Ep #359 – Kay Kay Singh – Questions to Ask a Syndicator Before You Invest

Here is some of what you will learn:

Empowering your Team
Getting Started in Passive Investing
Questions to ask a syndicator before you invest
Yield vs Value Add multifamily investments
Where to find city data
Specialists vs Generalists

To find out more about our guest: click here 

To find out more about partnering or investing in a multifamily deal: Text Partner to 41411 or email Partner@RodKhleif.com

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Full Transcript Below:

Kay Singh – Questions to Ask a Syndicator Before You Invest (Ep357)

Intro: Hi! I’m Rod Khleif. Each and every week I record an interview with a thought leader that I know you’re gonna get a ton of value from. Now here on YouTube are the video versions of my podcast, Lifetime Cash Flow through Real Estate Investing. Now to make sure you get the latest information please subscribe and hit the notification bell. Let’s get started. 

Rod:   Welcome to another edition of “How to Build Lifetime Cash Flow through Real Estate Investing”. I’m Rod Khleif and I am thrilled that you’re here. And I’m super excited to interview my friend today. His name is Christian Singh he goes by Kay Kay. Kay Kay Singh. And he started at in as a system engineer in fact he’s certified Microsoft System Engineer and he became a very successful entrepreneur and he’s now a multi business owner. We’re talking about that he owns gas stations in Laundromats and he’s got started like many of us in a single-family space. He’s in northeastern Indiana but now he’s in around you know approximately 25 over 2,500 doors as both a limited partner, a passive investor and also as a GP. He has syndicated his own deals now. So we have a lot of stuff to talk about and I love the fact that it’s him because he’s my friend. So welcome to the show KK.

Kay: Thank you very much. It’s my pleasure Rod to be on your show.

Rod: Yeah. Well listen. I have really enjoyed getting to know you I love your energy and your beautiful personality, positive personality. I know you’ve been to three of my events and I am grateful for that. And you know like many investors you see the value of you know this business being in team sport and the value of networking. But let’s get started with give us just a little background on you Kay Kay and you know I know that you know you’ve got 10 plus years of business experience in India where you’re from and then you know almost 20 years here in the United States maybe you could give us a little bit of your background and history.

Kay: I came to United States in 2000 as a Microsoft certified System Engineer. And I lost my job after 9/11/2001. So I decided to move on to the gas station business because some of my friends were in the gas station business so I partnered with them on one of the gas stations and got into the gas station business and never looked back.

Rod: hmm.

Kay: So we kept building our gas station business and actually we did a deal today for the ninth gas station.

Rod: No kidding congratulations that’s awesome. So you’re still in that business. It’s not like you’ve moved from that to multifamily, that’s just that…

Kay: No.

Rod: … the precursor to your entrepreneurial endeavors. So, ninth gas station fantastic. Wow!

Kay: Yep. I do have really good family and friends with me as partners and they manage all my gas stations and I am fully into the real estate business.

Rod: You are? Okay. And so, let’s talk about that for a minute because you know you’ve been doing the gas stations for a very long time now it sounds like almost 20 years just in the gas stations. Talk about you know how you; you, say you have friends and family that help you run them. You know, has any of that you know and that to me and I’m a multiple business owner as well anytime you can have people that you trust. You wanted that you empower, that you have faith in run you know a particular business that frees you up to do other things. I’m in that place right now in this business. Talk about some of the things you’ve learned and some of those some of you know those relationships have helped you in to the you know to get into the multifamily space.

Kay: The thing is that I have been in the partnership for the last 20 years and none of my partners ever left me.

Rod: mm-hmm.

Kay: And we didn’t have to leave any of our partners behind and some of my employees became my partners as well.

Rod: Wow. Wow.

Kay: So, they have been with me for about 20 years but I have always kept their share as well. So I have treated them very fairly. I never try to use anyone. So they are happy with being me as their leader. And I am the one who does most of the acquisitions. So I go do the numbers start to the sellers and make deals and everything. And they are the ones who do the operational part. So after one month I don’t go for a year sometimes to a gas station because I have made the system I put everything in their computer that they would need. And they then they take over and the operational part, they do the operational part.

Rod: So you have set up the systems. You’ve taken a time to set up those systems and as you guys know every business is nothing but people and systems. So you’ve taken the time to set those systems which is giving you the freedom to go off and focus on acquisitions in real estate, yes?

Kay: Correct.

Rod: Yeah. Okay

Kay: Correct.

Rod: And how did you empower? Because guys this business is a team sport so you we’re not talking about gas stations here we’re talking about building teams. How did you empower your people in the gas station business? Because that’s again that’s a great example of building a team and leveraging a team. How did you empower them and validate them? Can you drill down on that a little bit?

Kay: Yeah sure. I actually told my partners as my family and most of them are my family. They’re my daughter, my son-in-law, my nephew, and some people who I’ve done everything for them.

Rod: mmm.

Kay: So they’re very near and dear to me. And I try to be very fair. So they are always happy with what I say and they agreed to what I gave them the shares and the businesses and they like to grow with me.

Rod: mm.

Kay: So, none of them have ever said okay I’m gonna go sideways or with another partner but the reason is because we want to grow together. And I believe, I believe in if you got go far you got to have a team and you got to have some partners you go farther with other people and you’d be.

Rod: Okay. Well you’ve said some key things there and one of them was you treat them like family. And guys, when you’re in this business really the relationships are such a big piece of it and what is a relationship, it’s a friendship. So you, it has love, it has support, it has validation, it has all of these things, and of course growth. You know fact; growth is a basic human need. People need to feel like, particularly in any relationship, they need to feel like they’re growing, and so that’s a critical piece. You know from my team members, we just had an event here in my house, at my compound, where we did ideas for improvement. And when you allow people to add value to the whole, to the business, to the entrepreneur you know you trust them enough to allow them to make suggestions, and I have a lot of fun with it, and we have we did it for almost all day it was incredible because then some incredible ideas came out of it I’m like swimming with ideas from these amazing people that are on my team and it allows you to grow together. And because they’re enrolled, they have it, they’re enrolled in the outcome. Would you agree with me on this Kay Kay?

Kay: Sure. And if where I am today I would have never been here without those my partners.

Rod: Yes.

Kay: And they have never been there without my help either.

Rod: Right? Right it’s amazing how, you know? You need them they need you and when there’s mutual respect, and like you said use the word fair as well and I live by that word, okay? And you know as it relates to my students, my coaching students and, you know, and that is the operative word. Is what we’re doing fair and if someone, for example, wants to cancel from one of my live events, I always ask myself the word: Are we being fair to them, you know? And then are they being fair to us? Is there integrity in this relationship? Love it. Love it. All right, well let’s shift gears. I just wanted to, because you’re such a successful entrepreneur, I wanted to just add some value as it relates to team building and building a business because that’s really what we’re doing here guys. Is you’re taking off your entrepreneur hat you’re putting on your, I’m sorry your employee yet you’re taking off your employee hat, you’re putting on your entrepreneur hat. And so, you know all of these pieces come into play. You systemize it because it’s a business and then you’ve got to take care of your people, like their family. I love it. Alright, well let’s talk about now your transition into real estate because I know you started passively, correct?

Kay: Basically, I bought single-family houses before, I started back early.

Rod: Okay. Okay. That’s right. That’s right.

Kay: Yeah.

Rod: That’s right. Let’s start to…

Kay: Yep. I got an offer from a church member he’s the… I think he was 82 years old and he offered me a portfolio forty single-family houses and we didn’t know what cap rate is means at that time. So we didn’t know anything but he was very trustworthy and helpful person. So, I, we decided to buy his properties and we bought all his 40 single-family houses and I started managing myself to learn the real estate business. And soon I realized that I have passion for real state but single-family I cannot grow much.

Rod: Right.

Kay: So, we decided to move into multi-family. And with multi-family we did give some aloe eyes but they didn’t get through and the reason was we didn’t know much the business. So I decided to learn the business before do a next deal so I invested passively in my first deal in Dayton, Ohio

Rod: Okay. Okay. Well, and you know obviously you know I started in single family as well I just didn’t get the memo until after I had two thousand houses. You’re just much smarter than I am my friend. And so, you know there’s no question that multi-family is the way to go and so you just decided to go in passively on someone’s deal. So, talk about your first couple of passive deals and maybe what you learned and why you selected that particular operator and I don’t wanna drop names. But the pieces of the deal in how it was presented to you, maybe speak to that experience on that first passive deal. Because guys the reason I’m bringing this up is so many people start passively and then they end up becoming active just ,like Kay Kay has done here, and so I wanna talk about what that looks like because it’s a great way to start frankly. So if you could speak to you know the nuances of that deal why you selected that person and let’s start there.

Kay: Yes. When I was doing my research to find a passive, for passive investment and I followed some syndicators and learned about them and they’d talked to them over the phone…

Rod: mm.

Kay: …and slowly I build up relations with them. Had several calls and I decided to go and talk to one of them. So we had a meeting and I took my list of questions. Here’s my 42 questions that I ask every syndicator before my passive investment. So I went there with my questions and he answered all my questions and I wanted to start in the multi-family space immediately. So I gave him a check for fifty thousand because he had one of the deal that was ready to go. So I would, that’s how I stepped into the multifamily space.

Rod: mm. Okay. So Kay Kay I know you’ve been as a GP in two deals now and you know I know you’ve, you’re also out there helping people on Facebook and adding as much value as you can that’s just your nature. Which is why I consider you a friend because I just think that’s a beautiful thing and as it relates to you know in adding value to people I know you came up with the list of questions that you think a passive should ask a GP or an operator, you know, when they’re screening a prospective deal. So let’s go through that list. You shared it with me and I loved it and I took it and tweaked it and expanded it and even shared it with my students because I thought it was so well done. So, if you could speak to some of these questions that if someone is passive, you know? Let me rephrase that. If someone is interested investing in a deal, you know, from their armchair passively what they should ask or look for in the operator.

Kay: Well, when I started doing the research, I figured it out that the operator is the most important person in this everything in this multifamily space. So I did spend some time preparing my questions to ask sponsor and with these 42 questions and with your expansion I think you can definitely find out the answer to your question and also figure out whether you want to invest with this operator or not.

Rod: Well. So let’s go through some of them and we’ll go ahead and attach them to the show notes on this call but let’s go through some of them. So if you just kind of you know read some of them.

Kay: Yeah, I can.

Rod: And I’ll interject when I feel it’s necessary.

Kay: First of all I want to know who is the actual controller of the deal? Because there are several pieces to the deal, the syndication deal. I want to know who is actually the controller of the deal. And then I want to know how many deals he has done before. Does he have experience as a controller of the deal? And the third thing I want to see, if something happen to that syndicator, is there somebody who’s going to take care of? Does he have a really good partners as well?

Rod: Right.

Kay: And then I want to see how long experience does he have. Is he just starting out or does he have a long experience? And also I wanted, I want to know what markets does he focus on. And also whether he wants to just depend on the cash flow or just or does he want to add value to the property and also raise the rents etc. So does he really want to do something with the property or just buy the property and depend on the cash flow?

Rod: Let me stop you there for one moment. So the difference there guys is a yield play versus a value a deal. And there are some very large investors I’m not gonna name any names that are focused on yield plays. They’re buying very very high-end properties on the anticipation and hope that the rents will go up. I’m here to tell you in my opinion that’s dangerous especially where we are in the market cycle. So I would recommend you look for people that want to force appreciation by adding value. Please continue Kay Kay.

Kay: And then I want to see their fee structure.

Rod: mm.

Kay: Their syndication structure. So I like to see all that before I make decision and then I do my own underwriting as well. So just to make sure and also I do my own research as well. The, my research the market, after researching the syndicator. And then I would go to that market and research the market. So whether it’s, is it job growth, the population growth, the crime rate, and all that kind of stuff, the median income of that neighborhood. So I can dig right in deep into the neighborhood level rather than just researching the whole Atlanta city and then, it could be a cause of street, it could be a bad area and I had this experience in one of the gas station. At daytime it used to be a really good gas station at nighttime get used to turn into a ghetto area. You know I had experience so I transferred this and I always when I do my research I always think about my city. So if I have a gas station in a low-income neighborhood but there could be One Mile, there could be a Starbucks because it’s closer to the downtown. So I do all kind of research and also I have…

Rod: What do you use. What websites do you use? I just want to hear if there any others that I haven’t spoken about.

Kay: …I use several website. I have a whole list of websites I’ve kept that in my Evernote and I use mostly city data…

Rod: mm.

Kay: …for the crime and dig deeper into the deeper and then household housing alert, co-star reports. I…

Rod: Housing a Lotus One City – Dara’s One, Co-Star Shore. If you have that access to that is fantastic. Okay.

Kay: Yes.

Rod: Okay. Fantastic. So what else?

Kay: And if you don’t have a Co-Star report you can ask for a Co-Star report from the syndicator.

Rod: Yeah.

Kay: Yeah?

Rod: You bet.

Kay: Yeah. And then I look at the sales comps and also the rent form in Co-Star reports.

Rod: mm-hmm. Yep. So you dig deep. You dig deep and probably a lot more than most passive investors do. You know I’ve got your list of questions here and you know like one of the questions I don’t know if this was yours or my tweaking but you know you want to know what the what the syndicators target market is and are they specialists in that market or are they all you know are they are they generalists. You definitely want specialists and you might want to ask them what their criteria is, you know. Because again questions like this and will help you understand the business more as well and so many people go from being a passive to becoming an active as they’re learning while they’re being a passive investor they’re learning and so you know and yeah your question I see your question on here if what if one of the KPs falls ill or there’s you know god forbid gets hit by a truck or something but…

Kay: Yeah.

Rod: …and then you know some other questions is that you have and I think this was yours is how you plan to manage the cash flow, you know. When our distribution is going to happen, are they monthly on a quarterly, who does your accounting, you know. And I don’t know if you added this or me but what who’s the transactional law firm you’re working with, and who’s the syndication law firm you’re working with, sometimes they’re the same you know. Just again this is to for you to become more educated and do some more research. You know how do you communicate with your investors? That’s a great question. What’s your communication policy is that any? Is it webinars? What’s the frequency? Is it phone calls? You know, have you ever had a failure? You know what and how did you deal with it? What happened? I’m the poster child for that one. You know have they been full-cycle on a deal? That’s a great question to ask you know cuz there are a lot of investors that are just getting rolling. I’m stealing your thunder here buddy I just wanted to help out look because these are some great questions and a lot of these were yours. And you know are they going – how’s the management going to be handled? You know who’s the third party property manager? They’re gonna do it themselves? You know what do you know or can you find out about the management company? That’s such a critical piece of this, correct? Kay Kay?

Kay: Yep.

Rod: Yeah?

Kay; And that even the asset management you want to know who’s gone I mean if it’s syndicator has like 20 properties and if he’s doing the asset management himself? How many I mean…

Rod: Correct.

Kay: ….how many he can do it all the time?

Rod: Right.

Kay: So he’s not basically putting the whole time into that property…

Rod: Right.

Kay: …which you might be a part of so…

Rod: Right.

Kay: …I want all that before I invest.

Rod: Right.

Kay: I suggest your listeners to do all this homework before they invest in any property in the…

Rod: Right.

Kay: …multi-family to cover their risk.

Rod: If you’re gonna give someone your money by god you better know what it is you’re investing in my friends which is why I, come see me in Baltimore. We’d be in Baltimore. September 27th, 28th, 29th. Get an overview of this business before you give someone your hard-earned money. And it’s just critical that you wanted to have some basic understanding of what it is you’re doing. And because there’s some, frankly, there’s some stupid be stupid deals being done right now. Deals that haven’t been stressed tested properly and you know by operators that are unseasoned. So just really need to be careful. You know questions like stress-testing. How’d had you stress-test the deal? Talk about that you know have you looked at what happens if you’re 25% vacant for example? What’s the operating reserve you’re holding? How big is it? You know rainy day funding, in case something happens. Let’s see what else, what are we forgetting here Kay Kay. you know how long they plan to hold the property? What’s the business, what’s the business plan?

Kay: There’s no plan.

Rod: Yeah.

Kay: There’s no plan. They’re underwriting whether they’re writing it from the plan or not. So what cap rate? Exit cap rate can change the whole bad deal into a good deal. So …

Rod: I’m sorry. Could you repeat what you said cuz I didn’t quite understand you’d said the exit cap?

Kay: Yeah. Exit cap.

Rod: Okay Yeah.

Kay: So …

Rod: Guys, guys when they’re doing a pro forma, if you see the same cap rate on a prospective sale in five years that they’re buying at today that run the other direction okay because they’re deluded. Certainly you have a higher cap rate now some people say you know 25 basis points a year we do at least of 1% cap, exit cap bump, on our deals. And so you know that’s the kind of stuff you need to understand well enough that you can evaluate the deal properly. You know and then of course what are the returns; what’s the cash on cash return projected; what’s the internal rate of return projected, you know? You want to look over there. Their proforma and their expenses and see you know if they make sense; if they’re doing a value add; does the vacant, does the vacancy increase while they’re doing that? I mean its common sense things that you want to be looking at, Kay Kay pop it in here any time.

Kay: And one thing is very important to, when you’re looking at the rent comps you must do your own research because I have seen a lot of people cannot comparing apples to apples they are comparing that the other parties one bedroom with your 3 bedroom.

Rod: Right. Or an A-class property with a C-class property or you know property with different finishes and amenities, like, like I had a I had I tell the story I have a friend of a friend that screwed this up where the property was evaluating was separately metered and the tenants paid their own utilities and he compared it to one where the owner paid gas and water and he lost me a deal he could have flipped her wholesale to made a million dollars just because he didn’t compare apples to apples. So do your own homework. Okay. And then you know you wanna ask questions like why did you pick this market; why’d you pick this property and then shut up and let them talk and really it let them sell you on the area and the property but yeah. Let me look here. I’m looking at this list of questions and really appreciate you sharing this because it was aawesome. A framework for questions but listen if you guys want this it’ll be in the show notes and awesome. Well listen my friend it you know you are such a treat are you gonna make it to Baltimore by the way.

Kay: I will be there in Denver before that. Yes.

Rod: Okay oh yes yes yes. Kay Kay is a member of my multifamily boardroom mastermind that’s right we’re gonna be in Denver in July and there’s over five billion in assets in that group now it’s like become this incredible massive group I have a great surprise guest coming to Denver and I you know and so yes we’ll see you in Denver my friend, yeah.

Kay: And let me tell you that how that last mastermind in San Diego impacted my business.

Rod: Okay.

Kay: So in my this goal here I wanted to be a GP this year and my, and I wrote my goals, I wrote that in my goals that this year I’m not going to be investing just passively but I will be a General Partner on some deals too. So when I went to your mastermind in San Diego, hwho was sitting beside me and he asked me what I wanted to do I told him that I wanted to be a GP and he offered me a deal. And he said we have a deal here and if you can raise as much money and we can bring you, you know, as a partner. And I raised money in about 4 days.

Rod: Wow. Fantastic. Fantastic Fantastic.

Kay: Yep.

Rod: Now you’re playing an active role in that property. You’re a…

Kay: Yep.

Rod: …GP playing an active role in that property which is, which is critical…

Kay: Yep.

Rod: …and…

Kay: I picked on the asset management calls every week…

Rod: Yeah.

Kay: …and learn a lot from there, from very experienced the guys there.

Rod: Right right right right fantastic. And that’s how this is done guys and so yeah thank you for yeah, that’s amazing that happened in San Diego I remember meeting your family there and yeah so, we, this mastermind guys you know this is for seasoned operators like Kay Kay and you know every its proximity as power that’s our tagline and that really is the truth of it who you are is who you hang around with and there’s a perfect example in other examples David, David’s a 23 years old and he aligned with Glenn who’s got 4500 doors and now they’re our partners and doing deals together than they met my mastermind here at my house the first time. So you know guys you be around those that are doing what you want to do, that think what you think is hard is easy, and your success is inevitable. If as long as you take action your success is inevitable. Kay Kay it’s been such a treat to have you on my friend. I really appreciate you and I look forward to seeing you in Denver in July and then and then in September in at the Baltimore event. Guys if you’re interested in Baltimore, its RodinBaltimore.com and I hope to see you there. Tickets are still stupidly and ridiculously cheap, keeps the wrong word, my team’s gonna kill me for saying that. They’re very reasonable to me for three days teaching there’s no outside speakers, selling anything it’s just me. So I’d love to see if you can make it. Thanks Kay Kay, great to see you my friend.

Kay: Thank you very much. Thank you for having me on your chill ride. It’s my pleasure.

Rod: Absolutely. Absolutely buddy. Take care. Talk to you soon.

Kay: You too. Thank you.

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