November 16, 2018

JF1536: Growing From SFR To Multifamily & Private Lending Live Interview with Kay Battle

We have a treat for you today with a live interview that took place at our Cincinnati meetup. Kay is a local Cincinnati investor who has been investing in real estate for about 10 years. She started with REO’s and short sales, grew into multifamily, and then became a private lender. Hear more about her story and how she has been able to grow to the level she is at. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Kay Battle Real Estate Background:

  • Successful real estate investor who owns 35 units in Cincinnati
  • As her company and experience grew, she started a commercial lending company, Common Sense Capital Solutions
  • Based in Cincinnati, OH
  • Say hi to her at

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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.

We’ve got a special episode today, doing it live, and we’ve got a bunch of people hanging out with us at our Cincinnati meetup. If you ever want to come to Cincinnati and hang out with us and attend this meetup, go to

We’re gonna be jumping right into it. With us today we’ve got Kay Battle. Kay, how are you doing?

Kay Battle: I’m doing great, how are you doing?

Joe Fairless: I’m doing well, and good evening; I’m looking forward to our conversation.

Kay Battle: Same here.

Joe Fairless: A little bit about Kay – she is a real estate investor who owns 35 units in Cincinnati. As her company and experience grew, she started a commercial lending company called Common Sense Capital Solutions, and she is based in Cincinnati, Ohio.

With that being said, do you wanna give the Best Ever listeners and everyone hanging out with us  a little bit more about your background?

Kay Battle: Sure. First of all, thank you for having me; I really appreciate it and I’m excited to be here, talking to the Best Ever listeners. I started my real estate investing experience in 2008, right after the market crashed; I was actually still in college at the time, but I saw a huge opportunity to jump in feet first and just see what happens. It went really well, so since then I’ve been really focused on acquiring as many properties as I can. When the market was slow, I really focused on REOs and foreclosures.

I started with single-families, and then eventually got into small multi-units, so now the largest property that I have is 9 units. And like you were saying, as my experience grew, I really wanted to branch into some other areas, so I got into commercial lending. Now my company provides financing options for real estate investors and also small businesses nationwide.

Joe Fairless: Why do the shift in focus from being an active investor to lending?

Kay Battle: I’m still an active investor, but I wanted to go into lending because earlier this year I decided to take the leap of faith to become a full-time investor and entrepreneur. So I left my job — by trade I’m an engineer, so I left a really great paycheck to jump into something a little unknown and a little scary; I wanted to have another source of income outside of just the properties that I had. I’m still actively investing, growing and managing my portfolio, and then also doing the commercial lending.

Joe Fairless: In 2008 you got started.

Kay Battle: Yes.

Joe Fairless: It was a challenging time…

Kay Battle: Definitely.

Joe Fairless: You focused on REO…

Kay Battle: Yes.

Joe Fairless: Tell us about the first couple deals.

Kay Battle: The first that I’ve purchased was a single-family; it was not too far from my parents, so I was really comfortable with the area. A standard 3-bedroom/2-bathroom house. I think I paid $43,000 for it. It only needed some minor cosmetic repair work. I probably put $5,000 into the property to get it rent-ready, and the lady that moved in is actually still in the property. She’s been there for almost ten years, and she’s been an excellent tenant. She maintains the property really well.

So it was a great success, and I was lucky to have early success in that time period, because it really propelled me to want to continue to go and continue to grow… Because I know a lot of people hit hurdles or run into issues when they first begin, and then they kind of stay away from real estate… But I’m really passionate about investing and I think it’s a great vehicle for you to get to the point where you can be financially independent.

Joe Fairless: Where did you get the money to buy that first one?

Kay Battle: I got a loan. I had been working and I had a little bit of money saved up, so I was able to have a down payment. The down payment wasn’t very much, it was 10% or so… At the time, banks weren’t lending, so I was looking into some private options, and that’s another reason why I wanted to get into the commercial lending business, because I kind of understand the struggle of not being able to go to the bank and get a loan.

Joe Fairless: So who gave you the loan? Was it a bank, or a private individual?

Kay Battle: It was actually a small local community bank…

Joe Fairless: Which one?

Kay Battle: New Foundation. Are you familiar with it? They’re on Colerain Avenue.

Joe Fairless: Okay.

Kay Battle: They were able to work with me… And like I said, I had a little bit of money saved up, and I was able to get the loan, and then put the tenant in, and it was great. So it cash-flowed really well… I rented the property out for $850. The tenant paid all the utilities, and it was great.

Joe Fairless: Do you have that same loan on the property today?

Kay Battle: Yes.

Joe Fairless: You bought some properties from the bank, early on…

Kay Battle: Yeah.

Joe Fairless: And then what was the next phase of your investing?

Kay Battle: Eventually, as I grew — again, this was when the market was pretty low. I have some properties that I’ve purchased with cash that were free and clear, but they were very low — I think one of my best deals was a property that I purchased for $14,000, and I put about $10,000 into the property. It has three bedrooms, two bathrooms, it rents for $900…

Joe Fairless: Where is it at?

Kay Battle: It’s in Westwood, on a nice, little, quiet street. The tenant pays all the utilities, so it cashflows really well. So I have deals like that that were pretty low in cost and I was able to pay cash for. Then I have other properties that I do have loans on, and mortgages, so… But I ensure when I purchase that the property is gonna cash-flow appropriately and it makes sense.

Joe Fairless: Are you managing them?

Kay Battle: I do. I self-manage with the help of my father, because he loves me… [laughs] We use Buildium as a management software.

Joe Fairless: Some lessons learned on that?

Kay Battle: A lesson that I’ve learned is that it’s super-important for me as a buy and hold investor to properly screen and select tenants. It’s super-important because it can definitely save you some headaches, some turnover costs, and to maximize your profits.

I personally use a point system. Buildium has a service where they do the screening, the actual check – so they’ll do the background check, the credit check and all of that, but then I use a point system as I’m evaluating the actual application to make an objective determination of whether or not the tenant should be in the property.

Joe Fairless: What’s a story of something that has not gone right from the management side?

Kay Battle: Oh, a lot of things… [laughs] One thing that I learned early on is collecting rent can be difficult. Initially, when we were self-managing (myself and my father), we were allowing tenants to mail in checks, or we would go pick up rent, and that just got too hectic; things would get lost in the mail, people were saying they were mailing things and we didn’t get them… So now I only accept electronic payment, and that was something that I learned and that I’ve implemented, and it’s going really well.

Joe Fairless: If someone says they don’t have a bank account, what’s your response?

Kay Battle: If they don’t have a bank account, I require them to deposit their rent into my bank account. I do have tenants that don’t have bank accounts; I try to stay away from that, because I prefer people to pay electronically,  but I have some older tenants who don’t do well with technology, so I have them go to the bank and deposit their rent into my account… So I have an account specifically for that, nothing else is in the account, and they’re able to put their money into the account. The onus is not on me to ensure that I collect their rent.

Joe Fairless: What’s been the most challenging deal that you’ve worked on?

Kay Battle: The most challenging deal that I’ve worked on… I would say that one of the most costly challenges that I’ve had is working with a contractor that I didn’t properly vet. That’s one thing that I’ll always encourage investors, to properly vet your contractors.

Joe Fairless: What happened?

Kay Battle: In this situation I ended up losing about $20,000, so it was super-painful and not a fun experience. I hired a contractor; I was planning to actually hold the property, but it needed kind of a major renovation… And he was suggested to me from another contractor, and since he was suggested, I just didn’t think to really do any search, but he was totally a scam. He half-way did the job, the work that he did was sketchy, and then he ended up running off and I never heard from him again.

Joe Fairless: What did the first contractor say about him whenever you [unintelligible [00:10:56].25]

Kay Battle: You know, it’s funny, because the first contractor was recommended for me from someone who I trusted, and then he was too busy, so he said “I have one of my guys, he can do the job.” So when I came back to the first contractor, he told me that he basically found the guy on Craigslist, and that he had just hired him because he needed someone to help facilitate his jobs that he was doing. So he didn’t even know the guy personally… So that was just a huge learning experience, and now I ensure that I vet contractors, I get references, I search them on Google to make sure they don’t have any judgments against them, I look at reviews and just make sure that they’re totally legit…

And then I also try to work with contractors that don’t require money upfront. I know a lot of contractors aren’t willing to do this, but some are, and that really shows that they’re only interested in getting paid on the work that they’ve already completed, and work that’s up to your standards. So I try to work with contractors that don’t require that, and if I must pay, I only do a third up front.

Joe Fairless: I believe you mentioned earlier – switching gears a little bit – that the largest deal you have is a 9-unit, correct?

Kay Battle: Yes.

Joe Fairless: What are the numbers on that one?

Kay Battle: In terms of…

Joe Fairless: Bought it for, what have you done with the property, when did you buy it…

Kay Battle: So I bought the property in 2016. I paid $215,000 for it. All of the units are one-units. The property was really well maintained. I probably had to put maybe about $10,000 in. I had to update some of the electrical for the insurance company, and then do some other things around the property, but for the most part, it was pretty great.

The tenants are mostly older tenants, which is nice, because it keeps the building quiet, and they usually pay their rent on time; a lot of them have assistants… The units rent for a range of $500 and $575, and it’s going well. The utilities – I pay the water and the heat for the common areas, and then everything else is managed by the tenants.

Joe Fairless: Is there an opportunity to do RUBS on that?

Kay Battle: I’m looking into that. It seems to be something that would definitely help from an expense standpoint, because the water bill can get pretty intensive with a 9-unit…

Joe Fairless: About how much is that?

Kay Battle: I feel like now that they’ve gone to monthly bills, it’s going up pretty significantly… But I usually pay about close to $1,000/month for the water.

Joe Fairless: What’s an expense ratio for a 9-unit whenever you’re looking at a deals’ expense-to-income ratio?

Kay Battle: Typically, I like to keep it about 40%. For this one — like I said, the maintenance on it is pretty low; it’s really just the utilities that are consistently an expense… So it’s not that high.

Joe Fairless: What type of financing do you have on it?

Kay Battle: I just have a 30-year mortgage on it. I put down 25% to purchase is, so the rest has been finance.

Joe Fairless: What’s it worth now, would you guess, two years later?

Kay Battle: Honestly, I don’t know, but I feel like with the market the way it is now, what I paid for it was a steal; I paid 215k for the nine units. I don’t know what it would be worth now, but I’m assuming that it’s probably gone up significantly in value.

Joe Fairless: Is there a plan to do a refinance, or are you keeping it long-term?

Kay Battle: I wanna keep it long-term, but I am in the process of refinancing just to cash out some of the equity in it… But I’m very early in the process. We haven’t done the appraisal yet, but I’m assuming there’s quite a bit of equity.

Joe Fairless: Common Sense Capital Solutions, commercial lending company… How much have you lent so far?

Kay Battle: We’re close to two million. We’re about 1.7.

Joe Fairless: And within that 1.7, who’s been your sweet spot client?

Kay Battle: We do real estate and then we also do business loans, so I have sweet spots in both… But for real estate, it seems to be the fix and flip client that seems to be one of the ones that we do quite often.

Joe Fairless: When you take a look at your portfolio – you’ve got 35 units – what property takes up the most amount of your time, since you self-manage?

Kay Battle: You mean a particular property, or the type of property?

Joe Fairless: A specific property.

Kay Battle: I have a property, it’s a 5-unit, and it takes up the most amount of my time. I think it’s because of the location. Also, the state of the  property… So I purchased the property also in 2016, and I paid I think 115k for it, somewhere around there, and it’s five units, but it had been on the market for almost two years when I bought it…

Joe Fairless: Wow… We’re about to find out…

Kay Battle: Yeah… [laughter] Well, the owner of the property was out of state, and they had a management company managing it, and the management company really wasn’t doing a great job… So the property was kind of ran down, but the owner wasn’t willing to budge on the price at all, so I’m assuming that they got several offers, but they were below what they were asking, because it did have a lot of deferred maintenance… So I ended up paying full price for the property, which I think was still a great deal, but it just needed a lot of maintenance to get it up and going. There were already tenants in it, so… It’s just been a constant “This needs to be fixed, this needs to be fixed.” But we’re getting to a point where it’s pretty stable.

Joe Fairless: And the first thing you said about it was the area… So what about the area is challenging?

Kay Battle: It is off of Westwood Northern Boulevard, and it’s a great rental area, but the caliber of tenant is a little on the lower end. Like I said, I screen my tenants really well, so I get good people in there, but a lot of good tenants don’t wanna live in that area. It’s kind of hard to find good tenants willing to live there.

Joe Fairless: Since we are switching up the Lightning Round for this conversation, we’ll take questions from the audience… I’m gonna ask you a couple questions from the Lightning Round, just because I’m curious… What’s your best ever deal?

Kay Battle: My best ever deal is actually the one that I mentioned previously, the one that I paid $14,000 for. It’s really low maintenance, it cash-flows really well, and it was definitely a steal for what I paid for it.

Joe Fairless: How did you find it?

Kay Battle: MLS. At the time there were just so many REOs and foreclosures and properties on the MLS that you could go to the MLS and find whatever you wanted. It’s much different now. [laughs]

Joe Fairless: How long ago did you purchase the last property?

Kay Battle: 2016?

Joe Fairless: You shut it down…

Kay Battle: Well, let me take that back. So 2016 was the last property that I purchased to hold. In 2017 I did two flips, which I haven’t done a lot of – my primary source is buy and hold, but I did do two flips in 2017. I’ve been trying to find more property, it’s just been really difficult, so I decided to focus on the lending side until the market makes another adjustment and I can kind of jump in again.

Joe Fairless: What’s a mistake you’ve made on a transaction, other than the contractor?

Kay Battle: A mistake that I’ve made on a transaction… I would say improperly evaluating value. One thing that I’ve learned through this process is how to assess the market and see what I believe something should be valued at, but I have made mistakes, particularly when I’ve done a flip that I thought something would sell for X, and really it didn’t warrant that price, so maybe I put too much money into it to get all of my money back.

Joe Fairless: What aspect of the valuation did you look at incorrectly or differently than what you would in the future?

Kay Battle: It’s hard to properly value when you don’t have proper comps. Looking at the comps, I just misjudged what I could get for the property, and I was putting in higher-end finishes than I probably should have for the area that I was in, so… Definitely a learning experience.

Joe Fairless: What’s your best real estate investing advice ever?

Kay Battle: My best real estate investing advice ever – action. I know a lot of people educate, educate, learn, learn, learn, but my philosophy is learn as you go, so you have to take action. Wherever you are in your journey in investing, and whatever goals you have, just work towards your goals, don’t stay stagnant; just take action, just do something.

Joe Fairless: What kind of engineer are you?

Kay Battle: Chemical.

Joe Fairless: How have you applied that to your investing?

Kay Battle: As an engineer I’m very process-oriented, so everything that I do, even in my investing, I try to create some type of system or process to follow, so it makes everything very strategic.

Joe Fairless: For example…

Kay Battle: Even with the tenant screening, how I was saying that I have a point system – the point system is very detailed, and it encompasses a lot of different things, and everything is assigned a point amount. That’s kind of just the system that I go through.

In the property management, everything that I do has a flow to it, and I attribute that to my mind as an engineer.

Joe Fairless: We’re gonna do questions from the audience. First, a quick word from our Best Ever partners.

Break: [00:20:38].07] to [00:21:23].00]

Audience Member: You mentioned you make your tenants pay online… Do  you use the Buildium portal, or is there another online payment system?

Joe Fairless: Can you restate the question maybe?

Kay Battle: Okay, so the question was how do I make my tenants pay online – do I make them use the Buildium portal, or is there another vehicle that I use? I use the Buildium portal; that’s part of the package. Each tenant has a separate login where they can access their information, and then they pay online. If they use a credit card, they’re charged the 2.75% fee. If they have it directly deposited from a checking or a savings account, there is no fee. Then like I said, if they don’t have that option, I require that they actually physically take it to the bank.

Audience Member: [unintelligible [00:22:06].12]

Kay Battle: The question was “How do I handle tenants wanting to make partial payments through the Buildium system?” With Buildium there’s a setting that allows you to not accept partial payments, and I believe that’s true for a lot of the other platforms that accept payments as well. So if yo don’t wanna allow tenants to accept partial payments, you can select that within the settings. I typically accept partial payments, but a late fee is associated. So if they don’t pay the entire balance they then have to pay a late fee.

Audience Member: [unintelligible [00:22:54].29]

Joe Fairless: When they’re depositing it in the bank, do you just give them your account number?

Kay Battle: Yeah, so give them my account number for the bank…

Joe Fairless: Yeah, not the Buildium.

Kay Battle: Not the Buildium. And like I said, the account that I use is specifically for that, so they can’t withdraw any money, they can only deposit, and there’s really nothing else in the account; it’s specifically for them to deposit their rent.

Audience Member: [unintelligible [00:23:25].01]

Kay Battle: The question was was it an easy decision for me to leave my career to become a full-time investor and entrepreneur. It was easy in the sense that I always knew that this was what I was gonna do. I always had a plan, even from the beginning when I purchased my first property, that I wanted to get to the point where I could leave my job.

I was working at P&G, and I really loved my job, but I knew that that wasn’t what I wanted to do. I never intended to climb the corporate ladder; I knew that I wanted to be an investor and a full-time entrepreneur… So it was easy in that sense. It was hard because I was leaving a paycheck, so it was scary in that sense. I really tried to prepare myself and set myself up for success. I had a decent amount of money saved up, I had a plan, and once the time came, I was ready to go and there was no looking back.

Joe Fairless: How do you know how much money should be saved up?

Kay Battle: I always encourage people to have an emergency fund of at least six months’ worth of savings, and then anything beyond that is up to your comfort level. I wanted to be comfortable for what I felt like was a decent amount of time, so I needed to have a year to two years saved. So it’s really up to the person, it’s a personal reference, but I suggest at least six months.

Audience Member: Understanding that you bought your rentals in a more investor-friendly market, and that you’re not really desperate to buy them now, if you were going to buy a rental property now, what kind of numbers or what kind of return would you have to get to be willing to buy it?

Joe Fairless: You don’t have to repeat that…

Kay Battle: Okay… [laughter] That’s a great question. I will have to think about that, but one thing that I will say is that I won’t purchase anything less than five units at the moment, and probably moving forward I wanna focus on multi-units, larger… And then in terms of a return – it’s really hard to say, because I don’t wanna be unrealistic  given the market, and I know what I got into the market in, and it’s just so different, it’s just so hard… I have a chip on my shoulder and a different perspective because I’m like, “You want me to pay what for what…?”, and “I could have bought this back then at this amount of money”, so it’s just difficult to wrap my head around what’s to expect.

Joe Fairless: You’re squirreling away cash, waiting for something to happen in the economy, right?

Kay Battle: Yes.

Joe Fairless: Why not just hold on to that cash — so you’re selling at the top of the market, hold on to the cash and then buy at the bottom?

Kay Battle: That’s a good strategy, too. I just feel like at this moment the cashflow that I’m making from the properties is sustaining my living as well. So if I was to sell everything and get a lump sum of money… I’m dwindling this money down, waiting for the market to change again, and who knows that’s gonna be; we think it’s gonna be soon, but at that point I don’t know how much money I’m gonna have left. I’m trying to be strategic about playing this game long-term and what it looks like for me, and at the moment I’m considering doing some refinances, some cash-outs, and then jumping back in once the market shifts again.

Joe Fairless: And we’ll do one more question… Yes, sir.

Audience Member: I guess mine is kind of two-part… Where about is that property you said was on Westwood Northern, that was your biggest time [unintelligible [00:27:02].23]

Kay Battle: It’s on [unintelligible [00:27:04].19]

Audience Member: Okay. So just  kind of in the Westwood area?

Kay Battle: Yes.

Audience Member: Did you purchase that because the numbers just really made a ton of sense at the time, or did you expect there to be kind of like a revitalization, more people investing in that area?

Kay Battle: At the time, the numbers made sense. Typically, when I buy, that’s what I look at, and then anything extra beyond that is icing on the cake. The numbers made sense – I only purchased the property for a little over $100,000 and it was five units… And like I said, at the time all of the units were rented, so it was cash-flowing… It just was kind of ran down a little bit.

Joe Fairless: Okay, thank you so much for talking to us… The first ever time we’ve done this in front of a bunch of people. I enjoyed learning about your career after you left the cushy job, and went on as an entrepreneur, and what you’ve done – the 35 units, the contractor lessons… That’s a question that we’re going to work with some contractors first in things that I’m doing personally, and that’s something I hadn’t thought of to ask… If someone recommended someone that I was working with, “Okay, great. You’re a friend of so-and-so.” But the next question is “How do you know that person again?” and still qualify them like they came from a Google search, even though they came from a trusted source.

Kay Battle: Yes, exactly.

Joe Fairless: Thanks for being on this show, hanging out with us, and we’ll talk to you soon.

Kay Battle: Thank you very much.

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