Generations Of Wealth

Generations Of Wealth | Kirby Atwell | Smart Short-Term Rentals


Smart short-term rentals may not be occupied permanently, but you can still win big if you play your cards right. Derek Dombeck is joined by Kirby Atwell who talks about achieving financial freedom through this particular asset. He explains how he discovered the love for real estate entrepreneurship after more than a decade of serving in the US military. Kirby talks about the 1% gross rule, how short-term rentals allow for a self-management approach, and why he recommends buying properties in the suburbs instead of cities. He also discusses what it is like to live outside the busy urban setting now that he is living peacefully on a farm.

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Financial Freedom Through Smart Short-Term Rentals With Kirby Atwell

Kirby’s Story

I’ve got Kirby Atwell and even though he’s originally from Chicago, which is Wisconsin’s basement, I still am super happy to have him on the show. Kirby, I don’t want to go into your whole big long bio because you’ve done a lot of stuff. Why don’t you tell my audience who you are and dive in?

I now live in Indiana. That’s like the sub-basement of Wisconsin, but I’m happy to share. It’s great to be here, even though you are a Packers fan. I grew up in the suburbs of Chicago and I had a rich dad, poor dad experience growing up with my parents. My mom owned an independent insurance brokerage where it was the eat-what-you-kill type of experience. She started from scratch and grew as we were growing up.

I got to see what that looked like to live that entrepreneurial lifestyle and set our own hours and not get a paycheck. As I said, eat what you kill. My dad worked for the park district. He was a director of a park district in the suburbs of Chicago, a city job, very secure with retirement, that sort of thing. I got to see both sides.

I was always drawn toward my mom’s business. Not that I was super excited about insurance, but being an entrepreneur and setting your lifestyle the way that you want to create it. I knew two things then. As a kid, I knew that I wanted to be an entrepreneur and then I also knew I wanted to serve in the military. After high school, I was talking about options for the military. My dad who was an enlisted guy during the Vietnam era said, “If you’re going to be in the military, you need to be an officer because they drink coffee and hang out all day and don’t do much, but they get paid a whole lot. If that’s the route you want to go and if you’re going to be an officer, you might as well try to go to West Point.”

It wasn’t on my radar. I wasn’t top of my class, but because I played football in high school, it got me a leg in the door. I wasn’t a top recruit by any means, but it got me into the school. I went to prep school for a year after high school, and then I went to West Point for four years. I served six years as an officer in the Army. While I was in the Army, I picked up the gateway drug into real state investing, which is Rich Dad Poor Dad. I read that book and it changed my whole thought process.

I was like, “This is what I’m going to do the rest of my life.” I’m going to do real estate, even though technically it’s not a real estate book. I caught the bug. I did a few rental property deals while I was in the army and then got out in 2011 and dove in headfirst into real estate investing. I can share that experience if you want.

First of all, thank you for serving and I don’t have a comment on enlisted versus officers because it wasn’t my world. I don’t have a right to comment, but it’s pretty damn funny. You started in 2011 for the most part, which was post-crash. A lot of doom and gloom was already over. Things were on the upswing. Do you think that made a big difference as far as when you started to your success now?

It’s a good question. I look back at that. I am grateful for starting in 2011. I bought a few rental properties when I was in the Army. Very stable, turnkey property. I didn’t learn a ton on those but I started a flipping company in 2011 as soon as I left the Army. That’s a lot of speculation. Had I started that company in 2006, I probably would have made as many mistakes, but those mistakes would have been extremely costly because it’s forgiving when you’re on an upswing. We had hedge funds buying a lot of our properties after we’d flipped them and after we’d rehab them.

You barely had to list the property. They didn’t even do an inspection. They’re just throwing money at you. I think it helped, but at the same time, looking back, I would advise not to do what I did and not start in a speculative aspect of real estate investing. Instead, what I wish I would have done is buy solid rental properties that cashflow well.

I started in ‘03, and my audience knows the story, but I lost my ass in 2007, 2008, and 2009 and then had to rebuild, which I say publicly was the best thing that ever happened to me. It was a blessing now, but it didn’t feel that way back then. When I talk to people that have been in the business the last five years, maybe six, and it’s been low-interest rates, huge upside, and a lot of them thought this is never going to end.

Short-Term Rentals

We that have been in the business through some cycles, no better but a lot of people are looking at saying, “I’m going to buy based on appreciation because look at the appreciation we’ve gotten.” That was one of my larger mistakes early on. It was not buying strictly for cashflow. Your whole business model is primarily from what I understand about cash flow. Is that correct?

Yes. That’s the primary driver of our deals right now.

What do you think is the 1% rule? I think your 1% rule is a little different than the traditional 1% rule as it pertains to your short-term rentals.

Yes, exactly. In terms of a little bit of background about how we got into our niche, I flipped for five years and realized it was a treadmill that I was never going to get off of. We flipped about 70 properties all around Chicago and it was more stress and bigger headaches, the bigger we got. You could never get ahead because we weren’t building wealth. We didn’t have any recurring income.

In 2016, I switched to long-term rentals because what I am after is freedom. I need to start creating cashflow. I got into long-term rentals and I started basing my buying on the 1% rule that most people know. It’s talked about a lot on Bigger Pockets, where if you buy a property for $100,000, it should make a gross rent of 1% or $1,000 a month for your rent.

If you do that, then you should be left over with a few hundred bucks of net cashflow after all your expenses. It worked okay in the beginning. It was nice to be getting cashflow, but as I started to scale this I realized, now it’s turning into this beast that I’ve got to manage. I didn’t allocate extra money out of the few hundred bucks per property to manage it as I grew.

It’s going to take me a heck of a lot of these to get to a place of freedom. That’s when we transitioned. We moved over to Northwest Indiana and I transitioned to this model of low-cost short-term rentals that work for a variety of reasons, from vacations to utilitarian reasons. In this model, I started buying based on a 1% net rule.

My first property was $39,000. It was nasty. It was a small single family. I was like, “I’m going to test this out as a short-term rental. If it doesn’t work, I can always convert it back to a long-term rental.” This is in Michigan City, Indiana near Lake Michigan. I fixed it and had about $100,000 into it. After all my expenses, that property brought in a few thousand dollars a month.

After all my expenses, it was around $1,000 and $1,200 a month on average net cashflow. I went from making 1% gross to 1% net. What I realized then is that net income is the only metric that mattered to me because I went back to working a full-time job while I was building my rental portfolio after I stopped flipping. I wanted to get to a place of freedom and you can’t get freedom off gross numbers. Everyone talks about their seven-figure business or how much gross money they’re bringing in. Show me the bottom line because that’s what I can pay my mortgage off of. That’s what I can buy my groceries based on. I wanted to get to a certain amount of net cashflow to be able to leave my full-time job. I realized these properties can get you there much quicker.

The traditional thought process on short-term rentals is vacations, the people that are going on vacations. Being from the Midwest, you and I have an advantage because we can still buy cashflow properties. Even today, we can buy cashflow properties. People on the East Coast, West Coast, and other parts of the country can’t even imagine what it’s like to buy a property for $39,000 and net $1,200 a month.

Sustainability Strategies

Even today, I buy properties for under $100,000. I don’t want to say all the time, but I’m able to. How does that business build out? Do you have the one at $39,000, but is that sustainable? Are you then moving forward buying properties in that you had a $100,000 total after renovations of stuff? What did that look like as you grew?

I learned a lot and realized all the things I didn’t know in the first few. One of the things that I discovered is that if you buy multiple unit properties, the net cashflow is substantially higher. Your overall income might not double or triple. Say you buy a two-unit or three-unit, it’s not like you’re going to make twice as much nightly rate because they’re attached now.

If you buy multiple unit properties, the net cash flow is substantially higher. Click To Tweet

Maybe smaller units, but you have one set of fixed low expenses and you get great economies of scale. You don’t have double the taxes. You don’t have double the insurance. You don’t have double the lawn to most. You’ve got these economies of scale and your nightly rate is slightly lower than it would be with a standalone single-family house. Your net cashflow is substantially higher.

We started getting into these multi-unit properties where there’d be three units, but it cost very similar to what a single family would cost. We could list each unit individually because, in the off-season, it’s a lot of smaller groups traveling or workers or people visiting family or weddings or whatever. In the busy season, it’s big groups that typically travel, friend groups, grandparents, their adult kids, or grandkids.

We have a super listing then, where we list all three units together. All summer long, we can host these groups of 16 to 18 people at a big premium because there are not nearly enough properties that will host that many, and they don’t want to rent four hotel rooms. In the winter, you have the versatility of multiple streams of income for the smaller groups.

For example, the one that I closed an hour and a half ago, I drove here from the title company back to my office. It’s a two-unit property. We bought it for $145,000. It’s a big historic property. It’s got this huge open attic. It’s unfinished. We brought in the inspector and they said, “You can finish this attic and turn it into a third unit.”

We’re doing a $200,000 rehab on this property. We’re going to finish the third unit. We have three streams of income coming in on this property and we’ll have $350,000 total. It’ll be perfect when it’s done in this gorgeous property. That will bring in over $3,000 of net cash flow monthly. It’s right around that 1% rule that I target. It’s extremely hard to find an affordable property to make that cashflow.

If something happened along the lines of your area, your city, or your county changing any rules about short-term rentals, what would those three units bring in your traditional long-term rental income gross?

That’s always the litmus test that I use too. Does it work as a long-term rental so that if I ever had to switch my strategy, will it still cashflow? It’s right around the 1% gross rule as a long-term rental, ironically. Each unit would rent right around $1,000. It’d be about $3,000 a month coming in of gross rent. It would still cashflow pretty well based on my all-in price.

Working Around Low Bookings

You’re hearing a lot of the same things that I’m hearing and our audience is hearing. There are a lot of short-term rental property owners that are suffering. Their bookings are down. What do you think the market’s going to do and how do you invest based on that with your model?

I’ve been asked a lot that questions about the market. I think the market has been going down over the last fifteen years since I bought my first property. Before I used to try to predict that. I thought I could predict that. Anyone who thinks that they can predict what the market is going to do, I think you should worry about that person.

If you look at the last year, going into 2023, all the biggest firms, all the biggest data out there who had access to the most data, they all said that in 2023, the market is going to go down. We’ve got high-interest rates. It’s going to be a bad year. It didn’t happen. They were all wrong. If they can’t predict it, we’re probably not going to predict it either.

It’s not because you’re not, you don’t understand economics. It’s because there are so many factors at play that you can’t control, from political factors to printing of money to wars that happen, all that stuff. It’s not like a true market. What I do to prevent getting into a pickle with my real estate investments is buy based on sound fundamentals.

If I can buy a property that brings in several thousand dollars per month, and it’s still cashflows. In the worst-case scenario, it cashflows as a long-term rental. I know that if the market crashed tomorrow and went to 50% of its value, I’m still financially free. I don’t have to go back to work. I still have cashflow coming in. In the worst-case scenario, I have to convert it back to a long-term rental, and it cashflows less.

I also know that twenty years from now, it’s probably going to be worth double if history continues to go the way it always has been with real estate. During that time, all my guests will have paid off the majority of my mortgage. The fundamentals are so strong that you can make mistakes and things aren’t going to go exactly as you planned, but even with all these mistakes, you’re still going to be in a good position.

Picking The Ideal Market

Are you typically marketing to a certain type of property or how are you finding the highest cashflow properties? Are you seeking out those tired landlords that have a two-unit or three-unit, or they’re doing it the old-fashioned way, What are you looking at doing?

The way that I pick the ideal market is I look, as you said, throughout the area of the country that’s on sale. The Midwest and Southeast compared to the Coast is a lot cheaper, and then I start with the big cities and I don’t buy in the cities, but I look at the surrounding area around the cities. There are probably 50 suburbs or towns within an hour’s drive of these cities, and there are probably a hundred different cities throughout the Midwest and Southeast.

You look in these areas around the cities where regulation is much lower. The cost of a property sometimes is a third or a fourth. Our properties, compared to downtown Chicago an hour away, are at a fourth of the price of the same property in the city. Our taxes are substantially lower. We have almost no bureaucracy. There are barely any short-term rental rules. They’re inviting you to short-term rentals. This is helping our community. It’s bringing in a lot more revenue as opposed to what you have to go through in Chicago. These are the areas.

You want to look for local draws. You’re getting a great deal on a property. It’s low cost. There are all the utilitarian reasons people travel because you’re close to a large population center. There’s always going to be the weddings and funerals and stuff, but then if you have local draws, as we have in Michigan, we’ve got a casino, we’ve got an outlet mall, we’ve got wineries in the area, reasons why people will come in addition to the utilitarian reasons. That’s the recipe for the perfect place.

Once I find a place like that, which there are a lot out there, then I go on and set up a search. I used to do tens of thousands of dollars a month of yellow letters, off-market marketing, and Facebook ads to find off-market deals. When you’re flipping, you have to do that because I had to have so much volume. Now, I realize I don’t need the volume anymore. I’m at a place where my properties support us. I can get deals for free.

I set up the search on and then as soon as a property pops up, like the one that I purchased a few hours ago, I call the listing agent directly and say, “I don’t have a buyer’s agent. I’d love for you to represent me as the buyer and the seller so you can make twice the commission. I own a few others in the area. I’ll make your life easy.” I’m the person they want to close with, all things being equal. If they’re going to make twice the commission, why not get my offer in there right away?

That also builds that relationship with them to bring you stuff in the future if it crosses their desk, for sure. You’re able to buy off the MLS, which many people don’t even think is possible. I’m one of those that I still do. The majority of my business is off MLS. It’s direct to consumer, direct to seller. Not that I don’t search the MLS, I don’t target it, but that’s pretty interesting with your model.


Somebody coming into this, and this is my thought process because I’m not a short-term rental guy. I do have a property that we lease out bedrooms by the week. A 12-bedroom building that I built out. I’ve got that hired out at this point. Coming into this, my first question is management. Are you self-managing? Do you have a team? Are you advertising using larger platforms like VRBO and Airbnb or do you build out your platform?

The cool thing about this type of investing is that the management can grow with you. We technically self-manage. When we first started, our first one was in our basement. When we moved over here, we had this walkout basement. It’s a 1970s original house that we’re rehabbing anyway. We decided to turn the basement into a separate unit and see if it works as a short-term rental. This was 2017. Pretty early on and in an Airbnb land.

The management in smart short-term rentals grows with you, allowing you to self-manage. Click To Tweet

We did that and we were cleaning the property ourselves. We were doing all the bookings. Everything was on us. Once we got external properties, we started hiring separate cleaners and still took all the bookings. That went on until we had five properties and then we were at a point where between my wife and I as host and co-host. We’ve got enough economies of scale. We’ve created enough cashflow where we can hire an outside person. She’s in Florida and she’s still with us, and can answer any question anyone has.

She probably knows Michigan City, Indiana better than most residents because she’s answered so many questions, taken all the bookings, lined up the cleaners, handyman, and pest control, and done everything that needs to be done outside of the actual boots on the ground, cleaning, and handyman work. She can track her hours and we can pay her an hourly fee for the time that she’s working for us, as opposed to paying 25%, which is a going rate for a short-term rental property manager.

Technically, now that’s scale. The one we bought today will be 34 listings that we own with that one. Our systems have grown a bit. We have three guest relations people that now trade-off. They track their hours and we pay them on an hourly basis. We have nine different cleaners. We have a couple of different handymen. Technically, it’s all self-managed but we’ve probably got ten check-ins today and I’m not a part of any of that. The day-to-day is taken care of by a few key individuals who are a part of our team.

Financial Freedom

You’ve gotten to the point where you’re getting financial freedom or at least time freedom, which is one of the things that we focus on here at Generations of Wealth. We want to be financially wealthy, however, I want time wealth and I want spiritual wealth and all that. You’re getting to the point of financial freedom. What do you wish you would have known if you could have gone back and told yourself in 2011, what would you tell yourself about financial freedom that you now know today?

As I said, after I was done flipping, I went back to work. I got a corporate job with a nonprofit. It’s a veteran service nonprofit. I was a CFO for several years while I was building my short-term rental company. After our first experience with that first short-term rental, we set the goal of getting to eight of them to be in a place where it replaced my income and I could do it full-time. Pretty quickly, we got to that place in 2021 of being able to lead my full-time job.

In retrospect now, there are some things I wish I had known or considered. The biggest one is that I think people wait too long, in my opinion, in a lot of cases. There’s this big FIRE movement out there of financially independent, retiring early. People wait so long to leave their full-time jobs till they’ve got every expense paid for the rest of their lives. What they don’t consider is that once you leave, you’re freeing up 40-plus hours a week of capacity in your life.

I didn’t consider how impactful that would be on my life. I was used to doing my full-time job and the real estate thing on the side. Now all of a sudden, I’ve got all this extra time. For somebody ambitious enough to start building up streams of cashflow on the side, you’re probably not the person who’s going to chill for 40 hours a week.

You’ve got all this time now. You’re going to continue to build from there. People look at leaving their jobs and getting financial freedom as the destination. I have to get to $10,000 a month because that’s what I make in my W-2 job. If I’m a dollar shy of that, I can’t leave. Number one, your W-2 income is the least efficient income possible from a tax standpoint. A $10,000 a month W-2 income is nowhere near the same as $10,000 a month of real estate cashflow because you have so many write-offs with your real estate business.

Your W-2 income is the least efficient income possible from a tax standpoint. Click To Tweet

Number two, as I said, you’ve got all this extra capacity to continue to build your streams of income from there. Once you’re at $10,000, you quit. Probably pretty quickly, that’s going to grow to $12,000 or $15,000. Now we’re at 34 listing and I left when we were at 8 in 2021. In a worst-case scenario, you can always go back. That’s the other thing.

People look at it as this destination or this final thing. Worst case scenario, you still have the skills to work at your old job again if it doesn’t work out. I think there are a lot of people who are suffering and not needing to because they could potentially leave their full-time job today based on the income that they’ve created so far from their investments and they’re going to continue to grow from there.

A lot of people have that fear factor of getting stuck with the golden handcuffs because of benefits and health insurance and all of these things. I stayed in my job years ago, probably 2 or 3 years longer than I should have. However, I also went through the downturn and got my ass kicked and lost everything. I had that always in the back of my mind. I still have that in the back of my mind. Who wouldn’t? With the freedom that came when I walked away from my full-time job, the first couple of days, I didn’t even know what to do with myself.

Over the next weeks and months, it became more routine, but you’re right. When you have that 40 hours or more, in some people’s cases, to fill that with productive money-making entrepreneurial businesses, there are so many opportunities that have been in front of you the whole time. You didn’t even have time to see them. Now you have a new problem. You’re thinking, “Which opportunity do I chase?” That can be a problem for a lot of people because of the shiny object syndrome. They don’t focus on anything. They’re bouncing around like a bouncy ball in a 10 by 10 room.

At this point, I cannot imagine going back. You get used to this lifestyle where we live on a farm. I have lunch with my kids pretty much every day. I see them all the time. I don’t commute. Last Friday, we went to the Illinois Wrestling State Finals because I had a friend who had a son who was competing in the state finals. My six-year-old son and I left at 05:30 in the morning and we headed toward Champaign, Illinois. We were on 94, going toward the city of Chicago. It reminded me how miserable that commute was.

I used to commute downtown Chicago all the time and the people were going 90 miles an hour and full of anxiety in the morning trying to get to their job, and the difference between what the lifestyle is like. A lot of people don’t understand that if you sacrifice a few years, you’re creating tens of thousands, if not hundreds of thousands of hours of life that’s given back to you where you’re not doing these repetitive things like driving an hour to the city. It is something that you hate to do every day because you sacrificed a little bit and built up these streams of income. It’s so worth it to get there.

Becoming A Farm Man

You said you live on a farm now. You were Chicago born and raised and now you’re a farm man. That’s interesting.

We wanted to move to Northwest Indiana and escape all the issues with Chicago, with the high taxes, and the high crime. I felt like it was heading in the wrong direction. Not that Northwest Indiana is the Mecca of the world or anything like that and has everything figured out, but that I feel it’s the decision-making is heading in the right direction.

I feel like twenty years from now, I’m going to be much happier owning properties over here in Northwest Indiana. We also liked the lifestyle. We wanted to be close to the lake. We did that first property where that was our first exposure to house hacking, where we finished our basement and it worked well. It paid for probably two-thirds of our mortgage and we rented it in the summer. We then said, “If this works on this scale, what if we do it on a larger scale?”

Plus the fact we were having kids and we had no yard. We’re on a sand dune and they’re playing in the street out front. We need some more room and we’ve always liked the farm lifestyle. We looked for a while and we finally found this farm with the old farmhouse on it that hadn’t been lived in a decade. It had all these barns on the property but it was all overgrown.

We could qualify for traditional financing to buy this 45-acre farm because it had this farmhouse on it. We did this farm hack model or land hack model where you get a bunch of land because you have this farmhouse on it. We bought it, fixed it up, and then we started fixing up the outbuildings and we made an Airbnb here in one of the barns. It’s been a huge blessing. We love the lifestyle and we’re learning a lot about farm life.

It’s nice to be able to do farm work. I think it’s some of the most refreshing work that you can do, like working with your hands. We got a tractor, being outside planting your own food, but it’s nice not to have to do farm work. I still have my real estate business that pays the bills. I can do the farm work on my own, at my own will, instead of farming is a tough life if that’s what your income depends on.

I married a dairy farmer’s daughter back when I thought that there was such a thing as rich dairy farmers. It was a little bit of a bait and switch. It’s a tough life but for most of them, it’s a rewarding life. However, in this day and age is getting a lot harder for anybody on a small scale to survive on any farming, whether it’s grain or agriculture, raising beef or dairy cattle. Interestingly, you as a Bears fan from Chicago would end up channeling your inner Wisconsin and wanting to be a farmer. That’s pretty nice.

My wife is campaigning for a dairy cow. She wants to get a Jersey cow. We’ve got our own milk here, but we’ll see how that goes.

Leaving The Day Job

That’s fantastic. I’m going to try and get more digs on you as a Bears fan before the show is over because I have to. That’s what Packer fans do. Let’s circle back to your comment on people who may stay in their jobs too long. Another fear I think a lot of people have and rightfully so is financing their transactions after they no longer have a W-2. For me, I don’t use banks. I haven’t used a bank for investment property in 12 or 13 years.

Everything that I’ve done is, I raised private capital. I ran a co-owned and hard money lending company for ten years up until recently. We’ve always built relationships with private individuals. I also purchase property creatively, either through seller financing, sub-two options, leases, or fun stuff. What was it like when you left your job to finance these new properties after you left your job and what advice do you give people on that?

It’s interesting because I look back to when I left my job the first time. I left the military in 2011 and jumped into real estate full-time. That was my first exposure. I felt like I was doing all the things the wrong way. Learning from that and doing it again in 2021 the right way. At that time in 2011, there was no such thing as long-term financing on a residential single-family or two-unit property.

You could go to local banks maybe and get commercial terms. Typically it was like balloon payments and amortized over 25 years, but there weren’t these DSCR 30-year fixed-rate loans that are on every street corner it seems like these days. As long as the company cashflows, you can get a DSCR loan. You don’t need to have any qualifications from an income standpoint, or they don’t look at your tax returns or anything like that. They look at your personal credit to make sure you don’t have a bunch of defaults. Beyond that, they underwrite it based on that property itself.

The way we buy every property is we get a DSCR loan that covers 75% to 80% of what we need and then like you, we go to private lenders. We show them a simple one-pager that says, “Here’s what the deal looks like. Here’s the address. Here’s what we’re going to buy it for it, what we’re putting into it. Here’s what it’ll make after we’re done based on those other short-term rental comps in the area. You can see there’s going to be substantial cash flow.”

You can be in second position and still make a double-digit return and you’re still in a very good position from a safety standpoint and security standpoint. We don’t use any of our own money on these deals. Either we’ll buy it as a BRRR property. Once we refinance, we refinance out all the upfront money, whether it was hard money or private money because we’ve created enough equity where that DSCR loan covers everything that we have into it, or we use the combination of the DSCR loan and private money loan, and you can do as many deals as you want that way.

When you BRRR out of them or you refinance out of them, are you using another DSCR product based on the new value and the new income?

If we’re buying it turnkey and it doesn’t need rehab, we get a DSCR loan from the start. If we’re doing a rehab, like the one we bought today, we bought it with private money and we’re rehabbing it with private money. It’s a fixed rate lender at 10% who’s like a friends and family type of lender. By the way, Ben, our lender for the last decade wants to keep his money invested as much as possible. Once we’re done, we’ll refinance it into a long-term DSCR loan at that point.

That’s great. One of the things I do, and I don’t know if you’ve ever considered it, especially if I buy somebody’s property, either with seller financing or maybe subject-to their debt, which right now is fantastic buying property sub to 3% or 4% debt but I too choose not to use my own cash. It’s against my religion, honestly.

Future Dollars

I’ll bring in, and I’m very nosy with what my financial friends have, typically in their retirement accounts. I’ll bring in somebody with a $20,000, $30,000, $40,000, $50,000 IRA, maybe a 6% rate of return interest only regularly, but then give them a percentage of the equity on the backend when I seller refinance.

That’s giving them double-digit returns in their retirement accounts or cash if they happen to be a cash investor. What I like about that model is it helps our cashflow upfront. Yes, we’re paying them some of the equity on the backend, but that’s with future dollars, which assuming inflation does what inflation does, that future dollar’s worth less than today’s dollars. Have you ever considered a participating note scenario like that in your transactions?

That’s a great point you make about the future dollars. I haven’t done a participating note, but I have done joint ventures where very similar terms where either they get a fixed interest rate, a small fixed interest, and then some of the equity, or just straight equity. I’m in the process of building a duplex in Florida right now with a friend of mine with whom I went out. I’m doing all the leg work. I have a good friend who’s a builder and he helped me line up the lot. He’s doing all the building. He’s taking care of all the boots-on-the-ground stuff. I lined up a construction loan for 75% of what we needed.

My other friend said I’ll provide all the equity for a 50-50 split. Giving away a little bit more than a fixed-interest loan that I could get, but he’s a buddy of mine and we wanted to participate in this together because we’re both going to use the units too. We both share in that upside then. The downside about that is that they’re much more involved in the deal when they’re equity partners as opposed to fixed interest. I’m getting paid no matter what. It’s on you, but when they’re equity partners, it’s like every decision, I feel like I’m running by the equity partner, but either way, it can work well.

I don’t structure mine where they have any decision-making. That’s why they’re getting the fixed rate of interest for sure, and that’s getting paid out monthly, or quarterly, but they’re participating in the risk or the reward of the equity. If it doesn’t appreciate and we just cashflow it for 5 or 10 years, fine.

They’re gaining on the principal reduction each month as well because that’s equity. If there is an upside, that’s the bonus and they get to participate in that. My investors and I like that model. It makes sense for all of us. It’s something for the audience to consider. I don’t like institutional lending. Not to say I will never use it, but traditionally, I haven’t used it for my transactions or even DSCR loans. I haven’t even looked into them recently.

There are so many different ways to get it done.

Cash Flow Before Investing

What’s one question I should be asking you that I’m not?

One thing that I wish I had understood. If somebody had explained this to me back when I was a young Lieutenant in the Army, getting started, I’d probably have been financially free ten years earlier than I was. That is to focus on cashflow before investing. I think it’s a waste of time to invest a dollar into building your net worth before you get to a place of financial freedom. I think almost every single person out there does the exact opposite.

If you invest in a 401k, if you invest in stocks, if you invest in crypto, if you invest in anything that you are buying today in hopes that it will go up in value in the future, then you’re not getting any cashflow. Some stocks pay a small dividend, stuff like that, but most people that I talk to who are young think, “I’m going to fully fund my 401k, I’m going to save like crazy, I’m going to get to a place of freedom.”

I talk to a lot of people who are in their mid-career and they realize I’m never going to save myself or invest myself in non-cash flowing assets in the freedom. I’m going to be in the same job until I’m 65 years old because I don’t have anything that’s paying me and the thought of walking away from my full-time job, even if I accumulated $2 million in my 401k, it’s petrifying to most people because they’re now all of a sudden, I’m dipping into all my investments and I’ve got nothing that’s recurring.

In my opinion, if people started with every dollar I invest, what’s the highest cashflow I can get from that dollar? Within a couple of years, you can get to a place if you’re buying the right assets where you’ve replaced your full-time income. You can leave your day job and as I said, free up years and years of capacity in your life to now focus on wealth-building assets. Focus on the cashflow, get to a place of financial freedom, and then build your net worth. I think if people did that route, there’d be a lot more financially free people out there.

I agree 100%. The big lesson I learned was not that I was only trying to buy for appreciation, but when the markets crashed in ‘07, my properties in Wisconsin paid for themselves cashflowed, but I was also in Florida real estate. The Florida real estate crashed and burned hard, which affected the entire portfolio.

I was using all bank financing back then, by the way. Had I specifically bought for cashflow, those market corrections, I guess we’ll call them the crash, would not have affected me. The thing is you don’t know what you don’t know. That’s the beauty of this show. You have a podcast as well. I believe it’s called the Living Off Rentals Podcast.

Kirby’s Podcast

That’s what this is all about. We share our experiences and our knowledge. We didn’t have podcasts in the mid-2000s for us to listen to. Even if we did, I maybe wouldn’t have even listened to them at the time because I didn’t know that I should. Tell us a little bit about your show, how people can follow you, and how they can find you. I’m pretty sure that you’re going to give our audience a little something for putting up with us today.

I started the Living Off Rentals back in 2019. Now we’re on 225 episodes or something like that. It’s crazy how quickly it flies by weekly episodes. What I do is I bring on experts who are mostly living off rentals who are in this position of financial freedom and deconstruct how they got there. A lot of people talk about financial freedom, but there are not a lot of people you know or meet on the street who are truly financially free and have enough cashflow coming in to support their lifestyle.

Many people talk about financial freedom. However, you will not meet that many people on the street who have enough cash flow coming in to support their lifestyle. Click To Tweet

That’s what I go through on the show and I’ve got a whole platform. There’s a podcast and there’s a YouTube channel. I’m pretty active on social media. I recently did a masterclass where I outlined my specific strategy of how I find deals, finance them, and set them up, like what I target in terms of cashflow in this masterclass. It’s a free masterclass.

All the our audience can go to and It’ll be in the show notes. It’ll take you directly to where that is so you don’t have to try and think about or worry about how to find the information. It’ll all be part of the show.

I appreciate that.

Closing Words

As we wind down here, Kirby, I have a question for you that’s very important. When you go to a Chicago Bears and a Packer game in Chicago and you start hearing that chant, “Go Pack go,” overwhelming the Bears fans, how does that make you feel?

Green Bay is about as big as Chicago. There are as many fans. The challenge is seeing beyond all the cheese heads, all those hats with all the cheese. You try to see and they’re blocking the view of the field. I don’t know how you guys even get to see any football.

We’re trying to block the view for the Bears fans so there’s less crying because typically the Bears fans are crying and it’s embarrassing.

It is a good point. We’ve had like 27 quarterbacks in the time you guys have had 2. That says a lot.

It’s looking like we have another franchise quarterback. Three in a row isn’t going to be bad.

It’s helpful to your quarterbacks, I guess.

All kidding aside, I appreciate you taking the time and anytime I get to jab a Bears fan, I’m going to do it. Your knowledge and your being able to jump on here and share everything with my audience, I appreciate it. Anything that you have wrapped up here as we sign off?

I agree with your viewpoint a hundred percent in terms of creating a lifestyle. That’s the whole reason we do this and in my opinion, success is not a destination that you get to. A lot of people think they’re going to get to $1 million and all of a sudden I’m going to be happy. If that’s the outlook that you have, it’s probably not going to happen. That number is going to change as soon as you get there. Success is the ability to do what you love every day. If you can figure out what that is and design a lifestyle based on that, to me, that’s what success is.

Thanks for being here and to everyone, thanks for joining the Generations of Wealth Show. Go out and live your vision. Love your life. We’ll see you on the next one.

Thanks for having me.


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About Kirby Atwell

Generations Of Wealth | Kirby Atwell | Smart Short-Term RentalsAfter growing up in the south suburbs of Chicago, Kirby served 11 years on active duty in the U.S. military, first attending the United States Military Academy at West Point and then traveling the world as an officer in the Army. During his time in the service, he developed a strong interest in real estate entrepreneurship. He began studying and reading as much as he could on the topic, and he bought his first rental property in 2006.

In 2011, he left the service and earned his MBA with a focus on real estate finance. While attending graduate school, he started his first real estate investment company, rehabbing over 100 properties either to flip or keep as rentals in the Chicago area.

Today, Kirby primarily focuses on investing in high-cash-flowing vacation rental properties. He owns a portfolio of vacation rentals in northern Indiana, where he lives on a 45-acre farm with his wife and young kids. He also helps others who work a full-time job to buy and set up their first high-cash-flowing vacation rental through his signature program called The First Vacation Rental Investment Blueprint. Ten percent of all profits that he earns are donated to support veterans in need.

Kirby is the host of the Living Off Rentals podcast and YouTube channel, where he and other subject matter experts help equip listeners to achieve financial freedom through rental property investing.

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