EP 224 - Corporate Success to Real Estate Riches: Ken Gee’s 27-Year Investment Journey

[00:00:02] [SPEAKER_03]: Show.

[00:00:04] [SPEAKER_03]: Where we focus on learning and sharing with our listeners all there is to know about how to create

[00:00:09] [SPEAKER_03]: success in our lives.

[00:00:12] [SPEAKER_03]: This show stands on the shoulders of giants.

[00:00:14] [SPEAKER_03]: Our mission is to empower and inspire our listeners to create the life of their dreams

[00:00:20] [SPEAKER_03]: while it's having a blast in the process.

[00:00:23] [SPEAKER_03]: Let's celebrate life together.

[00:00:25] [SPEAKER_03]: Welcome to The Show!

[00:00:29] [SPEAKER_01]: Alright, welcome back to The Gentle Art of Crushing It.

[00:00:32] [SPEAKER_01]: Podcast.

[00:00:33] [SPEAKER_01]: My name is Randy and I will be your host today.

[00:00:36] [SPEAKER_01]: And really excited to have Ken Gees with us.

[00:00:38] [SPEAKER_01]: Ken is the founder and president of KRI Partners based on a Cleveland Ohio.

[00:00:43] [SPEAKER_01]: He has got 27 years in the real estate business with over $2 billion in transactions.

[00:00:49] [SPEAKER_01]: Currently managing over $200 million in assets entertainment and has done 14 full

[00:00:55] [SPEAKER_01]: cycle deals.

[00:00:56] [SPEAKER_01]: So, Ken, welcome to The Show!

[00:00:59] [SPEAKER_04]: Thank you so much for having me, Randy.

[00:01:02] [SPEAKER_01]: Awesome, Ken.

[00:01:02] [SPEAKER_01]: Well, let's just jump right in if you can.

[00:01:04] [SPEAKER_01]: Can you tell us a little bit about yourself and how you became to be the real estate investor

[00:01:09] [SPEAKER_01]: you are today?

[00:01:10] [SPEAKER_04]: Yeah, sure well.

[00:01:11] [SPEAKER_04]: Yeah, so I grew up in a small city called Toledo, Ohio.

[00:01:15] [SPEAKER_04]: Probably no one's ever heard of it unless you were a mash fan then maybe you have.

[00:01:19] [SPEAKER_04]: But I got my undergraduate from the University of Toledo in an finance and then moved

[00:01:26] [SPEAKER_04]: to the center for regional bank and pursued my master's degree at night.

[00:01:31] [SPEAKER_04]: It was a school called Case Western Reserve University, Small Private School.

[00:01:35] [SPEAKER_04]: I love the experience going from a state school to a private school was quite an eye-opener

[00:01:38] [SPEAKER_04]: for sure.

[00:01:40] [SPEAKER_04]: Okay, what happened to me, I was a personal lender and all my clients kept saying,

[00:01:46] [SPEAKER_04]: I don't know man, let me talk to my CPA, let me talk to my CPA and I thought, come on,

[00:01:50] [SPEAKER_04]: I'm gonna be the guy you want to talk to.

[00:01:51] [SPEAKER_04]: So, I said, all right, let's go be a CPA.

[00:01:53] [SPEAKER_04]: So that's what I did.

[00:01:55] [SPEAKER_04]: I, that's what I went to school for to be a CPA at Case and did that work for Deloitte

[00:02:01] [SPEAKER_04]: for seven years on the tax side, did a lot of M&A work, a lot of private equity work, all

[00:02:06] [SPEAKER_04]: the fun stuff that you can do if you think of CPA stuff as being fun.

[00:02:11] [SPEAKER_04]: But it was there that my kids were very, very young, my daughter was an infant.

[00:02:17] [SPEAKER_04]: And I used to do her middle-of-the-night feeding.

[00:02:20] [SPEAKER_04]: And for those of you listening who are a dad and who have a daughter,

[00:02:24] [SPEAKER_04]: you know that that bond is really, really interesting.

[00:02:27] [SPEAKER_04]: And really cool, and I thought it was really cool, right?

[00:02:29] [SPEAKER_04]: Three in the morning, just a certain hour by sleeping, I mean, it's great bonding time

[00:02:33] [SPEAKER_04]: until I realize, wait a minute, can this is three in the morning?

[00:02:37] [SPEAKER_04]: And this is the best you can do for your daughter.

[00:02:39] [SPEAKER_04]: And that's when I realized, remember, I had a good job at the time.

[00:02:42] [SPEAKER_04]: I was doing well at Deloitte.

[00:02:43] [SPEAKER_04]: I thought, man, I did everything.

[00:02:45] [SPEAKER_04]: But school, got good grades, did everything I was supposed to do.

[00:02:49] [SPEAKER_04]: And then I just realized that I just built a life from myself that was so busy

[00:02:52] [SPEAKER_04]: that I was probably going to miss my kids and my family growing up,

[00:02:56] [SPEAKER_04]: and that just didn't sit well.

[00:02:57] [SPEAKER_04]: So I embarked on this journey to say, you know what?

[00:02:59] [SPEAKER_04]: I got to do something different.

[00:03:01] [SPEAKER_04]: Well, as a commercial lender, I had a ton of real estate clients.

[00:03:06] [SPEAKER_04]: As a tax person at Deloitte, we had a huge real estate practice at the Cleveland Office of Deloitte.

[00:03:12] [SPEAKER_04]: And I said, you know what?

[00:03:13] [SPEAKER_04]: These people are making a lot of money in real estate.

[00:03:15] [SPEAKER_04]: I need to really get into this.

[00:03:17] [SPEAKER_04]: So I bought three deals, a 28 unit, a 24 unit, 22 unit, sold them three years later,

[00:03:22] [SPEAKER_04]: made $1,000,000 and realized this, I need to stop being a CPA.

[00:03:28] [SPEAKER_04]: If I could make money on the side, then I had up into that point at Deloitte.

[00:03:33] [SPEAKER_04]: Nothing wrong with Deloitte, Deloitte's a great place to work.

[00:03:35] [SPEAKER_04]: I don't want to distillate.

[00:03:37] [SPEAKER_04]: But it was a fantastic eye opener for me.

[00:03:40] [SPEAKER_04]: And so, you know, 27 years later, I've just continued to just grow that.

[00:03:47] [SPEAKER_00]: Are you interested in real estate investing?

[00:03:49] [SPEAKER_00]: But don't know where to get started or think you don't have the time or money?

[00:03:53] [SPEAKER_00]: Are you stuck in your W2 because the golden handcuffs make it hard to walk away?

[00:03:57] [SPEAKER_00]: If this sounds like you, check out impactequity.net and schedule some time to talk with the founder,

[00:04:03] [SPEAKER_00]: Randy Smith. Randy went from massive income to leaving his W2 through passive income.

[00:04:08] [SPEAKER_00]: And he can help you do the same.

[00:04:11] [SPEAKER_00]: www.impactequity.net.

[00:04:14] [SPEAKER_01]: So, you did those first three projects while you were still employed?

[00:04:19] [SPEAKER_01]: I suspect your income from those was probably comparable to what you made over those three years with Deloitte.

[00:04:25] [SPEAKER_04]: Yeah, well back remember, this is 25 years ago.

[00:04:27] [SPEAKER_04]: So when I started to do this, I was probably less than 50,000 a year, right?

[00:04:32] [SPEAKER_04]: So are you talking about, I spent seven years at Deloitte, but I have to do the math here.

[00:04:36] [SPEAKER_04]: I was probably probably a head over lap of about five years.

[00:04:43] [SPEAKER_04]: So I was at Deloitte.

[00:04:44] [SPEAKER_04]: So four or five years.

[00:04:46] [SPEAKER_04]: So I did a lot of this thing, you know, one of the things we talked to a lot of people every

[00:04:50] [SPEAKER_04]: day, they're trying to figure this business out and how to get started.

[00:04:52] [SPEAKER_04]: And they think you got a chunk from this pond into this pond.

[00:04:56] [SPEAKER_04]: And then you can have your fingers in both of them and that's what I did, right?

[00:05:01] [SPEAKER_04]: You can start real estate on the side and that's what I did.

[00:05:04] [SPEAKER_04]: Famped it with my job that made me realize I had to buy a apartment.

[00:05:09] [SPEAKER_04]: I couldn't buy a single fit in the home because I didn't have it in more time.

[00:05:12] [SPEAKER_04]: I had to buy a business that I could hire people to go do things and that's what made me start out with a

[00:05:18] [SPEAKER_04]: apartment.

[00:05:19] [SPEAKER_01]: Deloitte, I love it.

[00:05:20] [SPEAKER_01]: So so so many people listening to this podcast, including myself started with a single family space

[00:05:25] [SPEAKER_01]: and found out real quickly is just not a scalable option.

[00:05:28] [SPEAKER_01]: So your background is a CPA.

[00:05:31] [SPEAKER_01]: The numbers told me very clearly that you need to go bigger quicker.

[00:05:35] [SPEAKER_01]: So you're not actually the one managing the day-to-day of these very large businesses.

[00:05:41] [SPEAKER_01]: So I'm curious when you like Deloitte and specifically working in that division with

[00:05:46] [SPEAKER_01]: Induluite, that's a very reputable position, a reputable company, very demanding.

[00:05:53] [SPEAKER_01]: How did you manage your time while you were doing that?

[00:05:57] [SPEAKER_01]: You mentioned that you have a daughter that you've basically been in the middle of the night.

[00:06:01] [SPEAKER_01]: So why not throw in this big multi-family operation into it as well?

[00:06:04] [SPEAKER_01]: What did those first few years look like?

[00:06:06] [SPEAKER_04]: Yeah, it was tough.

[00:06:07] [SPEAKER_04]: I mean actually managing the way I had it set up, I would get up before work and do an hours

[00:06:13] [SPEAKER_04]: worth of work and then that lunch I would do things as necessary.

[00:06:17] [SPEAKER_04]: And then you have your evenings well kind of.

[00:06:18] [SPEAKER_04]: So when you're at a big firm like Deloitte at 7 o'clock at night, if you have to make a 15-minute

[00:06:23] [SPEAKER_04]: personal phone call, is kind of okay.

[00:06:26] [SPEAKER_04]: I mean it's 7 o'clock at night, you know, you gotta give up the break.

[00:06:29] [SPEAKER_04]: So I just weaved it in where I could did a lot on the weekends.

[00:06:32] [SPEAKER_04]: What I didn't do was I couldn't turn the units, I'd never show departments.

[00:06:36] [SPEAKER_04]: I didn't know how to maintain anything.

[00:06:38] [SPEAKER_04]: I mean I couldn't fix anything to save my life as my maintenance guy.

[00:06:41] [SPEAKER_04]: Sure.

[00:06:42] [SPEAKER_04]: Reminded.

[00:06:43] [SPEAKER_04]: So, so that I don't know if that answers your question.

[00:06:48] [SPEAKER_01]: It does.

[00:06:49] [SPEAKER_01]: Yeah, and I think you know kind of getting to the point where it's in this multi-gaming space.

[00:06:54] [SPEAKER_01]: It's especially if you're buying the assets that are a little bit bigger

[00:06:57] [SPEAKER_01]: and you can afford to hire people to do the things

[00:06:59] [SPEAKER_01]: that you might not be able to do if you're buying smaller units, less number of doors,

[00:07:04] [SPEAKER_01]: under one roof.

[00:07:05] [SPEAKER_04]: So no, and that's what actually led me to that 28-unit building because that's a business.

[00:07:10] [SPEAKER_04]: And I could afford, I had a great lady who lived on site, she got free rat and a little bit

[00:07:15] [SPEAKER_04]: extra money and she actually ended up growing with me and managed all of them.

[00:07:20] [SPEAKER_04]: She loved being in charge of everything and she was a wonderful lady and it just worked out

[00:07:25] [SPEAKER_04]: perfect, right?

[00:07:27] [SPEAKER_04]: I remember myself.

[00:07:29] [SPEAKER_04]: She became very good at the time I sold that third, you know, those three.

[00:07:33] [SPEAKER_04]: I, you know, she did most things.

[00:07:36] [SPEAKER_04]: It was really kind of nice which made me realize that you get the hard last harder you work.

[00:07:41] [SPEAKER_01]: Yeah, yeah and it's more, more important to find the right people to work for the people

[00:07:47] [SPEAKER_01]: to partner with, to do those duties because if you hire the right people they're in good hands.

[00:07:53] [SPEAKER_04]: So they will make you or break you, yes or you are right.

[00:07:55] [SPEAKER_01]: Exactly.

[00:07:57] [SPEAKER_01]: So let's talk about that point.

[00:08:00] [SPEAKER_01]: You're working into Lloyd, you had just sold these assets.

[00:08:04] [SPEAKER_01]: Was it at that point you decided you're going to leave to Lloyd and go full time in a multi-gaming space

[00:08:08] [SPEAKER_01]: or did it take all of your time?

[00:08:10] [SPEAKER_04]: It was about a year or so later because I had to remember I sold everything.

[00:08:14] [SPEAKER_04]: So now I had a bunch of money in the bank and I thought okay, I got it.

[00:08:18] [SPEAKER_04]: I got to make this happen.

[00:08:19] [SPEAKER_04]: So it was, I think I was around the late for another year, year and a half something like that

[00:08:26] [SPEAKER_04]: before I left.

[00:08:28] [SPEAKER_04]: But yeah, you know, because I was careful, right?

[00:08:30] [SPEAKER_04]: I was, you know, everything, the grass always looked greener on the other side and I was worried.

[00:08:35] [SPEAKER_04]: That was going to make a decision here that I would regret later.

[00:08:39] [SPEAKER_04]: So I was just overly cautious about doing it.

[00:08:42] [SPEAKER_04]: I will tell you, Lloyd, again, that's why I loved that firm.

[00:08:45] [SPEAKER_04]: They said can, you know, if it doesn't work out, you have a place here, don't worry about it.

[00:08:48] [SPEAKER_04]: All right, go try and I, you know, most firms don't do that because they just don't,

[00:08:54] [SPEAKER_04]: and they were so incredibly supportive.

[00:08:56] [SPEAKER_04]: So, you know, I can't say enough good things about that firm.

[00:08:59] [SPEAKER_01]: That's amazing.

[00:09:00] [SPEAKER_01]: Yeah, it's interesting.

[00:09:01] [SPEAKER_01]: You hear a lot of people, they have these negative beliefs around corporate America and the bad guys.

[00:09:08] [SPEAKER_01]: But I had a similar experience.

[00:09:10] [SPEAKER_01]: I spent 11 years with American Express and I can't think of a negative thing to say about them.

[00:09:16] [SPEAKER_01]: Like the time I spent there, the education, the training, the experience that I had,

[00:09:21] [SPEAKER_01]: really just set me up so I could be in a position where I could do what I do today, much, much like yourself.

[00:09:27] [SPEAKER_01]: So, yep.

[00:09:28] [SPEAKER_01]: Well, let's dig into that journey a little bit.

[00:09:31] [SPEAKER_01]: You bought it for the three, you're at the late for another year or so.

[00:09:35] [SPEAKER_01]: Did you immediately start scaling the business or did you take a little bit slower?

[00:09:42] [SPEAKER_04]: Yeah, it was slow.

[00:09:44] [SPEAKER_04]: My problem has always been that I'm a pretty disciplined guy, right?

[00:09:48] [SPEAKER_04]: A CPA, what figure, right?

[00:09:50] [SPEAKER_04]: But a lot of deals just didn't make sense.

[00:09:52] [SPEAKER_04]: So, you look at deals, you look, clearly back then I wasn't as,

[00:09:56] [SPEAKER_04]: I didn't understand numbers the way I do now.

[00:09:58] [SPEAKER_04]: I just did, yeah.

[00:10:00] [SPEAKER_04]: Everybody's the same.

[00:10:00] [SPEAKER_04]: But it just comes on the CPA doesn't mean I intuitively understand numbers.

[00:10:03] [SPEAKER_04]: It just means that I'm a CPA.

[00:10:06] [SPEAKER_04]: So, it took me a while and the biggest challenge I had back then is even though I just

[00:10:11] [SPEAKER_04]: made half a million dollars you really don't have a lot of liquidity and you don't have a big balance sheet.

[00:10:16] [SPEAKER_04]: And you know, all right, so you bought three deals.

[00:10:18] [SPEAKER_04]: Okay, you're not exactly Mr. Experience yet, right?

[00:10:22] [SPEAKER_04]: Even if you're a human like you are and you want to be proud of what you've done.

[00:10:25] [SPEAKER_04]: That's fine.

[00:10:26] [SPEAKER_04]: But I had to find a partner and that's the other thing that people just don't understand is you're

[00:10:32] [SPEAKER_04]: going to have some things you're lacking at that time.

[00:10:35] [SPEAKER_04]: I lacked the liquidity, I lacked a balance sheet, I certainly lacked experience, right?

[00:10:39] [SPEAKER_04]: Three deals does not make a veteran, right?

[00:10:41] [SPEAKER_04]: At least I didn't even tell him.

[00:10:43] [SPEAKER_04]: And so this guy helped me and we made a great deal.

[00:10:46] [SPEAKER_04]: I did all the work.

[00:10:47] [SPEAKER_04]: You know, we didn't put in the same amount of money and he did extremely well.

[00:10:51] [SPEAKER_04]: I did extremely well.

[00:10:52] [SPEAKER_04]: But it was through that period of time that I developed that relationship that allows you to

[00:10:57] [SPEAKER_04]: be that, right?

[00:10:58] [SPEAKER_04]: And that's what I always share with people.

[00:11:00] [SPEAKER_04]: You know, most people are getting into the business and do what we do.

[00:11:03] [SPEAKER_04]: They don't start off wealthy.

[00:11:05] [SPEAKER_04]: They just usually don't.

[00:11:07] [SPEAKER_04]: Well, they people invest passively.

[00:11:09] [SPEAKER_04]: And if we give up money to do their deals, that's what they do.

[00:11:12] [SPEAKER_04]: The people like us who want to make this their business, you don't have all of those things.

[00:11:18] [SPEAKER_04]: So you have to find a way to solve that problem if you want to continue in this business.

[00:11:23] [SPEAKER_04]: So I was lucky enough to find somebody who really helped me.

[00:11:26] [SPEAKER_04]: And you know, now we try to provide that for a lot of people that are trying to get started today.

[00:11:32] [SPEAKER_01]: So talk about that a little bit.

[00:11:34] [SPEAKER_01]: So you were essentially the hustle.

[00:11:36] [SPEAKER_01]: You were the feet on the street.

[00:11:38] [SPEAKER_01]: You were the guy that was managing the day-to-day operations of this business.

[00:11:43] [SPEAKER_01]: Did your first partner, were they just a balance sheet partner or were they an experienced

[00:11:49] [SPEAKER_01]: syndicator operator that was also teaching more about the business?

[00:11:53] [SPEAKER_04]: So no, he was very hands-off.

[00:11:55] [SPEAKER_04]: So first let me just be clear my first deal.

[00:11:57] [SPEAKER_04]: I did I borrowed my down payment and got the other half of it.

[00:12:01] [SPEAKER_04]: I became partners with my dad in the loss.

[00:12:02] [SPEAKER_04]: So we were 50, 50.

[00:12:04] [SPEAKER_04]: My second answer is deal her.

[00:12:05] [SPEAKER_04]: Did I my own?

[00:12:06] [SPEAKER_04]: And then then I said, okay, we want to buy these deals together.

[00:12:11] [SPEAKER_04]: This is a business area.

[00:12:11] [SPEAKER_04]: I'm not going to say the last name.

[00:12:13] [SPEAKER_04]: But so we bought these deals together.

[00:12:15] [SPEAKER_04]: It wasn't for many, many years that we decided, okay, we should start syndicating.

[00:12:20] [SPEAKER_04]: They're our first syndication was 2006 or something like that.

[00:12:26] [SPEAKER_04]: I don't remember now.

[00:12:26] [SPEAKER_04]: It's on our website.

[00:12:27] [SPEAKER_04]: You could see the sharing.

[00:12:29] [SPEAKER_04]: We're crossing as the deal.

[00:12:30] [SPEAKER_04]: We bought a few new buddies that were interested.

[00:12:32] [SPEAKER_04]: But sure what I did was I thought, man, this is going to take forever to grow this way.

[00:12:37] [SPEAKER_04]: And so what if we went out and raised money?

[00:12:40] [SPEAKER_04]: Well, I knew that.

[00:12:40] [SPEAKER_04]: Concept because of my time at Deloitte.

[00:12:43] [SPEAKER_04]: I had a bunch of private equity firms as clients.

[00:12:46] [SPEAKER_04]: So I thought, let's take this model and apply it to the real estate world.

[00:12:50] [SPEAKER_04]: And we did, we syndicated Van A can cross-sign and we sent then what happened was we completely changed.

[00:12:58] [SPEAKER_04]: I woke up that one day and said, man, we're doing well in Cleveland.

[00:13:01] [SPEAKER_04]: But what if we actually went to a place where everybody wanted to live?

[00:13:04] [SPEAKER_04]: Like Lord.

[00:13:05] [SPEAKER_04]: Like Lord.

[00:13:07] [SPEAKER_04]: And I thought, okay, let's try that.

[00:13:10] [SPEAKER_04]: So 15 years ago, I said, all right, we're done.

[00:13:12] [SPEAKER_04]: I'm just tired of getting beat up in Cleveland, right?

[00:13:15] [SPEAKER_04]: The man's applied thing was not in our favor.

[00:13:17] [SPEAKER_04]: And so I started the process of getting to know the Florida markets.

[00:13:22] [SPEAKER_04]: And now all we do, Eric, right, this as we do this podcast, we're 100% in Florida.

[00:13:27] [SPEAKER_04]: Right, we're going to expand to other markets outside of Florida.

[00:13:31] [SPEAKER_04]: But 15 years ago, we started that process.

[00:13:33] [SPEAKER_04]: We syndicated a few deals.

[00:13:35] [SPEAKER_04]: He has since retired.

[00:13:36] [SPEAKER_04]: I no longer need that ban, would cheat liquidity assistance.

[00:13:41] [SPEAKER_04]: So he and I syndicated a number of deals together.

[00:13:44] [SPEAKER_04]: And then I think when he retired, I'm trying to get the timing, right?

[00:13:47] [SPEAKER_04]: But I think that's right.

[00:13:49] [SPEAKER_04]: I decided, you know what?

[00:13:50] [SPEAKER_04]: It's really competitive in Florida, right?

[00:13:52] [SPEAKER_04]: Everything in my life seems to have happened out in necessity is what I've learned.

[00:13:57] [SPEAKER_04]: Looking straight.

[00:13:58] [SPEAKER_04]: So, you know, when a 30 deals come offers coming in on a deal in Florida,

[00:14:01] [SPEAKER_04]: because that's the way it is, they're all syndicated.

[00:14:04] [SPEAKER_04]: And Mr. Broker, I promise you, I will raise the money.

[00:14:07] [SPEAKER_04]: He's like, yeah, that's what everybody says.

[00:14:09] [SPEAKER_04]: So I thought, you know what?

[00:14:09] [SPEAKER_04]: I got to go raise the money first.

[00:14:12] [SPEAKER_04]: Because then I will be differentiated.

[00:14:15] [SPEAKER_04]: I will write about them.

[00:14:16] [SPEAKER_04]: I will get better deals, blah, blah, blah.

[00:14:19] [SPEAKER_04]: All of the things that seem to make sense if you have the money in the bank and I want to run.

[00:14:24] [SPEAKER_04]: That's how we now buy.

[00:14:26] [SPEAKER_04]: We're on fund number four.

[00:14:27] [SPEAKER_04]: And they're continues to go well.

[00:14:31] [SPEAKER_04]: But no, as this has evolved over time, as you get more experiences, you understand

[00:14:35] [SPEAKER_04]: investors better and the business better now.

[00:14:38] [SPEAKER_04]: This is how we buy.

[00:14:41] [SPEAKER_04]: And that was I wasn't wrong, right?

[00:14:42] [SPEAKER_04]: When we put that model from, you know, getting the deal, raising the money later,

[00:14:46] [SPEAKER_04]: to now raise the money, get the deal.

[00:14:49] [SPEAKER_04]: That's how it works so much better because,

[00:14:52] [SPEAKER_04]: I mean, what broker, when you tell them,

[00:14:54] [SPEAKER_04]: you're legitimately a $15 million this bad, and that's already raised, they're going to listen to you.

[00:14:59] [SPEAKER_04]: Of course, they are going to listen to you.

[00:15:03] [SPEAKER_01]: Yeah, so let's talk about that a little bit because the avatar of this audience, most people on this

[00:15:09] [SPEAKER_01]: audience, or newer passive investors, I generally deal with single asset

[00:15:15] [SPEAKER_01]: syndications where we're bringing dollars to an already identified asset.

[00:15:20] [SPEAKER_01]: Yeah, talk a little bit more about that process about how you build confidence with your investors

[00:15:27] [SPEAKER_01]: when you're essentially selling a buy box.

[00:15:31] [SPEAKER_01]: You're not selling an asset.

[00:15:33] [SPEAKER_01]: How do you communicate that in build confidence in your investors that you're going to go out and buy?

[00:15:39] [SPEAKER_01]: What you say you're going to buy?

[00:15:40] [SPEAKER_04]: Yeah, that is a really good question.

[00:15:42] [SPEAKER_04]: And it is the reason, the most difficult thing to get over when you start raising your first fund

[00:15:48] [SPEAKER_04]: because you don't have bricks and sticks to show somebody.

[00:15:51] [SPEAKER_04]: You just don't.

[00:15:52] [SPEAKER_04]: And so what you have to rely on is a track record.

[00:15:56] [SPEAKER_04]: So what we did is our track records on our website, but here's the CPA in me.

[00:16:01] [SPEAKER_04]: Thinking why is anybody going to believe my track record is what I say it is?

[00:16:05] [SPEAKER_04]: How do they know?

[00:16:07] [SPEAKER_04]: So I found this company called Baravast that at the time they existed for the purposes of vetting

[00:16:13] [SPEAKER_04]: and the name Baravast they vetted my track record.

[00:16:17] [SPEAKER_04]: But one of these stuff in years at the time was like 23, 23 years of deals.

[00:16:22] [SPEAKER_04]: I mean that was first of all extremely expensive, but it was a brutal process.

[00:16:27] [SPEAKER_04]: Right? I keep good records because I'm a CPA, but I had to have accurate terms and settlement statements

[00:16:31] [SPEAKER_04]: and purchase agreement. I mean you bank everything, you name it.

[00:16:35] [SPEAKER_01]: This is essentially just like this is like audited financials for a track record.

[00:16:40] [SPEAKER_04]: Yeah, yeah. They made me prove everything to them.

[00:16:44] [SPEAKER_04]: Okay. So our track record is on our website as a screen shot of what's on their website.

[00:16:51] [SPEAKER_04]: So you can actually click through from our website to their website.

[00:16:54] [SPEAKER_04]: They just want your name and email and you can see on their website our entire vetting track record.

[00:16:59] [SPEAKER_04]: Now they no longer do that. Unfortunately, I think the latest deal we bought was a Levi in

[00:17:05] [SPEAKER_04]: 24, early 24. They no longer in that business. I assume that they just didn't like the risk.

[00:17:12] [SPEAKER_04]: I don't know. Maybe they couldn't make money. I don't know why they stopped.

[00:17:15] [SPEAKER_04]: But interesting. You know they said, look, we'll leave on our site. What we've already vetted.

[00:17:21] [SPEAKER_04]: That wouldn't be fair to you. Collect literally five figures from you and then dump you.

[00:17:25] [SPEAKER_04]: Right? That would share fair. But they do do annual SEC background checks,

[00:17:30] [SPEAKER_04]: criminal background checks on me every year that I'm on their site because obviously they have

[00:17:34] [SPEAKER_01]: a reputation to protect. But you're still there. What's the name of that?

[00:17:38] [SPEAKER_04]: What's the name of that company again? It's called Verivest VERIVST.

[00:17:44] [SPEAKER_04]: So then we'll vet anybody new, but at least you can see our track record or you can just go to our

[00:17:51] [SPEAKER_04]: our website, kripartner.com, click through and you can get to their site. That's probably even easier for you.

[00:17:57] [SPEAKER_01]: Yeah. Yeah. And what a great. I'm just thinking about like I'm constantly vetting operators,

[00:18:01] [SPEAKER_01]: vetting deals that's literally, you know, I left corporate mirror because I didn't want to work as many hours.

[00:18:07] [SPEAKER_01]: And I'm probably working twice twice as many hours a day. I've never had. But yeah, to be able to go to a third party,

[00:18:15] [SPEAKER_01]: that essentially will review and verify those information would a tremendous offering that

[00:18:20] [SPEAKER_01]: would be to have access to that because I see deals every single day that they suggest this is our

[00:18:25] [SPEAKER_01]: track record and here's our returns. But how do you know? Right? Just like how to know a performer

[00:18:30] [SPEAKER_01]: is going to actually equate into numbers, how do you know that their track record is actually

[00:18:34] [SPEAKER_01]: that? So kudos to you for certainly opening up the, you know, opening up the business and sharing

[00:18:41] [SPEAKER_01]: that. And that I suspect is what allowed you to get the confidence from your investors to do that

[00:18:47] [SPEAKER_04]: first fun? Well, that and a lot of things, right? People have to read that trust factor has to really

[00:18:53] [SPEAKER_04]: go up. And so what we know is that people try to experience us in a lot of different ways before

[00:19:00] [SPEAKER_04]: they hold up, they're going to say yeah, I trust you enough, right? They have to be in situations

[00:19:04] [SPEAKER_04]: where they can ask me any questions that they want to. They're going to get a meaningful legitimate

[00:19:09] [SPEAKER_04]: answer. You can tell when people are BS and media, most people pay it. It's that kind of stuff. So

[00:19:14] [SPEAKER_04]: it's a combination of all these things. You know, my, I just, and you do a lot of money raising.

[00:19:21] [SPEAKER_04]: I always tell people, I want you to follow four rules. You got to make sure that whoever you're

[00:19:25] [SPEAKER_04]: investing with has experience and that means has the experience so they know how to deal with

[00:19:32] [SPEAKER_04]: whatever's coming next like 500 basis, 20 in fries and interest rates, go did all the crazy things.

[00:19:39] [SPEAKER_04]: Second track record that they've actually taken deals full cycle. So do you know they actually

[00:19:44] [SPEAKER_04]: can make money? You want them to be transparent, right? That makes sense because you've got to have

[00:19:49] [SPEAKER_04]: transparency and the last thing is you got to make sure they put your first. They got to put

[00:19:53] [SPEAKER_04]: the investors first. That's really, really important. Low harder for a lot of new investors to

[00:19:57] [SPEAKER_04]: figure that out but if you know I just tell people look at the fee structure, you know, just ask

[00:20:02] [SPEAKER_04]: yourself, can they get rich and you not? If that happens, I'm do need to move to the answer.

[00:20:09] [SPEAKER_01]: So for the newer investor, digging to that piece a little bit like what are some questions they should

[00:20:16] [SPEAKER_01]: what are some metrics they should be looking at to really understand if their interest

[00:20:21] [SPEAKER_04]: are being looked at first compared to the operators? Yeah, so the first is fees, right? As you

[00:20:27] [SPEAKER_04]: know, the more people you get in the GP pool, I hear the fees because everybody wants to eat.

[00:20:33] [SPEAKER_04]: Right? Yeah, the pie has to be bigger. So it's usually fees is the first obvious thing. The second

[00:20:38] [SPEAKER_04]: thing is making sure that you can get your capital out before they do.

[00:20:45] [SPEAKER_04]: Third thing is making sure you stay in the deal. Don't let them refinant you out.

[00:20:51] [SPEAKER_04]: Some people do that, it's pretty rare but that's I mean that's just brutal or might be. And

[00:20:55] [SPEAKER_04]: you take the risk with me on day one, you should be there on day whatever. The last day has

[00:21:01] [SPEAKER_04]: reap the profits, that's how I feel. So those are some things you can do. I'm trying to think

[00:21:06] [SPEAKER_04]: of there's other things. It's usually the piling on a fees that people don't. They just go

[00:21:11] [SPEAKER_04]: and I would tell your listeners, don't be afraid to ask whatever question you have. If it

[00:21:18] [SPEAKER_04]: doesn't, you'll write that you need to go ask. Don't worry about offending the sponsor, the fund

[00:21:24] [SPEAKER_04]: manager. If they're that easily offended, you don't want to be in business with them. They should

[00:21:29] [SPEAKER_04]: expect a hard questions. I get them and I appreciate them more than investors who don't ask

[00:21:37] [SPEAKER_04]: because investors would ask you know they're not thinking it through as well. Yeah, and more.

[00:21:42] [SPEAKER_01]: Exactly. You know what I mean? Yeah. No, I think the tough questions and due diligence process,

[00:21:48] [SPEAKER_01]: that's really what differentiates the more sophisticated to the non-sophisticated investor.

[00:21:54] [SPEAKER_01]: One thing that I've started doing recently and it have actually been the reason why I

[00:21:58] [SPEAKER_01]: stepped away from my last five deals was that I've started to ask for the most recent either monthly

[00:22:05] [SPEAKER_01]: or quarterly reporting that has been shared with investors on their entire portfolio. And a lot of

[00:22:12] [SPEAKER_01]: people, you know, you ask the questions about the state of the current portfolio and what's going on

[00:22:16] [SPEAKER_01]: with the health of these different assets and you'll get a response but then when you ask for the

[00:22:21] [SPEAKER_01]: actual reports that they've been sharing in the financials very quickly, you can see whether they

[00:22:26] [SPEAKER_01]: were telling you the truth or not. If they weren't telling you the truth and that's a big red flag

[00:22:32] [SPEAKER_01]: in a sign that it's time to move on and for the operators that aren't willing to share it

[00:22:38] [SPEAKER_01]: is another red flag. And I've had that number of those two are exactly. Exactly.

[00:22:43] [SPEAKER_04]: Three of my third rule. Exam. I'm telling you, those four rules work, man. Think about them.

[00:22:48] [SPEAKER_04]: Every time you see a deal failed, not always. I can't make it perfect. But most of the time one

[00:22:53] [SPEAKER_04]: are usually two of those rules are broken. Yep. So yeah, imagine like the exact time. Oh well,

[00:22:59] [SPEAKER_01]: how exactly are they going to be with you then? Right. Right. And when you ask them if

[00:23:06] [SPEAKER_01]: they're all going well and they all say perfectly, that's another red flag because, you know,

[00:23:10] [SPEAKER_01]: better than I do that, nothing runs perfectly and there's all kinds of issues. I do also

[00:23:14] [SPEAKER_01]: like the fact that you talked about this idea of the European versus the American waterfall,

[00:23:20] [SPEAKER_01]: whether people get their equity or their capital back before the operator start

[00:23:25] [SPEAKER_01]: hurting their own returns on the back end. That very simple adjustment can have a big impact on

[00:23:31] [SPEAKER_01]: returns and in the risk profile of the deal. Yeah. Yep. So good stuff. Well, let's yeah,

[00:23:39] [SPEAKER_01]: let's dig in. So today you currently have a couple hundred million in AUM and 14 full cycle deals.

[00:23:47] [SPEAKER_01]: How is your portfolio performing today? What does that look like? Perfectly,

[00:23:55] [SPEAKER_04]: yeah. Yeah. It's going well. So I'm a risk manager. So I want you to think back 27 years.

[00:24:01] [SPEAKER_04]: Means I went through O809. Yep. So there's, and remember I talked already a little bit about discipline.

[00:24:08] [SPEAKER_04]: I don't get as many deals as I'd like. The number one frustration that our investors have

[00:24:13] [SPEAKER_04]: is that they commit and I don't get them a deal fast enough. That's their, I'm just telling you,

[00:24:18] [SPEAKER_04]: that's their normal complaint. Why does it happen? Because I saved this up. I'm trying to

[00:24:25] [SPEAKER_04]: I want legitimately $2 to $300 an upside in rest. Now, so there's a reason I'm telling you this.

[00:24:32] [SPEAKER_04]: And then I'm telling you that because those who the people that are in trouble right now or

[00:24:39] [SPEAKER_04]: have been in trouble over the last year generally made one or of two or maybe both mistakes. Number

[00:24:45] [SPEAKER_04]: one, they didn't manage their debt properly. They thought, okay, I've got a three-year business

[00:24:48] [SPEAKER_04]: plan. I'm going to put three-year debt in place and that's all I need to worry about. Well,

[00:24:52] [SPEAKER_04]: the world never works out perfectly. And so I don't like that plan. If I've got a three-year business

[00:24:57] [SPEAKER_04]: plan, I want at least five years in debt that I couldn't be comfortable with, right? So the first thing

[00:25:03] [SPEAKER_04]: we did was nail down all of our debt. It's all fixed. I think the shortest term right now is three years.

[00:25:09] [SPEAKER_04]: Left on remaining turn. So that's the second thing we did is remember we're in Florida. So in

[00:25:16] [SPEAKER_04]: turn, to rates will end up some property tax. What if all those things moved against us?

[00:25:20] [SPEAKER_04]: How do you think you're going to pay for that? With the two to $300 in upside.

[00:25:25] [SPEAKER_04]: And so our discipline is and this is part of the reason we don't get as many deals.

[00:25:30] [SPEAKER_04]: On day one, my goal is to rent at what I think the projected new rent should be without doing anything.

[00:25:38] [SPEAKER_04]: So if I think there's three hundred bucks, I'm going to throw that first unit out there without

[00:25:41] [SPEAKER_04]: doing anything and get as close to the three hundred bucks as I can. And I expect to get close. Why?

[00:25:47] [SPEAKER_04]: Because I've already done the work. Here's the work part. You've got to go do a legitimate rent survey.

[00:25:53] [SPEAKER_04]: You've got to visit cops. You've got to actually do all this work. And if you do and you

[00:25:57] [SPEAKER_04]: understand your market, just like perspective, rent or wood, you know what you can charge for rent

[00:26:03] [SPEAKER_04]: today and what you can do. And so that's why we don't get a lot of deals or don't do a lot of

[00:26:08] [SPEAKER_04]: deals because those deals, I mean they're not everywhere. So you got to look hard and find them.

[00:26:14] [SPEAKER_04]: So our deals are all cath flowing. Our target has always been 6%. We're cath flowing

[00:26:20] [SPEAKER_04]: 6% on everything and I suspect, I mean if you were to value them today, the rise in

[00:26:28] [SPEAKER_04]: cap rates is probably a best probably bake even maybe a little more still. But as soon as we get

[00:26:33] [SPEAKER_04]: cap rates coming down even a point, which they will, especially Florida, we're I mean we're going

[00:26:40] [SPEAKER_04]: to be just fine. So I've learned a long time ago, this is the O8 lesson now. Just make sure that

[00:26:47] [SPEAKER_04]: when things get tough, just make sure you don't lose your property because these are multifamily

[00:26:51] [SPEAKER_04]: deals. This is housing. Everybody's a place to live. There's probably going to still be a need for

[00:26:58] [SPEAKER_04]: your apartment complex, right? You just got to get yourself through the bad times. And so how do

[00:27:04] [SPEAKER_04]: you screw that up by not having the upside hiring third party management that's not careful. We always

[00:27:09] [SPEAKER_04]: manage our own stuff. There's some good third party managers. I just know what something can happen

[00:27:15] [SPEAKER_04]: and make sure that you manage your debt. So because of that, our portfolio is doing fine.

[00:27:21] [SPEAKER_04]: I mean it's not growing off 10% or anything like that, but I'm pretty sure we'll meet in all

[00:27:25] [SPEAKER_04]: of our cases mid teens in no returns when we sell these properties. It's so, I want you to

[00:27:34] [SPEAKER_04]: realize that, right? It's staying disciplined. And if you have a hundred unit property with $300

[00:27:40] [SPEAKER_04]: more an income per unit, that's a lot of new income to share a lot of problems. You agree?

[00:27:47] [SPEAKER_01]: Absolutely. Absolutely. Yeah. So you have a very disciplined approach to finding the assets.

[00:27:53] [SPEAKER_01]: And when you combine that with the the fun structure that you're using, what does it look like from

[00:28:00] [SPEAKER_01]: investor standpoint from the time they commit to their dollars actually getting deployed? Are

[00:28:05] [SPEAKER_01]: they earning returns from day one or are they waiting for $369 for a... Yeah, count on that to be

[00:28:12] [SPEAKER_04]: well. Yeah, that's a good question. So let's say you've committed today. Our minimum's 100,000.

[00:28:17] [SPEAKER_04]: And let's say we had to deal right? Maybe half of your commitment will call right away.

[00:28:22] [SPEAKER_04]: Right? We'll spend right away. The other half sits in a temporary investment account.

[00:28:25] [SPEAKER_04]: We use PNC. They're paying like about $475 right now. That all occurs directly to your benefit,

[00:28:31] [SPEAKER_04]: not to mind. Yeah. So in theory, well, every time we close the deals because we have a deal,

[00:28:38] [SPEAKER_04]: we have, sorry, when we close a fund it's because we have a deal. And then we typically

[00:28:43] [SPEAKER_04]: have underplay capital that we're trying to deploy as quickly as we can. And a good example

[00:28:48] [SPEAKER_04]: that is our fund too is it still has about 5 million to deploy. And our fund for has over 10 now

[00:28:55] [SPEAKER_04]: to deploy. So we're going together to buy probably the next deal. So we'll generally try to do

[00:29:01] [SPEAKER_04]: two deals in each fund, keep rolling it forward because we always want to be in a position to always

[00:29:07] [SPEAKER_04]: have a place where investors are playing put capital and two we always need to be able to say

[00:29:11] [SPEAKER_04]: to brokers we have the money of the bank. Because that's how it makes us strong buyer and you just don't

[00:29:16] [SPEAKER_04]: know when that next deal is going to come. And if you spent everything and had to start over,

[00:29:21] [SPEAKER_04]: I mean we're pretty good at raising money. We've raised $45, $46 million but it takes a minute

[00:29:27] [SPEAKER_04]: to build that bank back up so that they the your brokers know and the seller know that you've got the money.

[00:29:35] [SPEAKER_01]: Can I make your investors? Your investors are also getting diversification across two assets

[00:29:40] [SPEAKER_01]: then as well. Yeah. Okay. Interesting. I've not heard that model. Generally when I hear the

[00:29:45] [SPEAKER_01]: structure people are raising funds and you know they might they might plan to buy five or six

[00:29:51] [SPEAKER_01]: assets in any given fund. I'm not heard this too asked strategy but I like that and it makes a

[00:29:56] [SPEAKER_01]: little sense why you would do that and I love the benefit to the investor. You know what I like about

[00:30:03] [SPEAKER_04]: here's what I like about it. The people that are using funds to buy five or six assets so

[00:30:08] [SPEAKER_04]: I want you to think about this. When we buy our the first deal in a fund, we close that fund

[00:30:16] [SPEAKER_04]: to new investors. It's close. Nobody else is allowed in that fund. Everybody's relative percentage

[00:30:22] [SPEAKER_04]: of their set. There's a lot of reasons I do that. The least of which is it is impossible for me

[00:30:27] [SPEAKER_04]: to have new people come into a fund to fund distributions to the people that are already there. Think

[00:30:33] [SPEAKER_04]: about that. Can you do that? The other reason I do it this way is I want you to think about

[00:30:40] [SPEAKER_04]: your in a deal and now Ken's going to allow a second round investors in, right? But here comes

[00:30:45] [SPEAKER_04]: your neighbor he's like how's that deal doing? It's killing. Okay, I'm in. Well he just took

[00:30:51] [SPEAKER_04]: he just alluded to you. He would only do that if the deal was doing well, right? What does

[00:31:00] [SPEAKER_04]: fund man? This thing's tankin. He stays away. You don't get deluded. How was that fair to you as

[00:31:06] [SPEAKER_04]: a first round investors? So I can't, I know the world the institutions have a way to make that

[00:31:14] [SPEAKER_04]: fair and equitable, but retail investors nor do I feel like I can really write that wrong.

[00:31:20] [SPEAKER_04]: I mean, it's like placing the bat on the game on Monday morning. Right. And you're not putting

[00:31:29] [SPEAKER_01]: different risk profile at that point. What's the assets been quite? Yeah. Okay, that's why we do

[00:31:34] [SPEAKER_04]: what we do and there's a third reason I don't like big huge funds. I just don't. It's in their

[00:31:41] [SPEAKER_04]: two-one wheelie. It's people it's just too much. I'd much rather have funds that are 10 to 20

[00:31:47] [SPEAKER_04]: million and just keep rolling those. That's that's fine. That's my business and that gets it done.

[00:31:52] [SPEAKER_01]: So at least for now that's our plan. Okay. Well, very good. Yeah, that's it's I've learned a

[00:32:00] [SPEAKER_01]: couple of things already in this conversation. Thank you so much for that. Curious your thoughts

[00:32:05] [SPEAKER_04]: on the outlook in the coming years. Yeah. I think I think we're going to see a lot more deal

[00:32:13] [SPEAKER_04]: velocity coming forward. Here's why. The only people that are selling or have been selling

[00:32:18] [SPEAKER_04]: to the people that have to. Yeah. Right. They just have to because they're being forced to because

[00:32:22] [SPEAKER_04]: of expiring ratecrapes or maturing dad so they've got an and rates moved up and their income didn't

[00:32:28] [SPEAKER_04]: move up enough to offset that. So they're selling they're in a tough situation. But the people

[00:32:33] [SPEAKER_04]: that have good assets that didn't have to sell, they're not selling. That doesn't mean they don't

[00:32:38] [SPEAKER_04]: like to turn money. That just means they're not going to sell into what they consider to be a bad

[00:32:42] [SPEAKER_04]: market. Well, that means there's a lot of products sitting there that has not been offered for

[00:32:47] [SPEAKER_04]: three years. That's all I'm going to come on the market. I think there's going to be tremendous

[00:32:52] [SPEAKER_04]: velocity. You're going to have rates come down some. So it's just going to make it a very

[00:32:56] [SPEAKER_04]: palatable experience for both the buyers and the sellers, right? That's part of the problem right

[00:33:02] [SPEAKER_04]: now. The last thing you don't because the sellers don't want to come down and the buyer can't

[00:33:07] [SPEAKER_04]: come up and you have this separation. But I just believe that the balance. Well, it's probably going

[00:33:12] [SPEAKER_04]: to be 25, 20, 6 things are really going to assuming the Fed doesn't jack rates back up and I don't think

[00:33:17] [SPEAKER_04]: they will. But assuming rates continue to trend down, you're going to get a lot more deal velocity.

[00:33:23] [SPEAKER_01]: That's what I'm saying. So what do you thought, Sonic? If we see this huge flood of assets hit the market,

[00:33:31] [SPEAKER_01]: what is that going to do to cap rates? Do you think that's like the supply to me and tells us

[00:33:37] [SPEAKER_01]: the supply goes up to me and telling you what else. Right? And that's going to have an impact on prices.

[00:33:42] [SPEAKER_01]: But I'm hearing many, many different stories in different vantage points on this, I'm curious

[00:33:46] [SPEAKER_04]: your thoughts. Yeah. So if you just look at demand of supply, we'll cap rates go down probably.

[00:33:52] [SPEAKER_04]: But I'm used to depress cap rates because I've been Florida and everybody wants to be a

[00:33:57] [SPEAKER_04]: Florida because of the gross expectations, right? I don't see that changing. So we're always going

[00:34:01] [SPEAKER_04]: to have relatively low cap rates. What is important is the way I come to market. Remember, we're not,

[00:34:09] [SPEAKER_04]: you don't have to worry about us raising, we already raised the money. Yeah, Mr. Seller, Mr.

[00:34:14] [SPEAKER_04]: buyer, or I'm sorry, Mr. Broker. And remember, we've been doing this for a while in Florida.

[00:34:19] [SPEAKER_04]: So our reputation is pretty decent, right? We don't retrade people. We don't swim or we don't

[00:34:24] [SPEAKER_04]: jerk them around and all that stuff. So we will likely get better deal so far we have. And I think

[00:34:30] [SPEAKER_04]: we will continue to get better deals. And it's indicators because of the certainty of clothes.

[00:34:35] [SPEAKER_04]: I mean, we can deliver a lot of things that a indicator can't deliver. And remember, I've been

[00:34:41] [SPEAKER_04]: a syndicated and I'm not not considered. You got to do what you got to do. My syndications, I usually

[00:34:47] [SPEAKER_04]: had to pay up to get up. I just get up. We still didn't have help, right? It's still sucks to pay up.

[00:34:54] [SPEAKER_01]: And the other not pay up. Yeah, well, that's a good point too. I think he

[00:34:59] [SPEAKER_01]: is. Operators become more skilled. They have more track record history. You see, you see that.

[00:35:06] [SPEAKER_01]: You see their returns start to drop slightly as well as compared to maybe some of those

[00:35:10] [SPEAKER_01]: other ones. Syndicators are more aggressive and giving more of the deal away. So I can

[00:35:16] [SPEAKER_01]: curious how do your deals compare to comparable assets at the marketplace for over a time standpoint?

[00:35:22] [SPEAKER_04]: Yeah, so our target is always mid teams. Annual rate of return. Six percent, cash and cash

[00:35:28] [SPEAKER_04]: is part of that. And the rest wouldn't even lend me a sell. So, you know, our track record's there.

[00:35:33] [SPEAKER_04]: So if I go backwards from the last deal, we sold what do we sell last? I think we sold whispering

[00:35:38] [SPEAKER_04]: notes. Kind of look, I'm doing this for memory now. I think the annual rate of return was like 36

[00:35:44] [SPEAKER_04]: percent. We held it for over two years. Not bad. The one before that was Ballyeve Club. We sold

[00:35:51] [SPEAKER_04]: that. We held that for three and a half years. That was in Jacksonville. And our return was about

[00:35:55] [SPEAKER_04]: 22 percent annual return. What was the lab before that? Why am I a coachman club, I think.

[00:36:01] [SPEAKER_04]: Coachman Club is in clear water. I think the annual return over two and a half years annualized

[00:36:07] [SPEAKER_04]: was 30 percent. So those are just the last three deals. My track records are you can go look at

[00:36:14] [SPEAKER_04]: every bit of it. I just get. Yeah. I mean, our Brits are Garden Grove. We continue to hold.

[00:36:20] [SPEAKER_04]: I mean, that deal has been insane. Little bit of winter havens Florida probably never even heard

[00:36:25] [SPEAKER_04]: ever. Never. Never. Right, low city between Tampa and Orlando. We bought 90 units. We raised

[00:36:31] [SPEAKER_04]: 2.2 million to do the deal. So we bought eight years ago. We've returned everybody's money.

[00:36:36] [SPEAKER_04]: We've returned another million eight. It's still cast for ridiculous. I love it. And they still

[00:36:43] [SPEAKER_04]: have five million dollars equity in the deal. Like there's no, I mean that the returns are ridiculous

[00:36:48] [SPEAKER_04]: there. We have rinse. And here's the secret to everybody who's listening. You got to have this

[00:36:54] [SPEAKER_04]: run upside. We have moved rents at that property. $665 a month in the end. And 30 percent of

[00:37:01] [SPEAKER_04]: the property is under rent restrictions. And we still moved to that money. So let me ask you then,

[00:37:08] [SPEAKER_01]: I'm looking. I'm working with an operator right now that is sitting on a very large portfolio.

[00:37:14] [SPEAKER_01]: They've done exactly the same thing. They've they've refining it's now some of them three and four

[00:37:20] [SPEAKER_01]: times they've been holding them since you know the 90s right? How long do you hold those assets?

[00:37:27] [SPEAKER_04]: Like is there a point? Do you really have to sense to sell it? Yeah, what happens is you really have

[00:37:32] [SPEAKER_04]: to start paying attention to the building. So my hardware that garden in the market right my

[00:37:38] [SPEAKER_04]: hardware that garden grow deals built in 2001 we had just put new roofs on it so roofs are done

[00:37:43] [SPEAKER_04]: that is important right 23 old roofs. And we held back so even though we distributed all that money

[00:37:51] [SPEAKER_04]: we held back half a million dollars and we did that because it's at a one bill that's 23 years old.

[00:37:56] [SPEAKER_04]: I need to be able to keep up with the current. I need to continue to update the units and everything else.

[00:38:02] [SPEAKER_04]: So that's what you use in that money for. So to me it's more about that right how long do you want to

[00:38:13] [SPEAKER_04]: you've got very little bases. Now you got to be able to figure out how to deal with that. So at some point

[00:38:21] [SPEAKER_04]: it's a little bit of a balancing act here. You want to be careful because if you let the asset age too much

[00:38:28] [SPEAKER_04]: it depends on your market. You'll hurt yourself right? Because the big expenses will start coming

[00:38:34] [SPEAKER_04]: in instead of the cash diffusion. Yeah, the partners don't put they don't give you money back.

[00:38:40] [SPEAKER_01]: That's not bad. No, we're right. Okay yeah thanks for walking through that it's something where

[00:38:45] [SPEAKER_01]: most of the operators I've worked with they've got pretty specific you know we're four to six

[00:38:50] [SPEAKER_01]: your homes they sell them they don't do the right refining it's thing but as my my personal investment

[00:38:56] [SPEAKER_01]: dollars are well I'm more of a cash flow investor day than I was when I was making big checks in

[00:39:08] [SPEAKER_01]: out having to you know go find the next deal every four years yeah I would rather those dollars stay

[00:39:15] [SPEAKER_04]: it just keep keep feeding so yeah so in my mind it's about the deal though now think about this

[00:39:21] [SPEAKER_04]: of you were in my arbor's a garden grow deal knowing it's a newer asset the floor plans are amazing

[00:39:26] [SPEAKER_04]: you if I told you hey I'm going to sell this thing you'd want to hang me I mean you just wait

[00:39:31] [SPEAKER_04]: you like what do you think like why you can't we how are you going to find the next deal that's

[00:39:35] [SPEAKER_04]: going to do as well so that's now if it's a product built in the seventies adds a completely

[00:39:42] [SPEAKER_04]: different story yep that totally different right so that's why I stated depends on the asset

[00:39:48] [SPEAKER_04]: member this is a business it has a lot of moving parts and you have to make sure that you're

[00:39:54] [SPEAKER_04]: making the right decision considering all of those factors that's the experience part of the

[00:39:58] [SPEAKER_04]: management to your management team's experience that I'm talking about because if you do that same

[00:40:03] [SPEAKER_04]: with the seventies product and you haven't taken care of the infrastructure of the building

[00:40:07] [SPEAKER_04]: eventually that roost it's going to come home to roost time you you're going to have to deal with

[00:40:12] [SPEAKER_04]: that and if you don't have the fun saved again your deal can go great but I can guarantee

[00:40:17] [SPEAKER_04]: if I call the arbor's a garden go investors and ask them to send me money it's not going to go well

[00:40:22] [SPEAKER_01]: it's just wouldn't that be good and you don't want to go well and I think to your point like

[00:40:28] [SPEAKER_01]: these are the things that somebody doesn't learn at a weekend conference learning how to

[00:40:32] [SPEAKER_01]: come I send a get her you learn those things by spending 27 years at being a CPA and gaining your

[00:40:39] [SPEAKER_01]: initial skills from a company like Deloitte to your master's degree so yeah very good well this is

[00:40:45] [SPEAKER_01]: uh this has been a fun conversation can I enjoy kind of the different perspective that you brought

[00:40:50] [SPEAKER_01]: compared to a lot of the folks that I've talked with and I'm sure your investors love love the

[00:40:56] [SPEAKER_01]: terms that you've been providing them for years and years so if you don't mind though I do have

[00:41:02] [SPEAKER_01]: a couple of questions that I still would love to ask if you got a few more minutes before we

[00:41:06] [SPEAKER_01]: I do up all right so let's let's if we can consider these questions from the vantage point

[00:41:13] [SPEAKER_01]: of the newer newer passive investment this is your high income W2 employee that may be thinking about

[00:41:20] [SPEAKER_01]: placing their first or maybe second or third LP investment potentially with you so all right

[00:41:27] [SPEAKER_01]: when when those folks are trying to get educated in this space what would you say is the best

[00:41:33] [SPEAKER_01]: place for them to go to start their education journey or continue their education journey

[00:41:39] [SPEAKER_04]: oh that's a good question um there are lots of people out there providing education for investors

[00:41:45] [SPEAKER_04]: I would encourage you to look at a good cross section of them because what let's be honest most

[00:41:51] [SPEAKER_04]: of them are there just to sell education and they tend to just kind of give you a little bit of the

[00:41:57] [SPEAKER_04]: details uh remember we do this I have to be careful I don't want to you know talk about your

[00:42:02] [SPEAKER_04]: book but you whoever it is that you choose you need them to go into the weeds with you right so

[00:42:08] [SPEAKER_04]: more you understand as an investor that's what Warren Buffett says don't invest in stuff that you

[00:42:15] [SPEAKER_04]: can't if but you need someone to take into the weeds so that you can understand a little bit so

[00:42:19] [SPEAKER_04]: that you can ask better questions so where would you go I mean you know I of course I'm going

[00:42:24] [SPEAKER_04]: to tell you you should look at what we do but compare her ask to any of the other investor education

[00:42:29] [SPEAKER_04]: folks read as much as you can I mean you can learn a lot on YouTube just trust your got follow my

[00:42:35] [SPEAKER_04]: four rules I'm down on the other my four rules I have a I think I have a book I I know of an article

[00:42:41] [SPEAKER_04]: on my website I might even written a book I can't remember about those rules but they are

[00:42:45] [SPEAKER_04]: okay the third view the best they just will because that's going to help you figure out who you

[00:42:52] [SPEAKER_04]: should put your money with and you're going to start to if you follow those for rules you're going

[00:42:57] [SPEAKER_04]: to start to know who who is the experience one is who and who's not so in quick refresher in the

[00:43:03] [SPEAKER_04]: four rules yeah so number one is experience they got to have experience right and it's because

[00:43:09] [SPEAKER_04]: you need a management team with experience right just like we just talked about should you hold the

[00:43:14] [SPEAKER_04]: asset or not secondly track record track records one thing anybody can buy deals but you have to

[00:43:19] [SPEAKER_04]: know that they've taken them full cycle and been successful right because they might you can

[00:43:25] [SPEAKER_01]: the can down the road and any thoughts on full cycle deals over in track record over any particular

[00:43:31] [SPEAKER_04]: time period do you like the longer the better I mean if they've been doing it here's the thing

[00:43:39] [SPEAKER_04]: got to be careful because prior to Mr. Powell raising rates the way he did if your heart was

[00:43:45] [SPEAKER_04]: beating your probably could make money in real estate because you know how you had to do is exist but

[00:43:50] [SPEAKER_04]: now right if you look at the last few years a lot of people have had a lot of pain and it's just

[00:43:55] [SPEAKER_04]: because of a few mistakes that in experience people may they never most of them didn't act with

[00:44:02] [SPEAKER_04]: some criminality they just they didn't understand that who to thought you needed to understand

[00:44:06] [SPEAKER_04]: you know finance when you're buying real estate well guess what it's a heavy capital business you

[00:44:11] [SPEAKER_04]: got to understand right who to thought that you got to understand the operation side of a business

[00:44:15] [SPEAKER_04]: well seems obvious to me but everybody hires their party managers right so there's a lot of

[00:44:21] [SPEAKER_04]: reasons that these things ended up where they are so do you want to if you can get you want to see

[00:44:27] [SPEAKER_04]: them the most you want to see in the last five years what they've done but to longer the better you

[00:44:32] [SPEAKER_04]: got to know about our first deal in 97 if there's somebody I mean if you go beyond 15 years I don't

[00:44:39] [SPEAKER_04]: know that it matters right like sure first 10 years does it really matter maybe look at my track

[00:44:44] [SPEAKER_04]: are going to first 10 years we all leverage we had ridiculous returns this because it was our own

[00:44:50] [SPEAKER_04]: money I didn't use anybody else's money so I was willing to leverage 98% I would never do that with your

[00:44:56] [SPEAKER_04]: money right so just so longer the better but I think if you go over 15 years I don't think it

[00:45:01] [SPEAKER_04]: kind of okay okay so the first two third and fourth one then yeah the third is transparency

[00:45:08] [SPEAKER_04]: this is key right think of the verivast thing think of the you ask your sponsors to send them

[00:45:16] [SPEAKER_04]: the reports yeah that's transparency my friend and you should expect that from them because if they're

[00:45:23] [SPEAKER_04]: not willing to be transparent with you up front there is no chance in my opinion they will be

[00:45:28] [SPEAKER_04]: transparent to you with you when it struggles so they just won't and the last thing is they got

[00:45:33] [SPEAKER_04]: it what you first yeah right so look at them to you the date later to the deal because look I'm not

[00:45:39] [SPEAKER_04]: there's a lot of people that do this business for a lot of reasons our fees are 1% acquisition 1%

[00:45:44] [SPEAKER_04]: disposition 1% SM management you cannot possibly think our fees are high I mean they're the lowest

[00:45:50] [SPEAKER_04]: anywhere why because the reality of it is I know you're at cash flow investor but the money is made

[00:45:56] [SPEAKER_04]: in this business long term the cash flow is just it's just enough to keep you happy right you're

[00:46:03] [SPEAKER_04]: doing it because it matters but that's not why the arbor's a garden-govian investors are thrilled

[00:46:08] [SPEAKER_04]: they're thrilled because they got their money back and then some and it just keeps on giving right

[00:46:13] [SPEAKER_04]: that's that's the money in this business so if you have people feeding up these deals it's just

[00:46:21] [SPEAKER_04]: I mean imagine a two or three percent asset management fee in a three or four percent acquisition

[00:46:25] [SPEAKER_04]: I mean it just you're just like man I mean you've got to make a lot of money just to pay all the fees

[00:46:31] [SPEAKER_01]: good point and I've never heard 1% 1% 1% 1% 1% 1% 1% before I've never heard that fees structure

[00:46:36] [SPEAKER_01]: before that's hands down the lowest fees structure I've ever heard of so yeah but it's because I'm not here

[00:46:41] [SPEAKER_04]: for the fees I hear for the long term remember we have to align our goals if I can't align my

[00:46:46] [SPEAKER_04]: goals perfectly with you if I'm getting big fees guess what the we could become misaligned

[00:46:53] [SPEAKER_04]: right because now I mean courage to turn the assets earn my acquisition earn my disposition

[00:46:59] [SPEAKER_04]: make deals that maybe I shouldn't make you see what I mean you see what happens yeah

[00:47:03] [SPEAKER_04]: that's why it's just friction plus every every penny of fee is usually 80 cents or 80

[00:47:10] [SPEAKER_04]: 20 on our split right a lot of people will get a lot more grip I know I know we're in the final

[00:47:15] [SPEAKER_01]: question here but I got to ask this question do you offer preferred returns with your investors or

[00:47:20] [SPEAKER_01]: or yes I see I feel like preferred returns can almost be offered the wrong incentive to

[00:47:27] [SPEAKER_04]: the operator some curious you thoughts yeah we used to do preferred return and and fun for a

[00:47:33] [SPEAKER_04]: week stopped and here's why so I'll try to be brief there's three things that happen to me when

[00:47:38] [SPEAKER_04]: I have a preferred return let's say I find let's say my preference six and so okay you're going to go

[00:47:43] [SPEAKER_04]: my deal I told you you get a profits six I said but you know it's cumulative so if I don't pay

[00:47:48] [SPEAKER_04]: in the beginning it's okay it'll approve and now I find a deal throws a four and a half so I do

[00:47:54] [SPEAKER_04]: the deal protect I do the deal I give you four and a half you immediately think I'm failing whether I

[00:48:00] [SPEAKER_04]: told you it would accrue or not okay sure you're looking for a six price so now right out of the

[00:48:05] [SPEAKER_04]: gate your brand new investor I have already frustrated you that is not a good experience my first investment

[00:48:10] [SPEAKER_01]: I had that exact same experience personally because I was I was not a basket at the point

[00:48:15] [SPEAKER_01]: I was frustrated because I didn't get my prof here why yeah that's exactly right I'm so glad you

[00:48:20] [SPEAKER_04]: asked this question we didn't yeah I guarantee no I what's my alternative my alternative is

[00:48:26] [SPEAKER_04]: going to my pocket and pay you the one and a half sorry well I mean come on man that I mean we don't

[00:48:30] [SPEAKER_04]: go into business to give money away so that's option two fails as well so what's option three

[00:48:36] [SPEAKER_04]: you got to pass on the deal because I can't make you happy I can't make me happy so now I'm missing

[00:48:43] [SPEAKER_04]: out on a deal that I believe would be really good deal long term because of this stupid

[00:48:49] [SPEAKER_01]: prof and that's why I dropped it and and I would argue can that even if you do keep the deal

[00:48:55] [SPEAKER_01]: you've got this compounding or the accruing and potentially compounding prof that doesn't allow

[00:49:02] [SPEAKER_01]: you as an operator to earn a single dollar until you sell the thing because there's no

[00:49:07] [SPEAKER_01]: left cash once worth that so now I thank you for giving that to you because I I've got back

[00:49:13] [SPEAKER_01]: of worth on this I mean traditional retail investors they want to see a preferred return and I

[00:49:18] [SPEAKER_01]: think we want to see preferred returns because we've been taught to expect preferred returns but

[00:49:23] [SPEAKER_01]: I believe that it's extremely important for the operator to be feeding their business machine to

[00:49:30] [SPEAKER_01]: keep the lights on and the doors open to make sure that those dollars are taken care of

[00:49:34] [SPEAKER_01]: in a longer period and not so dependent on the acquisition fees on the front end for the

[00:49:40] [SPEAKER_04]: distance you have a seal if you have a deal there's not performing and you know you got to work

[00:49:45] [SPEAKER_04]: out for the next seven or eight years to make sure your investors are all but you're not getting

[00:49:49] [SPEAKER_04]: paid a dime I'm just look that's not a real reason right but I'm just telling you I've never had

[00:49:56] [SPEAKER_04]: situation but I could just imagine sponsorship paying less attention yeah so like yeah is I'm not

[00:50:02] [SPEAKER_04]: getting a dime out of the zone what do you want me to do here right I don't want I don't want

[00:50:06] [SPEAKER_04]: to sponsor I don't want to be in that situation the other thing I will tell you if you're an 80

[00:50:10] [SPEAKER_04]: 20 split the prof only matters if the whole thing earns less than seven and a half you know that

[00:50:18] [SPEAKER_04]: right so you put one and a half is the other 20% so as long as you're making seven and a half I guess

[00:50:26] [SPEAKER_04]: that's possible but I would consider seven and a half a massive failure for the way we do business

[00:50:31] [SPEAKER_04]: I can't promise anything you know that neither can you no guarantees but that I mean that

[00:50:37] [SPEAKER_04]: return has to get pretty low for that path to actually matter can I feel like I can keep talking

[00:50:42] [SPEAKER_01]: all day here I want to be respectful of your time and the listeners as well so let me ask these final

[00:50:47] [SPEAKER_01]: couple of fun questions okay and then we'll just probably have to re-schedule and do this again

[00:50:52] [SPEAKER_01]: at some point this is a lot of fun I love that you can do yeah all right so let's see here

[00:51:01] [SPEAKER_01]: we you know we talked a ton about the due doses process I want to ask that question so

[00:51:06] [SPEAKER_01]: couple of questions here if if you're a guy that has a bucket list or has a chases after bucket

[00:51:13] [SPEAKER_01]: list items have you recently checked a bucket list item off your list or are you hoping to do so

[00:51:19] [SPEAKER_04]: here in the near future yeah late last summer my family and I my wife my kids we all went to Europe

[00:51:26] [SPEAKER_04]: hadn't been with we loved a cruise so we did a Western Med Cruise on real Caribbean

[00:51:31] [SPEAKER_04]: and if you've ever go to your man that is the way just everyday or you get to see a lot of

[00:51:37] [SPEAKER_04]: different things come right back to something you're familiar with so that's my bucket list that was

[00:51:41] [SPEAKER_01]: used my wife is dying to go back I love it congratulations on that that is saying we have been around

[00:51:48] [SPEAKER_01]: Europe but said we've done cruises but never the the Mediterranean cruise which I'd love to do so

[00:51:53] [SPEAKER_01]: it was a final question here if you had a hundred grand you needed to invest this week but

[00:52:00] [SPEAKER_01]: you couldn't put it into one of your own deals where you released that capital yeah where would

[00:52:04] [SPEAKER_04]: I place that that's a great I would probably put in someone else's real estate deal okay I'm been

[00:52:10] [SPEAKER_01]: real estate you know I don't stock market anymore now very good very good well kid this has been

[00:52:16] [SPEAKER_01]: a lot of fun I really enjoyed the time together I learned a lot and you've confirmed some things

[00:52:20] [SPEAKER_01]: for me as well so thank you so much for being on the show I appreciate it thanks so much for having

[00:52:27] [SPEAKER_01]: awesome all right to the listeners as always we can urge you to continue your education process

[00:52:32] [SPEAKER_01]: in this past and investing space and more importantly that that we encourage you to make the decision

[00:52:37] [SPEAKER_01]: to place that first investment both kid and I are convinced that once you do you will be so happy

[00:52:42] [SPEAKER_01]: that you did and just wish that you had done it that much sooner so be sure to join us again next

[00:52:47] [SPEAKER_03]: Thursday for another great episode well there you have it ladies and gentlemen another episode

[00:52:53] [SPEAKER_03]: of the gentle art of crushing it it was an amazing episode we know we sure learned a lot

[00:52:58] [SPEAKER_03]: and we hope you did as well we want to take a second and thank you so much for viewing or listening

[00:53:04] [SPEAKER_03]: to this episode and please just know that we only ask for one favor and that is to make this life

[00:53:10] [SPEAKER_03]: thank you and have a wonderful day