Ep. #20 - Stock Day Trader, Realtor, Real Estate Investor... and Landlord - Chad Kastel

“Landlords grow rich in their sleep, without working, risking or economizing.”
-John Stuart Mill – Political Economist

That quote relates well to the motivation of today’s guest, Chad Kastel – stock day trader… and landlord.

Intro

Welcome to Episode #20, and my second interview. Chad Kastel is my guest today. He is a stock day trader and landlord. He’s also a realtor in Hollywood, Florida, in addition to his more important titles of “husband” and “father”.

I had the pleasure of meeting Chad earlier in the year at a multi-family real estate investing event in Denver, Colorado, and we’ve maintained pretty much weekly contact since then, to see where we might be able to do business together. I highly recommend attending networking events, whether they be local, or you have to travel, where you can come into contact with like-minded individuals, who may be doing greater things than you, or maybe just doing different things than you, either way, from which you can learn. Not only will you meet colleagues, but potential business partners, and maybe your next private lender. But you can also come across someone who will be a mentor to you, or it might be the start of a mastermind, or just an accountability partner.

Meeting people and making connections, at networking events, can be very valuable to your growth – both business, and personal. Which is why I was especially intrigued to have met Chad – a stock day trader, who later got into real estate investing and became a landlord, because I was considering getting into stock day trading before becoming a real estate investor, literally within weeks of each other.

So, let’s get into the show, and hear what Chad has to say about stock day trading and real estate investing, and being a landlord and a realtor, all of it. And please, excuse some of the audio quality issues. I will improve that going forward.

Jonathan

So, my guest today, on the [ …and Landlord] Podcast, is Chad Kastel, an individual that I met at a real estate investing summit in Denver, Colorado. Great guy, has amazing information about what he’s done in real estate investing and, most interesting to me, he’s a stock day trader – something that I wanted to get in. So, Chad, welcome to the show, and thank you for being here.

Chad

Hey, J.T, thanks for having me on.

Jonathan

So, tell me a little bit about yourself and what do you got going on?

Chad

So, my background is in day trading, like you said. I've been doing that for 8 years. The way I got into that was through a collectible trading card game called Magic: The Gathering, which skillsets directly correlated to me getting into day trading. And in November, I got into real estate investing as a part-time, I'm not going to call it a hobby, but way more into it than a hobby, and hopefully will get into that full-time in the next couple of years.

Jonathan

So, tell me, how did Magic: The Gathering, I've heard of that game, and my son plays it, I haven’t, how does that lead into day trading?

Chad

So, Magic is a game of skill and chance, and limited information. So, you develop strategies to beat your opponents. Sometimes you develop the correct strategy, and you lose. And sometimes you develop an incorrect strategy and you win, and you have to be able to tell the difference between both of those, and not be result-oriented with those strategies. And those skillsets directly correlate to trading, because sometimes I've had trades in the past that have won, and they have been the wrong trades and they’ve been the wrong reasons to do them. And you have to correctly analyze that, so you don’t make a mistake again. Even though I won in that particular trade, it’s a long term losing trade, and vice versa. Sometimes you lose in a trade, but it’s a long term winning trade, and you have to just keep doing it. That’s how I was able to sell myself onto getting into trading.

Jonathan

And so, how does the day trading work? You’re not holding onto these stocks past one day literally, correct?

Chad

Me, most of my trades are minutes, seconds. It depends on how volatile they are, but yeah, I rarely keep positions over night.

Jonathan

Can you tell me how that works out as far as your best and worst days, or no?

Chad

Can’t really go into that, but what I can tell you is that I've made a nice living out of it. I've had, besides getting help getting into it, I haven’t had any financial assistance, and I've been able to provide for my family and buy a house, and get into real estate and buy a property in cash. It’s been okay for me.

Jonathan

More good days than bad, certainly.

Chad

Yeah.

Jonathan

So, I was considering becoming a day trader before I got into real estate investing. Are there any special knowledge or skills, or should you have a certain aptitude to be a day trader?

Chad

Well, the numbers don’t like. So, you have to be honest with yourself, and you have to be able to critically think things through. You have to be able to evolve because the strategies that you might use, at least in the way that I trade, two years ago, aren’t particularly applicable now, or don’t come as often. You have to be okay with, generally speaking, being alone. So, if you're an extrovert, like I'm an extrovert, so that’s kind of draining on me being alone all day. And those skillsets, being honest with yourself, critical thinking, they’re not something that everybody can have. Which is okay, but if you're going to get involved into a game where you could lose money, you don’t want to do that if you don’t have those skillsets.

Jonathan

Okay, so, how did you add “rental real estate investing” to being a stock day trader?

Chad

Well, I was just, over the course of last 4-5 years, looking at multiple revenue streams. And I knew I had an active revenue stream in day trading, even though I don’t know what I'm going to make every month, it’s been very consistent. And I was looking for a passive revenue stream.

So, in November, I finally just hopped into Google, and typed “How to invest in real estate?” and found Bigger Pockets, and started absorbing as many podcasts and articles and webinars and everything I could do. Once I figured out the basic formula to purchase a rental property, I just started to look in Florida, and didn’t find any cash-flow deals here, and ended up finding a cash-flow deal in Upstate New York.

Jonathan

Okay, well, I want to know more about that, but is your long term goal to move completely into rental real estate investing, or will you continue to do stock day trading, or do both?

Chad

So, my long term goal is to slowly move out of trading. It’s a five day a week job for the most part. Maybe a few years from now, I'm doing it two to three days a week, and five years from now, I'm doing it zero. So, to answer your question, yes, my long term goal is to get out of stock trading.
Jonathan

So, you said that your rental properties are in New York?

Chad

Yeah, I have one full-time rental property in Upstate New York.

Jonathan

Okay, well, tell me about that. Why in New York, and how is that going for you?

Chad

Just kind of the right place at the right time. I had a former business partner who recommended that area because he owns rental properties in the area. I just started researching it and found that the cash-on-cash returns were excellent, and just started making wholesale type offers on the properties, and waited till I got the right deal. The property I was buying, they were asking for $90,000. I offered $73,500 in cash, and $83,500 with the mortgage. We ended up meeting at $78,800 in cash. I ended up putting $10,000 into it, and now it’s renting. It’s fully rented for $2300.

Jonathan

How many bedrooms?

Chad

So, it’s a two-structure property. The first structure is a four bedroom house, and the second structure is a commercial unit occupied by a dog grooming place.

Jonathan

Oh, so, mixed use? Commercial and residential.

Chad

Mixed use, yeah.

Jonathan

And that was your first deal? Wow.

Chad

Yeah

Jonathan

Okay, so, how has that gone? Have there been any hiccups, headaches, hassles, or is it the best thing that has ever happened to you?

Chad

So, both. A $2300 rental unit on a, let’s just call it, $90,000 place is a great return on your investment. The reason it’s not unbelievable at the moment is, one, I'm having trouble cashing out. My plan was to buy it in cash, and then cash out, but my amateurish, or novice-ness, where I did not know that banks would not cash out commercial properties. They just don’t want to deal with mixed use properties. So, I've been having trouble getting anybody to re-fy me out. If they are willing to, they don’t want to do anything less than $100,000, or they don’t do Upstate New York. So, that was a mistake that, had I know, I might not have done

Jonathan

Okay, so, the aspect of it being a mixed use property, that commercial element, prevents you from going to a regular lender, and getting a thirty year fix?

Chad

Yeah, I've spoken to a lot of different lenders. It’s just one of those categories where it’s either not expensive enough, or they don’t want to do New York, or they don’t want to do mixed use. So, I've been having trouble getting a decent rate. I've had family that’s willing to do it, but I kind of just want to do this first one on my own. So, worst case scenario, I'll have a family member cash out re-fy, and they’ll give me the $70,000, or whatever the 70 % of LTV is.

Jonathan

Is there something specific about New York that makes them not want to lend on it?

Chad

The lenders?

Jonathan

Yeah, what’s their concern about New York?

Chad

I’m not sure. Just a bunch of lenders I've called have said “Oh, we do every State, but New York and Alaska”, or something. And New York just seems to be on the States that lenders just say that “Oh, we don’t do New York”. So, the conversation never went any further.

Jonathan

Well, see, a lot of people getting into real estate investing for the first time, their fear is the unknown, and they let that stop them from getting started. So, the fact that you got started is great. Other than having your cash locked in the property, have there been any other unforeseen occurrences, or things that you wish you had known going in?

Chad

Well, not the latter of your question, but the former is, well, you know, I've tried to work with a recommended construction guy. He has a construction company, and I was going to hire him to do the construction work, and I was going to hire him to oversee the property and give him some equity in the property to do so. Figuring if he owned some of the property, he would take care of it like its own. But it didn’t work out particularly well, and he didn’t do his job, so I ended up having to let him go. I was lied to, but some of it was my fault. I could have done a better job to oversee him.

Jonathan

Right

Chad

And, you know, the old adage, “trust but verify?”

Jonathan

Certainly.

Chad

I trusted, but only like three-quarter verified. So, I could have lost less money than I did. But you have to take responsibility when you mess up. It was my fault, and I lost out into it, so I got punished.

Jonathan

Do you think it would have been different if you were local, or the distance between New York and Florida play into it?

Chad

Maybe I would have driven over there. I think it more, I just was a little too trusting, and lazy or, I'm going to call it incompetent in some spots. But, yeah, maybe it would have worked out, so it wouldn’t have happened. But, I really just have to take the blame that I just needed to keep it a little bit more of an eye on him.

Jonathan

Mistakes are some of the best learning experiences, and if you’re taking that on yourself and saying that you’re to blame, you'll certainly be better for it going forward. How are you going to move forward? What are you doing in real estate investing now? Is it still going to be New York, or are you looking at other property types in other locations?

Chad

Yes, so, I will consider expanding on New York. I would want to get that particular place rented and see how it did for four months, and make sure that it was what I thought it was, and so we’re on the way to that. I had hired a new property manager, who I'm happy with, but not ecstatic about. He’s doing a pretty good job. I can get in touch with him, which I care about. Moving forward, I've started to flip properties in South Florida. Mostly my wife – I met a flipper down here, who wanted to expand his market. he wanted to teach me, I didn’t have any time, but my wife was interested, so he taught her, and we have already wholesaled and are midway through a rehab down here.

Jonathan

Oh, so you’re a husband and wife team in real estate investing?

Chad

Yeah, I would say it’s more like I bridged the gap from the flipper, whose name is Brandon, and that went to her. I'm not really that involved. I learned how to do it just because I wanted to be able to comp properties and learn that skillset, but she’s really doing most of the looking-and-finding for the properties.

Jonathan

So, with regard to things like comping properties, do you have your real estate license in Florida?

Chad

I do.

Jonathan

So, do you perform as a realtor in addition to real estate investor and stock day trader? Or did you just get it to be a better investor?

Chad

Well, I got it to be a better investor, and then I had somebody ask me to sell their house. It was the right opportunity, and we just wanted our contract for my first house sale.

Jonathan

So, is that something you’re going to pursue going forward?

Chad

If it’s the right opportunity, yeah. I'm not going to take someone’s house. If I'm going to take your listing, you’re going to get 100 % of me, so I'm not going to take the listing if I don’t feel that A) It’s worth it for me, B) I won’t do a good enough job, or C) if I think you’re going to be a problem to work with. I want people that are easy to work with, and understand that I understand the markets, and what prices things should be sold or bought for. And if someone’s going to tell me how to do my job, then they should get another realtor. That’s how I look at it.

Jonathan

Certainly, certainly. Well, that’s often one of the questions that those investing in real estate have, is should they get their license, and there are some pros and cons to it. Do you think it has been betterment, or has it hampered you in any way being licensed?

Chad

It’s hampered me in no way. If I just sell a property, and do nothing else with it every three years, I mean that’s just adding money into your revenue stream that wouldn’t have otherwise been there. I'm very, very big on having, on making a revenue stream, as I possibly can.

Jonathan

Yeah, I feel the same way. And then, with regard to the property manager on your other property, have you ever considered self-managing?

Chad

I've considered it. I don’t think the money that I'll save with one property is worth it to me at this time. Speaking with you, and a couple of other people who own multiple homes, the systems in place are phenomenal, and the time invested to get those systems in place, probably isn’t there for me right now. But once I stack up the properties, and have four, five, six, maybe ten properties, then yeah, of course I’ll very strongly consider self-managing.

Jonathan

So, as I mentioned, you and I met at Joe Fairless event, the best ever real estate investing advice conference, in Denver Colorado, what brought you to that event, and what did you take away from it?

Chad

So, there were a couple meetings down here, and I went to one and I met a really nice lady named Rita Medeiros. She is twenty something, single family home, in Ohio, and she just recommended some meetings, and she recommended some conferences. The meetings I went to worked out very well, and she recommended Joe’s conference, so I said all right, let me just fly there.

It’s the best conference I've been to so far. I got a lot out of it. I learned a lot. It gave me some ideas, and seed thoughts that I've expanded upon since going. I met you there. I met a bunch of other people there. It was a very positive experience. It taught me about partnering, and the one negative thing I'll say about the conference, is that I thought that people were a little deceptive with how they pitched me. So, they would say things like “Oh, I have 500 doors outright”, and when I actually delved into it, they owned four properties outright, and they owned 5 % of the other 496.

Jonathan

Yeah.

Chad

Which is totally fine, but they made it seem like they owned 500 doors outright themselves, or with a partner, or something.

Jonathan

Yeah, they don’t tell you that they’re a limited partner, and they’ve got a very small percentage in the deal.

Chad

And I didn’t know if it was a sales pitch, or if it was an ego thing, but I'm not a fan of that. I think owning a piece of 500 doors is already enough of a line in your resume, because it shows that you made the right investment types, and you’re expanding and hedging instead of owning one single-family home. It’s a great thing, but that’s just something I wasn’t a fan of, and something I look out for more now.

Jonathan

Yeah, I encountered some individuals speaking along those same lines, and it sounds like I thought it was more of an ego play. But yeah, it could have been a sales pitch as well.
Now, you’ve been on Joe Fairless’s show. Do you recall what episode that was?

Chad

You know, I don’t recall. It was in early May.

Jonathan

I’ll put it in the show notes in case people want to see what you had to say on that show. You mentioned that when you were at the event, you gained some knowledge about partnerships, and that’s something that I've been struggling with how about best to partner with individuals, how to build a team. With regard to your flipping business, or flipping activity, in Florida, are you starting that process of building a team so then that could become an on-going business for you and your wife?

Chad

Yes, so, the team is small, and know what the flipper taught us. We’re both realtors; my wife, and now we’re beginning to teach people from other areas in Northern Florida, and Central Florida, things that are just a little out of our grasp; to developing relationships with contractors there.

The most important thing is just to find the properties. If we find the deals, everything else will fall into place. So, it’s teaching people that will sit there and look at what’s on the wholesaler lists, and we’ll spend a few hours a day grinding through the properties to find one, to find a gem in the rocks. And so, I'm teaching somebody who lives in Wellington, which is about an hour and a half North of me, and I'm looking to maybe get into the Jacksonville area. It’s slow and steady. You know how it is.

Jonathan

Yeah, I'm hearing lots of things about Jacksonville. So, that’s one of the areas that I've considered expanding into, and I'm originally from Florida myself. So, your future goals for real estate investing, I know that you want to build a portfolio of rental properties. You’ve mentioned that you’ve done some wholesaling, and that you’re working with your wife to accomplish some flips. My purpose for going to Joe’s event in Denver was to learn more about getting into larger, multi-family properties. What do you think your focus is going to be going forward?

Chad

We’ve both kind of had that same goal, but I'm having trouble competing and finding decent deals in the larger multi-family units.

Jonathan

Me too.

Chad

So, that’s always in play. I'd rather scale up with multi-families, but I'm not going to force where I'm pegging into a square hole. If I can go out and find a single family home that can do cash-on-cash returns for 30 %, I'm not going to not do it because I want to get the multi-family. So, my goal is to have passive income on my own, and have some single-family homes, and have some active income with flipping and wholesaling, and then maybe long-term do some syndication with apartments. But the syndication, I can't force it. I'm not going to take peoples’ money and go and get a sub-prime deal, or a deal that’s not super-great. I'll wait until the market shifts, and then I'll get into that.

Jonathan

And so, speaking of that, do you think that there will be a change in the market, a downturn in the economy, or something of that nature coming along soon?

Chad

Statistically, yes. We’re on more of a ten-year upswing, and generally speaking, every ten years, you have some sort of downswing. I personally have a decent chunk of my portfolio in gold and in silver, to prepare for that. Does that mean it’s going to happen? Of course not, and I don’t have a crystal ball, but if history repeats itself at all, it should be coming in the next couple of years.

Jonathan

Okay, I agree with that. I didn’t know you were a gold bug. I wanted to get into that too. So, I have to ask you about that at a later date in another conversation. I want to learn more about gold myself.

Chad

I'm happy to discuss.

Jonathan

So, I want to thank you for your time, Chad. I know that you're a husband, father, entrepreneur, realtor, stock day trader, and you’re a landlord. What advice would you give the listeners of this podcast to also seek to add [ …and Landlord] to their personal list of titles and descriptions?

Chad

You’ve kind of touched on it earlier, is that you just have to take the dive in. There’s a lot of information on the internet. There are a lot of meanings. It’s very easy to learn how to be profitable as a landlord, so don’t be scared of the unknown. Pump yourself as much information as possible. Take the dive knowing full-well you’re going to make mistakes. Maybe search for a thicker deal with a lot of room for error, like I did. So, when you make mistakes, it’s not nearly as costly.

And don’t be results-oriented. As soon as I had a partnership go back, and let go of that person in April, by May I had another partnership in which we’ve already made more money than the one I lost. And I think a lot of people would have said “Oh, this one thing went bad”, like everything’s going to go bad. You just can't think like that. You have to make an analysis and move forward, and just jump in.

Jonathan

Thank you, I really liked that advice. I appreciate that. I have one additional question. What books are you reading right now?

Chad

I'm actually reading a book on Land Trusts by Randy, can’t remember his last name, Hughes maybe? I'm just looking how to put my property in Upstate New York, and the one that I own in Florida, which we really didn’t touch on, into a Trust, to make myself a little bit more insulated from liability and lawsuits.

Jonathan

You’re right, I did not go back to your Florida property. Tell me about it, please.

Chad

So, I bought that property in 2016, and this is what I knew about real estate. These are my thoughts; real estate, good. Renting, bad. That was all I knew. This is also a two-structure property. It’s a studio apartment in the back, about 600 sq., and a two-bedroom house in the front, about 1900 sq., and my wife and I lived in the studio and rented out the two-bedroom house with a pool on Airbnb. We live about a five minute drive to the beach and about a ten minute drive to the Ft. Lauderdale airport. Originally, we were going to buy a house for about $350,000, live in it until we’re ready for our next step, and I found this property for $50,200, and I said “Oh”, we can pay for our mortgage and plus by living in the studio.

And it took a little while to talk her into it, but she eventually agreed, and the money that we made and saved over that three year period, is about what I bought the property in New York for cash for. So, that’s snowball living in this 600 sq. apartment. That $70,000 we made is now going to make another $10,000 a year on top of that.

Jonathan

So, you sacrificed a little delayed gratification, and it resulted in yet another property.

Chad

It did, and my friends thought I was nuts, because for the money I was making, they just couldn’t understand why I was living in this 600 sq. apartment. It was livable, but I moved from a two-bedroom apartment on Las Olas, which is a very nice district in Ft. Lauderdale, into the studio apartment, and they just didn’t understand. But, I had a plan, and my plan is to be able to develop enough passive income to not have to work and not do my trading job.

Jonathan

How did you come to that realization? That’s something that most people never even figure out that you’re better off doing your own thing, and building residual passive income than being someone’s employee? I commend you for figuring that out at such a young age.

Chad

Well, a lot of people learn from their parents, like how to act. I learned from my parents’ mistakes, and they made pretty much every mistake financially they could in the book.

They were very irresponsible, and my father unfortunately passed away and had a tremendous amount of stress on himself in the later part of his life and his late 50s. So then my mom, because they had no money, and they didn’t have a retirement plan, they didn’t save, and didn’t invest, I didn’t want to be like that! I decided I didn’t want to be someone who had to work in their 50s. That’s the going rate. That’s what everyone does. They save up enough from their pay, they work very hard, and they retire for a totally sweet life in their 50s and 60s, which there’s nothing wrong with. I just decided that I didn’t want that. I did not like that status quo that everyone seems to do. I wanted to do the things I loved to do, and I thought that I could do those things from age 40 on, which is way earlier than most.

Jonathan

Yeah, unfortunately it is. Well, Chad, you’ve been a great guest. I thank you. You’re only the second interview I have done on the podcast, and I know that you and I will eventually be doing some deals together as well. We just have to get to that point, but I thank you so much for your time, and for the information that you’ve provided to those who listen to the [… and Landlord] Podcast.

Chad

Thanks so much for having me, J.T. It was a big pleasure.

Outro

Okay, that was my interview with Chad Kastel – husband, father, stock day trader, realtor, and landlord. What did you think? Let me know. I'd appreciate the feedback. And also, if you are beyond your first deal in real estate investing, let me know. Let everyone know. Come on the show and talk about your experience – good, bad or ugly. I want to hear about it. Everyone will benefit from learning from the experiences of others, especially others that are just starting out. Everyone can go on the Bigger Pockets podcast than listen to someone who has 200 units, but are you really going to learn from that person who has 200 units what you need to know in order to get your first unit?

So, go to andlandlord.com, scroll to the bottom of the page, and click “Get in Touch” if you’d like to be on the show. Or if you know someone who is an entrepreneur, or has a landlord story, or even a landlord horror story, that might benefit others to hear, I'm interested. I want to hear it. I'd like to get those individuals on the show. And if you don’t have any rental properties yet, and you’re looking to get started and become a landlord, but you think you can’t, you think maybe your day job prevents you from doing it, look at Chad. He’s a stock day trader, five days a week. His day is occupied, but yet he still became a landlord. So, you can do it, and property management may be the thing that will help you do it. And like I've said before, if your rental property, or if you’re looking to get a rental property in the Raleigh/Durham, area, feel free to contact me, and hire me and Blue Chariot Management, to take care of your property management needs in the Raleigh/Durham Triangle area of North Carolina.