Kirby Atwell (right) and Captain Chikara Komiyama of the Japanese Air Self Defense Force
Kirby Atwell’s first career was as a second lieutenant in the U.S. Army, where he served for 11 years. He loved his work, but he always felt an entrepreneurial itch.
While working as an air defense officer in Shariki, Japan, Atwell used radar to track test missiles being launched by North Korea into the Pacific Ocean. Yet in the back of his mind, he was doing calculations about the potential financial upside of real estate investing and how, if done right, it could provide him with a nice income.
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Becoming a Veteran Entrepreneur
When Atwell finished his tour in 2011, he already had purchased a few rental properties using both the money he earned while deployed and traditional financing.
A West Point graduate, the Chicago native knew he wanted to take his irrepressible competitive drive and begin renovating and flipping properties. He primarily relied on self-education, reading every book he could find.
“I loved the idea of owning an asset that could potentially pay me for the rest of my life,” Atwell says.
Atwell’s first business, called iCandy Homes, was built on a traditional flipping model. He would look for undervalued properties in the south suburbs of Chicago (foreclosed or just plain unattractive). Then he and his two friends would rehab them and put them back on the market.
While his long-term game has always been to buy, rehab, and maintain rentals, this first venture taught Atwell a lot about the dos and don’ts of real estate investing.
The best situations, he says, were ones in which the underpinnings of the house — specifically its mechanics (wiring, plumbing, heating) — were solid, and just the mostly cosmetic “ugliness factor” needed to be fixed. While they took a fair bit of elbow grease, those deals were the most profitable.
In the beginning, Atwell raised additional loan money from family and friends. Atwell would rehab the property and sell it. The upside for the family and friends was receiving their principal back with a higher interest rate.
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The Finances of Flipping Houses
At the height of iCandy Homes, Atwell and his two friends were flipping 24 houses at once, in various stages. His overhead ballooned quickly and he employed 13 people in addition to various contractors. Atwell felt like he was on a treadmill. He knew he needed to modify his business model.
“I did not realize how much overhead went in to flipping. I had to pay all the taxes every time I made a profit on a place,” Atwell recalls. “I knew I wanted to get into the rental market because it guaranteed passive income.”
The financial payoff wasn’t bad. From 2011 to 2016, Atwell sold between 30 and 35 properties for $200,000 to $1.6 million, and his company made more than $15 million in revenue. Atwell is the first to point out that revenue is misleading when it comes to real estate. It really comes down to actual profit.
He decided that in the long term, the business model wasn't sustainable. He wanted a level of passive income to grow and support him and his family.
Flipping ended up having massive overhead costs: constantly finding new deals; transactional costs; the costs of staging; and the opportunity cost. He knew the rental market was where he wanted to be, and he thought it could be more profitable.
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Rental Vouchers for Homeless Veterans
Atwell then learned about a program called VASH (Veterans Affairs Supportive Housing) that helps homeless veterans find places to live. The program is a collaborative effort with the Department of Housing and Urban Development (HUD) that offers vouchers to help veterans get off the street and to become productive again.
In May 2016, Atwell started his new company, called Green Vet Homes. He began buying and renovating homes in the southern suburbs of Chicago and renting them primarily to homeless veterans using VASH.
“These veterans get vouchers, depending on family size, from $1,200 to $1,900 a month,” says Atwell. “They can have 30 percent of their income go to rent. The intent over time is the veterans’ income increases, so they no longer need the voucher.”
Caseworkers also work with the veterans to help with the root causes of homelessness, be it illness, substance abuse, or simply an unforeseen change in life circumstance.
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Helping Homeless Veterans as a Real Estate Entrepreneur
Employing experience from his previous business, Atwell says the key to making his new rental business work is to buy houses that are ugly inside, “hoarder houses,” foreclosures, or places that aren't taken care of but have a good core.
“I replace the fixtures and the finishes and make it look good inside so the value of the property exceeds what I bought it for almost immediately,” Atwell says. “This increases my initial cash investment in the property and allows for a positive cash flow on a monthly basis.”
But Atwell isn't a mercenary looking to make a buck. The issue of homeless veterans is one he cares about passionately.
“I have seen so many reasons for veterans to become homeless. Veteran mothers with multiple kids who have a change in family and earning structure. I had a tenant who had multiple surgeries back to back and was sick for six months and lost his job,” says Atwell.
“These vouchers give people a reason to live and recover so they can get back on their feet.”
Atwell almost always rents to veterans, but also rents to Section 8 or market tenants if he can’t find a homeless veteran to help when a property is ready to rent.
His new company also tries to maintain the smallest eco-footprint possible by renovating old houses rather than building new, reusing as much of the existing property as possible, using energy-efficient windows and bamboo floors, and adding insulation to attics.
This in turn helps lower the cost for the renter because the home is more energy efficient.
Atwell’s Business Goals
Today Atwell owns 15 rentals. His initial goal is to own 24 properties over the next few years. Each house will ideally yield $500 of monthly passive income for all of his expenses. This would equate to $12,000 of monthly passive income, which would be enough to grow into new markets. Long-term, Atwell wants to branch out into incorporating multifamily models.
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Atwell is now the chief operating officer of a veteran-based nonprofit called Bunker Labs, which helps veteran entrepreneurs like him. Free to its 30,000 members, it supports the veteran community through meetups and online education on how to start a business. So, Atwell now can share his successes and lessons learned with other entrepreneurs.
Right now, he is able to manage his current business with a handyman and his dad. However, he's reaching the point where he is balancing financial freedom with incurring overhead again.
It's a balance all entrepreneurs face. Luckily for Atwell, he is able to grow a real estate business surrounded by a community of people he is passionate about.
This article originally appeared on Zing! by Quicken Loans.