By age 19, Bailey Kramer already knew that he wanted to channel his entrepreneurial mindset into commercial real estate. That was only two years ago. Since then, he has been learning, networking, and doing deals. Today he is GP of 64 units and a short-term rental property that is commercially zoned and allows weddings. In this episode, he shares how he broke into real estate at such a young age, how he acquired such a unique property, and his approach to financing.
Bailey says that to become a GP on a deal, it’s important to form relationships with other GPs. That’s why he joined a mastermind group, where he eventually received the opportunity to take part in a 64-unit deal by raising capital, handling administrative tasks, and assisting the asset manager.
Bailey brought $150K to the deal, for which he credits his networking skills. “The biggest thing that I did early on was network, network, network,” he says. “This was just [from] people that I’d met through the world of real estate.”
Bailey and his partner and mentor, Frank, came across an off-market historic property that had formerly been a hotel. Their original plan was to convert the building into a short-term rental property, which they did. However, they soon realized that the property’s beautiful castle-like exterior was drawing attention for different reasons.
“Once we looked at that and we posted about it, people reached out to us saying hey, can I have my wedding there?” Bailey says. “We didn’t have to do the advertising up front. People actually started to come to us, and that’s when we got more serious about the idea.” Now, when the property isn’t being used for a wedding, the whole property is available for short-term rental.
Bailey and his partner typically purchase properties through creative financing and raising capital. Starting out at age 20, Bailey didn’t have a credit score or income. Additionally, Frank works a W-2 job with an average credit score. “We both weren’t in the best scenario to qualify for a loan,” Bailey explains.
Best Ever Show host, Ash Patel, offered his insight into the matter. He advised Baily to find local lenders in their market. He recommended that they put together a docket of all the properties they’ve done, including purchase prices, plans, returns, and exits. “Present that to every local lender in the area, and you’ll find out quickly who is eager for deals and who’s not,” Ash said.
His final piece of advice was to have someone in mind who can sign on a loan, if needed, and to offer to give them part of the GP share as a signer.
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TRANSCRIPT
Ash Patel: Hello, Best Ever listeners. Welcome to The Best Real Estate Investing Advice Ever Show. I'm Ash Patel and I'm with today's guest, Bailey Kramer. Bailey is joining us from Orlando, Florida. He purchased his first property at 20 years old and is now the founder of a company which focuses on long and short-term rentals. Bailey's portfolio consists of being a GP on 64 units and short-term rental property that allows weddings. Bailey, thank you for joining us and how are you today?
Bailey Kramer: Yes, absolutely. Thank you so much for having me on. I'm super excited to be here.
Ash Patel: It's our pleasure, Bailey. Before we get started, can you give the Best Ever listeners a little bit more about your background and what you're focused on now?
Bailey Kramer: For sure, yeah. I got into the real estate world similarly to how a lot of people get started, but honestly, just a lot earlier. When I was 19 years old, I was in college, and read Rich Dad Poor Dad. I knew I had that entrepreneurial mindset always, I just didn't have really a business that I wanted to use those entrepreneurial emotions for, like an actual business to start. So I read Rich Dad Poor Dad, and that introduced me to the world of real estate. I spent about a whole year of learning and networking which we can dive into for sure, because I don't want to skip... That's a huge part of my journey. A year after reading Rich Dad Poor Dad I finally bought my first property which was a fix and flip deal. Since that first deal, I have done a bunch of different things, from the multifamily that you mentioned, having properties, long-term rentals, short-term rentals, and wedding venues... Definitely a lot to talk about there.
Ash Patel: A GP on 64 units - how did you become a GP on that deal?
Bailey Kramer: Great question. For that deal in particular, to take it back a step, to be a GP on a deal, you have to actually know the other GPs, because you need to have some relationship with them to be in with them. I got into that specific deal -- I actually joined a mastermind group where I was surrounded by all these people. First, I added a ton of value and then was given the opportunity to be part of the deal through raising capital and through other functions of the deal.
Ash Patel: What were the other functions of the deal?
Bailey Kramer: I guess more like a back-end organization thing. Obviously, we had the presentation for the deal, we brought investors in. I was just handling more of the admin tasks of, okay, sending out the emails, getting people on the actual webinar, our deal presentation itself, and then just check in more on a monthly basis, assisting more of the asset manager on some of those duties.
Ash Patel: Bailey, can you give us the numbers on that property? 64 units, what was the purchase price?
Bailey Kramer: 64 units, and the purchase price - it was about 60 grand per door.
Ash Patel: What was the raise on that deal?
Bailey Kramer: This is about a year and a half ago, so I'm trying to just recall the exact numbers. It was pretty turnkey, ready to go, it's just more of a tired landlord. We put down roughly, I want to say 20% of that. We didn't have much needed for rehab; we obviously had some reserves in there. I want to say we raised roughly about 25% of that 3.6 number.
Ash Patel: How much did you raise?
Bailey Kramer: About 150.
Ash Patel: Okay, was that your own money that you raised?
Bailey Kramer: No. That was raised. The way I raised it --this was obviously 20 years old-- was again just being part of this mastermind group, just focusing on network; that was the biggest thing that I did early on was network, network, network. This wasn't family, this wasn't friends, this was just people that I'd met through the world of real estate.
Ash Patel: How did you raise that 150? Was it from one person or a number of people?
Bailey Kramer: No, it was actually three people at 50,000 apiece.
Ash Patel: And you're 19 or 20 years old; how do you convince somebody to give you 50 grand?
Bailey Kramer: Yeah, great question. I still even do this today. Right now, I have more of a track record obviously, I've been doing deals and stuff like that. But in the very beginning, I didn't have really any track record at all. I posted on social media here and there that I was trying to do some real estate stuff, but I didn't have any track record. So especially in the beginning, what I recommend brand new people to do is leverage the experience of who you're working with. I wasn't like, "Oh, you should invest with me because I am the master of real estate." It was, "I'm working with these people," and use their credibility, their experience as more credibility.
Ash Patel: And are the people that you raise money from - are they your age, are they older?
Bailey Kramer: Yeah, they're older. They're in their 30s.
Ash Patel: What did that pitch sound like? What was the return? What was the expectation?
Bailey Kramer: I really didn't have to do much of the pitching per se, because, these people, I had a pre-existing relationship with. They knew what I was doing, and I knew that they were interested in investing in real estate at some point down the road, and they knew that I was actively looking at opportunities. So it was really just planting the seed up front, or once we started talking essentially, and then once we had this deal, it was more really of an invitation to our deal presentation that they were able to see the full analysis of the deal.
Ash Patel: Got it. Moving on to your short-term rentals, you have one with a wedding venue. Give me the story of how you led up to that.
Bailey Kramer: With that specific property, all the deals that I've done had been through off-market lead generation, and all off-market. We saw this one property and we caught the property before it was listed on the market. We chatted with the realtor, and we knew that this was a pre-historic property for the city. It was built in the late 1800s, like in 1890. It used to be a hotel, technically. It was called the Roxana Resort. We're like, "Okay, this is a hotel property, this is something different and unique." We started looking into the actual zoning of the property and realized that it was zoned for a boutique hotel, but we had more flexibility because it was commercial zoning and this property is obviously historic, so it's been through a handful of owners who've all done a variety of things.
So we approached the city and said, "Hey, we're interested in purchasing this property. We just want to triple check and get in writing what we can and can't do for the property." Because our idea was let's make this a short-term rental, not necessarily a hotel that you just check-in and check out of. Because it looks like a castle, like it's really cool looking, but it's a house; it's not a hotel like your classic Marriott that people are probably thinking of. So once we looked at that and we posted about it, we got people reaching out to us saying, "Hey, can I have my wedding there?" The realtor that was representing them was like, "Can I have my wedding there?" We're like, "Sweet." So we didn't have to do the advertising upfront, people actually started to come to us, and that's when we got more serious about that idea.
Ash Patel: You ended up purchasing it... And what was the price?
Bailey Kramer: It was 800,000. Plus, we did another 90 grand for just reserves, rehab, supplies, and furniture, so roughly 900,000.
Ash Patel: Today you have, I'm assuming, a ballroom. How big is that?
Bailey Kramer: It's actually all outdoors. We just have a really large backyard that faces a big beautiful lake; it has phenomenal views. It's mainly in the summertime that people are having their weddings here, and then some in the off-seasons where there's some room inside, but there's no ballroom per se. It's truly just a really cool-looking house.
Ash Patel: And there are Airbnb rooms inside?
Bailey Kramer: Yeah, we rent the property. When it's not being used as a wedding, we rent it for the whole property. You can't just rent a room like they used to do it back in whenever they did that back in the day as like a real hotel. Ours is like, you've got to rent the whole thing or nothing.
Ash Patel: Okay. So now you're in the event rental space, which is a business.
Bailey Kramer: Yeah.
Ash Patel: A little bit more than real estate. So how do you manage that?
Bailey Kramer: For the weddings, I don't know a single thing about weddings. I'm not married, I'm 21 right now, so that's all pretty new to me. What we did is -- at first we had the mentality of, "We're going to figure this out." Then we actually had someone reach out to us through Airbnb and they said, "Hey, I'm interested in having my wedding here." This was actually a different one of our properties, a couple of minutes down the road. It's also another larger property for Airbnb. Long story short, these people came out to the property to look at it, to see if this is going to be a good place for their wedding destination. While they were there and we were talking, they had so many ideas of how we can make this property cooler, and specifically for their wedding. From just talking to them, they told us that they were actually wedding planners. It was like a mother-daughter duo. They were event planners, wedding planners, they did all that stuff. So when we got the property that we were actually doing the weddings at, we've been in contact with them -- their wedding is in June of this year, actually now, but this was last year. Long story short, they said that they'd be interested in basically running our wedding branch of this property. They pretty much just handle wedding coordination with the owners. We just get them in contract, and then we hand it off to her.
Ash Patel: My advice is to keep it that way, unless you really want to get into the event rental space. It's a business, just like people that want to get into car washes or laundromats; it's not passive, it's a legit business. Listen, I'm in that space as well. You have chairs, linens, coordination of caterers, cakes... It's a different world, man.
Bailey Kramer: For sure.
Ash Patel: There are lots that love it and want to do it, just outsource that. So did you end up raising money for that $900,000 that you have into this property?
Bailey Kramer: Yeah, so for this property, in particular, the owner that bought this property is an owner that I bought pretty much all my properties up to this point. For this cool wedding venue, I am actually the property manager essentially for this property. But I was basically involved in the raise as well, so yeah, it was a full-on raise for the property too.
Ash Patel: How much did you raise? It was an $800,000 purchase. What did you put down?
Bailey Kramer: Actually, this deal was bought cash. The reason being is because they were asking a ridiculous number, I think close to a million bucks, maybe even more than that. It just was uncomfortable per se to just get a mortgage on a $1.23 million property when it's probably closer to the million-dollar range. The plan was, let's offer cash, quicker close, and they went for it.
Ash Patel: How did you raise a million dollars in cash for this?
Bailey Kramer: I think it was like the 900 figure, 800 for the purchase, about 100,000 for extras. Again, just through the network, being part of mastermind groups, any type of real estate group; there are people who are literally waiting there to throw their money at you. That's how we've done all the deals so far, it's just through the network of people that are ready to go. These aren't people that we have to convince, "Oh, you should invest in real estate. Real estate's great." These are people who already like, "I love real estate, I'm ready to go when you have your next opportunity."
Ash Patel: How many different investors did you have on this?
Bailey Kramer: There was a handful. I want to say five off the top of my head.
Ash Patel: Were they enticed by the fact that there's going to be revenue from weddings as well?
Bailey Kramer: Yes, that wasn't part of our underwriting per se. We weren't fully sure on the wedding. We looked at comps of how much other people were charging, but we actually just based off our projections on solely just what we're going to bring in on the short-term rental side. We knew that if we can pull off the wedding thing that it's going to boost the revenue by a lot. We gave that like "Listen, this is going to be great. Plus, if we can get this bonus on top of it, game's over."
Break: [00:13:17] - [00:15:05]
Ash Patel: Bailey, raising almost $900,000, if you want to offer your investors a 10% return, that's $90,000 a year. What kind of revenue are you generating from this property?
Bailey Kramer: This property will bring in around $300,000 this year.
Ash Patel: What was the GP-LP structure like?
Bailey Kramer: Again, this was a little while ago, so I don't know off the top of my head the exact split. I want to say 70/30.
Ash Patel: Is there a preferred return?
Bailey Kramer: There's no preferred return on this one, since it was a strictly cash play on this. Of course, there's risk in every single investment, that's no question. In this one, there's absolutely risk. But with not having a mortgage, I think the idea of it was a little different in terms of just preferred return and exactly what's going to happen. Because also, it's on the table, is not really needed, and there's no cash out refi that was really planned. It's just more of a revenue play with the fact that, "Okay, this property is going to be worth much more than we got it for as well."
Ash Patel: Man, I love your out-of-the-box thinking, and it's proven to be a success. If you're going to bring in 300k in revenue this year, what a win. Why not do the refi, because a lot of your investors... Let's say somebody's got 100 grand in this property. My assumption is they're going to want that money back to redeploy it somewhere else, maybe into your next deal. And maybe the play here is when you find another deal, you pitch that to your investors and it's kind of a package deal where you've got the bank ready to do your cash out refi, and "Guess what, investor, I've got a 1031 deal." It's not even a 1031, because it's cash out refi. You've got the next deal waiting.
Bailey Kramer: Right. It's definitely on the table. Basically, all the deals that I've done up to this point, minus that 64-unit, has been just through creative financing and raising capital. As far as getting loans on properties, I haven't touched that point just yet, because again, when I was getting started at 20 years old I had no income, no credit score or any of that stuff. My initial thought for all these properties -- I'm always thinking about the exit, but it was more of like, "How can I get started and get in?" My way was do anything you can to get in. Now that we have these properties, we are in the process of talking to different lenders about, "Okay, now how can you go to the next stage of refi-ing." Because we had this one to refi, we have a handful of other properties as well that would definitely be up for a good refinance.
Ash Patel: Bailey, who is "we"?
Bailey Kramer: The main person on my team is a gentleman named Frank. Again, I met him through this mastermind that I keep mentioning. But he is not only a partner on the real estate side, but also was my mentor and a huge component of me getting started in real estate. He had a couple of properties before him and I met, and he essentially showed me the ropes of what he's done. He was no master, didn't have the systems and processes down. He was just a one-man band who had some properties. But when I say "we", I mean myself and Frank.
Ash Patel: Does Frank have an aversion to loans? Is that why you guys gear towards all cash?
Bailey Kramer: For him in particular, he also doesn't have a W2 job; his credit score is fine, but it's nothing to brag about. So we both weren't in the best scenario to qualify for a loan. That was more on the single-family stuff that didn't require commercial, we're not like showing income, so we both just went in with the same mindset together of "This isn't an option at the moment, but let's figure out how we can do it." Because we knew it was possible. So now that we have income coming from these properties, a track record, the market's definitely helped push these properties up in value quite a bit, we're definitely able to secure refi.
Ash Patel: Alright, brother, let's change your mindset a little bit. Alright, so again, you've killed it on this wedding venue event center. Imagine if you had debt on this. Your investors right now, overall, you're making 30% or so returns on this property, or at least in revenue. But in terms of leveraged, returns if you had debt on this property, your investors potentially could have made 60%-70% annualized returns on the property. My advice to you is find a way going forward -- I get the challenges with not having the W2, a lot of banks won't want to talk to you; find local lenders. Is there one particular market that you're buying properties in?
Bailey Kramer: The market that I'm referring to right now and where all the properties are that I had bought in the past, are in Northern Illinois.
Ash Patel: Where are you based out of? You are out of Orlando. How did you come to Northern Illinois?
Bailey Kramer: I grew up in Wisconsin, so for me, it's not some foreign place. But Frank, the one that I'm mentioning, he actually lives in Northern Illinois, so that was pretty much the tie there.
Ash Patel: That's great. It helps with local lenders when one partner is in-state or in the area. What you and Frank need to do is put together a really nice pamphlet, kind of a docket of all the properties that you've done, half-page for each one. Purchase price, plan, returns, exit, whatever; just a quick little magazine thing that they can sort through pretty quickly, and present that to every local lender in the area. Bailey, you'll find out quickly who is eager for deals and who's not. You'll have some bankers that immediately jump on and they're going to want to talk more, they're going to want to schedule a call. Next time you're in town, they're going to want to sit down.
These are the people that you align yourself with, because they can look over the lack of income and all that other stuff and they start betting on you in your deals. Then in the back of your mind, have somebody who's high net worth, a high earner W2, and if ever you need somebody like that to sign on a loan, offer to give them part of the GP share as a signer. The sky's the limit for your next deals, because for a short time, you've already done a great job. Your numbers are home runs, so just set the bar higher, man.
Bailey Kramer: I appreciate the feedback. I totally agree. Financing has not been my strong suit. But I definitely agree, I'm totally with you. I think that's great advice.
Ash Patel: Yeah, it takes time. A lot of lenders won't even want to talk to you if you don't fit their strict criteria. But there are so many local lenders, even now, credit unions, where they're just hungry for deals. If they underwrite a deal like this and they see the returns... Now this one's going to be tough because you bought it vacant, so man, that would have been very tough to put debt on, because they're going to say, "Wait a minute, what do you want to do?" I don't know that I would even be an investor in this deal. But good for you for pulling that off. Listen, you've got a great future ahead of you, man. How old are you now?
Bailey Kramer: I'm 21 now, almost 22.
Ash Patel: You've been at this for less than two years?
Bailey Kramer: Yes.
Ash Patel: Amazing.
Bailey Kramer: Basically, it's been almost a year and a couple of months since I bought that first property, and a lot has been in the works since.
Ash Patel: That is awesome. Bailey, what's the hardest lesson that you've learned in real estate?
Bailey Kramer: The biggest lesson and also the hardest lesson is that you need other people, you need a team. I'm talking about... I've said "we" a lot, I've said investors a lot. In the beginning, I wanted to do everything by myself, and it was a rude awakening after talking to a million people and trying to do by myself that I realized, I don't have every piece of the puzzle, so I do need other people. That was the biggest rude awakening in the beginning of like, "Oh, I thought this is just going to be me and just buying up properties." But then I realized a lot goes into it and that I need other people, someway, somehow.
Ash Patel: Bailey, that is amazing advice. I was a one-man shop for seven or eight years until I figured that out. Good for you for figuring that out early. When I did figure it out, I 10X'd my portfolio, so great advice there, man. Bailey, are you ready for the Best Ever lightning round?
Bailey Kramer: I'm ready. Let's do it.
Ash Patel: Alright, Bailey. What's the Best Ever book you recently read?
Bailey Kramer: The Best Ever book that I've recently read? I keep going to Alex Hormozi. He has a phenomenal book. It's not real estate related, it's more sales-related. It's called "$100M Offers" by Alex Hormozi. Very good book.
Ash Patel: What was your biggest takeaway from that?
Bailey Kramer: To sum up the books in a nutshell, it's make an offer so good that people feel stupid saying no. How can you make something so good -- and this applies perfectly to real estate and syndications... It's make an offer so good that they can't say no.
Ash Patel: I like it. Bailey, what's the Best Ever way you'd like to give back?
Bailey Kramer: Best Ever way I like to give back? I'm actually in the process of that right now talking to a couple of mentors. I don't believe in the, "Oh, when I make it, I'm going to start giving back." It's, "Okay, start giving now, and as you become more successful, you can start giving more and more." But right now, I'm really keying in on a couple of organizations that have been pivotal to my life, and starting to figure out how I get involved, monetary and also my time, to see how I can best help organizations that have helped me.
Ash Patel: That's a great outlook. Bailey, how can the Best Ever listeners reach out to you?
Bailey Kramer: The best way to do it - Instagram, @the_bailey_kramer. I'm on Facebook and TikTok as well, but Instagram is kind of my hub, so if you find me there, @the_bailey_kramer, happy to connect.
Ash Patel: Bailey, I want to thank you again for your time today. Starting out by reading In Rich Dad, joining a mastermind, and putting together some really phenomenal deals. Being a GP less than two years into the game; you're going to be one of the rising stars in real estate mentor. We want to have you back in your next big win or your next crazy out-of-the-box deal.... So thank you again for sharing your time with us.
Bailey Kramer: Yeah, thank you.
Ash Patel: Best Ever listeners, thank you so much for joining us. If you enjoyed this episode, please leave us a five-star review and share the podcast with someone who you think can benefit from it. Also, follow subscribe and have a Best Ever day.
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