Large multifamily investments are one of the most profitable and wealth-creating opportunities in real estate BUT are also one of the hardest assets to manage and perform well.
The Big Kahuna, Corey Peterson, has expertly executed dozens of multifamily syndications with his company Kahuna Investments.
Today he is telling us how to truly become a successful syndicator that cashflows eery project and keeps your investors more than happy.
Listen now!
Corey’s Links:
Website: https://kahunainvestments.com/
Podcast: https://kahunawealthbuilders.com/podcasts/
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TRANSCRIPTS:
Speaker 1 (00:00):
Hello, my fellow Ripples. This is Chris Miles, your cashflow expert and anti financianal advisor.
Speaker 2 (00:07):
Chris Miles was able to retire twice by the time he was 39 years old, but he’s not content to just enjoy his own financial freedom and peace of mind. Chris wants you to have your own ripple effect so you can live free today. He’s not the financial advisor you expected. He’s the anti Financianal advisor you deserve. He’s jumping behind the mic right now, ready to make waves. Here’s Chris Miles.
Speaker 1 (00:38):
Well, it’s for you. Those of you that work so fricking hard for your money and you’re not ready for your money, start working harder for you today. Why? Because you want that freedom. You want to be able to do what you want with those, you want when you want, right? You want to be able to spend that time doing what you love with those that you love. But guys, I know it’s not just about getting rich because you want to live a rich life because as you are blessed financially, you have a greater capacity to bless the lives of those around you. That’s exactly ripple effect we’re here to create today. Thank you for tuning in. You’ve been binging, appreciate you sharing it with others as well. Just hearing a lot of the stories about how your guys’ lives are changing. So thank you so much for doing so.
(01:14)
If you haven’t done this already, check out our website, money ripples.com. We’ve got lots of great education on there, even if you want to dig deeper into infinite banking or passive investing, we got lots of good information there for you. Alright guys, so I’m bringing back a guest. I think we’ve now had ’em, must be third times a charm I’m thinking. So we’re bringing back Corey Pearson with Kahuna Investments. Corey also has written several books. He’s going to talk about one of them today. One of his books he has is Copy Your Way Success Standing on the Shoulders of Giants. He also hosts the Multifamily Legacy podcast that I’ve been on as well. Once or twice, great investor, been around the block, excited to bring him back again. This guy’s bought over 250 million worth of real estate nationwide. So Corey, welcome back to our show.
Speaker 3 (01:57):
Man, I love coming on this show. I love the conversations and really it is always something new every time we come on. It’s like the market keeps on giving us left hooks and body blows, and so it’s really how to take on the punches and still keep these investments going.
Speaker 1 (02:14):
Yeah, I think the last time we had you on was, I think it was 2021, I think it was pre 2022 when a lot of real estate investors just got roasted, right? I mean, some of ’em aren’t even in real estate anymore. Some of ’em have pivoted their business models completely different direction. You’ve been around the block. This is not your first rodeo, right? This is not your first recession or whatever they want to call it, soft landing that they try to call it, right? But tell me more about what your experience you’ve been having over the last few years.
Speaker 3 (02:42):
Well, this has been the most interesting market for sure because it really is about operational excellence. That’s been a key term that we’ve been really working on is how do you get lean and mean when insurance goes up 200, 300% percent on a property that you did not budget for in your performa four years ago, five years ago. But that’s the current state of the economy. You have got to become a masterful wizard on the art of getting lean and skinny doing only the things that you have to do in order to make profit. And by the way, it’s been very hard, but we’ve learned so many lessons along the way, Chris. And one of the things we did this year that I think is absolutely remarkable is we decided to vertically integrate. We finally got to a point where we looked at our portfolio, said we think we have enough fees and incomes to actually do this and to start up a property management company.
(03:43)
Now, who in their right mind would do this? Because that’s called tenants and toilets and 24 7 response. And why would you do it? And to simply put it, it’s about control. Chris, more than ever. I think in today’s economy it’s about controlling your costs and expectations. And when it really goes down to it, Chris, it’s about people. We’re in the people business and not so much our customers or our investors. And even though that’s a big piece of it, but I’m telling you it’s your staff, it’s the people that work for you. When we took over, and also I got to say this too, property management, third party property management companies, they’re not really aligned with the owner operator or investors goals. Why is that? Even though they kind of are, but they get paid on top line growth, not NOI, not net operating income, top line growth, which is what they focus on, grow the rents and they’re good at it.
(04:52)
But there’s another piece to the equation and that’s the expense side. And so oftentimes the knot, I see that side thrown to the wind. Oh, well that’s just what it is. And you can’t, not in this economy you cannot afford, well, we’re over a little bit or we’re over a hundred thousand dollars. Or you have to micromanage your expenses nowadays. And that’s how you drive your growth. And hold on to somewhat of your performa that you built three or four years ago because costs have skyrocketed and the insurance costs that have went a hundred percent or 200% up will kill your performance. That’s right. But I want to talk about really quick though is that people aspect, Chris, so culture, so I’m a big believer of this book called Traction by Gino Wickman and running your business and having the right people in the right seats all rowing in the same direction with one battle cry that is hard to achieve.
(05:57)
But you have culture in your company, whether you know it or not. The choices are you going to control it and dictate it. And so that is what we did three years ago really. We started building this thing, our hiring process, and we call it the decline attitudes, our kahuna culture and the things that we’ll hire for and the things that we’ll fire you for if you don’t fit. And now because it’s kahuna and it’s kind of the islands we like, be Ohana family, the rock said, your family, no one gets left behind in Lilo and Stitch. And so creating that culture, one of our cultures, be the kind show up, show out, be special. We want to see your unique gifts, bring those to the table. We want to celebrate it. But when we take care of our people, Chris, something magic happens. They buy into this ideal and people work harder for that attaboy or at a girl than they will for money. They want to belong to something bigger than themselves, Chris. And what I found is if you can give that in into such a way and how you do that, you build standards and cultures and this is the way we do it. We call it the kahuna way. Are you doing it? The Kon away? We’re not.
(07:14)
And when your team starts saying your phrases and we give choke praise, we use a lot of pigeon words, Hawaiian pigeon, so choke, I’m going to choke you out. It’s a lot of or a bunch of. And we like to give choke praise to our teammates. And then one of my favorites is we’re always trying to make it mo better. We’ve realized that we’re a work in progress and taking over a management company. It is so many moving parts, Chris, but at the end of the day I can look back at our team and say, look at how far we come. And for just the one example, we own a lot of student housing property. So in the college scenario, they all move in at one time or they move out and then three weeks, a whole new kid group of kids come in and they move in.
(08:05)
That’s called turn on One property. Last year, a pretty big 40 million project. We spent $350,000 on turn. We’ve got to clean ’em and get ’em all ready and here comes the next crew. But this year with our management company and our team, we spent $125,000. How do we spend that much less? Well, we said we don’t want to spend 300. Do we need outside vendors? What we found is we could hire kids, college kids for $15 an hour and pay them and say, here’s some comment. Here’s a scrubber. Let’s get into these units. You guys are now the cleaning crew. Oh by the way, what’s the commercial grade carpet cleaner? You guys go ahead and clean the carpets as well. Oh, by the way, you can pull all the nails and put a little dap on there, sand it a little bit with a little bit of water, and then run a pig brush. Now they’re painting units and they could do all these things. They’re very capable if you give them the tools. And so we saved so much money by not using the vendors and doing this early with the right crew and the right team, and we made it fun. And at the end of the day, we saved $150,000 and $150,000 divided by a seven cap is 2 million or something like that. It’s good money.
Speaker 1 (09:32):
That’s great money. Yeah.
Speaker 3 (09:33):
So that’s the equation I think that makes a difference in today’s economy. When you’re looking at people at syndicators like me, it really is operational efficiencies. You’ve got plastics, practice six Sigma, lean manufacturing just in time. I need my parts just when I need them. I don’t need anything on the shelves because that’s the world that we’re living in right now, Chris, and it’s crazy.
Speaker 1 (10:03):
Yeah, that’s such a good thing because you’re realizing even though your business is different than mine, I’ve realized the same thing. We’ve brought certain things in-house as well, realizing, well, we could farm it out. At the end of the day we just say we couldn’t do it just as well if not better, and for less
Speaker 3 (10:20):
And for less and get a better product really, because it’s that intangible thing that you’ve got that makes it so good. When I can look at my managers and they’re so proud, and this is the one thing I didn’t know that I really enjoyed Chris. I love people. I didn’t realize I loved them as much as I did until I started to being able to come into them and give them my entrepreneurialship cry and watching them take a hold of that because some of ’em just want to be employees, but they want to be something. They want to work behind, something that’s inspiring that we’re going somewheres. And to be able to give that to them and then also develop leaders, it has been so much fun. And I find that that is my favorite part of the business now. I used to, I love real estate, but I love people better and I really enjoy that part of what I do now. And I think it’s a big piece of why we’re successful.
Speaker 1 (11:13):
It’s fascinating because even bringing that up, I mean you’ve kind of alluded to it a few times throughout this conversation. I’m reading a book called Zombie Loyalists and one of the best way to create your own zombies, people that love to follow you, some of you guys are ripples. You guys are awesome zombies. Yes. But of those, your people, your employees, your contractors, they should be some of the most loyal people as well. And they talk about that, Hey, treat them. If you treat them right, they’ll also treat your people right too. I sort put a bigger emphasis on that, probably my team as well as just not just the clients but them as well.
Speaker 3 (11:50):
Yeah, that is really our core. That is our core. I was like, we talk about this a lot. We’re like, guys, if we’ll treat each other gold and really make sure you guys are very important. And so I’ll give you an example in my corporate structure next week, my whole corporate team takes off. All my accounting is off and we give it paid. We want on Christmas, the whole week of Christmas till new a company shutdown. And we’re paying why? Because I want my people to have family. Family is important to me. I want them to not just have a job I want them to have. This is what we do. This is part of who we are. We take care of family, and that means giving them the time and freedom to be with family. And when we do that, what happens? The reciprocate, they reciprocate that they’ll go out.
(12:42)
And if it’s a Saturday that they wouldn’t normally have to work, but we got something that’s due, they’re like, I’m going to get it done. I’ll burn a little midnight oil for you. And that’s what makes the ship go boom. It really is making those people and giving them that autonomy. And then the other thing is, one of the things that I’ve always done, Chris, and I would love to share this with people, is the power of the written word. I have personal stationary, and if anybody, you run your own company here, I’m just going to say you should get some and use it. The power of the written word. When you can dote on somebody saying, Hey, what John or Chris, I love being on your podcast. It meant so much to me and I love the questions that you ask and how you set me up.
(13:28)
Thank you so much for what you do. And you send that in the mail. I’m telling you, people take it, they read it. And when you do this for your employees or your vendors and things like that, they’ll put it in their little cubicle where all the special stuff next to their family photos, your card will be there. And I know this because I’ve done this. I’ve went to other people’s vendors and I see some of the people that I really like and I look and I’m like, there’s my card. And it’s been up there for years. The power of the written word is it, man. So dote on people and love on people, and you’ll be surprised, the reciprocation you’ll get. And that again comes to our company culture, Chris, which is I think our leading force that I think is the thing that separates us really almost our USP in creating a management company and owner operating assets. It’s the personalization of caring and being willing to give ourselves and our time and our efforts to create something. What do we call award-winning property management.
Speaker 1 (14:30):
I love it. Well, it’s kind of coming full circle. You expect someone who’s in the multifamily space like you are where you’re doing apartments and things like that, or student housing. You expect someone to say, yeah, the last few years, interest rates have been rough. That variable rate changed. It’s been horrible on us and we’ve had to get lean and all this stuff. We can’t find deals. No, for you. It’s like, no, we had to pivot, but in a different way. We pivoted trying to find ways to reduce costs, but also how do we essentially from top down and side to side all directions, how do we just treat people and how do we do it better?
Speaker 3 (15:07):
And trying to take care of the investors at the same day. My job is to take care of money capital. So it has been one of the most challenging markets in real estate in a long time. Investors, there’s many of ’em, like they’re not getting paid. We’ve got a couple properties where we’re still not making distributions, which seems to be par for the course, but it’s not great. But it’s a short-term problem to a long-term strategy. And I remind myself of this all the time. Now, the challenge is to let your investors fill this because they have to fill it and they have to understand, and this is where communication’s so key is like, listen, we’re in rough waters right now, but I’m the captain of the ship and I’m not going down. We are sailing into a different direction. We’ve got the power full on and we’re making course corrections, but we’re still going to get two. The port, it may take us a little longer.
(16:09)
We may have lost some cargo along the way, but we’ll get there. And every investment, I mean, I’ve had some investments where we’ve absolutely killed it and crushed it. I think when you do this long enough, you’ll win some really good, you’ll have a lot of good doubles and triples, and then you have some base hits, and occasionally you’ll have a dog. Right now there’s more dogs out there than not, but there was a lot of inexperienced operators coming into the marketplace, and those are the ones that are foreclosing and losing their properties. We’re not losing any properties, but we have some dogs as it gotten lean, of course. But that leads me into the next piece is when do you buy? Right? When is the great time to buy? Nobody, I say it’s always wants, honestly, nobody wants. Yeah. But right now I feel like, yeah, this is when it feels weird, which it is now. This is when you go in and so we’re now buying, we didn’t buy anything for the last year and a half. I’m closing on a property at the end of the year. It was a bank, REO property. I got an REO bank owned asset. Chris, when’s the last time we bought those?
Speaker 1 (17:15):
What, 2010 maybe? Yeah,
Speaker 3 (17:17):
Exactly. So I got a multifamily project that I bought for, we’re buying for six point something million and I got it as an REO auction an auction.com, and I stole it and I got an 8.6 rate and I’m still cash flowing because the bank has to sell it. And so what is my play there? I’m like, we’re going to make some cashflow, but five years from now when I refi that project, and I’m not at 8.6 maybe I’m hoping I’m at five, but even five and a half, I’m an ATM machine. I’m going to be printing money and I’ve got a 10 year project timeline for me on that project, five for my investors. So it’s a win-win, right? And it is really just understanding where you’re in the market cycle and then really just making sure that you’re making good financial choices along the way. And occasionally, yeah, you’re going to have some headaches and some bumps, but at the end of the day, that is real estate. That is why it’s real estate. It’s not risk-free. But I still also look at to the opposite side that you and I both know and come from the crazy rollercoaster of the stock market who understands that crap. And by the way, they don’t give your money back. They don’t say, oh, we’re going to make courses. They’re like, it’s the market. They don’t care.
Speaker 1 (18:37):
And they don’t take responsibility either, do they?
Speaker 3 (18:39):
No. No. And so that’s the difference is we take responsibility. I have to. And I think that is the difference, is you invest in some mutual fund down the road and how many people touch that thing before it goes to the right guy that says, we’re going to go buy shares of some company. Who is that person? And could you call ’em up? No, no way. So that’s why I love what you do, Chris, is you teach people how to get smart about their money and be in control. And I believe it so much. I think it is really about taking control of your money and being wise with it for
Speaker 1 (19:16):
Sure.
Speaker 3 (19:17):
Because most people know what to do with their money better than the market.
Speaker 1 (19:19):
That’s exactly it. Well, let me ask before I ask you the final question about your viewpoint of 2024 coming up, especially in the multifamily space. You have a book trust but verify, correct?
Speaker 3 (19:30):
Yeah. So this is a great time to segue it, right, because I wrote a book called Trust but Verify the Passive Investors Guide to Evaluating Real Estate Syndicators. And you can get this book by texting the word trust, T-R-U-S-T, to 4 8 0 501 1 2 7. So the word trust 4 8 0 501 1 2 7, we’ll send it to you for free. But I wrote it because there’s people that they’re like, man, I think I want to do syndications, but what should I be looking out for? What questions should I ask? And so I wrote a whole book showing you what to look out for and really the pros and cons so you have a look behind the kimono and be educated when you’re looking at potential syndicators like me.
Speaker 1 (20:16):
And that’s so important right now because mean 2022 kind of helped screen out some of these guys, but there’s still plenty of operators I know that are out there still in business, still trying to raise capital, even though they should have no business doing,
Speaker 3 (20:29):
And they’re living off acquisition fees and they’re just trying to string deals together. We just didn’t buy anything last year, right? A year and a half. Why? Because there was nothing out there that was worth buying. I know that there’s a lot of people that bought a lot of stuff, and they’re probably wishing they hadn’t, right? But they were just like, well, we’re buying this, we’re buying that, we’re buying this, we’re buying that. And I’m a little bit more like, listen, I think you need to be a little bit more methodical, understand the swings of the market, and now we’re into, the pendulum is changed and we’re in this weird spot because they just said we’re at the top of the interest rates. At least the Fed signaled that we’ll say, right? But that’s a great place. Now it’s like, okay, so when does it go down the other way? It’ll slowly go down. I don’t know how fast it’ll go down. I don’t think it’s going to go fast at all. The scarcity of, oh shit, everything’s going to crash, is not there as much as it’s like, okay, it might get a little bit better. And so there’s a lull right now that I think there’s a lot of opportunity for 2024 and our word is dominate. We’re going to dominate 2024, Chris.
Speaker 1 (21:36):
Well, that’s pretty much my question. What do you see Kevin in 2024? I’ve been telling my clients for a while that although I knew 2023 was pretty much a crappy year for apartment syndication, I told ’em, it’s like if you see ’em, you probably want to stay away for now until things start to shift a little bit until you see that shift happening and then the deals are there, and I know you have a very strict buy box. It has to check those certain boxes for you to be able to say that’s a good deal. Sounds. Well, we’re
Speaker 3 (22:02):
Still, and we’re still buying a lot of student housing projects, so student housing, they don’t really care what the market’s doing per se. It is about, because when your kids are 18, they’re going to go to school if they’re going college. So then it’s about size of college, where you’re at and how close you are to the college if you’re looking at that asset and what’s the USP for that property? And so it’s a little bit immune because mom and dad personally guarantee, and they usually make the payments anyways, so we like that piece of business. We still own regular apartments as well, but even in the student housing sector, insurances went up a lot. And here’s the key factor. All that stuff now is finally getting priced in to your new acquisitions and see, that’s the piece when insurance went up a hundred percent, it went up for everybody.
(22:55)
And so when you’re buying new acquisitions, a lot of that price stuff is already included now in their p and ls, so you’re not getting something like, oh, gotcha. Right? Yeah. And so they’ve had to raise or lower their prices to be able to sell. Now, the job always, Chris, is to find needles in the haystack. And I’m still convinced no matter what market that you’re in, if you look long enough and hard enough and at enough deals, and I’m talking not one or two, but hundreds, that’s the job is to find needles in the haystack. And when you do that, it can yield great results. Where we’re at right now, I think there’s a period of time where the next year is going to be a pretty good time to buy for the fact that interest rates will eventually go down. So if you can buy today in cashflow and make it through, have a business plan.
(23:50)
We’re not doing bridge notes anymore. No one’s doing bridge. You have to be able to raise capital now to do your repairs and your improvements. So this is where the men separate from the boys about raising real capital, not having the bank give you the capital, which is what everybody was predicated before. So now the true operators that know how to raise money, they’re going to be shining and they’re looking to buy everything. And then we’ll go through the cycle, let it swing to the pendulum, and then in five years from now, we’re going to be in pretty great positions with all our assets. And so that’s kind of my thought is let’s not miss the high tide. It’s coming right now we’re in the low tide. Things are kind of crappy and this is the signal to, and it’s been crappy for a while. We’re finally kind of getting into that apex where they finally signal with the Fed that things are going to change. So this is when you go in.
Speaker 1 (24:45):
Well, I’m excited for that change. It’s about dang time, isn’t it?
Speaker 3 (24:48):
It is about dang time, Chris, because the last two years have been the hardest years of my real estate career, and since 2005, I’m doing this business for a good minute. It has been. I think I went a little grayer over it, but what did I learn? I learned that you can almost get out of anything if you communicate well and if you have a plan, and sometimes you have to have a plan and a backup plan and then a plan behind that because there’s just things that you don’t see coming, but most people will give you that benefit. And then at the end of the day, understanding that it’s a long-term investment, not a short-term investment. Right. Everything that we do is predicated on long-term, five years to seven years timeframe, and so they’re not get hung up on the one year that it’s bad or the two years that it’s bad, two years in a seven year project. It’s just you can usually make up, you’ll make up for it. It’ll probably swing harder the other way when you get to the end. And so I’m convinced as long as I can cashflow, I can never lose on real estate because I can keep it for as long as I need to. And then you can usually hold it long enough. It always is worth more.
Speaker 1 (25:59):
That’s right. Hey, if people can wait through the stock market from 2000 to 2015 basically and not make any money, I’m pretty sure they can hang in five to seven years instead of 15, right? Yeah, exactly. Well, Cora, this has been great. What’s the best way for them to follow you, reach out to you? Obviously you got the book, of course. I put in
Speaker 3 (26:18):
The show notes. Yeah, he go to book, but also go to our podcast, multifamily Legacy podcast. I teach and talk about operations and what we do and Kauna Investments is our company, so investments.com, we’re always out there, but at the end of the day, it really is about making a difference and Chris, you do such a good job with this. I love what you teach and the way you take investors and give them the goods and the knowledge to get it done. That is priceless, my friend. When you have knowledge, knowledge is power in what you do with that and what Chris teaches you to do with it is super powerful.
Speaker 1 (26:56):
Absolutely, man. Appreciate it. Yeah. Knowledge is power, especially when you apply. You know how to apply the knowledge, right? That’s when it really changes your life. Yep. Well, great. Well, thank you again for joining us today. Everybody else, definitely text the number that we will have here in the show notes below and get that book. That’s such a generous offer from Corey to be able to have that book and you don’t have to pay for it, so that’s awesome. So definitely do that. Checkout his podcast as well. Everybody. Remember, it’s about the action you take, especially when it’s deliberate and when it’s intentional and it’s done with the right principles, that is when you see the right results, make it a wonderful process week and we’ll see you later.
Speaker 3 (27:34):
That is hard to achieve, but you have culture in your company, whether you know it or not, but when we take care of our people, Chris, something magic happens. And so we saved so much money by not using the vendors and doing this early with the right crew and the right team, and we made it fun. At the end of the day, we saved $150,000 and is 2 million or something like that. It’s good money.