Josh Cantwell: So, hey there. Welcome back to Accelerated Real Estate Investor. Hey, it’s Josh. So excited to be with you today. I have a special guest on the podcast. His name is Kenneth Gee. I have a great conversation with Ken coming up. I absolutely loved this conversation with him because he dropped some real like day-to-day actionable nuggets that you can use in your multifamily and syndication business. Real quickly, Ken is the founder and CEO of KRI Partners. They create wealth with investors through multifamily real estate. Ken is a syndicator. Ken has bought and sold thousands of units. He has owned and operated buildings in the Cleveland area market and where I’m from, as well as in the Central and Northern Florida markets. And today in the podcast, we talk about, number one, how to stand up and structure a blind pool fund to fund your multifamily real estate acquisitions. Number two, we talk about why you’re going to live on Zoom. Number three, we’re going to talk about how to eliminate equity raise risk. We’re also going to talk about why the second deal is 90% easier than the first one. And also, we’re going to talk about how to fully underwrite and effectively place capital in your multifamily deals. 

I really love this interview with Ken. He even dropped some additional nuggets on what we call The MoneyShow. You’re going to love that discussion on how to raise and recruit investors through an online virtual event called The MoneyShow, which we’ve never talked about before on the podcast. So, listen, guys, you’re going to love this interview with Kenneth Gee. Here we go. 

[INTERVIEW]

Josh Cantwell: So, hey, Ken. Listen, so excited to have you on today on Accelerated Real Estate Investor. Thanks for jumping on. 

Ken Gee: Thanks for having me. 

Josh Cantwell: Oh, fantastic stuff. I know we were kind of getting ready for this podcast talking a lot about all these similarities that you and I have. We got the Cleveland market, certain parts of the market, relationships that we have, which is interesting since we just met each other, how many people that we already know, which is great. But I would love to hear from your perspective what you got cooking. I know you just sold some buildings and you guys manage a bunch of buildings. You just set up a fund for $13 million, going to deploy that. So, what are you working on right now that you’re kind of most excited about going into the end of this year and into 2020? 

Ken Gee: Yeah. Most excited is now we’re just trying to deploy the capital that we’ve raised. We’ve got a third of it deployed in one deal that we’re doing in Tallahassee but now we’re trying to lock it down. I’m hoping to lock down one more deal by year-end. That would be great. So, we’re really excited about that. It’s just a challenge finding buildings right now because sometimes they just don’t pencil out. But that’s 100% of our energy. And then as we do that, then we’re probably going to roll right into our next fund and go back on the capital raising bandwagon, so to speak. 

Josh Cantwell: Got it. So, help me understand, help our audience understand the structure of that. So, you set up a fund, you raised 13 million. I imagine that’s probably a closed-ended fund now.

Ken Gee: It is. Yes.

Josh Cantwell: So, what’s the structure like? Our audience is going to be interested in like, first of all, how did you raise the money? And second of all, like what are you going to do with the money now that it’s in the bank, it’s sitting in the fund? What are you going to do with it like what kind of deals are you looking for? So, help us understand. First of all, how did you raise the capital? What kind of strategies did you use to get the capital in the house? 

Ken Gee: Yeah. So, good question. I would probably divide it into two pieces. Our existing investors followed us. Our terms of this fund I made very – this was our first blind pool fund, so I made the terms looked very, very similar to a syndication. I just skinnied them down a little bit to just make it more appealing. So, all of our investors followed us into the fund. So, that was the first place we were able to raise money. 

The second piece of that, I’m going to say there’s probably three. The second piece of that is if you’re not in Florida, there’s a big show in Florida called The MoneyShow. I had never heard of it before, found the guy on LinkedIn, and they put on a really cool show. It used to be a live-only in-person event. They went with a virtual show. So, I signed up for it. Thought it would be an interesting way to get in front of people who are looking for a place to put their money. It was hugely successful. We ended up doing a couple of virtual shows. I went to the Orlando show and everybody there is traders and things like that. And so, I was really the only real estate guy in the house, and that was really nice because it gave them a really good variation from what they’re used to, options and stocks and all that. These are pretty smart people. So, they appreciated our message. So, we were able to raise a significant amount from that. 

And then the third piece was really just online, just getting to know people online through a myriad of different ways. But now, we’re doing this on Zoom, right? I’ve learned to live on Zoom. And I think it’s all good because it’s going to really help everybody in the end but we were able to establish a lot of good relationships with people through that. 

Josh Cantwell: And is that process so like digital marketing posts, social media posts, podcasts? Turn that into an email opt-in, people opting on your investor portal, right? 

Ken Gee: You named it. Yes, sir. All of the above. 

Josh Cantwell: Absolutely. Yeah. We do a tremendous amount of that too. And it really works, right? It really does. I just encourage our audience to really start time going back through some of the shows I’ve done in the past, some of the webinars I’ve had about raising and recruiting money. I mean, Ken, myself, we didn’t know each other before we really, really scheduled up this podcast, and we’re essentially doing the same thing because it works, right? Because it works. 

Ken Gee: It does. There’s a lot of people looking for places to put their money because there are no really good choices out there. So, it makes firms like ours and yours a really good choice for them. 

Josh Cantwell: Absolutely. So, explain to our audience what’s a blind pool fund.

Ken Gee: Yeah. So, think about if you know a syndication, a syndicator goes out, finds the deal, locks it down, puts some of his own money into it, then runs around and tries to raise money, right? So, it’s a very, very stressful 45 to 60 days. And of course, they have levered existing relationships that they have. So, a couple of things there. One, it’s a very stressful way to do a deal. And two, they have to convince the seller to lock the deal up. We operate exclusively right now in Central and Northern Florida, an extraordinarily competitive place to buy. And so, as a syndicator, we just stood next to a whole bunch of other syndicators trying to convince a seller that we were the guy they should go with. So, I said, “Wait a minute, we got to find a way to differentiate ourselves.” We have the experience and we have good reputation and all that but so do a lot of other people. So, I said, “All right, we need to find a way to get us on their attention. So, let’s flip this around.” Instead of putting the deal in front of that money, let’s put the money in front of the deal. So, now I said, “All right. We spent about seven or eight months out telling our story, showing our track record and our experience and all that stuff.” 

And so, we raised just shy of $13 million. And through that process, now we have commitments, right? There’s not money in the bank. They’re actually commitments. So, now I have the ability to approach the market with money in hand. “So, Mr. Seller, that equity raise risk is off the table with us. So, we’re much more experienced. We know how to do this. We’re going to make it really easy for you. We’re going to close for sure, and there’s no equity raise risk.” So, it just differentiates us, especially at a market we tend to do plus or minus 100 units. Most fund managers are much larger. They’re looking for 300, 400 units. So, we’re kind of the big fish in the smaller pond, gives us a real good competitive advantage. So, that’s why we did it and that’s what it is. So, now I find deal number one, call the capital, we go close the deal. I find deal number two, do the same thing. And then our investors get a preferred return and we get all their money back. They get a preferred return. And only then do we get into the split, the profit-sharing split between us and them. 

Josh Cantwell: And is all the return like let’s say you find the deal, the deal is in its own like Special Purpose LLC. Are you taking the dollars from the fund and the people wiring money into the fund? And then you’re taking the dollars out of the fund and putting it into the downstroke for the deal? Like how does the money flow? 

Ken Gee: Yeah. The money flows exactly like you just described, investors. The investors have invested in a fund. That fund is going to invest in multiple assets, so their returns are at the fund level. And that’s really important for them, and it’s really good for them because now I called a third of the capital. We bought our first asset. It’s now basically a wholly-owned subsidiary of the fund. Think of the second asset the same way, third asset, the same way. Well, if you’re thinking about investing in a syndication versus a fund, if you do three syndications, one does really well, one doesn’t do so well, the sponsors are going to get paid on every syndication individually. In the fund world, the way we have ours set up, all those returns are measured at the fund level. So, in our world, you have to get all your money back that you’ve invested in the entire fund, not just one deal, the entire fund. You have to get all your preferred return and all your commitment that you funded, and only then do we split. So, that makes it a truly backloaded profit-sharing component because if that first deal does it really, really well and second, third don’t do so well, well, I’m not going to get paid much and you’re not going to get cheated, right? It’s a fund-level measurement that is so critical about funds. And it’s what really makes it appealing to invest in a fund because now they get some diversification and they know that they have a better chance of doing well rather than just one syndication. Does that make sense?

Josh Cantwell: Absolutely. So, if the Special Purpose LLC that owns 123 Main Street and let’s say that’s about 100 units, the fund is putting the equity into 123 Main Street in that LLC. So, does the fund wholly own that LLC?

Ken Gee: Yes.

Josh Cantwell: It does? So, that fund, that subsidiary of the fund owns all of the returns, profits, equity, refi proceeds, everything that happens within that deal.

Ken Gee: Yes, sir.

Josh Cantwell: And it owns that so there’s not like you’re not carving out certain pieces of the return or charging some other fees and all these other crud over here in order to, so, all the dollars go back into the fund, the returns. And then it’s split at the fund level between the LPs and GPs or the manager and the investors.

Ken Gee: Correct.

Josh Cantwell: Love it. So, I love this for a couple of reasons. One, I think our audience benefits from it. I benefit from it. I ran a fund forever but our fund was a debt structure where we brought money in. We lent it out in the form of hard money and private money loans for both residential and commercial short-term, usually two years or less. Now, the fund did really well. When COVID hit, we decided to just wind it down because we really didn’t want to be in the lending business anymore. We didn’t want the interest income. We wanted the equity income. We wanted the K-1 income. So, we decided, “Hey, let’s flip. Let’s move all these investors out, wound it down.” We pivoted most of those people into our syndications. But I’ve been thinking now and, Ken, you probably see this, there is an abundance of capital out there. There’s tons of people looking to place their money and the deal flow is harder to find, especially if you’re down in the Sun Belt, especially in Florida but there are still deals out there. Still makes sense. So, I’ve got all these people that are like, “Josh, when are you going to find me a deal? I’ve got so much money.” I’ve got $20 million in commitments that has to get deployed. Between the 450 units that we’re buying by the end of the year, I’ll deploy about 7 million of that, maybe 8 million of that. 

The rest of the money is just sitting out there. And so, I’ve been thinking like, “What do I do? How do I attract those people?” And again, what I like about what you said was we got the commitment but not the wire. We didn’t do the call for the capital until you had a deal. So, you’re not burning cash, you’re not burning interest, and diluting the fund return by having money in there that’s not deployed. 

Ken Gee: Oh yeah, you couldn’t afford to do that. That would be terrible. Right.

Josh Cantwell: Yeah. So, how much of your investors kind of chomping at the bit when you said, “Hey, I’ve got 13 million kind of committed,” but they’re still kind of waiting for you to find deals, right? 

Ken Gee: Yeah. So, that’s a really important point. And it’s funny. Every investor meeting I have, we talk about one word always during the meeting at some point, and it’s called patience. And I tell them, “Guys, you need to be patient. I want to deploy this capital for you on day one. However, you’re trusting me to make really good decisions about what we invest in, not just invest it for the sake of investing it, right? Because it is possible to lose money in real estate if you don’t know what you’re doing and you’re not careful.” So, I always encourage them, “Guys, you got to be patient. I promise you, I’m looking for home runs because if I fall short, alright, it’s a triple or a double. I’m not looking for singles because if I fall short on a single, what happens? It’s an out and I don’t like outs. That’s not a good way to be in this business long-term.” You get repeat investors because you do really well. And so, I tell them it’s a trade-off, “Just please be patient. I promise you, I’m trying to do it as fast as I can but I’m putting my personal money in next to yours. I don’t want to lose either one of our money. I want both of our money to do really well and the only way I can do that is to make sure that I’m willing to walk away from a deal if it doesn’t make sense.” 

I walked away from two deals this week. Not that we were headed down the LOI but I passed on it. I took a really hard look at it, fully underwrote it, and then just couldn’t get comfortable. In both cases, the seller just said, “No, I can’t come down that far. I think I can do better,” and they will maybe. Maybe not. And if not, we’re here. But patience, that number one word I think is critical. And we’re lucky we have a great set of investors that we work with because they get it. They don’t want to lose money, either. So, the other big word that is implicit in a pool arrangement or a fund arrangement is trust, right? Because they don’t get to look at the deal and bless it before they send the money. It’s a blind pool fund. It means they trust us that we’re going to make good decisions. We tell them, of course, what kind of deals we’re going to do and where they’re at and how big they are and how long we’re going to hold them and all that stuff. But they still have that trust. So, it’s sort of a trade-off, right? It is and most of our investors, they get it. They understand. I mean, yeah, they want their capital deployed but they also don’t want to lose money. 

Josh Cantwell: Right. Plus, in multifamily and especially large apartment complexes, 100 units and up, you’re not buying that deal to get out of it in a year or two. You’re married to that deal for three years, five years, seven years, 10 years. You’re married to it. So, you got to make the right decision upfront, right?

Ken Gee: You do.

Josh Cantwell: People say, “You make money when you buy. You realize it when you sell.” That’s generally true. You make money when you buy. You realize the profits through great management in the multifamily space. Great management. Great CapEx, leasing team. That execution is where it’s at. But if you overpay, it’s hard to kind of just make that up through operations, right? 

Ken Gee: Yeah. But I will tell you that coming from a Midwest state, going to a Sun Belt state, I actually had to teach myself, this was many years ago. I made this transition but I had to teach myself to look at deals a little different because the growth market at Sun Belt is a massive growth market. So, we actually underwrite deals kind of backwards, right? We always start with the neighborhood. I don’t even know that’s the question specifically but I think it’s important. We start with the neighborhood. If the neighborhood is good then you start from where your exit and work your way backwards. Because in growth markets like Florida, we’re moving rents very rapidly and there’s true upside. It’s because of the demand-supply picture that’s going on in those markets, that’s why everybody wants to be there. So, when I was in the Midwest, in a non-growth market, so to speak, right, I cared a lot about my going-in price. I still care about my going-in price in the Sun Belt but I know that most of the time what I’m paying for is the upside. And if I have to pay the seller a little bit for that, I’m okay with that because that’s the only way you’re going to get a deal because the upside is so significant that it’s worth it all day long. So, that’s why you got to actually think about what kind of market you’re in and underwrite according to that market. It took a lot of getting used to at first when I started to do it but it’s part of the reason. I mean, we’ve had huge returns down there and that’s not going to change. 

Josh Cantwell: Yeah. I love it. I mean, you’re looking at places like Dallas Fort Worth, Houston, the 15%, 20% year-over-year rent growth. So, if you’re charging $1,500 a month for rent, a 20% increase is $300 in one year. It’s a lot of growth, right? You know, $1,000 a month, a $200 jump in one year is tremendous upside. I love it. You know, we don’t do a lot in the Sun Belt. We look at deals but because we’re based in Cleveland, we focus on the Midwest. We’ve got a bunch of JV deals, co-syndications, and co-sponsorship deals we’ve done in the south, which has been great to kind of blend out the portfolio between growth markets and what you said, non-growth markets or growth markets. Like Cleveland’s a true value-add market, meaning everything in Cleveland, I laugh about this, Ken, everything is laminate and brown, right? Laminate countertops, laminate floors, brown everything else, cabinets, brown carpet. So, that opportunity in the Midwest is more of a value-add with true hard unit terms to upgrade the product. In the South, the product is all new. But in the Midwest, the product’s 30, 40, 50, 60 years old. So, the product’s old. You update the product in the Midwest, you’re forcing the appreciation versus in the South, where Ken’s at, the appreciation is coming from population migration, job growth, rent growth. Love it. 

So, Ken, talk a little bit more about that transition. Like this is just, well, wasn’t planning on talking about this but again because I’m where you were in the Midwest from Cleveland and you’re in the South, what other challenges or what other hurdles did you experience both mindset-wise and then just through the physical logistics of moving, making the transition from one market to another?

Ken Gee: Yeah. So, probably the hardest thing is wrapping your mind around how you’re going to go down there and figure this out and do it, right? So, I actually haven’t physically moved to Florida. I still live in Cleveland. Our back office is in Cleveland. Everything we do is in Florida, and I spend at least half my time there. We have corporate offices in Tampa and I’m in one of the major cities all the time there. So, now the biggest challenge that we had trying to make that transition was building credibility because there are tire kickers. I mean, we do third-party management as well. So, we’re a vertically integrated company. We manage our own stuff but we also do a ton of third-party management. And so, we get lots and lots and lots of calls of people that want to get in the market. And what always happens because it’s so well-networked by people like me, quite honestly, and there are so many tire kickers there that people go in, they try to get in, they find that they’re one of 15, one of 23 offers, they’re like, “Oh, Jesus, I’m out of here,” and they bail. The challenge is that people that get the deals are the ones that stick it out, right? You have to get the brokers to figure out who you are, understand who you are. 

The brokers control the deals 100%. I mean, if you’re one of 25 offers who controls it, it’s the broker. The seller goes to the broker, looks to the broker, and says, “Tell me who these people are. I don’t know them. Have you closed with them? Are they for real? Are they going to re-trade me? Are they going to close? Are they putting any hard money down?” It’s a very competitive market, and that’s why, for me, this is for us. This has been a whole process that’s been going on for more than 10, 15 years, building the credibility and everything else to get to the point where now if we’re within the top few bidders, we’re going to be considered very seriously because the brokers know how efficient we are, they know we’re going to close, they know I’m not going to make it difficult for them. So, building credibility is the hardest thing and just sticking to it because so many times, I mean, when you’re sorry, your offer wasn’t accepted, it wasn’t accepted, it wasn’t accepted, I mean, after so many times you’re like, “I’m out of here. I’m going to go somewhere else to find a deal.” You have to really be committed to that market. And we are because that demand-supply equation is so crazy. 

And it’s been that way forever, not just the last couple of months. It’s been that way for a long time. There’s no way I’m not going to be there because B, C class assets is what we buy. They’re not building them because they can’t afford to, and there is demand like crazy. So, we have rising demand and your stable supply. Price has got to go up. So, now I put a true value-add strategy in a bull market and it’s off to the races. I mean we’ve had as high as high-30% annual returns on our deals. So, those are pretty crazy returns. 

Josh Cantwell: That’s phenomenal.

Ken Gee: It’s an apartment building.

Josh Cantwell: I love it. I love it. You mentioned credibility multiple times. Is there a secret sauce for you to build credibility? Everybody kind of does it different ways. You know, some people buy brokers gifts and gift cards and just all kind of stuff, right?

Ken Gee: Yeah.

Josh Cantwell: Little gifts and trinkets and just things like that. Obviously, building credibility through making an offer, getting awarded the deal, and then closing it. That’s the best way to build credibility is to close kind of some of the ones obviously that are out there. Are there any other kind of silver bullet strategies that you guys have used to kind of build credibility? 

Ken Gee: Yeah. So, I think the number one and believe it or not, I mean, we send people holiday gifts, things like that, but it’s never been over the top crazy because these brokers that we deal with, I mean, they have pretty strict moral codes. Their relationship is with the seller. So, they’re not going to do something for me at the expense of their client, never, never. I’ve never seen a broker try to do that through all my dealings in Florida. But here’s how you build credibility the second way and that is do your homework. So many people want to throw on LOIs with doing some back-of-the-napkin analysis and then they want to be awarded the deal. Well, a broker is going to have conversations with you. They’re going to know that you didn’t really do much homework. You must tour the property or they’re not going to take you seriously. And they’re going to meet you and they’re going to figure out, “Did you really do your homework? Or are we going to decide we’re going to pick you as the horse we’re going to jump on?” And then as you go through the contract negotiations, it’s going to fall apart. That’s what they’re trying to figure out. 

And with our deals, we tell our brokers that we work with, “If you get an LOI from us, it’s been fully underwritten and it’s gone to our lender and they’ve blessed it. They say, ‘Yup, we can get this done for you.’ And as a result, we’re going to give you an offer with no financing contingency. It is likely going to have hard money and it’s going to have a 14-day due diligence period and close 45 to 60 days. A lender joined is going to slow that.” 

Josh Cantwell: I love it. Guys, these are really significant nuggets there that Ken is dropping that you, guys, got to pay attention to, right? Touring the building, showing up with an LOI, making sure that your LOI when you tell them it’s fully underwritten, it’s been blessed by the lender, that is going to have a short due diligence period and possibly hard money, those are all ways to not only build credibility but ultimately get awarded the deal and give that seller and broker a sense of certainty of closing. That’s such an important phrase in this business “certainty of closing” because the brokers, again, they’ve probably worked six months or two years or five years just to get that seller to the point of possibly selling. Then they decide to sell. They sign some sort of listing agreement. Then they got to do probably two months of due diligence to put together an offering packet. Then they’ve got to go through another month of tours and showings with the best possible buyers. Then another two to four weeks of a call-for-offer process or some sort of write-your-offer process just to get an LOI signed, then wait another two to four weeks to get your PSA going, then get that inked up, and then another 45 to 60 days to close. 

So, when it comes down to that LOI, guys, pay attention because Ken is really, really hitting it hard right here that that certainty of closing is so big because it’s been now years or months of effort just to get to the PSA stage. So, when they award a deal to someone, they do it with a tremendous amount of thought and intent to make sure they award the deal to the right person. They’ve put in far too much work to have that deal blow up. So, I wanted to circle back all that whole conversation up, Ken, with that comment because so many people take that for granted or just slapping out an LOI and think they’re going to be competitive. That just doesn’t work in this market. It doesn’t matter if it’s in Florida or in Ohio or anywhere else. It just doesn’t work. There’s too many professionals in the space that are doing it the right way, Ken, like you’re talking about. It’s fantastic stuff. Ken, let me ask you a question. Let’s drop back now to how you got started, right? I know you’re at City Bank. I know you worked for Deloitte. You made the pivot from accounting into multifamily. Talk about that early transition. Talk about some of the challenges that you faced. 

Ken Gee: Yeah. Well, I should probably just talk about the first deal I did because I don’t know how many of your listeners have done that first deal because the first deal was hard. What made it hard is I didn’t know what I was doing. I spent a year-and-a-half trying to learn probably what many of your listeners might be doing, trying to figure this out. How do I do this? What’s the right way? What do I got to know? How do I make sure I don’t lose money, so on and so forth? So, that first deal, I remember paying someone to be my mentor, so to speak, someone who had been in the business. He also was an attorney but I paid him a flat fee to do nothing else and say, “You know what, Ken, I looked at this deal. I’ve been in this business for a long time. You’re going to do okay in this deal. You’re going to make $100,000 on this deal.” And I said, “I’m going to make $100,000? Are you kidding me? Like, seriously?” That’s an obscene amount of money, right? So, I said, “All right, I’m excited. Now, I’m even more excited.” So, you’re signing that mortgage and here’s the thing. You sign on a $460,000 mortgage and you’re personally guaranteeing it because you’re too small to get a non-recourse loan and the golf ball in my throat was real. It was real. I mean, I remember having a difficult time swallowing, and I know it was stress-related. I’ve never been that stressed in my life. And everybody said, “Oh, the first deal is the hardest one you’ll ever do.”

And it wasn’t until that point when I figured out. Now, I know what they’re talking about because that $460,000 mortgage would have bankrupted me in a minute. That deal didn’t work out. And thankfully my family was behind me and so on and so forth. So, that is probably the biggest thing, right? It’s taking the time to learn as much as you can. I’m very deliberate about everything I do. That’s the CPA background in me. And even though I felt like I knew what I was doing, I really didn’t, I really didn’t, and I kind of figured that. That’s why I was so stressed out. But here’s the key. You forge ahead anyway, and you get it done. And the second deal really is a lot easier. It might not be easier to find but it’s easier to do it without having that level of stress. Now, it’s a very non-stressful event for us, right? Because I’ve done it so many times. But you know, back when I started that, that was the number one thing for me that I don’t know that people are really prepared for that. 

Josh Cantwell: Yeah. They’re really not. I mean, to this point, we’ve done 16 syndications and thousands of deals, thousands of units. But even just this past we were just talking about, I had a mastermind last week in Cleveland. Next week, next time, Ken, we have one in Cleveland. I’d love for you to sit in on it and just…

Ken Gee: Oh yeah.

Josh Cantwell: We’re about 35 people in, and I told the story about how we bought a deal in April, 220 units in Parma. I’m sure you’re familiar and the entire business plan that we had in April, none of it are we executing today. Because we were self-managing at that time. Now, we’ve got a third-party manager, right? The units that we were turning, we had a certain list of units that we thought we’d have some push-outs, some kick-outs, totally different list of people. The CapEx plan was very slow going for the first two or three months. We had about 40 vacancies. We were about 80% occupied. In the last 60 days, we’ve knocked out all those vacancies. We’ve done hard turns on most of them. And now we have 40 units that we’re going to be leasing up here at the end of October. But nothing that we planned for, and back then we didn’t have a VP of Construction. Now, we hired a VP of Construction. So, this is like our 13th or 14th syndication and still, things change, right? But you talk about it gets easier because now I’m used to kind of dodging and weaving and changing, morphing because you learn things as a CEO or an entrepreneur that you’re like, “Okay. I can apply that and I can apply that right now, and that’s going to improve my business plan so I’m okay with the change.”

So, yeah, you talk about that. And, Ken, I was going to ask you, this is a lesson, right, that you’ve learned? You’ve had a lot of success. You’re investing virtually in Florida, even though you’re still in Cleveland. You had this kind of very meager start with this first kind of small deal 460,000 on a mortgage. You’ve learned a lot along the way. Tell us about some of the lessons. What do you think you would tell your younger former self or what kind of advice would you give our audience about what you’ve learned along your journey? 

Ken Gee: Yeah. Boy, there are so many lessons. Number one, make sure you keep your mind right. Keep yourself focused on doing what your plan is and keep moving forward. Develop as many relationships as you can because you can’t do real estate by yourself. It’s too hard. It just sucks up too much capital. And unless you’re wealthy going in, you need people to do it with you. So, those relationships are key. On top of those relationships, I think, are just making sure that you pay attention to the details. I’ve always been a detail-oriented person, and every time I do a deal, I find details that had I just glossed over them, they would have cost me a lot more money than I realized. Problem is, if you don’t notice them, you don’t even realize they’re costing you money. So, it’s really about your mind and keeping your mind right and pressing forward and not getting distracted, right? Just be careful, be disciplined, and make sure that you’re focused on what you’re trying to do with the next deal. Just don’t stop. And if you stop, people stop all the time. They have a little hurdle that they are not sure how to get over. Go find someone to help you figure it out, right? That’s what you should do and figure it out. 

You talked about bobbing and weaving, and it’s interesting. Now, one of the big lessons that we learned is a couple and it relates to value add. With value add, we do a business plan, which is just about every deal we do. We do a business plan when we first underwrite it. We do a business plan when we tour it, I’m sorry, renovation plan changes when we tour it. Then we go through due diligence and sure enough, it changes again. Then we close. Now, here’s the key. I tell people, “Sit on your hands,” for other than turning vacant units. That’s kind of obvious. “Sit on your hands for 30, 60, whatever days that it takes to figure out what’s really going on.” And here’s why I learned that. There’s a lesson I learned. There was a deal when I spent all my renovation money. I know what I’m going to spend this money on. I went out and I spent it on day one. And on day 35, 40, 50, I don’t remember what day it was but I learned some things about the property that I didn’t know before. Boy, it sure would have been nice to have money saved that I could have reallocated. What I think sometimes syndicators do is they feel like the investors will view them as not knowing what they’re doing if they change their plan. 

And the reality of it is if you don’t change your plan, that’s a sign that you don’t know what you’re doing because you’re going to learn things all the time. And you know, in our business, we’re charged with using capital efficiently, and that means constantly challenging, “Okay. Should we do this? Should we really do this even what we know today? I know three months ago we thought it was dead on the right thing to do but based on the new information and all the information we have today, should we still do that?” And constantly challenge that, that’s the number one thing that I wish I would have done earlier. I mean, we’ve been doing it for years now. I learned the lesson a while ago but if people did that, I think it would save them a lot of stress and make them a lot more money. It’s just people want to get going on day one, right? And unit turns, I think you talked about turning 40 units, that’s not negotiable. You had to turn your units no matter what. But should you add this improvement and that improvement in this amenity and that amenity, sit on your hands for a few minutes until you figure out what’s really going on because they’re not telling you everything before you buy. Trust me. 

Josh Cantwell: Oh yeah. And a lot of times the residents, once you’re there, the residents have a sort of a sense of skepticism, right? Always. When you take over a new manager, a new owner, it takes a minute for them to begin to trust the new property management team that’s sitting in the leasing office. And then when they do feel like they sense and they trust the management leasing team, then the truth comes out, baby. Here it comes. Now, you find out what buildings got trouble, what buildings doesn’t, where the leaks are. There was maybe a crime in a unit or somebody passed away in a unit, or we all could use a dog park. There’s all this stuff that the residents will begin to tell you but they don’t tell you like Ken said on day one. It comes out at day 30, day 60, day 90. You learn from the building department, the inspector comes by. Whatever that is, it doesn’t all happen on day one. So, it’s great, great advice. Ken, fabulous stuff. Listen, let’s finish up with what we call The Final Five, the final five quick-hitting questions, quick-hitting answers. You ready for these? 

Ken Gee: I’ll do my best. 

Josh Cantwell: All right. Very good. Ken, what’s your favorite way to find deals? 

Ken Gee: Networking with brokers. 

Josh Cantwell: Networking with brokers. Fantastic. Favorite way to fill up your capital stack? Which I think we talked about because of the fund but… 

Ken Gee: Yeah. Just diverse groups of investors. There’s no one place for investors. They are from everywhere. 

Josh Cantwell: Yeah, got it. And you mentioned the MoneyShow, which is a new one. That’s fantastic stuff. Question number three, Ken. What do you think for you is maybe some of the best advice that you’ve ever been given whether it’s life advice, whether it’s business advice, apartment advice, what do you think has had the most impact on the way you think? 

Ken Gee: Probably two things. Number one, always keep learning. Don’t stop learning. I mean, I’m in my 50s. I’m way out of college now. I learn more now every single day than I ever did then. And it’s because I now understand the benefits of learning. It’s probably the number one thing. The second thing is don’t be afraid to think differently than you are now, I used to be an employee. I am not anymore. Couldn’t imagine being an employee now but making that transition requires you to think in a totally different way. And somebody told me that that would happen. Didn’t understand it until I’m there. Now, I do understand it. 

Josh Cantwell: Love it. Fantastic. Ken, what do you think? You know, as a CEO, you’ve got a lot going on, you’ve got employees, third party management, construction, underwriting, raising capital. You’ve got to get away to think and to process it all and put the puzzle together and the puzzle often will change. You know, a piece will fall out, an employee quits, you’ve got to replace them or a third-party manager is not working, you’ve got to replace them. So, you’ve got to spend time thinking. For you, it’s such a critical – moves the lever big time for a CEO or for a founder. What are some strategies or things that you do to think better to spend more time thinking and just kind of get away to allow yourself the mindshare, the time to properly think through some of the challenges that you’re facing? 

Ken Gee: Yeah. So, I would say two things. One, I schedule some time every day. I try to get into the office really early. Nobody’s around and I don’t start doing email. I just focus on strategic type thinking. So, that’s the first thing I do. But the real impact comes from when I go on vacation and I just do. I always try to bring the family down. We love to go to all the Disney resorts because it’s just so nice or we go to a beach resort. We go somewhere in Florida. And the time that I spend there at the pool hanging out, doing whatever it is we do, it gives me time away from the business because now I’m not worried about any of the day-to-day stuff. The side benefit to doing that is it forces everybody else to run the company while you’re gone. It has a dual impact and both are super, super important to me. 

Josh Cantwell: Yeah. And often say to my members and listeners, “Look, I usually get my best ideas when I’m actually not in work mode.”

Ken Gee: Oh, absolutely. 

Josh Cantwell: Like, I’m having fun with my family and I’m out of Disney ride. I’m on Winnie the Pooh or I’m on Soarin’ or something. And then just an idea just flies in. You’re like, “Oh my God, where did that come from?” You’re not thinking about work. Your mind is free to just process all this information and the ideas just come popping in. That’s fantastic. Ken, final question. Who do you think has been the mentor that’s had the biggest impact on your life and why? What did they teach you? What did they say to you? How do they impact what you’re doing today? 

Ken Gee: Yeah. Boy, there have been so many. Wow. I would say if you think about, well, mentors that I’ve actually spoken with, let’s talk about people I haven’t spoken with as like Warren Buffett, Bill Gates, people like that, that have figured out how to grow something that’s much bigger than themselves. I mean, those are people that I really like to understand how they do these things and so on. People every day, I would say the biggest mentor that had an impact on my life was the lady that you probably don’t know. I met her back in 1998. Her name is Karen. I’ll withhold her last name. She worked for the Shaker Heights Prointegrative Housing Service, and her job was to integrate neighborhoods. But what she taught me was, “Ken, don’t be afraid to build it. They will come.” And that first build it was $5,000 invested in that first deal that I had and improvements that I didn’t have. And she promised me they would come and that got me a $120 rent increase and suddenly really good applications. So, that woman, I haven’t seen her in decades. She had the biggest impact on the early part of my life that made me realize that this is how real estate is supposed to be done. She was dead on. They did come and the rest is history. 

Josh Cantwell: Oh, I love it and such like a real-world application, right? A piece of advice that moves the lever to raise the rents which raises the value of the building that you still, Ken, apply to your everyday business today, which is fantastic. And listen, I’m sure that a number of people in our audience will want to connect with you, invest in your deals, look at your fund, just learn more about you. Where can they get a hold of you? Where can they visit your website? 

Ken Gee: Yeah. So, let me, this is my e-book, MULTIFAMILY REAL ESTATE IS A TOTAL GAMECHANGER. I wrote it. It’s free. You go to KRIPartners.com/ebook. It’s real easy to remember. Let me tell you why I wrote the book. It’s a short book. It’s an easy read and it’s free. But I wrote the book to deal with two issues. The first one was everybody knows you can make a ton of money in real estate. What every person is trying to figure out is how do they get their piece? So, in that first part of the book, I take them through that process. Should I buy a single? Should I buy a double? Can I buy an apartment building? How do I do it? Should I buy a medical? Should I do warehouse? Should I do self-storage? I take them to that whole process because they have to figure out how it fits in their life and every single person is different. Now, the second part of the book makes the assumption, like most people should, is that they want to become a passive investor, a real passive investor. That doesn’t mean they went out and bought a duplex. That’s not passive. Passive investment means you put money in a fund like ours or someone of your deals and we do the work and get it done for you. 

So, that second part of the book talks about you’re going to do that but now who do you do with? So, I give them some real insight as to how the fund world works, how the syndication world works, and some ways to vet sponsors because I think that’s really important. This private capital raising is not going away anytime soon since the Jobs Act in 2012. It’s had a massive impact on lots of people’s lives, not just fund sponsors and syndicators but investors, right? More ordinary people can get into these deals and make crazy money, which is the way it should be but they got to figure out how to vet these people. So, that’s how I wrote the book because I thought the second half of the book would be really, really useful in arming people with the knowledge that they need to make sure they know if somebody is a bad actor or not. 

Josh Cantwell: Yeah. I love it. Ken, that’s fantastic stuff. Guys, go get the book. KRIPartners.com/ebook. Ken’s put that together for you guys and for all of his kind of followers and subscribers and friends. Definitely download that. It’s amazing. It’s short. It’s free. Fantastic stuff, Ken. Listen, thank you so much for carving out some time today. You and I need to gear up for face-to-face lunch soon and hang out together. So, we’ll talk about that after we sign off here. But thanks for joining me today on Accelerated Real Estate Investor. 

Ken Gee: My pleasure. Thanks for having me. 

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Josh Cantwell: Hey, guys. Listen, hope you enjoyed that interview with Kenneth on Accelerated Real Estate Investor. Don’t forget to download his e-book, KRIPartners.com/ebook. And as always, don’t forget to subscribe to Accelerated Real Estate Investor. Click the Subscribe button right now in your phone wherever you get your podcasts, wherever you get your videos. Subscribe to that so you never miss another episode. Don’t forget to please leave us some ratings, reviews so we can hear your feedback. I’d love to know what you’re thinking about the show, which shows are your favorite, what topics are your favorite, what guests are your favorite so we can bring more value to you every day through this show. Thank you so much for joining me today, and I hope to see you next time on Accelerated Real Estate Investor.

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