← Real Estate Investing School Podcast
Real Estate Investing School Podcast
247. How to Start in Multifamily Real Estate with Ken Gee
00:49:21
In this episode of the Real Estate Investing School podcast, host Joe Jensen sits down with Ken Gee, founder and managing member of KRI Partners. With over 26 years of experience in real estate investing, private equity, and commercial lending, Ken...
Loading summary
Transcript110 lines
- [00:00]
Ken Guy
I learned this lesson that no one wants to follow. When you buy these value add deals, sit on your hands for 30 or 60 days. Just chill, man. I guarantee you you're going to learn things about that property in the first 60 days that you did not know.
- [00:17]
Joe Jensen
Welcome to the Real Estate Investing School podcast. I'm your host, Joe Jensen. I've got Ken Guy here as our guest today. Now, Ken is the founder and managing member of KRI Partners. It's a real estate private equity investor education firm. He has more than 26 years of real estate banking, private equity, real estate investing experience. Throughout his career, he's been involved in transactions valued at more than $2 billion, which has included the acquisition, management, and financing of of various multifamily real estate projects. Before he got into real estate, he actually owned and operated several certified Cessna pilot centers in the northeast Ohio area, where he trained pilots for the Delta Connection program. He's married, has three grown children. He enjoys learning, spending time with his family, and helping people create wealth through real estate so they can enjoy life like he has. Welcome to the show, Ken. This is exciting.
- [01:18]
Ken Guy
Yeah, thanks for having me. I'm looking forward to it.
- [01:21]
Joe Jensen
Yeah. So that's kind of cool. You, you, you're a pilot then.
- [01:25]
Ken Guy
I am, yeah. Actually, I don't fly anymore, but I did and it's a, it was a blast, man. It's even more fun to own the place then you can fly whatever plane you want.
- [01:35]
Joe Jensen
Yeah, that's super awesome. That's a, that's a unique experience. Most people definitely have not ran Cessna centers. That's pretty cool.
- [01:45]
Ken Guy
I'm different, that's for sure.
- [01:46]
Joe Jensen
That's great. So what got you into real estate then, man? Like, you're, you're a pilot, you've got a business, you're running these programs, you know, like where, where was real estate on the radar? Was it always a plan or how did it come across for you?
- [01:57]
Ken Guy
Yeah, so. Well, I'll tell you the story. I grew up in Toledo. I'll be brief. I got an undergrad, University of Toledo, came to Cleveland, became a commercial lender, spent five years as a commercial lender while I went to school at night at Case Western Reserve University. If anybody's familiar with Cleveland, you probably know it. It was a, it was a good school. But so it was while I was at the bank, tons of my customers are in real estate and doing quite well, and I got to see how well they were doing, so I knew they were doing well. Then I went to case, got my degree and became an accountant. So I worked for Deloitte for seven years as a CPA on the tax side. As it turns out, the Cleveland office of Deloitte had a massive real estate tax practice. Now, those two things are just coincidental, right? So when I was at Deloitte, my kids were young. Like, really young. My daughter had just been born. I used to do her middle of the night feeding. So every 3am Remember, I'm a CPA, I'm working like a dog. And so the best time I could do with my daughter was three in the morning. And it was cool, because if you're a parent, there's nothing better than father daughter bonding. 3:00am, everybody's sleeping. And it was really cool. Until I realized it's not cool. And so, well, I realized it wasn't cool because it was three in the morning, and that was the best I could do. And I thought, man, this sucks. I, like, did everything I was supposed to do, got good grades, worked like a dog. I did everything. And now it's three in the morning is the best I can do for my family. I didn't want that. I was worried that they were going to grow up without me. And that's what really got me started. I said, man, all these people made so much money in real estate. I know they're not working like CPAs. I need to go figure this out. I did. I bought three little deals. A 22, a 28, and a 24 unit in Cleveland, sold them three years later, made half a million bucks, and realized, whoa, whoa, are you serious? I just made more money on the side than I had up until that point at Deloitte. And I was like, wow, how do I not do this?
- [03:54]
Joe Jensen
Yeah.
- [03:55]
Ken Guy
A year and a half later, I quit Deloitte. And this is all I've done since. Well, other than I did some. A little bit of flying on the side during that time.
- [04:03]
Joe Jensen
Well, it's so cool. And I love how it's like you were able to see it from different angles, right? Like, one, you did it on the side. You're like, this is more profitable than my job. But two, you, you were a lender, you know, you're like, oh, I understand the lending side. And then you were doing the tax stuff. And, like, I understand the tax implications. Like, I'm sure when the pieces are all aligning, you're just like, holy smokes. Like, how did I not know about this? You know? Like, at least that's how it was for me.
- [04:31]
Ken Guy
When I.
- [04:31]
Joe Jensen
You start learning it, like, is This a. Is this real? Is this a secret? Like, how is this not so obvious? How, how is this not shouted from the rooftops? And nowadays I feel like it is shattered from rooftops nowadays. It's just because I live in this little real estate bubble echo chamber. But like, I feel like you can't not see it everywhere, but I'm sure some still miss it.
- [04:51]
Ken Guy
Well, I, I do. You know, it wasn't that I knew about it, but what, what I, I just didn't understand that I could do it. See, that's what got me hung up, right? And that now fast forward, you know, 25 plus years, I watch people try to do this. They just don't. They can't visualize in their head them doing this thing. You know what I mean? It just seems so big and oh my gosh, how could I ever buy this million, multi, million dollar apartment building? It just seems ridiculous to even think you could do it.
- [05:23]
Joe Jensen
Yeah, that was the hard part.
- [05:24]
Ken Guy
That was the hardest part, actually.
- [05:26]
Joe Jensen
Well, and that is the hard part for a lot of people even who are in it. I mean, you, you didn't start with a house hack and a single family cottage on a ohana, you know, adu or ohana in haw. You went and bought three multi families. Like, how did, how is that your intro? Like, that's a pretty big jump.
- [05:45]
Ken Guy
Well, you know, it's funny, everything I've now thinking back to my life, everything happens for a reason. So. And I do remember thinking through this process, I'm like, all right, I want to get into real estate. Can I do this with houses? And I'm like, man, first of all, I don't know how to fix anything. And this is how I thought. Right. Whether it's right or wrong doesn't matter. This is the way my brain worked back then. I'm like, all right, so I'm going to make 100 bucks a month and I'm going to do this for a couple of years and then the roof's going to go there when all my money, I'm like, how the hell do I make money doing this? I do. It just didn't make sense. And then I thought, okay, well, wait a minute. So now I'm thinking I'm working like 80 hours a week at Deloitte. How do I pull this off? I can't, I can't do any of the work myself. So I said, all right, Ken, you're going to have to figure out how to do this in a way that you could treat it like A business. I remember those words in my mind. I just remember this is a business. I gotta get somebody to help me do it. I gotta have enough money to be able to pay a maintenance guy to do the work because A, I don't know how and B, there's no way I have time because my family was young and so that is why I did multifamily out of the gate.
- [06:51]
Joe Jensen
I love it.
- [06:51]
Ken Guy
That was my driving force because I felt like it was a business.
- [06:55]
Joe Jensen
I love it. There's this book I recently read called like Never Play It Small by Chase Jarvis. It's a brand new book. I don't love the title. It doesn't really fit what it's about. But. But he talks about constraints and he's like, art, great art is created when there are constraints. And I think it's the truth with business as well. Like you have the constraint of you didn't have the time, you didn't have the knowledge, you didn't have the skill set. Like you, you're like, I can't do all of these things, so those are my constraints now what can I do with those constraints? And it was like, oh, well, if I put a team together and they know how to do it all and I just facilitate this thing, then I don't have to do any of the repairs. I don't need to know any of it. I just made it happen. And that's true businessman of you. But I just love that it was your limitations that a lot of people look at and go, oh, I can't do real estate because of my limitations. And you were like, your limitations are what led you to do it the way that you did it. Which is so cool.
- [07:57]
Ken Guy
Yeah. What I tell people now is they view, See, you're calling it a limitation. I love that you did that because that's really what it is. Back then I viewed it. Most people now, I'm sorry, let me say this. Most people now view that as this is the thing, this is the obstacle that is I can't get over. I just, there's just no way, like I need a million dollars. It's not going to happen. Just stop even trying. And back then, I don't know why, but I thought, wait a minute, this is the problem that I have to solve. There is a solution. I just got to figure out what it is. And that's what I try to teach people now. Guys, I didn't know what I was doing. I didn't have any money, I didn't have any net worth. I had no clue. Like I had none of these things. The only thing I had was I'm willing to work hard and do whatever it takes. Right? So I had a lot of money.
- [08:44]
Joe Jensen
You didn't have 60 hours a week to dedicate to it. I mean, you were working a full time job and raising kids, you know.
- [08:50]
Ken Guy
Right, right. Again, it was a problem to solve. That was, I think as I look back, that approach is what got me there. It's just a problem. And when you're solving that first problem, you don't know if you can really solve it. Right. I had a golf ball in my throat for that first deal. I was that stressed out, right? That went away. And then I realized, wow, I can do this. And what. Over time you start to change your belief. You're like, wow, I think I can. Right? And then I became, I learned to fly. Then I bought a Cessna pilot center and developed that into three of them. I'm like, wow, wow. I just did. See what happens is this starts to stack and you start to believe that you can do it. That's why I always tell people, you get your first deal, everything's going to change for you because now you're real. Now you actually convince yourself that you did it. You actually did what you didn't think you could do.
- [09:46]
Joe Jensen
So let's, so how do you do it then? So let's talk multifamily. Like that's what you jumped into. That's what you did. A lot of people, a lot of our listeners, they dabble with house hacks. You know, I do, I have a lot of single family residential myself. That's kind of been my thing. But how did, how does someone just go and do a 27 unit? Like, how do you do that and make sure you don't just hose yourself and, and you know, end up just totally royally screwed? Like, yeah, how do you buy a 27 unit when you don't have a decade of experience and you don't have millions of dollars and you don't know what you're doing? Like, let's break it down.
- [10:26]
Ken Guy
Yeah. So the first thing you got to do is you gotta step ones. You gotta learn to underwrite. You gotta learn to underwrite. It's totally different than underwriting a single family or a fix and flip. Completely different. Because you're underwriting a business. You just don't realize it's a business. You think it's an apartment building, but it's a business. So underwrite it. Then you just, you gotta learn there's programs out everywhere now that'll teach you this, right? We do it, we teach people all those little details.
- [10:51]
Joe Jensen
Yeah, right.
- [10:52]
Ken Guy
What did Robert John Maxwell say? I remember saying that has stuck with me. People want to do what you do, but they don't want to do what you did. Well, you got to learn the did. You got to learn all the things that I did. And when you learn those things and you learn them from somebody who has been there, done that, all of a sudden you realize, wait a minute, I'm just putting one foot in front of the other and before I know it, I'm going to get there. Right. So a lot of it is learning because what happens is if you, most people have a conscience and they're risk averse and they don't want to, like you said, you're screwed if you mess this up. You don't want to destroy your family. You just don't want to do that. So if you don't know the numbers, if you know, you don't know anything about the business, it's going to be really hard for you to do it.
- [11:38]
Joe Jensen
Yeah, you were coming from the background of a commercial lender, so you knew underwriting. You, you, even though you weren't an underwriter necessarily, you obviously worked with underwriters and you knew how to like, see if an asset was a quality asset. I'm sure, you know, I'm sure there's a lot more you had to learn, but that probably gave you a huge leg up.
- [12:00]
Ken Guy
I assume it did. But even then I was still stressed out because remember, there was nobody around that would teach you every step. Like you have to do your personal financial statement. Oh, what's that? You got to do your schedule. Real estate. Oh, what the heck is that? And you got to do a bit, you know, there's a whole bunch of things you got to do in advance. Nobody was there to teach you that back then. So how did I solve that problem? Yeah, I solved that problem by. I needed validation. Right. I went to a bunch of apartment association meetings. I networked with all the speakers because, hey, if they're going to sit in front of a room and speak on a topic, they probably know what they're talking about. I needed to get to know those people and I learned as much as I could. Right. I was really intentional about that. But then even when I got my first deal, I'm like, man, how do I know that? How do I know? Like, I'm smart enough to know there's a bunch of things I don't even know. I don't know.
- [12:50]
Joe Jensen
Yeah.
- [12:50]
Ken Guy
So I hired this attorney, paid him 3,000 bucks, and I said, look, you own 4,000 units. I think this is a good deal, but you got to help me. I said, and I thought to myself, 3,000 bucks back then was a lot of money. I mean, it is today, but it was a whole lot back then. And I said, look, I need you to be my attorney on this deal and just, am I going to lose money or not? Like, he just knows after you own 4,000 units, you know what's going on. So he blessed the deal. He's like, no, I think you're going to do okay on this first deal. I said, oh, really? He said, yeah, I think you're going to make 100 grand on this deal. And I was like, you're on crack. I ain't making no hundred grand. What are you thinking? Right. Well, he wasn't wrong. I made more than that. We made a lot more than that on that first deal. But that's how I solved that problem. You see? Now I'm trying to convince myself and validate and get over that fear of screwing up. Right. Well, people have that problem now. So how do you do it now? You find somebody maybe like us, to be your partner, Experienced person, a mentor that actually knows what they're doing. That's the thing. I don't want you going in with people who have just bought a couple of deals. I mean, that's not knowing what you're doing yet. So you just got to match up with those people. Because most people that sit in my chair after 25 years, I actually want to help the next person because my kids are grown, you know, I. What do we. What, you know, what's our purpose in life? Well, now I actually get to impact other people. And when I'm able to do that, it really makes me feel good. I'm not the only guy on planet Earth with those thoughts. Right? So you got to find that person to lead you through this process, because they will, and they really want to, because they really do. Most people enjoy helping other people.
- [14:36]
Joe Jensen
They really do. And especially in the real estate space, I find it uniquely positioned where it's like, there's something about the way it changes our lives that it's like, oh, my gosh, it literally like, you're not only spending time with your daughter at 3:00am you know, I just came down to this podcast. I was upstairs teaching my daughter ukulele. I wrote this little song when I first got married, and. And. And I was teaching her that song and she's eight years old now. And it was. I was just like, I was in heaven. I mean, it's the middle of the day, I'm teaching my daughter ukulele. She's laughing and playing, and I'm like, this is so cool. You know, I mean, you would have missed that. Yeah. You know what I mean? Like, I should be. I mean, I should be at some 9 to 5 job, you know, or, or out hustle, grinding some hardcore business venture and becoming the best entrepreneur. And. And you know, it's like. But real estate's kind of different than all that. And once you like step into that and like, whoa, the freedom and flexibility and the way you can prioritize your life, it's so like, emotionally impactful. Then I. There's people like you and me, and so many people are like, well, I want to share that. You know what I mean? It's almost like religious, like, without getting too cheesy or weird. Like, people want to share their religion because it's blessed them in some way, you know, and it's like, I think real estate does that in an interesting way, where people are more willing to share and help in real estate than most spaces of life that, that I've seen. It's interesting.
- [16:03]
Ken Guy
I don't know. No, you're not, you're not wrong. It has impacted. There's no way my daughter played a basketball. We traveled all over the eastern half of the United States. I never missed an AAU tournament. Never. And there's no way I could have done that at Deloitte. I love Deloitte. I'm not knocking Deloitte, but there's no. A full time job would have allowed me to do that. Leave Fridays at noon whenever I want, get home, you know, come in late. There's no way that flexibility and there's no way I would have made the money. Right. Because I know myself. At some point I would have angered the wrong person in the corporate environment and it probably wouldn't have served me well. It would have ended just like that. That was what I was afraid of.
- [16:46]
Joe Jensen
So the way you did it. So if I want to jump into multifamily, let's say I'm like, hey, I really want to go buy a 20 to 50 unit. You said, go, go find a network of people doing it. Find a mentor that's actually done it multiple times that gets it. You also, so you, that's what you did. You also hired an attorney to really look at it. You paid real Money and said, hey, is this really gonna work to kind of protect yourself? And not only was he an attorney, but he was an experienced investor. So you got which you want both. Because now you need. You need somebody who's been there, not just knows in theory, on paper. That's right. So you found a mentor, you found a network, and you found an attorney. And those are kind of your key pieces to making sure that you were jumping in. Right?
- [17:32]
Ken Guy
Yeah, it was. It wasn't as well done as you just laid it out back then, because it wasn't. I mean, I did. I got my first deal closed. He. He helped me, first of all, the seller on that first deal, he was a really great guy. Everybody knew him in town. He's now a massive owner, super great guy. He helped me get the financing. So there were a lot of people helping me along the way, Right. And so I bought and I closed that deal. And it's funny because you think, you know, right, Okay, I got it closed. I know what I'm doing. I had no idea what I was doing because my little manager that was on site, she sent me applications right when people would apply for an apartment. Evictions, bad credit. I was like, oh my goodness, what did I just do to myself? Yeah, I can't get good people to come live here. So I was stressing out. And then I met with this lady. See, this is where weird things happened back then. It doesn't. This doesn't happen in this jointed now because there's so many programs that will help you do it and are well put together. But her name was Karen and she worked for Shaker Heights Pro Integrative Housing Services. She says, okay, and I'll meet you at the property. I'll tell you what to do. I'm like, okay. I had very low expectations for the meeting. I met her there. She's like, ken, this building was built in the 30s. The kitchen is built in the 30s. Nobody wants to rent apartment. An apartment with. You ever seen kitchens from the 30s? Yeah, they're not pretty. She's like, you need to make this nice. I said, oh, Karen, you don't understand. I just put every pen. In fact, I borrowed my half of the down payment on my home equity line. I don't have any money for this. She's like, well, I'm telling you, you're going to have to build. If you build it, they will come. I said, well, how much do you think it's going to cost? She says, it'll probably cost you five grand. I said, karen, no, I can't do that. What are you thinking? She's like, look, I don't know what to tell you, man. If you build it, they will come. I promise. So I said, okay, I'll do it. I found the way to found the money on a credit card. I don't remember now exactly what I did, but I spent the money. Now, when I started, the rents were 415. I renovated one unit, rented that unit at 599, and guess what happened? A good person showed up. So all of a sudden, by accident, I learned a whole bunch of lessons. Number one, too low a rent attracts the wrong renter. Number two, oh, there's this concept in real estate called value add. And I learned it by accident.
- [19:57]
Joe Jensen
I'm embarrassed.
- [19:58]
Ken Guy
I learned what value add means by accident. See, now, I would teach you that, but I learned it by accident. You can see how this whole process back then was hard. It was just really hard. And now it's not so hard. You just got to find the right person to help you.
- [20:13]
Joe Jensen
And so that didn't mess up all your numbers and underwriting to go in, and once you buy it, realize, oh, I need to rehab the whole thing. Like, that seems like it would be devastating.
- [20:21]
Ken Guy
Well, I didn't rehab the whole thing. Yeah, I didn't rehab the whole thing. It just. It did change my business plan. So what did I do? So I thought, okay, well, see, it didn't matter what my business plan was on the way in because I wasn't getting good apps. I was getting people that have been evicted and terrible credit, and they're not going to pay their rent. I'm like, man, this is not going to go well. So now I had another problem to solve. And that's what happens when you get into business. There's problems coming at you. You don't even know they're coming. You don't know what they're going to be about. I mean, all that happened. So now deal number two, I said, I get this value add thing. What if I bought a property and then I was networking with lenders, and I got a founder lender that would. They would lend me the money to buy the place, and then they would lend me money to improve it. So now if I did the work, got a good tenant, signed the lease, got the new rents, they would more than reimburse me for what it cost me to do the renovation.
- [21:17]
Joe Jensen
Yeah.
- [21:18]
Ken Guy
I was like, oh, I like this. So now I. Now, you see, my second business plan was completely different than my first. My first. I just didn't know what the heck I was doing. Business plan number two. Now, it was intentional and that I was like, man, I love this. This is cool. Sold that building. I sold them all three and made money. But you can see what happens here. I evolved over time. Whereas now if you want to get into this business, all you gotta do is find somebody like us and probably you, that knows this business and say, oh, wait a minute. Let me just teach you what you gotta know. You don't have to figure it out by accident. Right. You don't have to, you know, cry at your desk hoping and praying you can find a good tenant. We can teach you all that. That stuff didn't exist back then. I'm just telling you, it's one. It's a wonder that I made it right.
- [22:04]
Joe Jensen
Yeah. No, and it's. I think there's a lot to. There's. There's more than one way to do it right. And. And I think having a mentor and learning how to do it right is a great way. Like, we have so many resources nowadays. You know, there is something to be said about the person that just goes and learns it firsthand on a bloody, sweaty way. You know, it's like, you remember deeper. You're like, oh, man, it's like touching fire. Like, oh, yeah, you know my story.
- [22:28]
Ken Guy
I know it quite well.
- [22:30]
Joe Jensen
Yeah. And it's like, so did you. You ended up selling them all. Did you. Did you just roll that into, like, bigger units or why did you sell them where you refine that? Did you think about doing the refinancing and holding thing?
- [22:42]
Ken Guy
What?
- [22:42]
Joe Jensen
Why? Why?
- [22:43]
Ken Guy
So I didn't. Well, the bill. So they were very old buildings. They're built in the 30s. Sure. So that, that was really old. And I kind of. I mean, they weren't in a neighborhoods and Yeah, I just kind of felt like. And these are old buildings. There's stuff like breaking all the time. Like, I could bank myself fixing stuff in this place. So that coupled with. So I was a little worried about that. But more importantly, I was convinced. Wait a minute. This. This, this thing actually is worth a lot more. And so I don't remember how I priced it, but I remember thinking, I'm going to make like a lot of money. Like, I don't. Why would I re. Why, why sell? If I sell this and I make a lot of money, like, I know I've done it. I know that it happened. Like, you can't argue with that. Started, did it ended. Money's in the bank. And I needed to prove to myself that I could. Actually, the thought of making that amount of money is just overwhelming. I'm like, I mean, talk about driven. I'm like, oh, my goodness. To have that much money in the bank is just cool. So now, I didn't leave Deloitte right away. I was there another year and a half because now I'm like, okay, I got to do this the right way. And I ended up doing that. But I didn't just rush out, right. I didn't roll all that money. Right. I felt like, okay, I got to do this slowly. Now that I've been around the block a minute, I felt like I knew everything then, right? Because I've done three deals. I made a whole lot of money. I must know everything. But anyway, it was more intentional and deliberate as I continued to grow. And I found a partner that was a really big part of helping me grow. He had a lot of experience. He had a lot of liquidity and net worth. We were able to do things together. There's no way I could do by myself.
- [24:31]
Joe Jensen
Yeah, that's cool. It's almost like the first deal is like, proof of concept, right? And in paradigm shifting, really, like, you put that much money in your bank account, you're like, your paradigm has shifted of what's real, and it's not theoretical. Well, it may be over 20 years. I can. It's like, no, the money's in my bank account, this work. And now I can do it better and bigger and better and bigger. That's super cool. But what about today, though?
- [24:55]
Ken Guy
Right?
- [24:55]
Joe Jensen
So this isn't 20 years ago. This isn't 10 years ago. This isn't even four years ago, right? Where it's 20, 25. What can people do now, though, is that. Are those options still available, you know, in today's market?
- [25:10]
Ken Guy
Yeah. When you say options, you mean to get into multifamily? Absolutely. Yeah, absolutely. Now, Right now, in this. As we record this particular episode, I mean, lenders are tight right now. They won't give you a loan if. If you don't have some experience on your. In your group. So there's just. Again, all they are is different problems. You just have to solve them. So, yes, you can do it. I'm going to tell you right now, it's a lot easier to do today than it was back then. And in some respects, it's harder, right? So in some ways it's easier. Some ways it's harder. It's easier because you have people that have been there, done that successfully and they can teach you all the things you need to know. That stuff just. My Carlton sheets was my. You probably don't even know who he is, but he did single families a long time ago. He had the no down payment system on cassette tapes, right. I mean, I just dated myself. Totally. Right. That was it. But he. All he did was singles. So there, There are so many ways now to make it easy. People feel like it's harder, but it's only because first of all, they didn't exist back then, number one. And number two, they still have this. They still have. They're in their own way, right? I learned that as soon as I got out of my own way, everything changed. Like, I've now believed that if I want to do something, you know, our current fund, we have 20 million in it to deploy. Like, are you serious? Like, 10 years ago, I would have told you you were on crack again, right? That's twice you were on crack, right? In my life. So you just keep rolling, right? You keep rolling. And if I can get people to believe that they can do it and let me. They just. First of all, they got to slow down. It takes time to get there. But when they get that first deal and they do it with somebody with experience, they're going to be able to do deal number two. Deal number three. It just. I mean, I've been doing this 25 years and I've done. Now we're closing our 20th deal. Takes a while, right? It doesn't happen overnight, but it's. I call it. You can't say for sure in our business, but boy, it's not a get rich quick, but it is a get rich with much more certainty. That's how I look at it.
- [27:16]
Joe Jensen
Well, I love that you answer that because that's what I wanted to hear is just like. Because so many times I think people. Oh, man. Well, cool. Yeah. Ten years ago it was doable, but today's different. You know, it's like, yeah, today is different. Like you said, it's. There's more, it's easier. It's also harder. Back then it was harder and it was also easier. Like, there's just. It's just pick your battle of what you got to do and it doesn't matter. It's just figuring out what makes sense today. And also just technology wise, I mean, you've got rental softwares and you know, like, it's so much easier to collect rent and do background checks. Like, there's so many things to make it simpler that you didn't have back then, you know, and maybe prices were different, but there's pros and cons either way. But like I say, people are actively doing this today. If you think you can't do it today, it's just an excuse to not figure it out, you know, that's it.
- [28:09]
Ken Guy
You haven't decided. That's the same problem people had back then, by the way. Right. It seemed ridiculous that they could do it. The only difference between me and somebody else was I said, I'm gonna do this. I'm gonna go figure it out. Right. I'm gonna go figure out how to fly a plane. I'm gonna go figure out how to do buy an apartment complex. I'm gonna go figure out how to raise 20 million. I'm gonna go figure it out. And you just keep figuring it out. Problem is people telling you it's their mind. That's what makes it hard. It's hard to believe every problem is solvable. Pardon me.
- [28:39]
Joe Jensen
Yeah. No, it's just so hard to believe something that you've never experienced, Especially if no one in your network has experienced either. You know, I remember when I first got into sales and started making money before I did, I had a friend doing. I was like, yeah, that's cool for you. Like, that's awesome that you can do that. But I could never do that. That's for you. That's amazing for you, because he was sitting there kind of in your seat, like, look at what I've done. It's so cool. And I was like, that's awesome for you. But that's not me. Like, I didn't. I didn't. And no one in my world could. Was making that kind of money. So I didn't think it was possible. I think it's the same thing with real estate people. Like, oh, you're running firms of $20 million. You're buying multi units. Like, that's cool for you. Like, how am I supposed to do.
- [29:22]
Ken Guy
I could never do that. Right? Wrong. Yes, you can.
- [29:26]
Joe Jensen
Yeah.
- [29:27]
Ken Guy
Because you know what? There is no difference between you and the richest guy in the world. There's none. He just made different decisions. Well, make different decisions.
- [29:38]
Joe Jensen
Yeah.
- [29:39]
Ken Guy
So think differently. I'm telling you, there's no difference. We all put. I mean, we all take showers every day. We all have pants, we all have shirts. We. We all have. I mean, we're human beings. There's that much different. It's up here.
- [29:50]
Joe Jensen
So someone wants to learn it. They're wanting to get. So listening to this right now, Ken they're getting inspired. They're like, man, like, Ken did it. Like, you know, I can do it. I. So what do they need to do? They find a mentor. They learn how to do underwriting. That was one of the key things you said, like, learn how to, number one, really know how to do it. So you can figure. And underwriting is just seeing if it's a good deal, like looking at the expenses versus the, the income profits margin. Like just running all the numbers and looking at the situation to see where you're going to spend money, where you're going to make money, and if it makes sense, you know, is underwriting where the bad places are, you know, whatever. So they learn to underwrite. They learn to, you know, research the deal to make sure it's a deal. What's next after they learn that?
- [30:34]
Ken Guy
Yeah. So part of the underwriting process is understanding how you're going to make money.
- [30:39]
Joe Jensen
Yes.
- [30:39]
Ken Guy
How do you make money in real estate? You do it by growing income. You can beat up the little expenses a little bit, but the real money is raising income. Because when I raise your rent a dollar, it doesn't cost me a penny. So that dollar falls all the way to the bottom line. And then how do you value. This is different than single family. How do you value multifamily based on its ability to generate income?
- [31:01]
Joe Jensen
Yep.
- [31:01]
Ken Guy
So now there's some, there's some predictability, grow income, probably going to be worth more. So that, that's the finished part of the underwriting process. So now you have, you know, what you should pay today, you know, what you can probably do. There's no guarantees, but we show you how to do all that work. So then the next thing is, okay, now that I understand the numbers, how do I go about this process of presenting myself, talking to brokers? Where should I look? How big should I look? Who do I need? All that, that, all that, all that stuff is what people like us teach you. That's the next step. You've got to know all the. See, somebody that's been doing it 27 years has a lot better visibility than you do. You agree with, sure, I haven't seen everything, but I probably seen more than you. So I'm going to give you visibility into the future that you don't see because you've not been there, done that, but I have. We have. So now we're going to walk you through the whole process so that you're prepared. And literally, if you just follow our process, you'll get a deal. You just have here's the problem. People like to stray. People don't want to do the work. You got to commit to those things. And it literally is for real. You just do it. All you gotta do is do what we tell you to do when we tell you to do it. We're gonna make sure you understand why, and then you're on your way. That, that's if you wanna know how to do it, that's how you do it. I mean, it's literally that simple. The problem is people appear. They, they, they. I don't know. I don't know why they, they. Oh, I, I've tried to get three deals and I'm never gonna get a deal. Cause I so many people. Well, I get deals, you get deals, everybody gets deals. You just gotta see it's a problem. Right. People, they're always. I always feel like they're looking for off ramps. Right. You call them excuses, I call them off ramps. And just ignore the off ramps. Just stick with it and let's go. Because a lot of people give it the old college try. Most people fall out, but that's why the people that stick with it are so successful. And that's what you need to do.
- [33:04]
Joe Jensen
So learn to underwrite. Learn how it's going to make money, where you can increase the profit margins, tie down the lending. Right. Figure out where you're lending, who's going to lend you, what they need, all the lending criteria. What's the step after that then?
- [33:22]
Ken Guy
Yeah, so actually before that becomes the. You got to look at you. We make people do a personal SWOT analysis. I know that's kind of made up, but it's the strengths, weaknesses. You got to figure out what you got and what you need. Sure. Then you got to go find that, what you need. You got to go solve that problem. And so part of it is understanding your financial situation, your personal skills, all that stuff. Where do you live, what kind of market? So you develop a business plan, then we teach you. Okay, next, how do I deal with the brokers? Well, we teach you the elevator pitch. Right? You got it. Once you have a business plan and the broker says, what are you looking for? You know why? Because we helped you develop a business plan that makes sense for you. Right. If you're Bill Gates, you could buy a $50 million deal. If you're not, you're probably buying a $5 million deal. Right. You see, we're going to put you in the place where you can actually have success. Teach how to talk to the brokers. You see how we're just going through this process. How do you then develop a relationship with the brokers? Then? You got to have people on your team. When I say people on your team, I mean you got to know a property manager. You got to know a real estate attorney. You got to know what else? Somebody that's going to handle your real estate taxes. You got to have a cpa. You got to have. You got to have a whole bunch of people, right? SEC attorneys. If you're going to raise money, so we help you get all that in line. Why? Because when you get awarded that deal, now you got to do due diligence and you got to raise the equity and you got to work on the debt. You see how we've already got you ready to go. Like, everybody's literally at the starting gate ready to go for you to get awarded that deal. You already know who's going to be on your team. You see how we're just walking you through the process. We're just taking you through a transaction cycle. The part that is most unusual about what we do is we. We do all that prep work to get you ready and make sure that you understand you. So that. So you're not brand new trying to buy 200 units. I mean, that's just not going to work unless you're rich. It's just not. So let. Well, I want a big. I was told to go big. Okay, so you buy your first unit. 30 units. That's better than nothing. You know what I mean? And we help you figure all that out. That's the process. And that's how it really works. It's just people like to, you know, they try to take it too fast. And the problem is when you go up and try to buy a 200 unit, you're competing with me. And the brokers know you don't know what you're doing. They're not going to give you the deal. You think you're going to get the deal. You're excited, but then you realize you don't ever get the deal because you weren't qualified to do that deal. You see what I mean? You got to figure that out. You got to go be realistic about what you can get. And then once you do that, you'll get that first deal. I'm telling you, the moment you get that first deal and you close it, you're now a believer. You're like, no, I actually did it, right? I actually did it. Yeah, it was only 20 units, but it's 20 units. I didn't have before. And then you can go for 30 and then 50 and then 100. You see how you just. You got to grow up. That's at least that's what I like to see people do.
- [36:22]
Joe Jensen
Yeah. So do you think it's better to kind of start with those smaller multifamily than to, like, jump into the big ones? Like, you need to get your feet wet, get your team together, get some experience, because it's probably not going to happen even if you do try.
- [36:35]
Ken Guy
Yeah. It's not about. Should you. It's about the brokers are supposed to bring qualified buyers to the seller.
- [36:46]
Joe Jensen
Yeah, yeah, yeah.
- [36:47]
Ken Guy
You've never done a deal. You're going to get a $20 million deal and borrow, you know, 12 million. Like, no, it's not going to happen. So it's not that you should grow up like that. It's. You don't have a choice. Do you want to get a deal or not? If you want to get a deal, you got to go after the deal that makes sense for where you're at. Again, like I said, if you're rich, they'll sell you any deal you want because you got the money. But if you're not like most people, you're missing all those things that I was missing. You don't have any money. You don't have any net worth. You don't know what you're doing. You're missing all the important things. Are you willing to work hard? Well, then start at a place that makes sense so that when you talk to the brokers, they're like, oh, well, this is what I would expect for this size property. Right. You're not trying to compete with me for that deal because I'm not looking at 20 units.
- [37:38]
Joe Jensen
That's awesome. That's awesome, man. So now you're running this firm where you're investing other people's money. It sounds like you are just like a fund, I guess, where your sc. All the attorney stuff.
- [37:54]
Ken Guy
We're a real estate private equity firm is what we are.
- [37:57]
Joe Jensen
Yeah. But then you're also on top of that, educating a bunch of people as well, to be able to do what you're doing. You're doing both, which is kind of cool.
- [38:04]
Ken Guy
Yeah. So when you come into our ecosystem, we just try to figure out, you want to be the active guy, you want to be the guy doing the deals. Let's go down that path. Or do you want to be passive? So my goal is to help you create wealth in real estate. It doesn't matter how you Want to do it. We can help you on both sides because we know what actually happens is. And I love this, people start out learning and then they go back and forth, right? Because now that they learn, they're actually make. They're actually smart investors now. Because when they go and divest passively, they actually know what to look for. You know what I mean? So we have people crossing over on both sides all the time.
- [38:42]
Joe Jensen
Meaning they're just like, giving money to invest in your funds and then also doing their own projects. And they can do both, which is cool, you know? Cause each one has its own strengths, you know?
- [38:52]
Ken Guy
That's right.
- [38:53]
Joe Jensen
Cause like you said, like, oh, if you have the money, you could buy it. But, like, not necessarily. Just because you're rich doesn't mean you know how to do underwriting or have a team put together. The last thing you want to do is go throw, you know, even more. You know, people think, oh, if you're rich, it's like, well, do you think a rich person is going to want to go buy a 200 unit? Like, and when they don't know what they're doing, you don't have a team. That's the last thing they would do. Because that's a lot of money. You know what I mean?
- [39:14]
Ken Guy
That's a lot of their time. That's the most important thing.
- [39:17]
Joe Jensen
Yeah.
- [39:18]
Ken Guy
Rich people understand time is more valuable than money, so they're like, no, I'm just going to give you my money and let you do it. Right. So we, we have both sides. All I, all that matters is somehow you want it. You, you, you believe in this concept of, of investing in real estate. And we all.
- [39:34]
Joe Jensen
There's a lot of. I love it, man. I love it. I want to go into with. While we still have some time left to kind of dive into these questions. We have these final four questions. Sometimes we do as like a fire round. I want to kind of take a minute on each one and really dig into it.
- [39:50]
Ken Guy
Okay.
- [39:51]
Joe Jensen
But we can take it along as short as it takes. But, but before we do that, what is the best way for people to kind of tap into what you're doing if they want to be a part of Ken's world, you know, in whatever shape best fits them and get their swat done by you to kind of see what's a good way for them to reach you?
- [40:10]
Ken Guy
Yeah, just. It's easy. Go to kripartners.com so kripartners.com and you can go from there. Or you could text or call 216-290-1710. And somebody on our team will get with you and help, more importantly, help figure out where you're at, what makes sense for you. And maybe we can't help you. I don't know. But what's most important is that we figure out where you're at and what you're trying to do, and we can help then guide you through the process.
- [40:37]
Joe Jensen
Yeah, I love it. That's exactly how I do it with any of my students. I always say, like, if anybody gives me, like, asks for advice, I'm like, you got to know, like, what your goal is, what your resources are, what your timeframe is, because that's going to determine your strategy. Again, it's these limitations, right? Like, if you've got 20 million, that's different than if you have. Have 20,000 in debt. You know what I mean? If you have a job and credit versus not like, whatever your limitations are will determine your strategy, you know? And so we got to know what your. What's your resources, you know, where are you at, what's your goal and what's your time frame, you know, and if you know where someone's at, then you can start to build the business plan. So I love that that's how you guys started. I feel like, yeah, you have to. You know what I mean? And. And so many people just want to show up and go, oh, I just want to be retired and rich. How do I do that? I say, well, let's get a little more nuance.
- [41:26]
Ken Guy
You know, you're right. You're right.
- [41:28]
Joe Jensen
Well, that's awesome, man. So let me ask you this. So first question of our final four is if you could send a text message out to the world. Everybody gets a message from Ken. What's it gonna say?
- [41:41]
Ken Guy
Ooh, that's a good one, man. That's a good one. I would say if I thought that they would understand it and do it. Get out of your own way. Get out of your own way. It's hurt me so many times. You just got to get out of your own way. Even though I feel like I've done a lot, I could have done 10 times more. I just telling you, your brain hurts you.
- [42:05]
Joe Jensen
Yeah, we're our biggest.
- [42:07]
Ken Guy
Get out of your own way. If you can. Get out of your own way, you'll be okay.
- [42:10]
Joe Jensen
Besides anything that we're associated with, give me a book or podcast recommendation.
- [42:16]
Ken Guy
Yeah, well, first of all, your podcast is good. Let's start there. But you're already listening, so you already know that book, I would say the biggest. The book. I want people. I want people to read two books. One, Stephen Covey's 7 Habits of Highly Effective People. And I want them. Huge thing, right? Secondly, you need to read Grant Cardone's 10x rule. When you combine those two things. One, you understand people and how they function. With Stephen Covey's book and with Grant, you learn that if you think it takes X amount of work, not even close. You need to do at least 10 times that. And that resonated with me a long time ago. And it is, I think, a lot of what made us so successful.
- [43:01]
Joe Jensen
I love them, man. Those are really good, like literally like life changing books to me. You know, Seven Habits. I remember reading that when I was young and it was just like the foundation of how to live effectively and live correctly. Like, you know, it's so huge. If anybody hasn't read that or if they have, it's like, I need, I'm like, I need to go reread that. Like such a powerful one. Good principles. And then 10x roll. Yeah. Just kind of like kicks in the butt. It's just like, dude, just go. You got to do way more. Stop being soft. Like, work is kind of like the, you know who David Goggins is. That that crazy elite athlete guy who's like always yelling at people and, and Grant Cardone is kind of like that for, for sales and business. Just like stop being soft and get out and do what it takes. And it's harder than you think. And that's okay. You're also more capable than you think. It's like, okay, I'll stop making excuses.
- [43:52]
Ken Guy
Right? Look at every successful person. They will. Every one of them will tell you it's about the details. And they work. You got to be willing to work, work out, work everybody else.
- [44:01]
Joe Jensen
Yeah. Love it, man. Next question. And this is a fun one. What's on a. What's the most expensive or interesting mistake you've made in real estate investing? Have you ever lost money on a deal?
- [44:17]
Ken Guy
Yeah, we lost a very, very little deal on one in Cleveland. It came out of the recession, the great, you know, the financial crisis. But it was intentional. We could have held onto the building for many years longer. It just became a pain in the ass. And I didn't want to keep spending time and energy on it. So we sold it. I think we, we lost like 10 grand. I mean, in the grand scheme of things, it was nothing. It was no investor money. It was just me and, and my partner. So it was Not a big deal. But we. So that. But that, that mistake, I don't know that I learned much from that, but that was just an intentional decision. I. Or, yeah, it was an intentional thing for us to do, but I didn't want to sidestep that question. Have we ever lost money? Never lost a dime of investor money, but we did on that. Probably the most. One of the most expensive things that I've done is everybody likes to do value add deals. And so what do they do the moment they get that deal? They start doing things right away, right? They just. I'm going to. I'm going to do this, I'm going to do that, and I'm going to do this, and I'm going to do that. Well, I've done that. And I learned this lesson that I kind of blew through my budget and I did it really quick, and then I realized, oh, there's something I really need to do and I don't have any money left. So what I learned from that lesson, I didn't lose money, but I just wasn't able to do what I wanted to do. But what's really important is I learned this lesson that no one wants to follow, and that is when you buy these value add deals, sit on your hands for 30 or 60 days, just chill, man. Just chill, okay? If you got to do the roofs and you know they're leaking, that's one thing. But just chill for a minute because I guarantee you, you're going to learn things about that property in the first 60 days that you did not know. And you're going to have to make sure that your renovation budget is flexible and dynamic because there's just. You're going to learn things and you're going to. You're going to need to change it. And that's. That's the number one lesson. That's the most expensive lesson I've learned. Because now I'm like, oh, man, I'm glad I waited. Let's reallocate this a little bit differently because guess what? I might even get a better result than I thought, because now I'm. I just know more. So there it is.
- [46:31]
Joe Jensen
That is, you know, I've never, I've done a lot of these podcasts, you know, we're in this a couple years, and I've never been given that advice, and I love it. I think that is so good. You know, and you, like you said from the beginning, you're like, you're running a business, you know, and you're buying a business when you're buying commercially, it's valuated as a business. You're buying a business and I think of like a business, you know, merger or takeover, you know, and when one business culture comes in is like, okay, now that we bought you. And they just like making all these changes. They have no idea like what's really going on. And it's like the good ones get in, fill it out, figure out who the influential people are, who are the movers, who are the shakers, who's the problem people. They see the real situation and then act accordingly. And it's the same thing with real estate. Even single family, like this would be a good way to do it. It's like fill out, you know, obviously single family is a little different, but, but like, I just think of, you know, when you have a big multifamily, it's like which units are like the death mill that are just costing them in tons.
- [47:36]
Ken Guy
Yeah.
- [47:36]
Joe Jensen
Just see where the issues are and, and just take some time to breathe to figure it out. I love that. I think that's really, really good advice in a lot of ways in life. But, but definitely. But it's hard to do, right, because you want to get, you want to get.
- [47:52]
Ken Guy
Time is money. Oh, my gosh. Time is money. Oh my gosh. Chill, man, chill. You're going to cost yourself way more money if, if you get over your skis.
- [48:01]
Joe Jensen
I love that. I think that's really good, you know, rare advice. So thank you for sharing that.
- [48:06]
Ken Guy
You're welcome.
- [48:07]
Joe Jensen
All right, last question. Ken, what's one word or phrase to encapsulate what you love about real estate investing?
- [48:16]
Ken Guy
Ooh, what do I love about real estate investing? Wow. There could be more than, more than one phrase, but it is life changing. Absolutely. Has made my life and my family's life. I, I, I, I can't say enough. It's the reason I'm a cpa, I'm a commercial lender. I could, I, I gotta go back to. I, I, this is what I do. I have had a lot of choices. This is what I choose because it's so impactful. So it's life changing. If you want the phrase, that's the phrase. It's life changing. You just, you just got to do it. It's not going to be easy, but just do it. Nothing worth it is easy. I love it.
- [48:55]
Joe Jensen
Yeah, I love it. Well, thanks so much for your time. I appreciate this. I'm excited to, to do more with you in the future, but this has been really cool. Thanks for sharing with our listeners.
- [49:05]
Ken Guy
Yeah. Thanks so much for having me, man. I love this. I enjoy this.
- [49:08]
Joe Jensen
Absolutely. This is Joe Jensen signing off for the Real Estate Investing School podcast, reminding you to get out of your way.