didn’t have to — they were living in Indianapolis, and they bought a gas station here in Ft. Wayne, and they didn’t have to move, because I moved here.
Joe Fairless: Okay. Now, let’s fast-forward to the 82-year-old landlord who walked up to you at church… Why you? Why not someone else?
Kay Kay Singh: Well, after a while I came to know that he sold it to somebody else, and for some reason he couldn’t get the loan, and he didn’t trust him to do the same thing that he did to me… And he knew me for several years, and he knew that I was an entrepreneur, I had money, and I could get a loan, so that’s why I think he chose me.
Joe Fairless: Do you remember the terms for that deal?
Kay Kay Singh: Well, we didn’t talk much about the terms, because I didn’t know how these [unintelligible [00:06:22].23] worked, but before we talked about the terms, he said that his son doesn’t want him to do this, because he said he’s already 82 years old, and he said “I don’t know how long I’m gonna live [unintelligible [00:06:37].02] I asked for one free house.
Joe Fairless: [laughs] And you got it?
Kay Kay Singh: And I got it. I used that as earnest money. So I didn’t give him any earnest money; whatever that price was, I used that as earnest money.
Joe Fairless: Wow… What did you end up paying for the portfolio and what was it actually worth at closing?
Kay Kay Singh: Well, it was about $900,000 that we paid for the portfolio. We got an appraisal when we get to get a loan, and it was about 1.2 million.
Joe Fairless: Okay. Do you still have the 33 single-family homes?
Kay Kay Singh: Yes, we do.
Joe Fairless: Why do you have them, versus selling them and doing a 1031, or just selling them off individually?
Kay Kay Singh: Well, the cashflow is good. When I took over — there’s another story, because he promised to help me for a year, and after about 10 days I said “I’m gonna do something different. I’m not going to be doing it this way; I’ll be doing everything [unintelligible [00:07:45].18]” So I let him go after ten days. I moved all my properties to Buildium and started running them from there. I read a lot of books and a lot of online research.
Also, after I took over, I realized that he was charging less rent, and he was charging much less deposits, so I started raising rents. In about a year, my rent roll was $22,000.
Joe Fairless: What was it before?
Kay Kay Singh: $18,000.
Joe Fairless: Wow. In one year you increased the rent roll by $4,000.
Kay Kay Singh: Correct.
Joe Fairless: Did you have to invest money into those properties to do that, or was it just —
Kay Kay Singh: No.
Joe Fairless: What is the rent roll today?
Kay Kay Singh: Today the rent roll is around $25,000, because I bought seven more properties last year.
Joe Fairless: Well, just the original 33 properties – what would be the rent roll today?
Kay Kay Singh: $22,000.
Joe Fairless: When did you get the portfolio?
Kay Kay Singh: June, ’15.
Joe Fairless: June 2015?
Kay Kay Singh: Correct.
Joe Fairless: Okay. So I wanna make sure I heard you correctly – you got this property in June of 2015, originally the rent roll was $18,000, then within one year, so approximately June of 2016, it was $22,000, right?
Kay Kay Singh: Correct.
Joe Fairless: And then today, with those 33 original properties, the rent roll is still $22,000?
Kay Kay Singh: Approximately, because we added seven more properties, so now the rent roll is — I haven’t figured out how much it is just for those 33. But with the seven more properties that we bought last year, now the rent roll is about $26,000.
Joe Fairless: Okay, 26k. Have you increased rent on the original 33 since that one year anniversary?
Kay Kay Singh: Yes, anytime we had a turnover, I increased it by $22.50.
Joe Fairless: What are some tips that you have for the Best Ever listeners who have portfolios of this size, or maybe a little bit smaller or maybe a little bit larger, in terms of management?
Kay Kay Singh: Well, I wanted to learn the business, so I’ve been managing it myself, and I’m spending only nine hours a week.
Joe Fairless: That’s outstanding.
Kay Kay Singh: Yeah, everything is online, and I spend nine hours… I go there three days a week and three hours per day, so nine hours a week.
Joe Fairless: You go there three hours a day, three days a week… So where do you go exactly when you go there?
Kay Kay Singh: It’s 20 miles from my home. They are not in Ft. Wayne, they are in Huntington, Indiana.
Joe Fairless: Okay, but when you say you go somewhere – I mean, you’ve got single-family homes, so are you going to each of the homes, or are you doing something else?
Kay Kay Singh: No, we have an office.
Joe Fairless: Okay, got it. And are you still using Buildium?
Kay Kay Singh: Yes, still using Buildium.
Joe Fairless: What other tools do you use to help you manage the properties?
Kay Kay Singh: I use PDF Filler for all my leases, and evictions, my notices… Everything else, I use PDF Filler.
Joe Fairless: PDF Filler, okay.
Kay Kay Singh: Correct.
Joe Fairless: So between Buildium and PDF Filler – those are the two primary tools you use?
Kay Kay Singh: Correct.
Joe Fairless: With your acquisitions, the seven that you’ve purchased since the original portfolio – can you give us an example of one of those properties? Price point, what it rents for, that sort of thing…
Kay Kay Singh: Well, I bought six from his son, again. His son had six houses. I bought one house at an auction for $23,000, and then I used that house as collateral to buy six more from his son.
Joe Fairless: [laughs] Okay. So you bought one house at an auction for $23,000, and then you used that as collateral to buy six more… So those are the seven that you purchased.
Kay Kay Singh: Yes. The house that I bought for 23k was appraised for 56k, so I used that to buy his son’s six more houses. The average rent on those was $650.
Joe Fairless: Will you elaborate on exactly how you used the house for collateral in order to purchase six additional homes?
Kay Kay Singh: Well, on 23rd May, I was there for another flip house to buy at the sheriff’s sale. This house – nobody bidded on this, but I knew it was by my property; I had seen that house. Nobody bidded on it, so I went ahead and bidded on it, and I got it for $23,000.
Then I went to the bank and got it appraised, and used that as collateral to buy six other properties from the previous owner’s son.
Joe Fairless: And by using it as collateral – you’re getting a loan from the bank and then you’re pledging that house for the loan… What was the value of each of the homes, approximately? Those six.
Kay Kay Singh: 210k.
Joe Fairless: Total.
Kay Kay Singh: $210,000, yes.
Joe Fairless: In total, for six of them. Okay, cool. Any unique deal structure with his son that you did?
Kay Kay Singh: No, we went to the bank and got the loan, and we just bought from him directly.
Joe Fairless: So did you have to put any money out of pocket, besides the $23,000 that you used to buy the house that was collateral?
Kay Kay Singh: No, we didn’t use any cash from our pocket.
Joe Fairless: I imagine this was a local community bank or credit union that’s in Ft. Wayne…?
Kay Kay Singh: Correct. Midwest Federal Credit Union. Our previous loan was from the same bank too, so they were happy; we were paying on time, and we had cashflow, so the bank was pretty happy about it.
Joe Fairless: You’ve got the single-family homes… Do you still do any gas station business?
Kay Kay Singh: Yes, I do. Actually, in my gas stations I have partners and each partner runs two gas stations. It’s kind of a family — my daughter, my son-in-law, my nephew… They are my partners. My daughter and my nephew are partners in this corporation, too. We bought all these houses in the same corporation, and they are my partners here, too. They are working for me, and I am working for them.
Joe Fairless: What do we need to know — if I’m gonna look at buying a gas station for the first time… I’ve never purchased one, I’ve never looked at the numbers… I know this is such a big, broad question, I recognize that, but what do I need to know going into the transaction, if I’m looking to purchase a gas station?
Kay Kay Singh: Well, there are two different ways to buy a gas station. Either you can lease it, or you can buy the real stake. The simple formula is that we want our money back in at least 4-5 years. So if you are leasing it, then you don’t get a bank loan. If you’re buying a real stake, then you have to put 20%-25% down.
Joe Fairless: Which one did you do, the lease or the buy?
Kay Kay Singh: Well, we did both. We own four properties, and six of them are leased.
Joe Fairless: When does it make sense to do one over the other?
Kay Kay Singh: Well, I like leasing. The problem with the gas stations is sometimes there’s a leak, so if the property is contaminated, it’s a big risk, it’s hard to sell.
Joe Fairless: Has that happened for one of your properties?
Kay Kay Singh: Well, we bought a property that was contaminated before, but we didn’t have the liability. The previous owner had the liability, so they had to take care of it, and they are still doing it, and we have owned that gas station for five years.
Joe Fairless: Wow.
Kay Kay Singh: Yeah, it’s a long process.
Joe Fairless: I guess that it depends on the scope of the contamination, but in general, how much does it cost?
Kay Kay Singh: Sometimes it’s millions. There is a state insurance, and you have to pay only the down payment, which is $35,000 in the state of Indiana, $60,000 in the state of Ohio. You just pay that, and the state takes care of the rest of it. But it runs into millions.
Joe Fairless: Wow. You pay that every year?
Kay Kay Singh: No, we pay them insurance premiums.
Joe Fairless: Okay. So you have some that you leased, some that you bought… Your goal is to get your money back in 4-5 years. Can you give us the numbers on a property that did that, and then maybe give us numbers on a property that did not?
Kay Kay Singh: One or two properties did not do it in five years. One or two out of ten. But on one gas station – my first gas station – we got our money back in eight months.
Joe Fairless: Wow. And that was a lease or a buy?
Kay Kay Singh: That was a lease, and then eventually we bought the property, too.
Joe Fairless: The ones that you did not achieve that goal – which is tremendous; even if you don’t achieve it in five, you achieve it in seven, you’re still doing pretty darn well – why did you not achieve it on those couple?
Kay Kay Singh: Well, this was a brand new gas station, so we had to build our business from day one. It took us five years to get steady profit, and it cash-flowing.
Joe Fairless: Some would say that a brand new gas station, if it’s in the right area, is more desirable than one that’s more established, but in that same area.
Kay Kay Singh: Well, there was plenty of competition. It took us five years to get it cash-flowing, but now it’s doing great, and we have made up all our money. We bought it in 2009, so we got our money back in 2016. After five years, the next two years we made up all our money.
Joe Fairless: Did any of those gas stations just completely fall flat?
Kay Kay Singh: That was the worst one we had.
Joe Fairless: Okay, fair enough. Based on your experience as a real estate investor, what is your best real estate investing advice ever?
Kay Kay Singh: Well, my best advice would be invest in yourself before investing in any kind of real estate. We did everything wrong, but we still made some money… But that doesn’t mean it happens all the time.
Joe Fairless: What are some expert tips for making money with gas stations?
Kay Kay Singh: You should have good marketing, clean, and good customer service.
Joe Fairless: What type of marketing tends to work for gas stations?
Kay Kay Singh: Well, normally people do just the gas, but we try to do the inside sales, because that’s where we make money; we don’t make money on gas. We have digital displays on our gas stations, we try to display the deals, and we try to change the deals every week, so that they have something new.
Joe Fairless: It’s typical not to make money on gas, right?
Kay Kay Singh: Correct.
Joe Fairless: Would it be advantageous for you to always be the lowest in price for gas, that way you drive more traffic?
Kay Kay Singh: Well, the competition drops the price too, so you have to match the street.
Joe Fairless: Okay.
Kay Kay Singh: Yeah, if you drop three pennies, somebody else will drop three pennies. Then you’ll have to drop three pennies again. The best practice is to match the street price.
Joe Fairless: Based on your experience, you mentioned that you recommend working on yourself before you invest in any type of real estate. What’s one way that you work on yourself?
Kay Kay Singh: Well, I’m doing this now, after three years. You need to read a lot, you need to learn from the people who have walked this path before, rather than just walking by yourselves. It’s much better to learn from the experienced people; have some mentors, read some books, read some forums, like Bigger Pockets… That’s what I’m doing for my multifamily investment now.
Joe Fairless: We’re gonna do a lightning round. Are you ready for the Best Ever Lightning Round?
Kay Kay Singh: Sure.
Joe Fairless: Alright, let’s do it. First, a quick word from our Best Ever partners.
Joe Fairless: Alright, Kay Kay, what’s the best ever book you’ve read?
Kay Kay Singh: Multi-family Millions.
Joe Fairless: What’s the best ever deal you’ve done?
Kay Kay Singh: Well, we bought a house – I already discussed – at an auction for 23k, and it appraised for 56k, and we used that as collateral to buy six more cash-flowing rentals.
Joe Fairless: What’s a mistake you’ve made on a transaction?
Kay Kay Singh: The biggest mistake we did in the second year of our real estate career – we bought it at Auction.com for 91k, and we rehabbed it and spent about 20k before the closing happened.
Joe Fairless: How did you end up with the house?
Kay Kay Singh: Finally, the closing did happen, after 45 days. Then we put it on sale, and it was sold to the first customer for 139k.
Joe Fairless: So you made a little bit of money on that.
Kay Kay Singh: Yeah, we made about 23k on it.
Joe Fairless: Best ever way you like to give back?
Kay Kay Singh: Well, we have a charity. We have had a charity since 2009, and we adopted 15 children since 2009, and we organized medical camps through that charity, and cancer awareness, and [unintelligible [00:22:05].29]
Joe Fairless: How many children do you have living with you now?
Kay Kay Singh: The children adopted are through Forgotten Children Worldwide; they are in South India. Fifteen.
Joe Fairless: Do you legally adopt them, or are you sponsoring them?
Kay Kay Singh: We are paying for their education, school, lodging.
Joe Fairless: What’s the best ever way the Best Ever listeners can get in touch with you?
Kay Kay Singh: HoosierRentals@hotmail.com, and I am pretty active on Facebook and LinkedIn.
Joe Fairless: Well, Kay Kay, thank you so much for being on the show. You gave us three keys to making money with gas stations: good marketing, make them clean, and have good customer service. You also talked about a creative way that you got into the residential business, by having a conversation with someone at your church, and then doing the deal with him. Then talking about how you manage that portfolio that you’ve since added to using PDF Filler and Buildium.
Thanks so much for being on the show. I hope you have a best ever day, and we’ll talk to you soon.