Ep #441 – Jeff Klotz – Billion Dollar Multifamily Portfolio
Here is some of what you will learn:
- Real Estate Investor at 17
- Building out your business verticals
- The investment life cycle
- Getting good at the basics
- Getting good returns quickly
- Over communicating the journey
- Building your Fund
- Programmatic Joint Venture Structure
- The chemistry of partnerships
- Exploring potential
To find out more about our guest click here.
Full Transcript Below
Ep #441 – Jeff Klotz – Author Investing in the US
Intro: Hi, my name is Rod Khleif and I’m the host of “Lifetime Cashflow through Real Estate Investing Podcast” and every week I interview multifamily rockstars. We talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the like and subscribe button to get notified every Monday when a new episode comes out. Let’s get to it.
Rod: Welcome to another edition of How to Build Lifetime Cash Flow through Real Estate Investing. I’m Rod Khleif and I’m thrilled you’re here. And we have a real treat today, gentlemen on that’s one of the more impressive people I’ve probably ever interviewed. His name is Jeff Klotz and you know I’m gonna have him tell his story. But I’m just give you a few highlights so you know he’s grown to over a thousand employees. He’s been involved in 125,000 apartment units, 42 developments, tons of other projects got a portfolio valued over a billion dollars and you know basically sits at the head of six independent companies that under the umbrella of the Klotz Group of Companies very very impressive. Welcome to the show Jeff
Jeff: Thanks for having me. I appreciate it
Rod: No absolutely my pleasure. So you know I’d like to start where I usually do and that is just have you take a few minutes and talk about your progression cuz I was really happy to see that you started out in single-family like I did and just maybe you can talk about how you started and kind of how things grew to here
Jeff: Sure. Well I love to and I appreciate that. That was a great intro no pressure yeah it’s kind of hard to follow those footsteps but you know I think my story, it’s interesting to me I kind of slipped and fell into the real-estate investment world at an early age. I literally bought or acquired my first rental property in high school and it was really by accident. And so you know as the story goes I was flipping through the local beaches newspaper and I saw an ad for sale or ad in the for sale that said house for sale $5,000. And I thought wow that’s great you know like how can you who would not want to buy a home for $5,000. So I pick up the phone I call a guy and he promptly laughs at me and says you know sorry kid that’s $5,000 down. I’m 17 years old and high school and you know back then high school kids didn’t really think about the this or investment or even real estate right all we cared about was the beach and surfing and girls
Rod: And what year was that Jeff?
Jeff: I was in 1994
Rod: 1994 okay thank you
Jeff: I’m dating myself a little bit. It’s hard to, I don’t know, please don’t make me do the math but and so you know I hung up the phone you know didn’t have a clue what he was talking about and you know promptly went and asked my dad, hey Dad what’s this guy talking about what does this mean? So you my dad who was a firefighter by trade didn’t have a whole lot of investment experience himself. He sat me down and had to talk with me so Jeff this is how it works so he explained you know cash flow and mortgages and seller financing and interest rates and you know you’re doing good if you’re collecting more rent than your cost are. So he gave me a five-minute crash course and of course most of it went over my head as a high school kid and but the parting words that conversation were always literally, you should do it. And so I thought okay so I called the seller back and arranged a meeting so the next day I skipped school went to his local office which was actually in the back of the local VFW bar and so you know here I am a 17 year old walking into the bar and this kind of crusty older gentleman kind of slides a contract across the bar and says here’s the contract. It’s not negotiable if you want to buy the home you can do a drive-by but you can’t go on it cuz I don’t want you disturbing my tenant and I thought that’s a little weird but you know it was an opportunity to buy homes. So I thought well this is great so I did a drive-by, like the house, and went to closing and you know the interesting part about closing was I learned you had to be 18 to sign a contract. So I remember having that that realization in the middle of the closing table and luckily I wasn’t carded by the by the closing attorney girls
Rod: No kidding. That’s hilarious
Jeff: But it was kind of a joke because you know when you’re 17 is all about how old you have to be to do certain things like go to a movie, buy this buy that or what have you drive and so I bought the house and I later went on to buy all 30 of the gentleman’s home. He had a portfolio of 30 homes and he was kind of the essential buy here pay here house resellers. So every house he had he probably sold in repo’d or foreclosed on probably 20 or 30 times and I think his average whole period or average success period was probably a year. So when he saw me coming he thought wow this young kid he’ll never figure out how to make his mortgage payments and so every time I’d save up a few extra dollars, I’d go back to him and there every time he repossessed the home, I’d go back to him and buy it from him. And so you know fast forward a couple years I’m probably 19 maybe 20 years old, I start to learn and understand that I’ve created a lot of equity in these homes and I’ve raised the value a lot and I started to educate myself on refinancing and basically took the entire portfolio to the bank and got one heck of a line of credit ended up with about five million dollars in equity or excessively that belief and paid the guy off and I remember literally walking up to him at closing and trying to give him a hug for paying him off and he looked at me he was like you know you started a gun, you put me out of business, what am I gonna do? I said, gentleman, you know I’m giving you a three million dollar check here like this is gonna be the best time of your life. He’s like he’s like no you don’t get it like my wife’s gonna spend the money I’ve got nothing to work on like I should probably divorce me and it was a funny story but I was pretty proud of myself for it you know paying the guy off and I end up again with a lot of credit that really allowed me to pursue my dream which was the acquisition of multifamily. And so you know during that two or three year period from from 17 through 20 you know I had built an entire not an entire business but I built a construction company and I had built a real estate management company around these thirty homes but I really fall in love with the multi family industry. So I as a teenager I literally learned of the you know the economies of scale and the efficiencies and the challenges that were possessed by most larger multifamily owners and I just always felt that I could do better. And I just saw the multifamily industry was almost a wide world of opportunities for me. And so but there were certain cost to enter as you know. The, your multifamily is expensive and so when I was able to refinance that family home portfolio and end up with about five million dollars in the credit line which was accessible then I really kind of kick-started my I guess my multi-family investment career.
Rod: So let me ask you this, now this is Jacksonville?
Jeff: Yes I was born and raised in Jacksonville or Jacksonville Beach and thought of the really started my investment career here in Jacksonville you know growing up everybody wants to leave their hometown to go out west go up north go down south or what have you and so I became pretty well-rounded and committed to the area when I started purchasing real estate. I did spend some time in games will allow attending University of Florida and that was good because that was also pretty good market and what have you. And so you know by that time we had built you know we had built up the construction company, we built up the management company you know early and we’ll call it like late to mid 90s, ‘97-‘98 you know we were serving most of North Florida include Gainesville, Jacksonville, Ocala, out to Tallahassee, but we were we were really starting to grow both the platform and our investment portfolio. And so but still being a really young kid not coming from any wealth, not knowing really any rich people, and not really understanding capital markets and really not having much credit. It was difficult right so I had an initial five million dollar credit line that I was able to use pretty carefully but I really couldn’t figure out how to do much more than about for real estate transactions a year and that’s going on for about really the first ten years stretched. So probably you know 1997 through about 2007 I really struggled to grow the company or do more real estate deals right cuz let’s face is right there’s three months in a quarter takes you about three months to transact on an average deal you got 30 days worth of due diligence maybe 45-60 days worth of financing and then everything goes right you could probably do that four times a year and so I was buying on average about nine hundred to a thousand units per year for about a 10-year stretch through kind of the late well in about 2007
Rod: This is without any outside capital? This is just your own deals?
Jeff: Well it’s with very limited outside capital.
Rod: Wow
Jeff: Through about 2007 I never really understood what I’ll call capital markets and so I understood the country-club investor. Yeah I could not kind of, I could call some lawyers some doctors and dentists and I could get well we call small sums of capital. My secret back then was to quickly figure out how to add value and quickly refinance the property so I could pull out that added value and then roll it into the next deal. That also kind of explains that limited kind of track of doing just four transactions a year. And so but I possessed a huge desire almost innate desire and drive to grow an organization you know one of my greatest senses of accomplishment is not how much money I make or even the real estate deals I’ve built or developed. But it’s really the organization that you built. And so my solution and growing the organization was to grow it vertically which was build out the platform right so you know fast forward you know through 2007 we had basically built out the six major food groups which was the brokerage business, the mortgage banking business, the property management business, the development business, the construction business, and investment banking business. We continue to grow that even today. We’ve got about a dozen subsidiaries which include a title company an insurance company a marketing company things like that but those six major food groups are still what we consider the most important aspects of you know the entire lifecycle or from concept through completion
Rod: Can I ask you a quick question? I’m sorry I interrupted. This is fantastic. So you’ve got these six vertically integrated companies under your umbrella and you know I look through a few of the websites you know I see you at the top of that food chain and every one of those you know do you have individuals that manage each one of those entities for you? or just give me a little insight into the management structure of that. It just seems so new almost overwhelming
Jeff: Sure so when properly staffed, you’ve got the class group itself which is literally the parent and operating platform of a group of wholly owned subsidiaries which includes all those different verticals. And so again when properly staffed each one of those business units has someone in charge right. Most commonly referred to or titled a president but in some cases there a managing director or maybe they have a different job title that they’ve had for years in the back or to keep it. But generally speaking there’s always a business unit leader in charge of the entire effort right. And so they did manage the company, the P&L, and everything with
Rod: Okay okay okay very impressive sorry I interrupted it just just so impressive to me
Jeff: It’s it’s you’re basically you’re describing your king in on some of the challenges of running so many different efforts which none are easy right. I mean I always say they’re simple but they’re not easy right. And it’s both, but they’re necessary parts of what I’ll call the investment lifecycle because one of the most valuable lessons learned during the last downturn was if you really wanted to control your own destiny, you needed to control your own resources and not really rely on third party folks to help because when things get tough, you need to really rely on your own team
Rod: Well your timing well your timing tonight made my eyebrows go up a little bit you said you you did this through 2007 right? And then it sounds like you you did some sort of a shift so I’m excited to hear what that is because of course you know I lost fifty million dollars the next year. So I’m very very very familiar with that particular scenario and area and time like
Jeff: The joke is we’re still all starred and beat up and bruised with almost you know significant damages suffered from that that period of time. Nobody cares for what we’re going through today
Rod: Oh I know and I want to chat with you about that but please tell me what was happening back in 2007 and how you got through that era because I’m totally interested here
Jeff: In my world, 2007 was still gangbusters so being obsessed with trying to figure out a grow a business and understand the real estate investment world. I started to really understand and wrap my arms around capital markets and how to access Capital and really what you know the whole concept of being you know a real estate investment sponsor was you know not a syndicated but really a sponsor and so we hadn’t started really build a team and gear up for what we thought was a you know end of 2007-2008 launch of our first real estate fund and ofcourse in 2008 that’s when everything kind of just hit a screeching halt for us but it was literally a third quarter of 2008 when all of a sudden somebody flipped a switch and what we thought or saw was happening in the rest of world became a very real reality that it was happening in our world as well. And so you know I had to delay the launch of our first real estate fund til 2010 but it didn’t slow us up on our desire to continue to purchase real estate. So you know when you build up a machine or a monster as I like to refer to it you can’t just stop you got to continue to feed it you got to continue to do deals. And so you know half of our time spent like going into the recession of the downturn last go-around was really focused on how to survive, how to maintain our portfolio, and I kind of easily adopted this philosophy or strategy that if we could keep our properties well operated and well occupied with the rents paid, who really cared about what happened to the rest of the world. Our value would continue to keep up and what-have-you so you know clearly
Rod: It’s not naive at all.
Jeff: Well clearly I was wrong because we lost significant value in the portfolio but the one thing that it really helped me understand was you know he who can operate the best has an upper hand and these types of circumstances. And so we got really really good at the basics really good at operating and really really good at operating for almost a defensive position and so you know if you go back to you know that last downturn and you really study the analytics you know our properties fared better if not the best in the market or the one of the best and so
Rod: And why do you think that is? Can you you know you were at a high level right now. Let’s go a little bit more micro because it’s so relative right now
Jeff: Sure. I think that generally speaking nobody had a portfolio like ours with as much of a hands-on, boots-on-the-ground, kind of roll your sleeves up, get your hands and fingers dirty approach, and so yeah I was on every ask that we owned every week. I was traveling like a madman. I was obsessed with trying to figure out how to beat the recession right. And the big part about that was there was really no history to describe what we should expect as a next step right. I learned back then that you know don’t say it’ll never happen because it just might happen
Rod: And it just did again
Jeff: When this go-around I will learn you don’t say they’ll never do that because well then they will right. They’ll shut down the beaches, they’ll shut down schools, they’ll shut down everything right. So it’s kind of a it’s you know I guess the lessons learned here are there are no two downturns alike right. But so we went from doing about a thousand units a year and about four units per year through about 2008 to 2009. In 2009, we acquired 9 deals, 2010 I think we did 13 deals, 2011, I think we did 20 deals, 2012, I think we did 36 deals, 2013, out here over 40 deals. So we got to what we were doing on average in really the middle of the downturn which was comes with a peek at our business about 10 deals a month. And so we were doing and that was both you know acquisitions in disposition but we built up pretty quickly after about 2009 so for about 2009 through about 2014-2015, we were acquiring about 10,000 units a year on average and that was you know that was some some pretty explosive growth for us and keep in mind, I’m not a you know a well-trained CEO. I had no prior experience as a CEO, have been self-employed my entire adult life. So I had no clue what I was doing. I was just figuring out as I went and so you’re literally building an organization from a hundred employees in 2007 to 1,103 in 2014
Rod: Can I, I’m sorry I hate to interrupt you because I’m loving this but I just want to drill down on something you just said, so can you give us a few insights as to maybe some hurdles and some strategies, like me and my organization we just implemented the EOS system I don’t if you’re familiar with the book traction and it’s a model for management and meetings and things of that nature. Did you adopt somebody system? Did you bring in and I kind of want to go back actually a little bit you know when you first got into this business, did you go do some courses? Did you do some training? Was this all self-taught or did you have any mentors? Can we go back there first then I want to come back to the business growth if you don’t mind
Jeff: So the answer is no. Back when I got started you know this concept education and boot camps and training and even well I’ll call you know corporate mentorship or what have you really don’t exist. I mean I had some friends and some family that maybe had some had dabbled in and business owners or what have. But I for some reason I possessed this innate desire to be a businessman to be self-employed to grow an organization to be an entrepreneur and I didn’t understand it back then. But now I do a little bit better so unfortunately you know as much as I tried to educate myself and learn and become self taught, there was really at least I had very limited access to anything that was anything like what you have today right. If you wanna them through the world of multifamily investment you know it’s easy to find a mentor, easy to find a coach. I mean there is a plethora of materials out there I mean you guys do a phenomenal job
Rod: Well thank you
Jeff: Hand-holding the folks from almost up you know beginner mode to success mode right. And so thank you it’s amazing the resources available today that’s provided by folks like yourself that really a fast-track that process that effort. Yeah you know if I had to do it all over again, I would have adopted some sort of formal system like what you mentioned EOS or so. There’s a bunch of them out there now in my opinion they’re the same whether you know
Rod: Oh they are. They’re just repackaged the EOS is kind of a rendition of the Rockefeller habits right right. And so did, I got so many questions I want to ask you but did you adopt any of those? or did you just kind of you know plow forward, make the mistakes, learn from the mistakes, keep going, or just give me a little idea of how you cuz that’s such massive growth
Jeff: Sure. So the answer is no. In hindsight, I should have. We basically we turned the lights off in the car and press the gas and kept driving. I mean we it was we did what, I mean it was literally, it was a battle every day and it was so much good happening that you really couldn’t say no and you know we were growing by leaps and bounds and the opportunities to buy discounted and distress, troubled,
Rod: Perfect timing perfect for you
Jeff: Yeah and you know we were buying this stuff priced by the pound and we really couldn’t say no and so and we were creating massive amounts of value mean during our peak our construction company was turning almost a thousand units a month. We’re doing nine hundred and something odd unit turns you know throughout the southeast right in eleven states. So it was you know to say it was gangbusters. Now let’s face it right you learn as a young child growth spurts are typically followed by growth pains right and so we sure felt our fair share of those and ultimately that’s what really prompted us to really evolve the organization right. So back you know ten years ago or literally since inception my focus was C Class lower income, value add and ground-up development but workforce housing in the middle mark and and we you know like a lot of folks that’s your easiest entry path into the industry because it’s the most affordable. But we, unlike a lot of folks we stayed true to that sector because well we created a lot of success in this. So we became known as really in the South the go-to group for for what we’ll call C-class value-added. In fact our business strategy in 2009 and we set out to be the first to really institutionalize that asset class because one of the things that we recognized you know over ten years ago was that you know the big investment firms and the big household names or the institutions of the world never had access to C-class multifamily because back then none of these syndicators and none of these small sponsors existed. Nobody who really owns C-class had any type of corporate governance or a type of institutional grade investor relations or reporting or what-have-you. And so the bulk of the majority of c-class multifamily was owned by moms and pops and they were consistently even in a good market you know creating trouble for themselves because most of they were over leveraged and they were capital constrained and what-have-you. So we kind of found even through the better part of the market in early 2000 that we were still able to buy discounted C-class real estate and
Rod: With your connections, were you able to, did you have receipt you know were you approaching receiver companies that were in properties in receivership and dealing with you know special asset groups that were you know trying to liquidate stuff? I mean did you become known as a source for them?
Jeff: Yes and we became the receiver in a lot of cases because we’re in the property management business because we were in the mortgage banking business. So kind of early 2000s we built a lot of small Bank CRE departments with our mortgage banking business and so a lot of those guys really want to own and operate their own commercial real estate lending departments and so they farmed it out to us and we were building their CRE loan departments pretty large and so you know we were their hero up until about 2009 and then the course they already calling us saying you know Jeff get us out of it. It’s all your fault and you gave it gives now this mess what do you do. And so you know we stepped in as a receiver, as trustee, we put our management company to work for the banks and the lenders and we became really really good at workouts a lot of times the banks would call us on them and when they started seeing early signs of default and we stepped in and try to kind of perform some sort of loss mitigation efforts and analysis and really strategize a work out that was a win-win for everybody but ultimately you know we you could only do so much and so we were kind of front and center when these assets started going back to the bank and you know as we receive you know the quarter point of the receiver we were managing many of them and so we doubled the size of our management company through really a receivership and trustee services or mostly you know banks and lenders or other creditors. And so now you know the platform itself really put us in the right place in the right time
Rod: You had all the pieces. So let me ask you this, you obviously wrapped your arms around private equity because you can’t do what you did one hundred thousand dollars at a time with doctors and dentists and lawyers. So can you speak to that a little bit? Can you speak to maybe how you got into that world because I mean I think that’s probably the belle of the ball were going to be, the belle of the ball for us moving forward as well as really trying to align with good private equity operators and can you speak to that a little bit?
Jeff: Well I can and our first fund and even our second fund was really geared towards what I’ll call retail investors you know we work with the broker-dealer channels and we worked with a lot of you know our minimum investment was always a hundred grand
Rod: So you worked with broker-dealers as well okay okay
Jeff: We work with anyone and everyone. Keep in mind back in 2009 or 2010, if you were talking about launching real estate fund, people looked at you like you were crazy. I mean literally I can’t tell you how many people told me Jeff, you could never, give up, don’t even try like you’re talking nonsense there’s no way in the world you a de novo first time fund sponsor is gonna be able to successfully raise blind poll discretionary capital during this time. And you know we realized you know that there were a lot of folks a lot of investors out there that really really wanted to take advantage of the opportunity to buy you know pennies on the dollar real estate
Rod: Now at that time was 506 C out or the were you able to go to non-accredited or you had just just totally accredited investors
Jeff: Just accredited yeah
Rod: Okay okay so you could advertise at that point though?
Jeff: We could not advertise
Rod: Oh you could not
Jeff: And we did not really solicit so we generally have had to work through placement agents, investment banks, broker dealers, on our network base right. So a lot of folks we were successfully able to convert a lot of folks that wanted to buy real estate from us realized that well you know buying real estate and owning real estate isn’t really all that it’s cracked up to be so maybe I’m better off investing a half million or a million dollars with Klotz, instead of buying a piece of real estate from Klotz and it’s what have you aboard. And so that was you know we’ve never really played a big part of it because it I think real estate became a big buzzword for discounted assets back in, back in those days
Rod: Well sure. The media made everything look like you know but people are dying in the streets you know as you know they make it much more scary for people and we’re encountering that now with investors you know we had 800 under contrat. We had people that got crushed in the stock market and now the fear is pervasive. So how did you, how did you push through that cuz it’s happening right now again. How did you push through that market sentiment that fear like you started to describe people saying you’re crazy
Jeff: Well the beautiful thing about multifamily especially when you’re able to purchase it at a discount or distressed broke and troubled is you can create almost an instant level of excitement with the value you create right. So we were able to create so much excitement, it was almost like you know in a world back then where everything was doom and gloom and the entire world was falling apart, we had little space carved out where we were buying multifamily and creating immediate value and an immediate excitement and again many of these deals we weren’t holding very long and so really wasn’t a five-year lockup or hold
Rod: So you got good returns for your people real quick – and then that word spreads yes
Jeff: Exactly and as an investment sponsor or a joint venture partner or what have you, we’ve always been very transparent, collaborative, and highly communicative. And so we like to really brag or share the success and take, like for me it’s all about the journey. And so we’ve really really focused hard on taking our investors and partners along with us in that journey so they can feel the excitement and there’s no kind of you know there’s no wandering or worried or concerned. I mean when you’re creating value literally on day one it becomes pretty exciting to them but so we had early-stage success right our first fund was oversubscribed, second fund was oversubscribed and then the third fund we realized that it was just, it was really tough to create the type of growth or raise the type of capital that we wanted to in you know $100 or $500,000 increments and so we started to really focus on a more professional type of investor,
Rod: family offices
Jeff: Exactly family offices, endowments, pension funds, you know real state investment firms, fund the funds, and even private equity. And so our third fund we realized that while approaching private equity they didn’t really want to participate like they wanted to control the show and they’re not even probably the best in pieces. So getting a prime an equity fund or a group to write you a check for a commingled discretionary fund an investment we realized was pretty difficult. But what we did get was we got a lot of the principals and the presidents and the executive team members who loved our investment pieces. They said you know what can’t really take the company in as an investor but wool we like to privately invest like I think are more investor. I think you know I personally want to invest in so we got a lot of admiral runs. So that was reassuring that we had a business plan and the business strategy that was what is feeling and then you know after a few of those, one of our groups kind of took us under their arm and said you know Jeff you might want to consider the programmatic joint venture structure. Of course you know I said the same thing I did back in 1994 what’s that? Well let us you know we’ll create together create a specialized program. We’ll give you one big slug of capital. You of course it won’t be discretionary you’ll give us major decision rights and but we’ll get to control and customize the entire process so that when we want to sell we can sell. We don’t have to worry about other investors basically you know driving or steering the business strategy in a different direction with new ones. So we did our first 55 million dollar programmatic joint venture right around 2013, 2012-2013. And it was like, I told you kind of the progression of deal flow or how went from you know doing just four deals a year to nine deals a year to you know 20 to 30 to 40 to 50 deals a year. It was that injection of those large sums of those large slugs of programmatic capital that really kind of put the pedal to the metal of you
Rod: So let me ask you this, how limiting was that kind of a relationship cuz I know we just bought an asset in Kentucky last year where pretty much the private equity made the guy sell he was very upset about it. So can you speak to that a little bit? I mean there’s obviously the positives is the sheer scale. You were able to buy it. Is there a flipside?
Jeff: Well I think you coach on this right. You’ll pick in the right investor or partner carefully is the key right. So we learned that in some cases the hard way because you know sometimes you get someone up you know who’s typically young and has no experience in real estate but just graduated college sitting in an ivory tower making investment decisions that you know in your heart are wrong or incorrect or not the best but you know he who has the gold makes the rules. And so it’s really tough for me having to learn lessons I had already learned before but picking the right type of partner is important. So we always, look at I’m not just interested in a check or I’m interested in a true partnership and we’re interested in a relationship and so you know our best investment partners have become friends and become mentors and have really helped us in our evolution as an organization. That’s what we’re looking for right
Rod: No, I love it I love it. We’re gonna take just a second to hear from our sponsor okay
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Rod: Welcome back. Now we were just talking before we broke for a second about the importance of picking the right partners and I’ve got a resource for you guys here it is right here. It’s a free called, – no that’s not it. That’s the wrong one. it’s a list of questions that you should ask before you get into partnership. I don’t have a copy of it here but you can get it just by texting hang on one second “partnership” to 41411. It’s got about questions up front you know and it ties right into this conversation. So I thought I’d throw that out there it’s a great resource so that you know cuz I’ve had you know I’ve got a I’ve got a multifamily mastermind it’s about ten billion in assets in there and some of the big hitters in there have broken up their partnerships because they didn’t ask the hard questions up front. They didn’t you know really dig in and but you know question I’ve got for you Jeff is, talk about an early failure that positioned you for future success. I think that would be real interesting if anything comes to mind. I know you weren’t prepared for that question but
Jeff: Well you know it’s interesting it’s not that I can’t think of any. There’s just so many of them right. Like this business for me has been the school of hard knocks and like how do you learn you learn from your mistakes and you learn from your failures and the key is not to make them, the key is to only make it once and learn from them the first time. That’s my theory anyhow
Rod: I call them seminars. Yeah mine was a 50 million dollar seminar for me in ‘09
Jeff: And could be an entire college education right? So, but you know I think that there’s so many different lessons learned along the way whether it’s you know how do you hire, how you recruit, you know how do you align yourself with you you know your investment partners or your team. You know alignment is key in any relationship. And so
Rod: Can you drill down on that just for a second because that’s somewhere I wanted to go with you because there’s no way you could have done this without finding the right people and you know even the heads of your different entities your you know and then the people below them. Give us some tips on finding the best people
Jeff: Well it’s all about the team right as you pointed out earlier you can’t do it on your own and without a rockstar team, you’ll never be as great as you can be. You’d never reach for maximized your full potential and so yeah I wish I had, I’m still learning as we go right I can’t really tell you exactly how to find the right people that I can tell you it’s hard work it doesn’t happen naturally. It doesn’t happen by accident you know every now and then you find someone who who’s a great fit or there’s more instant or natural chemistry and that’s what we really look for. You talk a lot about the we kind of coded the C culture here which is just basically a handful of kind of corny words that start with letter C but they’re really after the right type of chemistry. So you know we we seek folks that are coachable, who communicate well, collaborate well, coordinate well you know those four main topics really create the right chemistry. And so it’s interesting you know nothing that we do is simple, easy, basic, average, mediocre, normal, typical, or traditional. Like our partners set bars that are extremely high and so you know we have to recognize, our team myself and my existing team, we have to recognize that we can’t just simply survive by being normal average, basic, typical, traditional, or whatever right just normal amounts of effort normal amounts of skills or capability or action, this doesn’t do it for us because the bar set pretty high and everything we do is challenging. And so we have to recognize that when we’re interviewing and when sourcing a recruiting talent and not so much we have to find people that are that way but we have to find people that are willing to be that way and not just in their job performance but or their hard skills but their soft skills right. So you know we you’ve heard it a hundred times or thousands of times it’s not, it can’t always be about your your hard skills or your education or your capabilities of your experience. There’s a lot of might be personality or your soft skills and finding the right personality or the right fit the right alignment the right goals I think it’s critical
Rod: Emotional intelligence as it were. So you said coachable, chemistry, communicate, what were the other two Cs?
Jeff: Well there’s Collaboration and coordination. Those create those initial foundational efforts or behavioral traits trait good chemistry or help to create good chemistry right. But what we really seek out is to create that right type of chemistry because if I look back over the twenty five plus years that I’ve been doing this, what I’m able to create you know as an individual the right relationship with the right resource, it’s like a rocket ship. We can create significant success but when that fit is just not there success is tough it’s troubling, it’s difficult, it requires work, you want you want the right relationship to be to be natural and that’s not that easy and it’s not that easy to figure out
Rod: Do you occasionally I mean I assume occasionally you realize you made a mistake and you have to make a change that certainly that’s happened with me. Well let’s shift gears for just a minute just you know talk about soft skills. What drives you to build something this freaking massive Jeff? I just please please enlighten us
Jeff: Look, I think I’m crazy right. I mean I’m probably diagnosed with something I just haven’t gotten that far yet. I mean I can’t really explain it I just add this innate drive and desire like I wake up every morning I want to build and create and accomplish and I won’t go to sleep unless I’m happy or satisfied or content with what I’ve accomplished from that day. And there’s just something about and I can’t figure it out. I talked to you know neither one of my parents were self-employed or business people and I did you know no one in my family is for that matter so I really can’t it’s not about the money and it’s really about it’s about building something, creating something, and that’s where we have our most most fun our most satisfaction or most enjoyment and I you know at a deep personal level, I believe as humans, were designed and built and created to accomplish it and you know I like to think that I’m just fulfilling my purpose while refining it every step of the way. I also like to think I’m just exploring my potential which is part of the fun too. So the challenge of it you know I think I told you earlier that when we were launching our first fund you know nine of the ten people we spoke to said, oh it can’t be done, don’t do it, you’re crazy, you’re nuts, like what are you thinking. And all that did was kind of add fuel to the fire. It was almost like I became obsessed like insanely obsessed for launching a fund because so many people told me it couldn’t be done I had a rule of thumb you know maybe that has something
Rod: Sure sure. Let me ask it let me it I’m sorry I’m sorry please, your thought, forgive me
Jeff: To do what we both do, you can’t be normal right. You need to have that craziness in you right.
Rod: Now let me ask you this I’ve got a lot of aspiring investors listening to you right now. They haven’t pulled the trigger yet. They’re maybe super analytical, maybe did they need to have all the facts before they take action. What would you tell that specifically demographic because that’s a big one for me is these super analytical people that you’re super successful once they take the plunge but what would you say to them?
Jeff: I think you know I tell you the same thing, they’re telling the same thing, my dad always told me like just do it. Just do it yeah but the number one thing I try to make people understand because there’s a lot of education out there and there’s a lot of folks that like no one really understands without kind of thinking behind the curtain how difficult and how hard it is right. And so there is no absolutely no get-rich-quick or eating rich easy solution out there. I mean this is one of the harder businesses and more the harder industries the great news about that is with the right type of effort, and the right type of work, and the right type of commitment, you can succeed. But it’s not easy and I think everyone who really wants to create the type of success that they dream up has to understand the type of effort, the type of action, the type of commitment, that’s necessary. And the biggest problem I find or I see is people generally take that for granted you just don’t understand how difficult or how hard it is and you really got to prepare yourself mentally for that challenge. It’s a war
Rod: You gotta want it you gotta want it yeah you got to want it. So is there anybody that you look up to in this business? Is there anyone that comes to mind when I asked question?
Jeff: Well there’s a lot of folks right inside you know there’s a lot of the industry leaders that have created you know a lot of success. I personally admire folks that have created substantial success from nothing or self-made. I mean there’s something genuinely impressive about self-made men or women and I’ve got a few partners probably shouldn’t name them
Rod: Oh that’s okay that’s okay I was just listening to Sam Zell being interviewed on Tim Ferriss that’s about the only podcast I listen to and it was just so impressive came from nothing and you know
Jeff: Well you know I’ve got the link here on my desktop that it’s scheduled too. I hope to be able to have some time to review that this evening
Rod: Oh No kidding. Oh it’s incredible they’re so impressive yeah yeah. Well listen Jeffrey I really appreciate your very very valuable time today I know how incredibly busy you are and you’ve added incredible value and uncertainly inspired tens of thousands of people with this conversation. So I’m really grateful and I’m gonna have to drive out to Jacksonville. I’m in Sarasota I’m have to come out there and buy you a meal one of these days because are you really fantastic
Jeff: I’ve been to Sarasota a lot
Rod: Oh really? Fantastic. Well please let me know the next time and thank you so much for adding value today my friend
Jeff: Thanks Rod. Take care
Rod: Thank you!