Kent is a former management consultant, start-up owner, and corporate executive turned full-time real estate investor and operator. Kent is the CEO of Hudson Investing, a multifamily investment firm which helps busy professionals scale and diversify their real estate portfolio. He has been featured on many shows including Best Real Estate Investing Advice Ever and The Real Estate Syndication Show providing impactful interviews and practical tips for investors.
Here’s some of the topics we covered:
- Syndication Mistakes
- Due Diligence When Choosing A Bank
- Smaller Banks Lending Money
- Praising Your Team
- Accepting and Giving Feedback
- Giving Your Team Context
To find out more about partnering or investing in a multifamily deal: Text Partner to 72345 or email Partner@RodKhleif.com
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Full Transcript Below
Intro
Hi. My name is Rod Khleif, and I’m the host of “The Lifetime Cash Flow Through Real Estate Investing” podcast. And every week I interview Multifamily Rock Stars and we talk about how they built incredible wealth for themselves and their families through multifamily properties. So hit the “Like” and “Subscribe” buttons 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 a Lifetime Cash Flow Through Real Estate Investing”. I’m Rod Khleif, and I’m thrilled you’re here. And I know you’re going to get tremendous value from the gentleman that I’m interviewing today. His name is Kent Ritter. Kent’s got a podcast that I was on. It’s called “Ritter on Real Estate”. You guys need to check that out. And his website is kentritter.com. And I’m very excited to share some content with Kent because like I said, I’ve been on his show. I know he’s a nice guy and he’s got a lot of value to add. So, Kent, welcome to the show, brother.
Kent
Thanks, Rod. That was a glowing intro. I really appreciate that.
Rod
Well, it’s truth. It’s truth. So, you know, why don’t we start by having you give a little background on you? I know you went from W2 to you know, former management consultant to you know, doing this multifamily business. And so that’s one of the topics I want to get into you with you. So why don’t you give us a little background?
Kent
Yeah, I’d be happy to. So, you know, I kind of a winding path into where I am now, as a lot of people do. I started out my career as a management consultant, which essentially what you do as a management consultant is you help businesses solve problems that they can’t solve themselves. And so I spent 12 years doing that, just flying around the country, working with hundreds of different businesses. And really through that process, you know, I bring that up because I really started to see some themes. I started to see what works, what doesn’t work, and what I realized, you know, whether it’s project management or just you know, being able to convince people to move in the right direction, it really has translated well into my real estate career.
Rod
Sure.
Kent
Partially through that process of being a manager consultant, I started my own management consulting firm with five other partners who started out in 2010, sold out in 2015. And then that’s what really started my real estate career. I started as a passive investor and I started doing some smaller things with some buddies, some fix and flips, some singles and duplexes, but really started passive investing with other sponsors because, you know, when you sell a company right, they don’t usually don’t let you just walk away. So I was now an employee of the company that we sold for. I had four years left on my earn-out. And so I started really in that process, passively investing because I wanted to diversify. I didn’t want all my eggs in one basket, I had capital from that sale, but also because, you know, as time went on, I just really fell in love with real estate in the process and understood all the value. And that’s when I started really passive investing with the eye on one day being active. And so I started seeking out sponsors who are willing to also act in a mentorship capacity and help me learn. And I actually just interviewed somebody on one of my podcasts, and he had a great, great line. He said, you know, “you are learning and earning”, and I think that’s fantastic. So I was investing passively looking to learn. And then I did that until about 2019, when I felt like I had gained enough confidence, got in the right mindset, and had the knowledge to go out and be part of on the GP side of part of a syndication. So I joined a group in 2019 and we acquired 250 units, and then kind of through that process had gained some other mentors, one of which runs a large multifamily private equity firm, in about 20,000 units. And I think when he saw me having some success on my own, he said, why don’t you join our platform and we can partner up? And we were talking about different strategies, and they had gotten so big at the time that they really only focused on 200 plus unit properties. But, I mean, we all recognize there was opportunity below that as well. So he said, look, if you want to come on and execute that strategy on kind of 200 and below, I’ll let you use our platform and our resources to build your team on. So it’s kind of a cool start-up within a larger corporate kind of experience. And so did that in 2020. Learned a ton. I kind of look at it like my real estate MBA. I was there for 15 months. Ultimately, at the end of the day, you know, I’m an entrepreneur at heart, and I really had the desire to build my own business and my own company and shape it in the way I wanted to. And so sat down with my mentor and had a tough conversation and said, you know, I said, I love what we’re doing here, but, you know, if I want to be you, I can’t work for you. And so ended up you know, mutually parting ways and started Hudson Investing really up again in June of 2021. And we’ve gone on to acquire 181 units thus far. We’ve got a couple of others under contract at this moment.
Rod
Love it. Love it. I want to circle back to quite a few things you said because I want to hammer them home. Number one, you know, in your management consulting business, you started to see, you know, similar patterns, and that’s an incredible experience you know when you can cross-pollinate that to what you’re doing now. And guys, those of you listening, I promise you that you’ve got skill sets and superpowers you’re not even aware of that will translate into this business that will help you in whatever aspect of this business that you get into. And you started passively like so many people do in this business. It’s a great way to see behind the scenes you know, and a good operator like us and like you will allow someone to look behind the kimono and see what’s actually going on. And, you know, we do a lot of education with our passive investors, and good operators will do that. So you can get a behind-the-scenes of stuff that I can’t teach from the stage in my boot camps. You’ll see as a passive investor, and I highly encourage you, if you have the resources to do that, to start that way. It’s a fantastic way to start. And I love learning as earning. I use that line all the freaking time because it’s the truth of it, you know. I’m continually learning and reading and growing. If you’re not growing, you’re dying. I love the fact that you’ve mentioned the fact that you’ve had several mentors over the years, and you worked with them. Guys, that’s paying for speed. Okay. Bottom line. And in your case, you paid with your, you know, sweat equity with this gentleman that had 20,000 doors. But the bottom line is, you know, certainly you can do it on your own, but it’s going to take a lot longer. And so I love that you brought all those key points up. So let’s talk you know, you sent me some notes on some awesome topics that I’m really going to enjoy getting into. But let’s start with your path from having a W2 to becoming an investor. I think you kind of gave us a little bit in your background here but, you know, maybe talk about, you know, the fears you had to push through and things of that nature, because that’s tough for a lot of people. They struggle. They have limiting beliefs or they have fears or they’re comfortable and they don’t take action with this. Can you speak to that?
Kent
Oh, yeah. Like everybody else had my fair share of limiting beliefs, and I still do, you know. Everybody does. I don’t think you ever quite get rid of them.
Rod
Right.
Kent
But that absolutely was the first barrier to overcome. I know you talk a lot about mindset. I mean, I’ve listened to your content for a long time.
Rod
Thank you.
Kent
It is critical. It really does start with mindset. It starts with believing what you can do. And that was a point where I had a mentor come into my life and help me shatter some of those limiting beliefs and say, you know what? I can do a big deal, you know, and I can raise the equity. I do have something to share out there. You know, when you think about trying to raise equity, I think it’s really critical. If you want to do it to any scale, you have to become a thought leader. You have to put yourself out there. You know, you got to show people who you are, what type of person you are, and what you know. And, you know, that was really one of the reasons why I started my podcast. And again, that was another mentor that came along and really pushed me to start a podcast and said, you know, you got to get out there. And that’s just not me. I mean, a lot of people don’t believe this, but I’m actually an introvert, you know. I’ve trained over years to be extroverted and to present and present well, but, you know, it’s not naturally my state of being. I think that being said, I’ve really had to push out of my comfort zone to get out in front of that many people. And now, you know, we’ve got tens of thousands of people a month that listen to it. Now it’s proof. It’s like, wow, okay, there is something valuable there. I do have something I can share you know, but at the beginning, it’s really uncomfortable to put yourself out there. You know, I think what you said about limiting beliefs and stepping out of your comfort zone, I’ve started to look for those opportunities now, to look for those things where, you know, in my past, I would have said, oh, no, that doesn’t feel good. I’m going to stay over here in my box. But now I look for those things. And if I start to get that uneasy feeling in my gut, I start to say, you know what? That’s something I need to pursue. I need to go after that because that’s the only way that we’re going to grow.
Rod
Love it. Tony Robbins has got a quote, “the quality of your life is in direct proportion to the amount of discomfort that you can live with”. And I think, you know, anybody those of you listening, you look back on anything amazing that you did that once you were done with, you’re like, oh, God, that was freaking awesome. You pushed yourself. You got a little uncomfortable. You know, you talked about you know, shattering your– well, shattering may not be the right word, but certainly pushing through your limiting beliefs and fears because you got a mentor. And I think that’s one of the reasons you know, I put a little plugin for our warrior program. My students now own well over 50,000 doors. I’ve been teaching for about four years. I’m super proud of that. But it’s because of that dynamic they get in there, they see other people just like them that have done it. You know, that’s why I’ve been so successful. And you talked about getting a mentor for your podcast. I bet in my warrior program, as I’m talking about my warrior program right now, I bet we’ve got at least two dozen warriors that have started their own podcasts as well. To create reach. You can do it through a podcast. Like you say, you become a little bit of a thought leader to add value. Be it a podcast, be it a meetup group, create a Facebook group, you know, your LinkedIn page, YouTube channel, whatever it is. We have so many incredible opportunities right now to create reach. And you don’t need thousands like you and I have, you know, even if you just have a few hundred people that appreciate you because you add value to them. When you’ve got a deal, all you got to do is mention it and your phone starts ringing because you know, they trust you. They believe in you. They know that you’re coming at this from a good place. Would you agree with me on that?
Kent
I definitely agree. One thing I’ll just share that really helped me was, you know when I was looking to start a podcast. I’m looking at the space and you look at how many podcasts are out there.
Rod
Two or three million right now.
Kent
Yeah. And so I was like, you know, what else could I add that hasn’t already been said. Right. And my mentor told me he was like, you know, it’s not about that it’s about–. There are going to be people that resonate with you in the way that you say things, and you’re going to say things differently than other people say things. And so no matter who you are and kind of how you communicate, there’s going to be people out there that resonate with you, and they’re going to want to listen to the way that you say it. And that really helped me change that limiting belief of what else can I add? Right?
Rod
Great advice.
Kent
It wasn’t about the content as much as about maybe the perspective and the way that you share it. And that’s going to connect with somebody.
Rod
And you being you, you being authentic. Not trying to be something you’re not. You know putting the– you know the dirty laundry is the one word, putting the pain out there, putting– in fact, we’re going to talk about some of your war stories here in a minute. But putting that out there, not being afraid to let people know you’re freaking human and, you know, you’re not perfect as nobody is. And so that was great advice. You had some great mentors there, brother, I got to tell you. So let’s move into another section. Let’s talk about team. Because, you know, you and I both know and if you’ve listened to my podcast, you know that this business is absolutely a team sport and you can’t and shouldn’t try to do everything. You can’t do it. And anybody that’s built any real scale with maybe one exception that I know has done it with a team, and even he had an internal team. So really that’s how you build this thing. So, you know, because of your, you know, extensive management consulting experience, you know, I think you started to see some of those patterns. And what makes businesses successful. Can you speak to that a little bit and relate it to team?
Kent
Yeah, for sure. I look at it as there’s kind of four things I think that are critical to, I guess I’d just say making a business successful. And I think really when you relate to hiring and bringing people on and not only bringing them on but having them stay. And so it’s culture, context, fit, and feedback.
Rod
Okay, hold on. Taking some notes. Culture, context, fit. And, oh, I love this. I love this. That encompasses damn near everything. I love it. Keep going, please.
Kent
Yeah. So, you know, it starts with the culture that you want to build. I mean, when you’re new and it’s just you, it’s you, right? You’re the culture. And when you bring on that first person, you know, that culture becomes you and them. And as you bring on additional people, the culture continues to grow. And if you do it right, the culture takes over a life of its own. And it’s not being dictated by, I think, the leader. I think the culture becomes the kind of the interconnections of the team and the group. And you have to set the foundations of that early. And I think the two things that really matter with culture are like mutual respect and accountability. With that accountability, I think the ability to fail without being ostracized.
Rod
Hugely important.
Kent
Yeah. The most dangerous things are the things you don’t know about. And if you rip people every time they make a mistake, they’re just going to stop telling you about their mistakes. And I saw that time and time again. It’s like you have to create a culture where you can fail gracefully, you know, and people can learn from that. One of the things I would tell my teams and as a management consultant, I tell my team now is like, I don’t expect you to be perfect. I just expect you to do it better next time than you did at this time. And I think that’s all we’re trying to do. Right?
Rod
I love it.
Kent
Yeah. It’s all about culture. I think other things that lay around, I talked about context.
Rod
If you don’t mind, let me expand on culture just a little bit, because I built 27 businesses, and, you know, several have been worth, you know, tens of millions of dollars. Most have been, I call them seminars instead of failures. Most have been spectacular, flaming seminars. But, you know, I remember developing a culture at a large litigation support company I had, and we did all kinds of cool stuff. But, you know, one of the key pieces is you have to come up with some core values around the company. You also, you know, ideally have– you create a mission statement. You know, for example, our core values here in my thought leadership business, go along with the acronym family. Okay. And so like, the family stands for family and fun. You know, we have a supportive family with lots of fun. This is for the team to rally around, and this is how we operate. Then the A is for authentic. You know, we aren’t afraid to ask for help, but with us, you know exactly what you got. Transparency, like you talked about, which you very much need. That massive action is another one that you know, we’re continually taking massive action, which is what I tell my students. You know, you make a decision, you take massive action. At some point, success is inevitable. The next one is integrity. And honestly, that was number one on our list. But we had to move it down to have it fit the acronym family. But, you know, we do what’s right even when it hurts. And then, love is the next one. We love what we do, and we do it with love. And then the last one. Yes, was to evolution, where we’re constantly innovating and evolving. So that’s an example of core values. So, you know, even if you start a small operating business here, guys, and start your strong multifamily business, I would encourage you to come up with some core values so that you have some guiding beacons for what you do. Do you agree with this, Kent?
Kent
100%. I mean, I have a team of seven, and I’ve got core values.
Rod
Right. There you go. There you go.
Kent
A lot of them aligned very similarly to yours, you know.
Rod
Love it. Love it. So I just wanted to add that in. So let’s talk about context, please.
Kent
So context, this was one of the things that I just saw over and over again when I was a management consultant. People just did not provide to their employees. So what I mean by context is, you know, let’s just– imagine an assembly line, right? You’ve got ten people on the assembly line. Well, does the first person know how what they do, whether good or bad, affects the next person align and even the 10th person in line? And usually, the answer is no. Usually the person, you know, for simplicity, is pressing the button. And they don’t know what happens next when they press the button or when they don’t press the button. That’s their job. Press that button. So what I found is when mistakes are happening, you know, I think that most people want to do the right thing, I think they want to do–you know, they want to help their business. I think they want to do what’s right. But most people just, they often just don’t know the impact that what they’re doing is having downstream.
Rod
Or not doing.
Kent
Or not doing is having downstream. So, you know, if Betty doesn’t get that file into that folder by this time, right, what does that mean? If she doesn’t know that it affects something critically down here then what’s the big deal if I didn’t get in there at 5:00, maybe it was 5:15. Right? So just for your team, providing them context on how their role fits into the larger company and the larger vision and the impact that they have on the global mission, I think it’s critical, and I think it’s something people gloss over in the day-to-day. And they just said, you know, do your job and keep your head down and that kind of thing. But you got to pull, I think everybody up to a certain level to the strategy to understand what we’re all trying to achieve.
Rod
I love it. You just gave me some great information right there that I can see that I need to do with my organization. So I really appreciate that one. That is awesome. All right, how about fit?
Kent
So fit is just you need to hire people that fit within your company and fit with you. And fit with the others and the culture that you’re building. Right. I think one of the best– well, let me tell you why. Because the most dangerous thing in any business is to have a bad apple because, you know, like a cancer that will spread throughout your company, it will impact your culture. And you got to make sure–you know, and the best way to avoid that is don’t hire them in the first place. Don’t hire people that are a bad fit in the first place. And so with fit I believe strongly in personality tests. I like the Tony Robbins DISC profile.
Rod
And that’s free, by the way. You can go to his website and do that one for free, and it’s incredibly accurate. It’s DISC profile and he does it for free. You can upgrade and pay more and get into his coaching and stuff. But that’s awesome. I’m sorry I interrupted. Please continue.
Kent
No, exactly. So, anybody that I hire now, I have them do the personality profile as part of the hiring process because I want to understand, you know, what are their values and what type of personality do they have and what can I expect from them? What are they going to succeed at? Does their personality fit the role? I think that’s a big deal. And then also it gives me a lot of insight into what are maybe blind spots they have or what should I look out for. For example–
Rod
And how to communicate with them.
Kent
And how to communicate with them.
Rod
Sorry, I interrupt you. Please continue your thought. Okay.
Kent
No, you’re exactly right, you know. One thing, for example, if I see somebody as a very high orientation to I think it’s the S. No, I is for people.
Rod
Steady and compliant is S.
Kent
I is people. Right. The people orientation. Yeah. So if I see a really high people orientation, then, you know, not that they’re going to do it, but something I want to watch out for is that they’re not just telling me what I want to know? They’re telling me what I need to know.
Rod
A yes man. Right.
Kent
Right, exactly. A yes man. It’s just something to watch out for. You know, if you understand people’s personalities, you understand how to relate to them, how to communicate, and how to get the best out of my thing. So they got to be a good fit.
Rod
No, I love it. You know, it’s interesting. I just hired a COO with my company. It’s a huge role in my company and today, actually, so it’s kind of timely, this conversation.
Kent
Congrats.
Rod
Thank you. Yeah, I’m really excited about it. He’s a rock star and very excited about it. But, you know, I had him interview someone that worked for me previously, a very high-level position in one of my other companies. And one of the big things that he looks for is someone that can fit with me because, you know, obviously, I don’t have a very subtle– you know, my personality is very strong. Not that that’s necessarily a negative, but it can be. So he looks at team fit for– he helps me make sure that I’m making a fit decision. You know, team fit decision and Rod fit decision, as it were. But anyway, so this is good stuff. All right. So now, of course, feedback, accountability. Speak to that a little bit.
Kent
Yeah. So again, this is a really simple thing that is often missed you know why? Because it’s uncomfortable. So one, feedback, it’s got to be timely and you’ve got to deliver the news timely. News isn’t good or bad, but it has to be delivered. And there’s positive feedback. You definitely need to tell people when they’re doing well, I think. And this comes from being a dad, too. It’s so much more effective to praise someone or your children when they’re doing something you want them to do than to discipline them when they’re doing something you don’t want them to do. Right? I think that positive feedback works so much better. But then there’s also constructive criticism and we’re all learning, we’re all growing. Right? There are all things that we can do better. If you’re not giving constructive criticism, you’re doing your employees that just service. Because again, everybody wants– most people want to do better. And if they don’t know that they’re not, then how can they change? Right? And so a lot of people put it off. They don’t do it, say, oh, we’ll get to it. They avoid it. They’re avoiding it not because they don’t want to hurt that other person’s feelings. They’re avoiding it because it is uncomfortable for them to have to do. So, my message is, as a leader, if you’re going to be an effective leader, you’ve got to get out of your own way and over your own stuff. And you got to give the feedback to the person that’s going to help them. And you approach it with love and empathy.
Rod
And you start with the positive. Start with the positive. Do you agree with me on that one? You start the conversation with what’s great. Here’s what you’re doing great. Now–
Rod
Well, I think– I’ll take a little different spin on it. So my approach is you bring empathy to the conversation by telling them why. First, you ask their permission. Can I give you feedback? You’re creating buy-in.
Rod
Okay.
Kent
If they say no, there’s no point in giving them feedback anyway because they’re not going to listen to you. So you get by and they say yes. Then you tell them why you want them to get feedback and say, you know, Rod, I’ve got some feedback I’d like to give you because I really want to see you get to the next level. I really want to see you be the best podcaster you can be. You know, whatever it is, you tell them why and it’s because you really care about them. You want to see them do their best, then you deliver the feedback. Then I think if you can also work in positives, it can help dampen the blow.
Rod
I think people don’t listen unless you incorporate some positive. But listen, I love the why. I mean, I absolutely love the why. You know, I’m reminded of– I bring up Tony again here. Tony at his events, he has people do an exercise and people in their group give them feedback. And this is where I got this. And he always starts with you know, what was great about what you just did. Here’s what was great about what you just did. Now, here’s what you can improve. But listen, I love this, man. This is such good stuff. And asking their permission first, you know, I will tell you, the praise is so freaking important. I used to write in my planner when I had 60 employees, you know, praise two people today. Find something that I can praise them about. And, you know, I just sent an email this morning. I was given a data boy to somebody that somebody said you know, new VA we just hired her. Hearing great things about you. Keep up the good work. Boom. Quick email takes two seconds and makes their day, you know.
Kent
It does.
Rod
It’s more important than money. Honestly. You know, when you do something and tell somebody that, you know, they’ll kill for you. Honestly, when you praise them regularly, they’ll walk through fire for you. Honestly.
Kent
I mean, that’s what people want, right? People want recognition. They want to know they’re doing a good job. And I think you got to provide that for them. And, you know, I’ll be totally transparent. I haven’t been the best at that lately. I think I’ve been so heads down. I think there are a few folks that really deserve some praise that now that we’re talking about this, I’m going to go write some thank yous.
Rod
Yeah, same here, buddy. It’s something I don’t do nearly enough. And sometimes, you know, I’ll be on a Zoom call or, you know, Slack call with one of my team. And I’m like, you know, I don’t think I’ve told you lately how much I freaking love having you on our team and feel blessed to have you here and so on and so forth. And they’re like, wow, you know. And what did that take? You know, a few seconds. But it’s got to be genuine, of course. If it’s fake, they know it’s fake. It’s got to be genuine praise. And of course, the same thing, of course, applies to your spouse, to your intimate partner, to your kids, to anybody. You know, people thrive on praise. Well, that was really good stuff, brother. I really appreciate that. So now, I hate to go from positive to negative. I probably didn’t sequence this well, but, you know, you’ve got a couple of war stories that you referenced when you sent me some notes for our conversation. And, you know, I think there are some lessons there that would be helpful. So let’s talk about the first one which is your lender issue, the day of closing.
Kent
Yeah. Not that these aren’t painful to discuss, but I’ve recognized that there is value in these lessons.
Rod
Oh, absolutely. There’s always a lesson.
Kent
Like you said, seminars. And you learn more from the mistakes you made than the successes you had. So 100%.
Rod
By the way. One second, before you go into that, just one more thing on feedback. Guys, you should actively ask for feedback about you, about your company. Okay. Critical. So it’s not just giving feedback. It’s asking for feedback. Because how are you going to improve if you don’t get that? So immediately after one of our boot camps, the next day, if you participate, you’ll get a survey from us. Hey, what did you love? What didn’t you love? And of course, you know, 99% of its love, but I’m looking at that 1% to see what we can improve. Same thing with my boardroom mastermind. We just had that in Vegas a few weeks ago, and they got a survey the next day. Hey, what did you love? What didn’t you love? Because you know, you can’t grow. We survey our warriors. How could we do this better? And so, you should proactively seek out feedback at every opportunity. Don’t be afraid of it. Welcome it. Do you agree with that?
Kent
100%. I think seeking feedback on your business is huge, is fantastic. Like you said, how can you do better if you don’t know what you’re doing wrong?
Rod
Yeah. All right. Sorry I interrupted. Do your lender war story. Please.
Kent
So the lender war story. This is on a deal we closed here in November. We were supposed to close in October. And so, you know, we’re going through the process. And essentially, the long story short is our lender dropped out, like, not at the 11th hour, literally noon on the day of closing. I got a call from the lender, and the lender says, and it was a small credit Union here in Indiana. And they said, hey, Kent, we got a problem. I said, oh, yeah, what is that? What’s that? And he said you know, we’re not going to close the day. I said, why not? At this point, the deal had been through their loan committee. It had been to their CEO. It even gone to their board for levels of approval. And so they call and say, we can’t close the day. Guys, I was literally about to drive to the title company. You know, what’s going on? They said, well, they said the LLC it’s buying the company is owned by another LLC. I said, well, yeah. I said, you know, there are several LLCs in the deal based on us you know, raising money and the structure we set up, it’s all outlined in the operating agreements I sent you in the org structure, I provided with the operating agreements. You know, you guys have had those for months. So what’s the issue? Well, they’re like, well, we’re not comfortable with that. And I’m like, well, what aren’t you comfortable with? They said, well, we’ve never done that before. What have you never done before? Well, we’ve never lent to an entity that is owned by another entity. And I said, okay. So I said, where are we? Well, we can’t close, but we need to evaluate this and we’ll get back to you. So, you know, I obviously had to scramble, communicate with the seller, communicate with the title company, everybody else. They didn’t give me a no. They strung me along for another week without an answer. I literally couldn’t get a hold of anybody. It got to the point where I had to call the mainline and talk to the Secretary and say, hey, can you connect me with this person? The only reason they connected me is because they didn’t really know who I was. But I finally got an answer and they’re like, no, we can’t do it. In about two days, I called 12 banks. Luckily, I had been building bank relationships prior to this. I called 12 banks. I was able to get in a couple of days’ four-term sheets. We ended up going with, I think a better position bank with actually better terms. And we were able to work with them. We were able to get it closed in two weeks once they had it. So it all worked out. But man, I got a few more gray hairs, I can tell you that.
Rod
Oh, sure. Now, did the seller, I mean, were you in a closing deadline situation?
Kent
Yes.
Rod
You had to negotiate an extension?
Kent
So I did negotiate it, yeah. So we were going out of contract in like three days and I couldn’t get anybody to respond to me at the credit union. So I’m like, what am I doing? Like we’re going out of contract here. I need you guys to respond. You got to at least give me the courtesy of telling me what’s going on. And so I had to go to the seller. The seller obviously wasn’t happy. I asked for 30 days because I didn’t know. I thought, as if we’re starting from scratch, you know, an appraisal is going to take that long. So basically, I had to give the sellers five grand in cash and I had to double my earner’s money for them to stay in the deal.
Rod
That’s not too, too painful, but we paid 100 grand to get an extension at, you know, an additional purchase price or more.
Kent
Well, probably relative to size a deal, but yeah, you know, they could have been much nastier about it. They had me over a barrel.
Rod
Could have taken your earnest money, honestly.
Kent
Yeah, they could have. And so, you know, luckily, we had built a great rapport with the seller. It was a direct-to-seller deal. We build a good rapport. So, you know, they weren’t happy, but they stayed in it with us. We actually released the earnest money to them because they had another transaction going on. So we had to keep the deal together. And so, you know, at the end of the day, we got it done.
Rod
So what’s the lesson? What’s the lesson?
Kent
Yeah, so the lesson is one, you know, ask your lender if they’ve ever worked with a syndication before. Make sure you explain what a syndication is. Because I said all those things. I said, you know, we’re doing a syndication. We’re raising money from outside investors. Explained all that to them. Send them the operating agreement, send them the org structure. But make sure you’re just really, really explicit about what you’re doing and what the business structure is because nothing that we were doing was out of bounds. It’s a very standard kind of syndication deal structure, but it’s just something that they didn’t experience. I think– the only thing I can put together, how it made it through all those levels and nobody brought this up is that just nobody looked at the operating agreements until the title company sent the letter to me saying, we need you to sign, saying that you’re allowed to sign, you know, to buy the property. I think once they saw that, they’re like, oh, what’s going on here? They went back and looked and they’re like– you know, their minds–.
Rod
And then their hands went up in there. Banks can be like– lending institutions can be like Ostriches. Okay. And you’ll see that if there’s a contraction and anytime there’s a contraction, instantly everything stops. And, you know, credit unions are just not that sophisticated. You would never have that issue with a large bank or certainly not with Fanny or Freddy. They’re very, very familiar with the structure, and you’ve never had that issue.
Kent
And I think another lesson learned because I got the contact from another investor who had done several deals with them, and he said, you know, I’ve worked with them. You know, they’ve been great.
Rod
That’s what I was going to do next is referral. Yeah.
Kent
Yeah. So I had gotten a referral, so I felt good, probably because I got that referral, I didn’t check in as much as I should have into–like, you got to vet the lender just as much as they’re vetting you. And I think that’s the big lesson from you was understand their experience, what’s their real estate background, what’s their sophistication because you don’t want to end up in a situation like this where they’re catching up at the 11th hour.
Rod
I will tell you, I would have probably fallen into that same trap because you know, you get a referral from someone. Usually, that carries enough weight with me. But I’m glad you said that. I’m going to get a lesson myself from this is to do the due diligence, particularly, with, you know, a smaller outfit like that, to see what the level of sophistication is and what sort of deals they’ve done. Okay. Now, let’s talk about your second war story on a passive investment that you make. This is really important for those of you thinking about investing passively.
Kent
This was the seminar. My first step into real estate was a seminar. So this was, you know, like back in 2015, I was getting started and I got introduced to crowdfunding. And, you know, as a way, I was like, wow, you can go on and you can invest in real estate. This is great. So, you know, I went through and it was on a site. I went through and I was scrolling down and like, oh, there’s a deal. Oh, it’s in Houston. That’s a great market. Cool. I’m going to invest in it. I’m going to try this out. So, you know, I put some money into the deal. You know, everything’s going along fine. It seemed. I didn’t really know. I had never talked to sponsor, really had no idea who the sponsor was, just looked–saw the numbers and pressed go and was wiring my money. Right. Well, I paid for that because the sponsor turned out not to be a good guy. He actually, he committed fraud where he went out and he got a Fannie Mae loan, and then he went out and got like three or four other loans, all securitized by the same property, and didn’t tell any of the other lenders about any of the other stuff that was going on. And so, ultimately, they found out, Fanny found out. He lost the property, and, you know, we were all out our investment.
Rod
Wow.
Kent
That was a punch in the gut, obviously. Luckily, I think I had enough understanding to know, like, okay, this isn’t real estate’s fault. Real estate is still a good investment. I wasn’t shied away from by one bad experience. Really, it was my fault. And it’s a lot of the stuff I talk about now with people and a lot of the thought leadership I try to do is around, you know, as a passive investor it’s not a passive experience. You can’t just go and just send somebody your money. You’ve got to proactively find sponsors. You got to find sponsors that have integrity and you’ve got to do your due diligence on the sponsor.
Rod
Absolutely.
Kent
Before you start on the market, the deal, anything else.
Rod
Absolutely.
Kent
That’s what I didn’t do.
Rod
Yeah. No, I’ve created a resource on this. It’s “questions to ask a general partner before you get into a syndication”. If you guys want it, it’s just a list of about 50 questions that you need to ask honestly and just text, what is it? “GP QUESTIONS” to “72345”. And I’ll get it to you. But, you know, just like anything. You’ve vet anything. You’re going to vet a partner, you would do due diligence on a partner. This person would be a partner for you, for sure. And you’ve got to check them out.
Kent
Yeah. You got to trust, you know.
Rod
Right.
Kent
I trusted that the website was doing diligence because honestly, they advertise that they do.
Rod
Right.
Kent
But really, you know, you going to hit again, trust but verify. Do your own research.
Rod
Yes. Your examples with a crowdsourcing, crowdfunding platform is really surprising to me because they brag about their, you know, due diligence on potential sponsors. So that really surprises me. But certainly, you know, there’s enough– in our business where you just go directly to an operator and invest in a deal and you’ve got to ask us regardless, you need to ask those questions. Well, listen, brother, I really appreciate you coming on. You’ve added tremendous value today. It’s great to see you again. You know, thanks for spending some time with me.
Kent
I appreciate it, Rod. And really, you know, like I said, I’ve been a long-time listener, first-time guest. And so, yeah, I appreciate you having me on. It was a good time. Hopefully, some of my stories help people avoid some of the mistakes I made.
Rod
Yes. Sounds good. Thanks, buddy. We’ll talk to you soon.
Outro
Rod, I know a lot of our listeners are wanting to take their multifamily investing business to the next level. Now, I know you’ve been hard at work helping our warrior students do just that using our “ACT” methodology which is Awareness, Close, and Transform. Can you explain to the listeners how they can get our help?
Rod
You bet. Guys, we’ve been going non-stop for three years building an amazing community of like-minded people, and our coaching students which we call our warriors, have had extraordinary results. They’ve purchased thousands and thousands of units and last year we did over 1000 units with our students. And we’re looking to grow this group and take it to the next level. We’re looking for people who want to follow a proven framework that’s really step by step and then leverage our systems and network to raise equity. To find and close deals and to build partnerships nationwide. Now, our warrior community is finding success in any market cycle. So if you’re interested in finding out more about how you can become more of our incredible network and take advantage of the incredible opportunities that are coming very soon, apply to work with us at “MentorWithRod.com” or text “CRUSH” to “72345” and we’ll set up a call so you can check us out and we can check you out. That’s “MentorWithRod.com” or text “CRUSH” to “72345”.
