Many professional athletes find themselves in financial trouble within five years of retirement. The story is all too common: large contracts, lavish lifestyles, and a career that ends in their 20s or 30s, leading to a financial cliff. However, Devon Kennard, a former NFL linebacker, bucked this trend. He played eight seasons for the Giants, Lions, and Cardinals and built a substantial real estate portfolio during his career. Today, he shares his insights on financial planning and real estate investing.
Kennard’s journey began with the purchase of his first rental property as a rookie. Over the years, he expanded his portfolio to include more than 50 rental properties and 50 syndication investments. He also runs a private lending business with his wife, Camille, in Phoenix. His book, It All Adds Upoffers a roadmap for high earners looking to deploy their income wisely.
Building a Real Estate Portfolio While Working Full-Time
One of the biggest challenges for high earners is finding the time to invest in real estate while managing a demanding career. Kennard faced this challenge head-on during his NFL career, often working 80-hour weeks during the season. His strategy involved making better trade-offs with his time rather than trying to find more hours in the day.
Kennard’s approach included focusing on one market, building a team before he needed it, and accepting that his first few deals might not be perfect. He emphasized the importance of discipline and consistency, suggesting that five to seven focused hours a week can lead to purchasing one property a year. This disciplined approach allowed him to build a substantial portfolio without quitting his job.
The Pitfalls of Lifestyle Inflation
Many high earners fall into the trap of lifestyle inflation, treating each raise as a reward rather than an opportunity to build wealth. Kennard observed this pattern in NFL locker rooms, where players would upgrade their lifestyles with each new contract, only to find themselves in financial trouble when their careers ended.
He argues that the most expensive mistake high earners make is spending money on lifestyle upgrades that do not generate more income. Instead, he advocates for redirecting raises into investments that can build wealth over time. Kennard’s locker room example highlights a universal pattern seen in various industries, where lifestyle inflation can trap individuals at a higher level of spending without building true wealth.
The 401(k) vs. Rental Property Debate
When it comes to long-term financial planning, Kennard advocates for investing in rental properties over maxing out a 401(k). He acknowledges that a 401(k) has its benefits, such as tax deferral and employer matches, but argues that rental properties offer more tangible advantages.
Rental properties provide visibility, the ability to add value, and the potential for tax deductions. Moreover, Kennard believes that buying rental properties transforms the investor, teaching them to evaluate deals, manage tenants, and read markets. This knowledge compounds over time, leading to a more skilled and savvy investor. Kennard’s personal experience demonstrates the value of this approach, as he built a substantial portfolio and developed the skills to allocate capital effectively.
Evaluating Real Estate Deals: The Four C’s
As a private money lender, Kennard has developed a framework for evaluating real estate deals. He uses the Four C’s: Character, Capacity, Collateral, and Capital. Character refers to the borrower’s track record and communication skills. Capacity assesses the borrower’s ability to execute the project. Collateral evaluates the property’s value, and Capital ensures the borrower has sufficient funds for the down payment and other costs.
Kennard also emphasizes the importance of skin in the game, asking himself if he would invest his own money in the deal. This principle has helped him avoid principal losses and maintain a strong track record in private lending. His framework provides a disciplined approach to evaluating deal flow and ensuring successful investments.
Shifting from Earning Income to Building Assets
Kennard’s journey highlights the importance of shifting from earning income to building assets. Many W2 earners identify with their work and spend most of what they earn, saving the rest in a 401(k) they may not fully understand. Kennard argues that this approach is insufficient for building long-term wealth.
He advocates for treating income as fuel for building assets rather than as the end goal. This shift in mindset allows individuals to focus on deploying their income strategically, building a portfolio that can provide financial freedom. Kennard’s experience demonstrates the value of this approach, as he built a substantial real estate portfolio that outlasted his NFL career.
Devon Kennard’s story offers valuable insights into building wealth through real estate investing. His disciplined approach, focus on avoiding lifestyle inflation, and emphasis on building assets provide a roadmap for high earners looking to secure their financial future.
