Podcast Episode 101 Transcript

Episode 101: Building Massive Wealth With Multifamily Investing With Ken Gee

Are you ready to bring your real estate game to the next level? My name is James Prendamano. I'm the CEO and founder of Prereal. And over the past 25 years, I've closed over a billion dollars in transactional real estate. Each week, a meeting with outstanding investors, high performing individuals, and visionaries operating in the real estate space. These are the people that are actually out there in the real estate game right now getting it done. This podcast aims at bringing anyone's game to the next level. This is the Prereal podcast. Welcome, everyone, to the Prereal podcast. We're joined today by Ken Gee. He's the founder and president of Kri Partners. Folks, we've had a lot of different people on the show in the multifamily space. You hear me talk a lot about TikTok investors. Ken is in one of them. He's been involved in over $2 billion in transactional real estate, and he has an accounting background, and he's made a heck of a name for himself. Ken, thank you so much for joining us today. Happy to be here, James. Thanks for having me. Oh, it's our absolute pleasure. Anytime we can get a real investor that has been around the block and understands these things are cycles, and not every deal is a great deal. It's an opportunity to provide value for our listeners because we want them out there making the best investment choices that they can. Couldn't agree more. I'm with you. Yeah. So you didn't wake up and one day have a management company and have this portfolio, so maybe a minute or two can on the background. How did you end up making the leap and getting into real estate? Initially? Yeah, that's a great question. So I started out, I grew up in Toledo, Ohio, moved to Cleveland, got married, went to work for a bank. I spent five years as a commercial lender. All the time while I was listening to my customers, they had lots of real estate and were making a ton of money on it. Then I thought, for some reason, I wanted to be an accountant, CPA. So I got my master's degree at Case Western Reserve small private school in Cleveland, and then went to work for Deloitte, where I spent seven years mostly in the tax M and a multi jurisdictional tax planning just all the fun stuff that you'd want to do if you're going to be an accountant. There is such a thing as fun things to do as an accountant. But again, here I came. All my clients in real estate. The Cleveland office said that firm had a massive real estate practice with household names, and we watched them just make tons and tons of money. And we also had a number of private equity clients that happened to have grown up in Cleveland. So when I was at Deloitte, I said, you know what? I'm killing myself here. Getting to work at 630 in the morning going home at 11:00 at night and I wanted to see my kids. And I said, all right, I got to figure this thing out. So I spent about two years working on it, trying to figure out how this thing works. I went to every seminar I could find. And back then this is back in 1997, so there were not podcasts everywhere. It was a lot harder to find this information out. So local apartment associations, things like that. And then I finally pulled the trigger. Felt like I had a golf ball in my throat back then when I did it, that's how stressful it was. But I bought my 1st 28 unit apartment complex, thought it was just massive. And that's how we got started. So I'm interested in the why your driver at that point was you were burned out a bit, maybe on those crazy long hours and days and you're trading time for money and looking for financial freedom. Was that kind of at the core? Yeah. No, that's exactly what it was when you think about it. I did everything our parents taught us to do. Went to school, got a good degree, got a good job, everything would take care of itself. But I found myself it's an interesting story. It was about three in the morning. One morning, I was feeding my daughter in her room. She was very young. My son was in his room, my wife was sleeping. And that was really cool time to spend with her, right? That's a father daughter bonding thing that you can't replace. Except that one night, I just started thinking about anything but that time I was spending with her. I was trying to figure out all the things that I wanted for us, our family, myself, for her as a family. I wanted to be able to put her through school without a ton of student loans. I had a whole lot of things that I wanted to do, and here I was working like a dog, and I just couldn't get ahead. Right. I just couldn't figure out how to do that. And I was able to save a little bit of money, but not much. Every time I turned around, the stock market would crash. So it was at that point in my life that I said, you know what, this has got to change. This cannot continue. I cannot continue working like this and not getting the results that I need. So that was when I made the switch. And you're right, I did it exactly for that reason that we just described. And that is, I needed to find a way that I could earn well. It was passive income. I needed to find a way to really reach my financial goals. Because you talk about the rat race here, people talking about the rat race. I was definitely in it. And even though I was working hard, did everything perfectly, supposedly. And I felt like I was successful, I wasn't going to reach my goals, and it was obvious. So those are profound moments and difficult moments that it seems many of us have, Ken, but few of us act on it. There are so few of us that actually change our course and change the pathway that we're on. Like you said, go to school, get the degree, get the job at the big company. That's what we were taught and that's what we did. And so few of us are able to wiggle free from that. So you were clearly at this point in a time where perhaps you were not investing in real estate, but you're around real estate investors, right? You're around folks that are doing this. Were there any outside influences outside of that? Any mentors or folks that you work with? Well, I learned what I needed to learn just from going to apartment association meetings and courses that they would offer. I would network with all the people who would be speakers at these events. They would get local apartment guys, attorneys, all the property managers, all those people. And I really spent a lot of time networking with those people and trying to learn as much as I could. So was there one particular mentor? No, there probably wasn't one particular mentor. It was just everywhere I turned, everybody was doing really well in real estate. Remember the bank? For five years, I had to listen to my customers and watch my customers make a lot of money in it. Now, is that deloitte doing their tax returns? They were making obscene amounts of money. And so this driving force, that story I told you about my daughter, is true. If think about your father, you're there with your daughter, and you just know that where you're headed is not going to get you to where you need to go. So that was really my catalyst. That was my motivating factor. And I will tell you, it was hardest when remember I talked about the golf ball in your throat kind of thing? That's exactly how I feel. I remember that day vividly when I signed on that mortgage. Back then, it was a whopping $460,000 mortgage that I just thought was incredibly large. But the stress that I felt, you just got to push through it. So you're right. A lot of people don't push through that and don't make that change. And I'm here to tell you that if you just stick with it and press through it and deal with that golf ball in your throat for a minute and now, see, now we have coaches everywhere, right? There are people like you in this podcast and just people everywhere that want to give people a lending hand. We didn't have that back when we started, or at least when I started. So that was a catalyst. My catalyst was my family that made me want to do this. And in terms of mentors, I just tried to pick pieces of as much information as I could from everywhere, and that's how I put it together. It wasn't the easy way, that's for sure. No, look, I started in the business in 1996. I was 21 years old. So back then it was a very different world. Right. On the real estate side, we actually had the books. This is pre modems, this was pre any of that stuff. But there was a grind about that which has benefited me. I can't even begin to put words around what those years meant for me in my career. Today it's almost to a point where there's too much information available. And this is what, if anything, comes across from the podcast today, folks, it's this go to a seminar, take a course. A real estate investor. You are not right. There are professionals that have dedicated their lives to real estate, and they understand the cycles, the tax consequences, all of the things that go along that some of the newer investors, and some of them are amazing. I've had some of them on the show. They're full of energy, full of life. They've got wonderful careers ahead of them. But you cannot replace experience. And experience has taught me an awful lot in this game. And today I hope to glean from Ken's experience what folks should be looking for. So with that, Ken, if you could spend a minute or two on a typical deal structure over at Kri LPGP, what does that look like? What does it mean just to give the audience a flavor of what you're doing? Sure. So as a firm, we have evolved. We used to do all syndication. So I don't know how much your listeners know about with syndication versus a blind pool fun, but a syndication is simply the sponsor goes out, finds the deal, then he locks it up with seller, convinces them to go under contract, and then runs around for the next 45 or 60 days and tries to raise the money. And hopefully he's established some relationships before that. So it's not hard. Yeah, I used to do that, but that puts a lot of gray hair on your head if you're sitting in my chair, because that's a very short amount of time to raise an awful lot of money, especially when you're in a hyper competitive market. Like, we primarily operate in Florida and in the southeast, so there's a lot of guys standing right behind me if I slip up even the slightest. So what we've now done, and we're in the process of raising money for our second fund right now, but we switched to the blind pool fund model. And I remember I said at deloitte I had a lot of private equity experience because I have a lot of private equity clients. It's exactly what private equity firms do when they buy and sell companies, we just do it with real estate. So now that deal first, equity second. We flip that model over and we go out and we get commitments and raise the capital first. So then we can go buy the properties with the confidence knowing that we have it. Now, the reason we did it, we did it because we're in a hyper competitive market. Everybody that's competing for these properties in our market it's not uncommon to get 15 offers on a deal. 2030 offers, right? Yes. Almost all of those people are syndicators. So the syndicator that wins the deal has to pay up. But if we're a fund manager, that broker, that seller knows we've already raised the capital, they know we're probably more experienced. That means there probably is a far less likelihood of being retraded, that due diligence will go smoothly and that equity raise risk is off the table. So we now become a much, much stronger buyer and we become much, much stronger for the broker community. So that's what we do now is we raise funds and then in that fund we'll put two or three or four deals depending on the size of the fund. And then in terms of a legal structure, it's no different than we buy the property. It goes into an LLC and then the fund owns the LLC and then we have several LLCs under that fund and our investors get the benefits of a little bit of a diversification. For example, our last fund, we have a deal in Tallahassee, Daytona and Bradenton, all in Florida, but all in completely different markets, completely different property types. So they enjoy some wonderful depreciation or diversification. The other thing they enjoy is the upfront cost, right? All the set up costs and the Ppm and all the legal fees that you have. With this indication we get to spread those over several deals because when we have to do it one time with the fund. So that's the model that we use now. We found it to be very effective, especially in very competitive markets. If we were pursuing deals in a non competitive market, you wouldn't need a fund, you just wouldn't because sellers would be happier, there are fewer competition, sellers would just accept that equity raise risk because they're just happy to be able to sell to somebody. But in those competitive markets you got to put everything on your side that you can find. Yeah, sure. So you paid the dues, you did this indications and now folks are investing essentially in you and in the company. Right? That's what this is about. It's exactly right. You pledge the money and you know that Ken and his team are going to go out and find the deals which again translate directly into deal quality in many instances because as Ken noted, you're approved entity, the cash is already available and the seller knows that they've got a deal that's in all likelihood as long as the property passes through third parties and diligence that we're going to have a closing here. So folks are investing in this blind pool. They don't necessarily know. They don't know which assets. They just know is the fund limited to multifamily? Is that what's described it is, yeah. So we do BC class multifamily. We're always going to be in growth markets. Right. That's most of Florida and Southeast in Texas. And we generally hold that deal for three to five years. So we're going to add our value. We're going to move rent, create our value. We're going to leave some for the next guy because the next guy needs a reason to buy, and then we're going to turn that. So the investors will get a 6% preferred return while we hold the deal. So they get paid while they wait. And then the big payday in the value add world, as you know, is when you sell the property. So when we underwrite, we underwrite to a minimum of 15% annual returns. That's what our target is. We always want to blow that away, of course, because I don't like under promising and over deliver. No, I like to under promise and over deliver. That's what we always try to do. But that's generally the way the fund operates, right. We get paid last. Investors get paid first because that's the way it should be. So it's 6% prep. You get your capital back, and then it's a straight 80 20 split. Super simple process. It doesn't need to be complicated. It looks very much like a syndication in terms of the structures. It's just you get the benefit of getting multiple properties in one fund. So when you're building out the metrics for each deal and you have your subscription docs, I'm curious, we both know that good markets come and go. There's a lot of folks that have made an awful lot of money over the last few years that don't understand what's right around the corner. What do the subscription docs look like? What can the investor expect? Is there a steadfast time period where that liquidity event is going to happen? Yeah. So you're talking about the exit liquidity event? Yeah. I think the max life on it is six years or seven years, and I have the ability to extend it one, two, or three years. Here's what you don't want to do. In the real estate world, time can be a friend. And what you don't want to do is be forced to exit a deal at the wrong time. You just don't want to do that. So we need that flexibility. We really do intend to hold three to five years, create our value, and move on. If we create our value in years one or two, think about just something as simple as remodeling your kitchen at home. Right. You remodeled it today. Well, in seven years, you're looking at it and thinking, wow, this thing is looking old again. Right. It gets beat up the kids abuse it. That's just what happens in our world. We would prefer to not hold that asset that long. If we need to, we need to. We want to have that flexibility, but we want to turn that asset because investors very much appreciate not having to wait 510 or 10, 12, 14 years for their big payday, so to speak. So super smart structure. Six to seven years. You have the right to extend if you're in one of those market shifts, if you will, and the bigger pay days come toward the end, but you're still paying a 6% prep, which is a nice return along the way. When you're identifying deals, are you always kind of jumping into the new markets or are there certain markets that, hey, this is where we're going to find our deals? Are you limited in that sense? Is it like Florida, Texas, and it's as broad as the states where you could place the money or what does that look like? Yeah. So the bulk of what we do is in Churchill, Northern Florida. But our criteria really starts with growth markets. Right. If you think about the whole sales process, you think of a funnel. It's no different with identifying properties. Right. We look at markets that we generally like them, then we just continue to analyze the submarket and we get right down to the neighborhood. And what we're looking for is good is growth that's diversified. That's not dependent on one employer or the military. We don't like to buy something right outside of military base because all it takes is Congress is to change one law and your whole investment is worthless. Right. We try to get that diverse. We don't want to locate right next to Disney. Right. That's not a good situation if you have a pandemic, right? No, we don't. We don't. We're not planning for another pandemic. But the point I'm making is we like to look at every single risk that we know exists and we do everything we can to mitigate those risks. And we really get in the weeds when we talk about mitigating that risk because we're looking at different types of employers and different types of industries because that revenue stream matters. And we always stick to good neighborhoods. Early on in my career, we went to the tougher neighborhoods. But my friend, I'm telling you, that's a tough road to home. There is no doubt about it. We don't do that. We stick to the good neighborhoods because when you have recessions or downturns, when you think about it, it's usually the extremes of the markets that really get hurt. It's maybe the top end gets hurt. The very bottom part of the market gets hurt. The people in the middle, I mean, they just don't get hurt. Now in our market, for example, think about Central Northern Florida, right? They're building like crazy in that market. It's a fair statement. But what they're building is all A stuff. They're not building b C stuff. And when you think about the roughly 1000 people that are moving to Florida every year, all those people aren't wealthy. Yeah, some of them are, but not all of them. So we have a situation and we look for this set up. And this set up exists in more than just Florida. It exists in Texas, it exists in many of the southeastern states. Right. For lots of reasons. But we're looking for a situation where we have that increasing demand, no new supply. Because if you think about economics, it just puts upward pressure on rents. So it's kind of a bull market rate. That's the rising tide that you want to be part of. But then you put a value add strategy on top of that and that's when you get crazy returns. It just really are nice. So it's funny, as you're mentioning some of these things to stay away from, which, again, only through experience can you really appreciate those things. There was a time in my career where I would have looked at things like being next to a government installation or an anchor, like a Disney, and thought, how could you go wrong here? Right? And I'm thinking of all these decks that have come across my desk that are highlighting those points. But again, there's the difference between that's experience. That's what it is, right. That's you fully understanding that what you think can happen will it's just a matter of when. And you've got to be positioned properly to indoor and to kind of get to the other side of the rainbow. Now, are you guys looking at deals that are built and in need of reposition? Are you doing ground up? What is the complement of deals that you're taking a look at? Yeah, great question. We don't do any ground up development. We do everything that's existing. We prefer eighty s and newer. So we need to be able to add value somehow. Most of the time it's physical improvements and some management. Sometimes we'll get lucky. In fact, we have a tallahassee deal that we've done. That one is mostly management. It's a little bit physical, mostly management. Just because the seller didn't manage the rent roll properly, he did a bunch of improvements. It's just what he did. He did his business plan. It was very effective for him. But he left that meat on the bone for us. So that particular property is one that's an anomaly that's in our fund, but it's mostly management there. And since November 1, I think we've moved the rent role like 7000 a month or 8000 a month on a little 84 unit property, believe it or not. Wow. And folks, that is the best improvement in cash flow that you can make, boy, when you've got a market where through some minor improvements and physical improvements, every dollar that you're increasing on that monthly rent is a direct dollar to the bottom line. Can you spend a minute talking to the audience about inflation and why you think multifamily I'm assuming you think multifamily are a hell of an option during the inflationary period. Could you speak a little bit about that? I do. I have this discussion all the time with lots of different people. So when you have the situation that we find ourselves in right now, people are getting nervous. They think inflation is going to destroy everything. It's not. I mean, we've had inflationary times before. Here's what generally happens in the multifamily world. And I'm talking from a macro level. So if you think about it, we're in an inflationary period right now. I don't know exactly when this lawyer, but assume we're still in an inflationary period. And so now the government, the Fed, they need to try to tamp that inflation down because they don't want inflation to run away. I'm cool with that. I get that. So the way they deal with that is they see inflation is a demand supply thing, right? So it's hard for the Fed to deal with supply. They can't, they can't affect the supply side, but they can't affect the demand side. And they do affect the demand side of the equation by raising interest rates. When they raise interest rates, things become more expensive to do. Buying a car, buying a house, lots of different things, capital investments with manufacturers and things like that. So what that does is it starts to tamp down demand. Right now, let's look at what happens when you raise interest rates. Let's look at specifically multifamily now. Right? We raise interest rates. What happens very recently I just saw an article, the mortgage loan application rate is the lowest right now than it has been in 22 years. Why is that? Because the Fed is raising rates. Mortgage rates are going up. But here's what's not happening. People don't suddenly not need a place to live. They still need a place to live. It's harder to afford that house if they want to buy. So what do they do? They come into multifamily. So now what do we have? We're back to the demand supply thing that I just talked about. In multifamily, supply is not going up because they're not building BC class properties. And now we've got another reason for demand to increase in the manufacturer in the multifamily world. So that again continues to put upward pressure on rent because we have more people trying to live in the same number of apartments that are out there. Does that help? I love it. It's a beautiful model where as a direct result of the measures that the government has taken and has been pretty candid, they're going to continue to take and raising rates. It becomes a funnel for you. I mean, Christmas, if people can't afford those homes anymore, they're opting to rent. And that just helps you back fill and put upward pressure on The Supply Side And The Demand Side, and Rents Go Up And Everybody's Happy. So You're Doing Deals In Need Of Repositioning. You Lost The Lease. All Those Fancy Terms That You're Focusing On To Try And Drive Value. How Are You Vetting The Asset Itself? Are You Relying Entirely On Third Parties? Do You Have An Internal Team That's Vetting And Doing Some Of The Underwriting? What Does That Process Look Like? Yeah, It's A Combination Of Both. So First Of All, after 2025 Years, You've Been In The Business A Long Time. When You Walk A Property, you Don't Need To Spend A Lot Of Time On The Property to Just Understand How It Is Being Run. Right. I Can Walk Onto A Property And I Know If There's Duct Tape Behind The Walls, I Know What Kind Of Things I'm Going To Find. Right. So That's Step One When We Develop Our Offer And Everything Else. And That's One Of The Reasons That Sellers Like To Work With More Experienced People, because The Seller Knows This Guy. He Understands What He's Got Here, and He's Not Going To Come Later With All These Supposed Surprises that He Didn't Know About because There Are No Surprises, Really. So Now We Get To Our True DD. We Walk All Of Our Units. We Use Our Own People For All That Stuff. But We Do Rely On Outside People In A Consultative Way to Sign Off On Roofs, to Sign Off On Breaker Panels And Things Like That. We Don't Remember We Are The Steward Of Someone Else's Money. And I'm Not An Electrician. Right. I Don't Want To Have A Potential Situation where I've Got All These Fed Specific Panels In A Property and I Didn't Know It Because Somebody Paid It Over It, and I Don't Know How To Recognize It. Right. So We Rely On The Trades And Bring Them In To Look At All Aspects Of The Property so That We, In The End Have A Good Feeling For What The Property Is Like. What We Don't Generally Do and I'm Not Saying There Is Anything Wrong With This, but We Don't Generally Just Hire One Inspector To Go Out And Look At Everything because Generally Speaking, they're Going To Identify Glaring Problems. But They're Not The Licensed Electrician, they're Probably Not The Roofer, they're Probably Not The Licensed Plumber, And So On. So We Tend To Go Right To Those Trades Directly because That Makes The Most Sense, and That Allows US To if We Already Know Something Is Potentially An Issue, we're Going To Really Hyper Focus On That. We May Have One Or Two Or Three Roofers Out During DD because One Man's Opinion Is One Man's Opinion, and We Want To Make Sure We Get A Good Cross Section. Okay. So We Know Where You're Looking. We Know How You're Looking. We Know How You're Getting Through The Diligence Process. So Now It's Time To Close The Property Leverage. What Factor or what role does leverage play in these deals? And a little bit on the cash stack, if you would. Yeah, so we tend to be conservative, as you would expect. 65% to 70% is where we tend to hang out. We'll do bridge loans, but we're careful. We want to make sure we have built in extensions and our bridge loans, that's really important. We like to manage the interest rate risk. We try to go fixed if we can. And we just want to make sure that we give ourselves flexibility on the back end should there be some delay in our ability to implement our business plan and get the property where we think. Now, I probably could have talked about this before, but back in the DD time or back reverse to the time before we write our loi. One of the things that I see a lot of people not doing, and that is spending an enormous amount of time upfront really understanding the rental market. Right. We use you already to get our initial set of reports, but we don't rely on their rents because they're late, they're delayed, they're never right. So we'll go out and we'll find all the competitors within a mile or 2 miles, or 3 miles, depending on how many competitors there are. And we will go out and check everybody's rents. And the reason we do that is because we want to understand where our property is today. This is the key to this. And we want to know, OK, we know what we're going to do to the property and then we're going to project where that property is going to go. That's our upside. What is critical to us is that when we go into a deal, we know because of our rent survey that we know how that property is going to compete one level up from where it is today. And we know that the moment we get it there, the rents and the market already supports that. And that's the key because some people will allow for some increases but plan on the market allowing them to continue to get five or 7% increases. We would never do that. We know that today. If we put that unit out there and the work is done, we know that today we can rent it at our projected number. What really happens then is we usually beat that number. That's the objective is to beat that number. And then after our initial value add, our red projections on renewals are like 2% increases, which is if I go back to conservative, right, we're doing everything we can to mitigate the risk upfront and we're doing everything we can to show our investors the most conservative case that we can. Because then when we do over deliver, it's obviously a much better conversation to have than the alternative. Sure. So again, for value in the audience, I want to make sure that I'm putting a spotlight on this. Ken just talked about a process that you may feel. Well, of course people are checking out the rental market and understanding absorption and understanding what's going to happen if they raise rents, because the blind pool fund is set up the way it's set up. They have the ability during that time period to focus on those things instead of raising money trying to backfill the syndication. I've seen some really scary decks lately. There's a lot of good folks out there that are caught up in this excitement of multifamily investing, and everybody's doing it. And there are so many people, and a lot of them, I think, are good folks. I just think that they're excited and they're a little ahead of their skis, and they don't understand that there's a cycle that comes along with this. And they wouldn't even begin to understand that these are the things that you want to folks. I'm not saying go cut ken to check tomorrow. That's not what this is about. This is about ken's firm and the type of work that ken does. That's what we need to be looking for. We need to be looking for folks that have been through the war. They understand what's coming around the corner, and they're not running around in a manic state from the point that they execute to the end of diligence, or some cowboys go beyond diligence, and they're headed right into a closing. And they're not funded. They don't have the ability. They have not lined up all of the funds necessary to take down the asset, never mind to keep it running into the future. And a buddy of mine was looking at a deal down south, and he brought me to deck and he said, do me a favor, take a look at it. And we're going through it. Ken I'm seeing crazy numbers on appreciation that they're banking on. I'm seeing crazy numbers on liquidity events. There were two liquidity events that were refi, and the third that was a sale within the next ten years, but expenses were stagnant. There was no accounting for inflation. Rents were up 30% in the first three years. And those deals, they do exist. Those things do happen where you can unlock value because things are in on the market. But when we got into the debt service and this is something you touched on a little earlier, they were doing a bridge. And I said, why is this two to three years from now? Why are interest rates what they are today? And this was never contemplated. Man and they raised three and a half $4 million in two weeks off of a couple of phone calls. And as sure as I'm sitting here, I can tell you that deal will end up in receivership, because the deal doesn't work without the appreciation that they're banking on, and it certainly doesn't work when rates are at seven and 8%. So these are absolutely invaluable things that we often don't take the time to put a spotlight on, but gosh, those are the things that we need to be looking for when we're parting with our hard earned cash and looking for somebody to place it in the market. Yeah, no, I agree 100%. I always like to see the people that are new in this business. I want them to succeed. In fact, my advice to them is you need to make absolutely 100% sure that your first deal is a home run, because if you don't, you won't be back. Your family that you probably went to for money, they'll support you, but they'll be frustrated. Right. It'll be a bad situation. And all it takes is doing the work up front. That is the number one thing that I see, because we do third party management as well. And I see this all the time, that people just don't want to do the work or they don't know how. And I just plead with anybody, take the time, figure out how to do the work and actually do it. When I talk about our rent increases, it's not a gas. It's not a we think rent will go up. We're going to show you a rent stack visually with real life rents in today's market that we checked yesterday, literally yesterday, and we're going to show you where this property is now and where it will be. And it's already well within the market range that it should be. Right. I like to have a lot of I call it a lot of air above us, right? Because then I still have even more to go, because that's my goal is to tell you I'm going to do X and do X plus whatever, 200, 300, whatever it is. But that's the important part. I have no problem with Pie and the sky projections. I just want to make sure people do the work, because there are crazy things that you can find out there. But you just want to make sure that it's for sure. And you want to be able to say to your investor, I know that we're raising rents, and here's why I know it. And when you do that and you show that to them and you show them the cops, then it's lights out, right? Then your investors will feel comfortable, and you actually have no problem getting into the weeds with them because, you know and that's the other thing I tell investors when you take that time to learn and to know. I have this little saying, I probably stole it from somebody, but I can't remember who I stole it from. But knowledge builds confidence. It just does. And when you're sitting in front of an investor, you don't know what questions they're going to ask you next. And I challenge them, ask me whatever you want about the deal. I don't want to know what you're going to ask in advance. I don't tell me, let's do this on the fly. Because I am that confident that we understand our markets that well, and we've done that level of homework. And that's what I want to see new people in this business do. Because when you do that, you will be shocked at how much more confident you are. And you'll just know, right? When you have that conversation with investors, they know and they can sense that you're certain and you've done the work. And when you haven't done it, they sense that too. Yes, without a doubt. Ken so you mentioned third party management. Could you talk to us a little bit about what the firm are you managing all of your own assets or what does that look like? Yeah, we're vertically integrated, because, remember, apartment communities are just their business. They just happen to be apartment communities. And so, just like any think about a business executing its business plan, execution is critical, right? If you hire a bad management company, one that doesn't understand, doesn't know what they're doing, your investment is not going to go very well. It's just not because it's the operations that are going to get you from point A to point B. And we always manage our own stuff, and we do some third party it's not a massive part of our business, but we do it because, well, it helps build out our infrastructure and excuse me, pays the bills and things like that. So we do it. And we've developed a lot of investor relationships through that process, believe it or not. And the other thing that it does for us, and I didn't understand this in the beginning, but it changes your relationship that you have with the brokers in those markets. Because when brokers refer you a third party managed client, they do that with confidence, knowing that you're not going to screw it up, and they know that you're going to take care of their client. Well, think about you're kind of on their team there for a minute, right? Most people are adversarial with brokers and we're never adversarial with them. But in that situation, we're kind of on their team, so they get to know it. They get to see how well we operate. Then when it comes time, hey, here's our phone, we're ready to go find us a deal. They are all over it because we've already developed just that super deep network and that relationship. But if you think about a hyper competitive market like Florida, your relationship with the broker world really matters. It absolutely does. So third party management has had a lot of benefits for us, not just implementing our own business plans, but there's just so many benefits to it. It's not the most fun part of our business, I won't lie to you. I mean, third party management is tough stuff. It just is. But we really feeling good when we help our clients buy and we're able to lead them through that process and they make a killing on the way out. Right. That makes you feel good. Yeah. So just a minute. On managing, it's another place where we're seeing folks be over optimistic on the revenue that it's going to throw off and the opportunity there self managing without a doubt, gives you autonomy over the asset. And I'm a big fan. If I'm placing money with a fund, I want them to self manage because it closes the loop. But for those of you that are looking to get into these deals where maybe folks don't quite have the runway under them, especially if it's their first asset and they want to self manage, that's rife with potholes along the way there, self managing is not an easy thing to do. So if we can talk for a few minutes on the fund again, are you able to take exchange proceeds? Is there any opportunity for that? Yeah, I wish there was. That's the one thing that I can't figure out how to fix. I mean, it is technically possible to do it. The problem is it's not practical, so it's not something that we could entertain. I won't go into how you can you could actually do it, but I said the legal fees would probably be more than the taxes that you're saving. Yeah. And I assume Opportunity Fund, same thing. Not a place for Oz money. No, probably not. Because you're going to be in multiple assets in our fund. And if they all happen to be an opportunity that I wouldn't say the typical investor for us, high net worth individual, family office, self directed IRAs, that's becoming more and more popular. Because I love self directed IRAs for investing in funds like ours. I know there's you bit and whatever, we won't get into all that. But what I like about it is it matches up. Real estate is generally a longer term investment. Right. That's exactly what IRAs are. Right. So I like that matching. When we look at the investors that come into our funds, it is really important to us that their goals match what we're doing. Right. If they're trying to make a quick hit and get in and out in a year and flip, well, we're not right for them. If they're trying to hold something for ten or 15 years and want to have no buy sell friction, well, that's not what we're going to do. Right. Because I don't want somebody in our fund that I know is not that matching of goals is really important to us. So typically, the individual, the high net worth individual, we have a number of wealth management firms that we work with that put their clients in our fund. They love it because it gives them a lot of diversification for their clients because their clients don't know where to go find this opportunity. Right. It used to be kind of a scary place that nobody knew about. But now doing what we do is becoming far more mainstream and so our investor pool just continues to grow over time. So what are just a couple of things that on the surface, if you don't have the opportunity to sit down and talk to someone like yourself for an hour, or you haven't heard of podcasts like this where we're laying it out on the surface. Ken, what are a few things investors can look for in identifying the right place to place their money? Yeah, that is a really good question. So I think we have beat the experience thing to death, right? No question about it. I want them to really take a look at the track record. I don't know if you've ever heard of Verivest. It's V-E-R-I-V-E-S-T. It's a website. No, I have nothing to do with them. But we did pay them a lot of money and they vetted our entire track record. So you can go to verivest.com. KRI partners, I know that's a lot, but you can find us on their site. All 23 years of our record has been vetted by them. We sent them hundreds and hundreds of pages of tax returns, bank statements, settlement statements, I mean, you name it, they really beat us up and make sure so the full track record is vetted. They also do background checks on us regularly. Every year they do them, they check with the SCC, they do a full background check. The reason I'm talking about them again, I don't have anything to do with them, but I love what they do because if you're a potential investor talking with us, you don't have a good way to vet us. You're probably not going to ask me for 23 years of tax returns. I mean, you're just not. So this company exists for that purpose. They're very expensive for us to pay them to vet our track record, but it's hugely valuable in my opinion, because we're an open book. I mean, if you're going to give us your money, you should know exactly what we've done in the past and exactly how we did it. And you get to see pictures of the deals and the whole thing. It's out there. I would encourage everybody to go there. I would encourage people to take the time to talk to someone like me with the firm, somebody that's knowledgeable, right? A lot of the larger firms will have investment guys or gals, but they're so far removed from the deal. Most of the answers are generic and things like that. Right now, I'm not knocking big firms, I'm just saying that what would matter to me is that we could have a very similar conversation to what you and I are having right now, where you can ask me very pointed questions and I have very specific answers because I know exactly what we do and I think you want that as a potential investor, you want to make sure that you see that. And the last thing I'll talk about is look at the terms of the fund or the syndication or whatever it is you want to make sure that they get paid last. Now, the problem is that gets kind of tricky because sometimes some of the fun terms and syndication terms they put together are just confusing and whatever, find someone that understands it and walk through it with them. I always tell people, I want you to ask yourself a question and look at the terms and try to figure out is there any way that investor or that sponsor can do well and the investor not? It shouldn't be. Like, for example, I'll give you an example, our fund. This is an argument against us forming a fund, right? For our sake, we have three deals in that fund. Our bonus is back loaded, meaning there's three deals they're going to sell. The first one, I still have to return everybody's money. There's no bonus there. The second deal, I'm going to make sure that the balance of everybody's capital for the whole fund is returned and then their preferred return and only then do we get into the bonus. So think about that, how long we have to wait to get paid. You need that kind of back loaded performance payment, right? You don't want your sponsor getting paid before they've done anything amazing, right? In our world, if all you get out of our fund is a 6% return and your money back, well, guess what? I don't deserve a bonus that didn't do very well, right? That is not why we all got together to earn 6%, right? We did it to do better than that. So just focus on that investor first thing and sometimes it gets a little squirrel because the terms, they start to get confusing. But do your best to figure that out. Well, guys, this is tremendous advice, verivest site I was not aware of. I think it's a great place to consider if they're actually going and embedding the deals. It may seem like on the surface, of course, I want to get my money back before my syndication partners do. Time and time again, we see huge fees on the way in. Who found the deal, who sourced the deal, who missed the deal, who underwrote the deal? I mean, big fees, man, big fees where folks are eating on the way in. Again, there's a lot of different structures out there and many of them work, but where I believe heading into some uncharted territory here. So please make sure you're being real smart and doing your homework before you're cutting any checks with that. Could you spend a minute or two and take the crystal ball out and tell me what you see on the horizon in the next couple of years in the economy? Yeah, I spend a lot of time thinking about this, researching this, talking to economists specifically. I try to stay away from the news media because they're very headline driven. But if you talk to we used a company called it our Economics. Again, I have nothing to do with them, but they're economists. They're looking at real data and they're projecting and whatever. Look, I think we're all going to be just fine. I think we're going to have some inflation for a while. I think the Fed is going to knock it down. I'm already seeing information that tells me that shipping rates in the forward shipping rates in the not very far future yes, that's right. Yeah, they're coming down considerably, down 40 plus percent. That, in my mind, has always been a leading indicator on what's happening with pricing, with demand and things like that. And just recently we saw Target, target bought, bought, bought because they had to build up their inventory because they didn't know what was going to be next, and now they're dropping prices. Right. So I think this inflation thing is going to trail off. If you look at all the forward rate curves that are out there with the sofa rates and the Fed fundraising and all that kind of stuff, it's expected to go up, then it's expected to level back down and go down. Like the Treasury, I think, is expected to stay under three for the foreseeable future after that. Right. We're just in a period of adjustment. And whenever we have these periods of adjustment, what I have noticed over the years and again, I'm not an expert here, but I just noticed people tend to overreact, right. Stock market tends to sell off more than it should, and it tends to run up more than it should. Right. We're in this back and forth thing, and it's kind of the same way with interest rates. I'm actually thrilled to see rates move a little bit because it gives us some breathing room. Right. It knocks some of the buyers out of the market that are a little scared because they know they're new, they know they're nervous, they know and they don't want to make a mistake. So that allows us to compete with a few people when we're buying. But we consider right now to be a buying opportunity, and we are looking to deploy as much capital as we can right now because we think there's tremendous opportunities right now, especially in growth markets like Florida. I can't figure out how to screw up Florida in terms of demand supply. I just can't. We keep asking ourselves how that gets screwed up, and I can't figure it out. Yeah. So look, I think that every market is a buying opportunity. Genuinely, if you're positioned properly and you have the right plan. This has been incredibly informative, a lot of value delivered for the listeners here. I really appreciate it. Tell the folks the best way to find you and to find Kri. Yes. So we've talked about two things at length here. One is how people are trying to figure out how to get real estate into their life. The second thing we talked about is how to vet real estate firms. Those just happen to be and you didn't know this that happened to be exactly what I wrote about in my book. So go to Kripartners.come ebook. I wrote it. It talks about those two things, right? And the reason I wrote about them is that every person that's trying to figure out this real estate thing wrestles with these two things. How does it fit into their life? I go through a whole analysis of should you be active, should you be passive? What kind of real estate do you like? Do you not like to help you get through that process, then? Because most people really should be passive because they don't have the time to go figure out a whole new business, because maybe they're a physician or a doctor or something or an attorney. Then I help you figure out exactly what we spent time talking about, and that is how to vet sponsors like us. Because I think the long term health of what we do here is going to be dependent on good sponsors. People vetting those sponsors, and people are going to make an enormous amount of money as long as that whole thing stands up. And that's why I love what Verivest does, because it supports that directly. So it's Kripartners.com ebook and you can download it. You just got to trade your email address for my book. That's all I ask. And if you don't want to hear from me again, just unsubscribe and you're on your merry way. You've given so much information here, Ken. It seems like a hell of a proposition. So, folks, as always, the links will all be down below. Ken gee Kri Partners, thank you so much for the time today. Really appreciate the information. You bet. Thanks so much for having me. My absolute pleasure, as always. Everybody out there, please stay safe.