Josh Cantwell:   Welcome to the Accelerated Investor Podcast with Josh Cantwell. If you’re looking to retire early with forever passive income, you’re in the right place. This podcast is the go to destination for real estate investors, both active and passive, and multifamily apartment investors, both new intermediate and advanced. Now sit back, listen, learn, and accelerate your business, your life, and your investing with the Accelerated Investor podcast.

[INTERVIEW]

Josh: So, Corey, hey, welcome back to the accelerated real estate investor podcast. It’s been a few years. What’s going on, big Kahuna? How we doing?

Corey: It has been good. It’s crazy, man. It’s a little bit crazy right now. It’s been. It’s been a roller coaster last couple years, but we’re starting to see some deals come through the pipeline again, which is kind of exciting. We just put our first reo, like auction.com. It’s not auction to come. It’s one of those auction sites. Whatever. But I just won. I was like, oh, my God, I won.

Josh: Nice.

Corey: And what’s cool about that property is I own a property right adjacent to. It’s a student housing property, right? So I own the property that’s closest to the college, and this property backs up right behind mine.

Corey: Nice.

Corey: So I was like, I’m going to cut a fence, and I’m going to lay a little golf part. A golf path. And so now we all have access to. Right to the college.

Corey: Right?

Josh: So, like, nice. Let me ask you with that in mind, like, how much do you believe in your investment strategy? Do you believe in buying, like local buying, like, in your backyard, or in trying to build a footprint, like a large footprint in one area? How much is that on your mind when you’re investing?

Corey: Not much like that.

Josh: I’m.

Corey: I’m the worst on this, Josh. I own stuff. I own crap everywhere.

Josh: Okay?

Corey: I wish I had it in one spot, but it’s just like with student housing, it’s kind of hard to buy multiple. So 70% of my portfolio is now student.

Corey: Right.

Josh: Okay.

Corey: So we’re not buying mainly, and I don’t know why. I just. I keep getting offers of these apartment student housing deals, and they keep penciling, so I keep buying them.

Corey: Right.

Corey: We’ve just built a footprint that’s in the south and the midwest that allows us and the students allow you to travel and have the. To take the cost of traveling into account for your. For your regionals.

Corey: Right?

Corey: So we’ve. And something new that we’ve done this year, Josh, is we vertically integrated.

Josh: Okay.

Corey: I said I would never do it. I said I would never do it.

Josh: So tell me about that. So tell our audience. For those people that might not know what that means, what does that mean? To be vertically integrated? And why did you say you’d never do it?

Corey: Yeah.

Josh: And then why are you doing it now?

Corey: So that means I took over management of my properties, tennis and toilets. Right. And, you know, it’s funny how you grow in this business, right? So when you first start, you’re just trying to, like, I need to replace my income. I just want to replace my income. Get out of the, you know, get out of bondage. And you can, then you do that. And then you start going. Then you start building a machine and, you know, all these little cookie cutters across the country, how, what we have done, and we’re like, in seven different states now.

Corey: We’re trying to buy in those seven different states. I’m not trying to buy outside of those states. I’m trying to buy where I already have stuff.

Corey: Right.

Corey: Makes more sense. But then you get to this piece called management, and I am a firm, and then, like, interest rates went up, 100,000 gazillion percentages points, it feels like. And by the way, insurance costs, like, bend over, take that, right? 100% increase on some properties. Like, you can’t write this shit up, right? You can’t make it up. And so economic efficiency has been, like, my number one objective.

Corey: And the problem is property management. We are not aligned in our goals. And listen, again, I said I would never do it. I don’t want to take on that. Like, I don’t want to take on 57 employees.

Josh: Yeah.

Corey: But I did. And I realized this year, I’m going to tell you, the best thing I ever did in the last ten years I’ve been doing this is take over property management.

Josh: Really? I was not expecting you to say that. Why? I thought you were going to be like, it’s a nightmare. It’s awful. One of the best things you ever did. Why?

Corey: People and culture. So I’ve realized that my biggest, like, the thing that feeds me the most is actually not making money.

Corey: Right.

Corey: It’s affecting people.

Corey: That is my, that’s where I get my juice nowadays, right? Making money is no longer. It’s never, it’s doesn’t. I don’t care about that part.

Corey: Right.

Corey: I’ll make money. I make enough money. That’s not the motivator. Making a difference in people’s lives. Now, that gets me thinking.

Corey: Right?

Josh: Yeah.

Corey: And what I found is that most companies are not doing it right. They’re not giving clear vision and have real good goals and company culture. And I have found that by inserting that into my management company, it has been the most joyable experience. And people, one person, one property manager can make or break you.

Josh: Oh, yeah. Oh, yeah. That property manager, that’s on the ground, more so than the regional, more so than a CFO or a CEO over property management company. I mean, we had a property that was humming along. It was 170 units. Property management company recommended third party. Property management recommended moving this one guy to this other building. We own 300 units. And we immediately saw that 300 unit building run more efficiently with better leasing, with less evictions, with less move outs.

Josh: He worked really well with our construction company turning units. We own the construction company. So we turn the units. And sure enough, the 170 unit that he left went in the toilet because the property manager that they brought on sucked. She was basically running her own realtor business out of our management office. She was not leasing. She was not following up on things. She was not getting units moved.

Josh: That one decision by that manager, that third party manager has cost us money for eight straight months. We finally cured the problem about two months ago. And when I went to ask the third party manager, well, look, you clearly had a mis hire here. You clearly cost us about $20,000 a month. You could see it in the p and l, how it just dropped off, flattened out, and then came back up with this new manager that we just brought a few months ago.

Josh: You know, what, what’s. What’s the recourse? What’s your recourse for your miss hire? And they were like, well, you lost money, but we lost money, too, because our feet went down.

Corey: I’m like, dude, your fee is three.

Josh: And a half percent. Like, it’s a couple hundred bucks a month.

Corey: Seven.

Josh: $800 a month. I lost 20 G’s a month.

Corey: Yeah, for eight months.

Josh: So I can see why you would want to do this now. You decided to focus on culture and people.

Corey: What things did you do?

Josh: What things did you do to instill culture and create that in your company?

Corey: Starts with the hiring process, right? So we have. Now there’s a book I’m going to recommend. It called a CEO does three things by Trey Taylor in there. He talks about his hiring system. He calls it the four C’s. I use it exactly how it’s created in that book. Our first interview is we don’t even. It’s all about culture. So I go over my core values. We have four core values, right? So people, integrity.

Corey: Gosh, now I’m forgetting one moxie.

Josh: I’m on the spot on it.

Corey: But.

Corey: And so we go over these things in details with stories of how it looks like in our companies, right? And then we have this other thing we call the decline attitudes, right? Number one, be the kind, right? Like, these are all hawaiian pigeon words. But for our culture, this is how we, the second one is give em. Give em, bro. Like, go for it. Do your best.

Corey: Right?
Corey: It’s like our warrior cry. Like, if you see a bunch of guys in Hawaii riding a surf and riding a wave, like, give em, bro. Right, biohanna.

Corey: Right.

Corey: The rock said, you know, family, no one gets left behind.

Corey: Right.

Corey: You know, spread. Aloha. We want to hire good people that have good arts.

Corey: Right.

Corey: We’re more worried about who you are as a person. That’s what we’re looking for. People that care.

Corey: Right.

Corey: And then give choke praise.

Corey: Right.

Corey: Choke is a pidgin word for a lot of. Or a bunch of.

Corey: Right?

Corey: So we want to give choke praise to our teammates. And then our favorite, my last one is we make it mo better.

Josh: Right? It doesn’t sound hawaiian.

Corey: We’ll always be a work in progress, right? And so by giving this culture piece and really starting with that, that’s 90% of the first interview is just us talking about who we are. I’m not even listening to them yet, right? I’m like, listen, you need to understand what you’re coming into, right? Because we talk about culture and stuff, like people, and we talk about the commitment that we’re, like, our people are giving. And if you’re not an a player, it’s not going to be me that’s going to let you. That’s going to be on you. It’s going to be all my staff, my people, because they expect excellence.

Corey: Right?

Corey: That’s. That’s how. If you want to be a part of that and the interview goes kind of like, listen, you’re probably not a fit for us. I’m going to convince you that you’re not a fit for our company.

Corey: That’s the interview.

Josh: Yeah. Unless that’s fantastic.

Corey: Unless you are, then you’re like, hell, yeah, I want that.

Corey: Right?

Josh: And do you actually do the interviews? Do you have a. Do you have an interview team? I start.

Corey: I do the culture piece. That is my. That is my for all property. Not for anything lower than a property manager, but for property managers. I’m. I’m doing that first interview, right. Because that’s not important to me right now. Here’s the second part of this. And this is something we’re getting ready to start in play, probably first quarter next year. Our MIT program, our manager in training program.

Josh: The biggest problem.

Corey: You just said it, Josh. Someone left. And who do you have replaced? It’s always in every third party management company. They have this freaking problem of, let’s play the lottery and throw the dice.

Corey: Right.

Corey: Because that’s what we’re doing every time we hire someone. That’s not Kahuna’d.

Corey: Right. We want.

Corey: We haven’t. It’s called the Kahuna way. Like, we do it the Kahuna way. So the Mi. Now I got this. Now I’m not very smart, but I’m really good at like copy your way to success. That’s my thing.

Corey: Right.

Josh: R and D. It’s not research development. I took this from the duplicate.

Corey: Exactly. I took this from the proper restaurant management company. They, that I used to work for when I was a restaurant manager. They had an MIT program. And this only works because I’m doing it all within my portfolio. But I’m going to create a process. I have these student housing properties where I have a bunch of college graduates. I’m going to start marketing and I’m going to find people that want to be in the property management business and they’re going to become an MIT.

Corey: And then I’m going to make every property that’s in my portfolio contribute a little bit to the kitty for the MIT program.

Corey: Right.

Corey: And that’s going to give me the dollars to put these people in queue to. And then they’re going to go and, you know, we’re going to create a curriculum for the first week is not even with the property manager. They’re going to go to the maintenance supervisor and the maintenance supervisor is going to have a book, a packet, a booklet, and say, this is the maintenance supervisor spot. And here’s all the things that I do.

Corey: Check, check, check, check, check. They’re like, got it. They’re going to spend a week or two with that, you know, and he’s going to be a trainer because like, he’s going to be, I’m the trainer. This is the Kahuna way.

Corey: Right?

Corey: Then they’re going to go into the property manager. Then they’re going to go into leasing. Then they’re going to go to the CA or all the little spots and then they’re ready. Now they’re deployable. Deployable.

Corey: Right.

Corey: So when I have. And when you hire them young like this, college kids who, you know, you know, 25, 26, they’re relocate, relocatable. So, yeah, then you’re like, okay, well, I got this property just came up here. You go. And then they go and they show up. You’re going to buy a, buy a new property. They already know your system, your process. They’re doing your huddles. They’re coming in with the Kahuna way.

Corey: And how much more efficient are we when we do it like that?

Josh: Yeah, it’s fantastic.

Corey: It’s going to be phenomenal. So we are already starting to work on that process to get the curriculum built to what we’re doing right now, to have our training modules so set up that we’re becoming a company of systems and solutions that ultimately is going to help us get there faster. Then the biggest thing is that, Josh, property managers, third party property managers, we’re not aligned in a way. We think they only get compensated on total collected income and us as business owners and our investors get paid on Noi.

Josh: That’s right. There’s something called expenses.

Corey: Yeah.

Corey: And so I’ve seen it and this has happened to me now, good property managers, and I’m not saying all third party property managers are bad, by no means. I just decided to take that piece into my own hands. And we will never third party anybody else’s portfolio. It’s just going to be my portfolio that my staff work for. But it gives us a sense of purpose because eventually I want to become a family office where all we’re doing is running my own deals with my own money and my own team.

Corey: Right.

Corey: On the whole, fantastic. To make sure that we’re efficient. And I think it is the evolution of whenever you get to a certain spot large enough that it makes sense, control the whole process and then you’ll eliminate your leaky buckets.

Josh: Well, what I like about what you’re saying is, first of all, I’m actually interviewing Friday for the fourth time. The guy that we’ve identified to come in, he’s going to basically research, watch, observe. He’s going to be our vp of asset management with the intention of, over time, moving all of our assets to self management, just like you’ve done. So we’re hiring the first guy. He’s a really high level COO, VP of asset management, VP of operations type. He’s a system guy, he’s a former military.

Josh: So we’re probably a year behind you. And we’ve done the same thing. We’ve done 20 syndications, we’ve bought 4500 units, we’re currently sitting on about 2700 units. It’s time for us to self manage. And I think this comes down to Corey. As you mentioned at the beginning here, there’s expenses that are uncontrollable. And you would consider those to be insurance, water, sewer, electric, gas, real estate taxes, those are uncontrollable.

Josh: Well, if those uncontrollables keep getting more expensive, you have to find a way to take the controllables, which is your people, your staff, your property manager, your maintenance tax, your repairs and maintenance, all the things that are controllable and actually control them, which a lot of third parties don’t do, right? So it sounds like that’s definitely on your mind.

Corey: I’ll give you an example.

Corey: Right?

Corey: So we have a property, $40 million property in slippery Rock, Pennsylvania. Student housing property. 632 beds. Right now, with student housing, they all move out and in within a three or four week period of time, right? So it’s a massive project, right? And you got to go clean and prep and all this stuff. So last year, the property management company that I’ll not name did it, and they spent about $375,000 moving.

Corey: And that was kind of loud. I’m like, dude, what the hell? So this year, we did it. Kahuna management did it, 135.

Josh: Whoa.

Corey: Right.

Corey: For 30%, I’m telling you.

Corey: Right?

Josh: So how do we do that?

Corey: Well, I was like, listen, there’s no way in hell I’m going to spend this much money, right?

Corey: On.

Corey: Turn. It’s stupid. That should never happen. So we’re like, okay, let’s identify. Let’s hire some cas and some kids that work at the college, right. Or whatever, live in our building, probably four or five of them, $15 an hour, $12 an hour. And they’re now are. They’re going in. They’re the cleaning crew. Instead of hiring a third party vendor to be the cleaning crew, we just have the cleaners.

Corey: Right?

Corey: Give them a scrubber and some comet. Let’s go. Here’s what it looks like, right? And then we found out that they can be the painting crew, too. Oh, by the way, pick out all the nails, right? Get a little dap. Put the dap on there. Come back with a soft, you know, sponge.

Corey: Right?

Corey: And now some paint the next day, because we’re just touching up the paint. Oh, there we go. Now we got the painting crew, right? Oh, by the way, let’s find the commercial grade shampooer, carpet shampooer, which we bought.

Corey: Right?

Corey: And now you’re the carpet cleaner, too. And so, as people would leave, we were doing this way early. So when we got to actually, that three week turn, because a lot of kids have already left. I mean, honestly, they don’t all just. They leave right when school’s out and there’s, like, a three month period that these things are vacant.

Josh: Yeah.

Corey: As long as we can get into them, we can do the work. So that’s what we did, and so we were very efficient in the process, and we just spent so much less money.

Josh: Let me ask you, Corey, a question about your kind of personal fulfillment as a CEO. How does it feel from a personal fulfillment perspective to now know that you have more control, you have more people that are buying into your brand, into your systems, your solutions? You said at the beginning of the show that you really are focused on people and impact, not on money. So how has this helped you fulfill that for your personal legacy and your personal fulfillment?

Corey: Yeah, so we just had all our property managers and maintenance supervisors. We flew them all the year to Phoenix and just did an event.

Corey: Right.

Corey: And the whole deal was to not really train or teach. I mean, we did a little. We did some of that, but was to win hearts and minds.

Corey: Right.

Corey: Because we win hearts and minds, they’ll do it. Not because you told them to, because they want to. They don’t want to disappoint. They, you know, I think that’s a bigger lever. And, I mean, some of them cried. I mean, like, that’s my favorite part, is to motivate, right. And show them that I’m a rags to riches story, guys. Like, I didn’t grow up with a silver spoon. I’ve had to work hard, and I want to help you guys in your endeavors and help you succeed in your lives to where you want to go. And this may be a stepping stone, but how you do one thing is how you do everything.

Corey: And let me show you the way.

Josh: I love it.

Corey: So we built that kind of peace into the system, which is, along with my personal story with the brand Kahuna, everything, sunsets and palm trees, trying to create this whole universe that we’ve controlled now to do something really special to me. That’s my legacy, what I’m trying to leave behind, because I want this company to be going long after I’m gone.

Josh: Yeah, I love it. Corey, tell me a little bit more about your thoughts on the difference between a and B players. Right. So, a lot of people hire b players. They think they’re a players because they do a good job. My thought the difference between a and B is that b players do the job well. A players make the job easier for others. Like, they actually make the job simpler. They systemize it. They actually improve the process.

Josh: They’re not just part of the process and do a good job being part of the system. A, players actually improve the system on their own. That’s. That’s kind of my differentiator, I guess. It is what are your thoughts?

Corey: That’s exactly. So I have a, I have a. We just hired a new staff accountant, right. And. And we had to let one go, right. Because the. The one that we let go was the b player. She knew the job, but she couldn’t figure anything out. She wasn’t going to add anything to the equation, right. And so that’s just not part of. And, like, after a while, becomes the culture not fit, right. Because, like, one of the things we talk about in our company, everybody has to possess this, right? This is one of our core.

Corey: Your Google, Enos has to be strong in our company. In other words, you need to be able to figure some things out.

Corey: Right?

Corey: Because we’re not looking for robots here, right? We’re not. We’re too small of a company to be a robot company. And I don’t think we’ll ever. I don’t ever want to be that.

Corey: Right?

Corey: So your googliness has to be strong.

Corey: Meaning?

Corey: Because I’m like, guys, if you come in with some stuff that I don’t know, guess what I’m going to have to do? I’m going to have to google the crap and I’m going to have to spend a little time and I might have to change the way I google it till I get the right answer to pop up. And then I’m going to have to watch a dumbass video, right? And I’m going to do all the steps to do your effing job, right? So just do that for me so I don’t have to do it, right. Because that’s what I’m gonna have to do.

Corey: I didn’t get smart. I wasn’t born smart. We all born with the same shit, right? Nike crying and so I’m just gonna get now. And your a players would be like, yeah, I already did that. Or they’ll say, I’ve already done it enough that I already know how. I know the solution.

Josh: Yeah.

Corey: Right?

Corey: And your a players make other people a players or can help harness. That’s what I think. That’s their genius. Like, they’ll be. People will be like, oh, wow, I needed. I need to step up my game.

Josh: Yeah, this guy’s doing it. I also use the analogy of gears, right? So I know you’re a gearhead. You love your jeep, you go on trips. I see your posts. I love it. But, like, a B player just keeps the gears moving, but at the same speed. A C player actually makes the gears grind to a halt. An a player makes the gears go faster, right. And does it on the up and.

Corey: They’Ll lube it up and, like, they’ll be like, oh, you need another cog here to make sure we want. We need another speed that even we need to hit. Ludicrous speed.

Josh: I love it. So, Corey, I know you’re tight on time. So am I. But I did want to ask you a little bit about your thought on today’s market. You mentioned that you just got awarded a deal. It was an Reo. You probably felt like a residential investor again, huh? Like an auction deal.

Corey: It was so fun, man. I had, you know, the only, only challenge was the next day I had to wire a million bucks. But, like, but it was still cool. I was like. And I got it about. About a half a million dollars cheaper than I thought, right. That I was willing to go up to. And I was like, no one’s going to bid. Wait, no one’s going to bid? No one’s bidding. And then I thought I was going to win it, and then it’s like, no, now it goes from 250 to minimum bid to 100, right? And then.

Corey: And then it goes another two minutes and it goes to 100, and then it goes to 50, and finally it shuts down. I was like, oh, I won. Yeah.

Josh: Nice.

Corey: But my thoughts on the economy right now is like, listen, everything’s priced into the market finally, right? Insurance is now priced into the marketplace for most properties, taxes, the interest rates are priced into the market. So if you can find now, it’s still always the same problem. Our job, Josh, is to find deals in the haystack. It’ll always be that way. It’ll never be easy. That’s really the job of when you’re buying an acquisitions mode, to find needles in the haystack.

Corey: There’s always needles in every market. They’re finally starting to come. For a while there, it was a little harder to find them, but they’re starting to percolate now because people that are selling now have to. No one that’s selling now, I think, wants to. I think they have to. And so if you can make the deal, pencil now, I got to think tomorrow’s pencil. And I’m saying five years from now because that’s how I’m thinking.

Corey: I’m looking, setting myself up for the refi of a lifetime, right when I go out. And hopefully I’m assuming rates are going to be lower than they are now. But even if they’re not, I’m still okay because I’m buying for cash flow today. I’m will always be a cash flow investor. I don’t buy in markets that don’t allow me to cash flow within at least year two.

Corey: Right.

Corey: I mean, by year two, I need to be making some money or the project’s probably not going to get green light by corey, because that makes me nervous.

Josh: I’m with you. I’m with the same thing.

Corey: Right.

Josh: So this idea of, you know, guys are no longer really wanting to buy with what a lot of us call negative leverage, which means that interest rates are, let’s say, at a seven cap rates at a five and a half. They don’t want to do that anymore. They don’t want to have the big cash bleed. And you’re going to see some sellers selling because they have to, because of floating rate bridge debt that has to be sold.

Josh: And so my theory is if you were going to buy in 2021 and you were going to buy based on your rent schedule, rents getting a bump, you got to do a value add program. Youre going to bump your rent and then its going to grow by x percent per year for the next five years. And youre buying on that. If you were going to buy in August of 2021, which is the peak of the market, and today, you could buy that same asset for ten or 20% less, youre still buying that same cash flow because we still have a major housing shortage. We still have a major, major supply and demand issue for housing.

Josh: And youre still buying these rent bumps. Youre still going to do your value add program, but now your basis is 1020, 30% less.

Corey: Yes.

Josh: If youre going to buy two, three years ago, you absolutely should be buying now. And then when rates come down, because, again, this inflation will be behind us, maybe we might even be in a war. War creates uncertainty. Then dollars, they fly to safety, which means the ten year treasury is going to go down, which means interest rates are going to go down. Not that I’m baking war into my pro formas, but that’s a possibility very much.

Josh: Yeah. All these things are mattering. So for willing to, here’s another one, Josh, today, what matters is where we’re going to be three to four to five years from now.

Corey: Yes.

Corey: And how many people are not in the market? How many people that went to single family guys that went to the multifamily conference and said, oh, I’m going to go. Cause that was the big word for the last three years, multifamily. Now, I’ve seen videos from the same people saying, you don’t wanna get in multifamily it sucks. Yeah. You know, I’m doing this new thing now.

Josh: Stay out, then. Stay out. Corey. I’ll finish with this. I just talked to my brokers who said they have. There’s this big portfolio in my area that came out 1000 units. 250 people signed the non disclosure confidentiality agreement and a couple years ago there would have been 100 tours and probably 30 offers. They had three tours on that same portfolio because people are looking for cash flow. It has the cash flow now versus hopefully cash flow five years from now. So great insights, Corey. Listen, man, tell our audience where they can find you. Tell us about your website.

Josh: Tell us where they can engage with you.

Corey: Hey, so the best way right now, I’ve got a new book that I just. Gosh, there it is. It’s called trust but verify passive investors guide to valuing real estate syndicators. People like us. If you’ll text the word book to 480-500-1127 we’ll give it to them for free. So Kahuna investments.com is our website. And, Josh, as always, man, I love talking to you. Let’s do it again. I need to have you on my podcast and let’s jam.
Josh: So how do we say goodbye in Hawaiian?

Corey: Aloha, bro.

Josh: Just aloha. There’s no goodbye. I thought Aloha was aloha.

Corey: Well, aloha I think it is. Hi and goodbye and goodbye.

Josh: Well, hi and goodbye, Corey. You’re the man, dude. Thanks for jumping on the show today. We’ll be in touch, my friend. Talk to you soon.

Corey: Thanks, bro.

[CLOSING]

Josh Cantwell: Well, guys, there you have it. I really enjoyed that episode with Liz. Man, being responsible to others is such a motivator. Giving to others, I feel so good about myself, right? Such and such a good place when I give to others. Number three, making a new decision. I remember when I was diagnosed with cancer and came out of my hospital bed and had an opportunity to restart my life, I had to relearn how to eat, I was not going to go back and redo my life the way I had been doing it, so making that decision. And then finally, as Caleb and I mentioned, don’t quit.

Guys, listen, everybody can do this business. Everybody can be successful. Everybody can be a multimillionaire with real estate. Keep getting your education, keep listening to podcasts like this. But most of all, go execute, raise capital, make offers. Don’t quit. We’ll see you next time on Accelerated Investor.