TRP109: Connecting With A Broker – Interview with Corey Peterson of Kahuna Wealth Builders
February 2, 2021
Transcription
Randy L:
All right. Hey, I want to welcome you to today’s show. Boy, I am so excited. We are going to have a monster episode. You are in for a mega blessing. I’ve got a great friend of mine, Corey, the big kahuna, Peterson on with us. Corey, good to have you on my brother.
Corey Peterson:
Man. Thanks for having me, dude. I look forward to this. I’ve been looking forward to all week. So super excited.
Randy L:
Indeed. Me as well, me as well. How are you and the family doing? Everybody’s been doing good. I mean, I see your son’s been killing it. Oh my God, dude. I love the last video that you put together where he’s just slaying it on the football field, man.
Corey Peterson:
It’s a lot of fun. Sports, our kids are active in sports and 2020 has been one of those years. It’s been a crazy year, bro. It’s had its challenges. I’m right now, if you’re watching a video, I just wrecked my wrist. I’ve had COVID, I’ve had my gallbladder removed.
Randy L:
Yeah.
Corey Peterson:
But listen, there’s so many blessings out there that I’ve received. God’s blessed me and my family. And I’m super excited just to talk about real estate today and the differences that it’s made in my life because it’s a game changer. This game, multi-family investing is game changer, bro.
Randy L:
For sure, man, for sure. Well, we’ve got some exciting topics we’re going to talk about. But I just want to drop a quick nugget right here for you guys who are watching or listening. Think about it here, about what Corey just said, right? It’s about that perspective, that mindset. That you can look at the lens of your life and see it through a filter that says, hey, what a blessing it is and look for the good, or you can look at the negatives or the setbacks and call it that way. And I’m here to tell you that you will experience life on a greater level when you look at it that way. So praise the Lord. So, all right, well awesome.
Randy L:
Well, I know let’s talk about today. I think very relevant high of mine topic. Talking about connecting together with brokers, because a lot of times this, this comes up as a question, even to me, I’m sure as well to you. It’s like, oh how do you get these awesome properties? How do you approach this? And I tell people like, look, realistically, when we’re working with a 7,500, 150, 200 unit property, that’s 10, 15, $20 million. Those are not just coming off of Craigslist. Right? You know what I mean? Those are the more sophisticated sellers probably 80, 90, 95% of those properties are transacted through a handful of key brokers in a specific market. And that’s part of the nature of how this business works. So what you’re going to talk with us about today, of how to connect with those folks and then how to structure your offer to be in the mix is critical. So let’s kick it off.
Corey Peterson:
I’ll even say it’s how to create an unfair advantage.
Randy L:
There you go.
Corey Peterson:
It really is. It’s creating an unfair advantage over your competition. And it has nothing to do with real estate. That’s what’s crazy. It has everything to do with people. And that really is the game of multifamily. We are in the people business all the way through and through. Whether it’s people for your investors, it’s people that live in your community, and it’s the people that bring you the deals, which is the brokers. And you’re right. Absolutely, Randy. I believe once you start playing a higher level, it’s not like the single family game where it’s mass marketing, it’s sophisticated game. The gatekeepers or the brokers, they do a lot of that grunt work. And listen, myself as the same way as you, when I go to list a property, I’m not answering some direct mail piece.
Randy L:
I get text messages or calls from people that have skipped trace this. And they’re like you get some, forgive me, some ding dong uneducated person, meaning not uneducated not smart, but just doesn’t know the market. And they’re like, yeah, hey, would you be interested to sell the property at XXX? I’m like, yeah, don’t call me, click. It’s just not going to happen because that’s not the pathway that I would entertain selling the property.
Corey Peterson:
It still could happen. But it’s a way different message anyways. It’s like, hey, listen, we’re buying those marketplaces. We’ve selected your property meets our criteria and we’d want to see if you want to entertain an offer. That’s a little different conversation, but that very rarely happens. But honestly, the game is played with brokers.
Randy L:
For sure. And even to what you just said, even to in that regard, even if you were speaking with a seller that’s a potential of an off-market property, that’s still is a relationship deal. It’s not a wham bam thing. It’s like, hey, just like you said, I’m interested in this market. Would you entertain that? And then it begins the forming of a relationship. But realistically, when I look at transactions in any given market, probably 95% is virtually all transacted.
Corey Peterson:
I’m going to hire a broker, I’m going to have him put it out to the marketplace and find me the very best offer humanly possible.
Randy L:
A hundred percent. And then on top of that folks listing, it is three to five that do all the business in any one major MSA in terms of the brokerage offices, right? It’s not a wide diffusion like they do.
Corey Peterson:
It’s not 25 brokers you’ve got to go get to know.
Randy L:
Now it’s a handful. And again, I think you know what it is? And I’ve told this and I’m glad we’re talking about it is because people really don’t want to do the ground and pound, the grunt work, the necessary work. They want to get the big bang, but not be willing to put in the 20 mile march to get there because I’ve had people say that to me. because when we targeted a new sub market, now again, I’ve got different team members now, but in the early stage it would be for sure, me connecting together, spending time, you know what I mean? All the things that are necessary to do.
Corey Peterson:
And so it starts with this, right? So I got a new market I’m going to go in. And this is where I think we’ve been really good as well is let’s go target. And we say target because that’s how we do it. If it’s a new market, I don’t even know who’s who the brokers are, here’s what I do. I call my mortgage broker with Berkadia and I say, hey, listen, here’s the target markets. I need you to go to CoStar, go to your data because they have their own data analytics company, and pull me all the top five brokers, top seven brokers in this marketplace. And they’ll give it to me. I’ll look like, whoa. So I don’t have to mess with it. Now I know who I’m going to target. And then I’m going to call them and introduce myself now.
Corey Peterson:
And then I’m going to fly into that market. Right? You’ll fly into that market. And don’t spend a day, don’t spend two days, maybe spend three full days. And you’re doing breakfast, lunch and dinner every day, all day with brokers, you’re touring properties. Even if you’re not even interested in that property, you’re going to go tour properties with all these brokers because that’s how you form an initial relationship, right? And at this point it’s very superficial. They don’t know you, you don’t know them, you’re just trying to make sure that you show them that you’re a competent buyer. And what I like to do when we’re at the site visits and we’re have kind of some downtime, I start trying to find personal things about them because this is the key part of this. And it happens by asking a simple question. This is my favorite question. It’s called, hey, Randy, what do you like to do for fun?
Randy L:
Yep.
Corey Peterson:
And then you shut up.
Randy L:
For sure.
Corey Peterson:
And they’re going to tell you. So here’s how it goes. I say, Randy what you like to do? Randy says, I like to golf. Corey hates to golf. So I’ll be like, well, what else do you like to do? But I’m going to find something that I have a commonality with you, Randy, because I know that if we can… And it’ll will become my open in other words.
Randy L:
For sure.
Corey Peterson:
And when we have a real relationship with somebody, what happens is just like we did, when we first talked right, came on, we did talk about real estate really. I mean, kind of did, but we would talk about how’s the family? What’s going on with the kids? How’s life, right? Like that’s the normal open.
Randy L:
Yeah, for sure.
Corey Peterson:
And then you get down to some business.
Randy L:
Yeah. Well, let me just interject here too real quick. I want to unpack a little bit for the listeners here. I mean, so first and foremost, I love the very first word. Target. It was not a scattered approach of looking at all this crap that may be flying around on CoStar or LoopNet or whatever. It’s a specific focused target for a reason. There’s demographic growth there. There’s opportunity there. There’s a reasoned thoughtful process to it. And then the next part of that is it’s data driven. And then not only is it just like, hey, let me see about Google and Tom, Dick, or Harry. It’s like, let me see who’s really the key people in this market, and then becoming intentional.
Randy L:
One of the things, and again, for the folks that are listening, this is an intentional a higher level approach that you’re going to have to invest in if you want to start doing… Plenty of people invest with us directly, no doubt, and same with you. But if you wanted to say, hey, I want to become Corey or I want to become Randy and I want to start doing it myself, you’ve got to be willing to make an investment. It’s a business that you have to do. And then like, oh my God, Corey, I can’t just go for a day? No, you’re there for three days.
Corey Peterson:
There’s a little bit of capital requirement. Right? But that’s the game that we’re playing. Now, here’s the best part. If you don’t have the capital, find a partner that does.
Randy L:
Yeah.
Corey Peterson:
Right? Because it can still be a team sport and you can still make it happen if you don’t have the funds. Then but listen, to play this game, you got to have a little bit of seed capital to plant your garden. Right?
Randy L:
Sure.
Corey Peterson:
Because once these things grow, it produces fruit that’s the ripest and best in the world.
Randy L:
For sure.
Corey Peterson:
And that’ll feed you forever. So Randy, as I go into these markets and then I find out what they do for fun. And then I’m every time I call the broker, in other words, the broker sends me a email with a deal. Me or my team, it’s really my team, my team will underwrite that deal, and then we’ll always call back and give him feedback.
Randy L:
Yeah.
Corey Peterson:
And that’s another important, so giving brokers feedback of why it did or didn’t make sense or just, it doesn’t even matter. They just want to know that, because it shows that you’re actively looking at their deal. They have no idea who opens up their emails. And the whole goal is to go from the email list, which if you’re on the email list and that’s all you’re getting, the broker does not care about you. Okay?
Randy L:
Yeah. You’re not at the top of the list.
Corey Peterson:
You want to get him the phone list where he texts you or he calls you and says, hey Randy, guess what I got? I just got a new listing. I’m going to give you a first crack at it.
Randy L:
For sure.
Corey Peterson:
Or you just want to be on the short list.
Randy L:
Yeah. Yeah. Let me interject. To that end, we just got a 250 unit property on that exact thing, right? Where it’s an off-market deal. We’re in the top, probably one, two or three. And that is a text, a call that came to us. Hey, I’ve got this deal. It is a short timeline just based on what the seller wants to do. Boom. I knew the moment we talked on it, it’s a winner. And our team underwrote it, had it turned around, site visited all done in two days. And bam, LOI within three, four days.
Randy L:
But what you just said is so key because I told this to another guy and he’s asked me, Randy, I’m having trouble, and bottom line is he’d get a thing, and OM sent to him, like you just said, ah, this is crap, delete. And it’s like, dude, what are you talking about? What? Hold on here, what are you talking about? You didn’t even take the time? It’s like, that’s a test, right? He’s sending you crap. And if you don’t take the time to investigate and, like you just said, underwrite it and then have thoughtful, articulate reasons as to why it doesn’t match up to your investment model, then why would he send you something great?
Corey Peterson:
There it is. See? The better the broker can understand your buy box, right? Because you want it to be like, oh, this is a Randy deal. Hold on. I’m calling Randy right now. And I’m like, hey, Reyna got, and he’ll put… And that’s not a big list. Because brokers are really easy to understand. Okay? Brokers want to make a paycheck. They work for free until you close. So if we all understand that concept, then it’s he who’s going to give him his paycheck with the least amount of fuss and make his seller happy.
Randy L:
Yep. For sure.
Corey Peterson:
That is the job that we’re trying to convey to the broker as we continue our relationship. And anytime you can do anything other. Listen, I love to rock crawl, I got my Jeep, and I liked riding motorcycles. Anytime I could find any broker that has that in common. Or if they’re in my town, I’ll be like, dude, stay an extra day, and let me take you out in my Jeep. Let me do something other, just having an experience. And what does that do? It creates an unfair advantage where all the other noise when they have a good deal goes away, and all they’re thinking about is I need to have some kahuna in my life. Right?
Randy L:
Yeah. For sure.
Corey Peterson:
And they call. So that’s kind of my first step of getting into with brokers. And it works really well. And then recently, so I’ll show you how this works, and then when we actually have a real deal and we’re going to now do a site visit. Okay? So initially I don’t get involved in site visits until we’re in best and final. So on a particular property, we just did it in San Antonio where one of my team members went there initially because we don’t even put LOEs on properties unless we’ve toured the property.
Corey Peterson:
That’s our personal what we do because we want the broker to know that we will spend the time and money to go to a market. I live in Phoenix, this one’s in San Antonio, but we flew and sent one of our reps there to look over the property. And so we were great. And then we put in our LOI and we got invited to best and final. Well, in best and final, that’s when Corey gets in his plane, I don’t have a plane, but I wish I did. I got in my Southwest plane because I’m still chiefing. And I flew to San Antonio and then we go and do another kind of site visit with, we’ll call it the capital. When you’re coming to a property, Randy, they know that the decision maker is here.
Randy L:
For sure.
Corey Peterson:
Right? And so I think that’s really important, especially in today’s competitive environment, Randy, these are some little things that you’ve got to do to kind of get a competitive edge, right?
Randy L:
Absolutely.
Corey Peterson:
Because it is, it’s very competitive now, and cap rates are compressed. But there’s still value out there because interest rates are so freaking low.
Randy L:
For sure.
Corey Peterson:
So we go to this property. And so when I get there, this is kind of how I typically do it. And I think it works this way. And I’ll give you some tips at the end. I go and I meet the broker. I’ve talked to him a couple of times now, and this one’s actually a new broker for me. I don’t have a great relationship. My team does, but I don’t. Right?
Randy L:
Yep.
Corey Peterson:
That’s okay. So I get introduced and we shake hands and I was like, hey, this is great. Now I’ve always believed you got to take control anytime you are at a property, because if you let the broker lead you, you’re then being led. And you’ve got to come in as I’m the owner. I know my process. You want to show professionalism at all times.
Randy L:
For sure.
Corey Peterson:
That you’re leading this discovery. Right?
Randy L:
Yeah.
Corey Peterson:
And so one of the ways I lead is I just go straight to the manager before I even go look at any of the units. I’ll sit down for a good 20 minutes and everybody’s just holding court, watching me ask questions to the manager.
Randy L:
For sure.
Corey Peterson:
And we just have a great conversation. The broker interjects you’re in there. Right?
Randy L:
Yeah.
Corey Peterson:
But we’re having real good conversations, good flow. But I’m really not paying a whole lot of attention to the broker at this point. And it’s kind of done purposefully because I’m trying to establish, maybe this is the lying part of it, right? But I want to let them know that I’m in control and I’m here to gather more information to help us make a buying decision. But I’m also wanting to let them know that we’re super serious. And so he’s listening to all my questions.
Randy L:
Yeah. Well, even in that though, he’s understanding, and again, we’re very similar in the connection where you’re going to get the best information from talking to the staff, both the manager and maybe the maintenance guy.
Corey Peterson:
And the maintenance guy.
Randy L:
For sure. That’s gold Right there. Yeah.
Corey Peterson:
The maintenance guy knows all. I said this the other day, I was at an event. I go, man, every property has a where’s Waldo. Right. And that guy’s good at blending in. Right? And every maintenance guy knows where all the Waldo’s are at, right? They know where those secrets are that no one wants to tell you about. The key is to be nice about it and say, man… And one of my favorite things to do, Randy, is I call it the magic wand. And I when we go there, I act like I grabbed my magic wand and I go Mrs. Property manager, here’s your magic wand. And I hand it to her and she grabs it. This is just like in SNL. Now this is the magic wand. With this wand, you could do anything within whatever you want it to fix or whatever you really felt like needed to get done, what do you fix? And they start telling me, well, I would do this. I would do that. And it’s so funny when I transfer that wand, they sing like canaries.
Randy L:
Oh yeah, for sure.
Corey Peterson:
And then I do the same thing with the maintenance guy. I hand him the wand and then he starts telling me all the things. And the broker’s like, oh my God, they’re just vomiting. And I do it right in front of them. And so they got the wand. They’re happy. And I’m learning tons. Now, somewhere in that middle of the property, I probably already like the property, but now on this particular property in San Antonio, I really like it. And so now we’re done, we’re walking back to the office. This is when it’s kind of like the transition. I now leave the manager. I do not need her anymore. And now I’m right next to the broker.
Corey Peterson:
And I start talking to him, right? And here’s what I say, Randy. And I think this is really important. I tell him, Drew, I like this property a lot. I want to be your buyer. I want to own this property. I want you to know, I am very interested and we want to be the one. And so I don’t remember where I learned this from, but letting people know that you want to buy it and be very clear and not, well, yeah, it’s a great property. No, this is a time where you let someone know that I want this property. I want to be a buyer. I’m going to tell it to him probably 20, 30 times, Randy.
Randy L:
For sure. Repetition is the mother of learning. But it also goes back to what you said about it’s certainty. Certainty of close. This guy is looking to get paid. And the only way he gets paid is by getting this done. And the easier the transaction is for him and the seller, the more he can focus on finding more properties to sell instead of handholding some pain in the butt buyer. And so now you’re providing him with this clarity and certainty, I’m here at the property. I absolutely want to buy it. I’m your guy. You know what I mean?
Corey Peterson:
And then he tells me, so I asked him, I go, hey, listen, Drew. Now we’re feeling pretty good about each other, he likes what I’ve done, we’ve had a little bit of conversations. Right? Because I’m asking him, Drew, how long you’ve been at working for Marcus & Millichap. Right? And he’s a younger kid, so I know he’s new. Right? But I want to hear his story. And so he tells me his story. I was like, man, that’s so awesome. And I said, this, you got this listing? Oh yeah, I got it. I’m like, dude, great job. So we sandwich a real critical question and all that praise and worship. Right? And then I go, Drew, what’s the seller’s hot buttons? What does he really want?
Corey Peterson:
And he goes, man, he wants surety of close. And he just straight up told me. So now the rest of my time that I’m telling him I want to buy the property. And I said, I think I’m going to be able to demonstrate to you when I give you my best and final with beyond a reasonable doubt that if you want surety of close, I am your guy. I can show you all my recent transactions. And I go Drew, will you promise me that you’ll call my Marcus & Millichap rep from a different market. Will you promise you’ll come at Berkadia rep and ask him how we performed, and ask them how those deals went down? Will you that for me?
Randy L:
Yeah.
Corey Peterson:
I’m embedding commands this whole time. Now I’m a big believer in MLP. Okay? I want Drew to go to sleep at night thinking kahuna, kahuna, kahuna, and when he wakes up, and so the next day, guess what happens? Corey calls up again. Hey, Drew. Drew, just in case you forgot, I really want to own this property. Okay? I’m working on, actually, I had some questions on his… Now they make you fill out a form when you’re in best and final that gives you all the more stuff, the 20 other questions that they want to ask.
Randy L:
Yep.
Corey Peterson:
And so they had this part in this assumption piece and I already knew it wasn’t assumption, but it was a great reason to call them. And I was like, Drew, man, you got me really nervous here because on your paperwork, it says that this is assumption maybe. Did I miss it? Oh no, no, no. I forgot to take that out. Right? I already knew this, but I just wanted to go there because it was my reason for calling.
Randy L:
For sure.
Corey Peterson:
Right? Again, as my open. And then I went back and I got to like lay it on thick and. Drew, I really want to be your guy. And then I asked him, now Drew, I’m going to need your help. Okay? So what I would like to do is I know your offers are due on Thursday. Can I be the last one to put in the offer? Would you allow me to do that? And could you give me some pricing guidance? Can I call you late on Thursday night and asked for some pricing guidance? Which is in other words, if Drew likes me and feels like I’m the guy, what’s he going to tell me?
Randy L:
Yep.
Corey Peterson:
The number.
Randy L:
Yep. For sure.
Corey Peterson:
This is why it’s called an unfair advantage because I got a relationship with Drew. Drew’s probably going to tell me within hot or cold to be in the running to win the deal. And I’m already really close. So I’m like, listen, Drew, I’m not going to lose by a hundred thousand dollars, okay? A 100, $150,000. I’m not going to lose on that, okay? So I need you to understand, I want to buy your property. And so he understood that. Now we’ll see where it goes, but I love going into this situation now. I feel very confident that I’m going to win.
Randy L:
That’s awesome, man.
Corey Peterson:
Now I could not. Listen, things happen. Sometimes somebody comes in with a ridiculous offer and I can’t Tommy top it. But if we’re close, I know that I’ll win.
Randy L:
Yeah. Absolutely. One of the things too, I would say even in this marketplace, because sometimes I hear people talking about this and you’re talking about a very normal situation that exists in today’s market, where you’re dealing with a best and final on a public property that’s marketed. It’s a great property. The pricing is good. And then somebody says, oh, but man, I got to get a deal to make money. It’s like, well, on some level, you’re not understanding the nature of this business. Because again, you’re able to pay to the seller what would be a fair price.
Randy L:
You’re able to see in the business model that you’re able to make improvements or renovations to the units, bring the rents up in a commensurate level to those improvements, drive an increase in the NOI, reduce potentially expenses because of better operations. And then as a result of that, it’s not guesswork, it’s forced appreciation. So you know on the day that I pay whatever it is, $15 million, 12, 20, whatever the number is, that I’ve got a direct pathway to creating this much value. And so I can afford to pay 12, 15, whatever the number is that you’re buying it at. And it’s still a deal because your debt is at whatever the rate is 3%.
Corey Peterson:
3%. Yeah. 3% with five years of interest, only on a 12 year note.
Randy L:
Yeah. For Sure. So you’ve got this great debt. You’ve got a clear runway to improve the property, increase the rents. It’s not like, oh, I’m hoping that things go well and the market carries me up. It’s like, no, this is a disciplined, methodical approach. Because again, sometimes people get hung up on, oh, I don’t know that I want to buy a property from a broker because the price may be not too much now. Yes.
Corey Peterson:
I’m buying this one at a 5.8 cap rate. It’s a 1974 product game. Now for a lot of people like, oh my God, you’re doing what? But that’s what we’re in, in this current marketplace. I’m okay with it. Right?
Randy L:
Yeah.
Corey Peterson:
Because I believe in the state of Texas and everybody that’s moving there.
Randy L:
For sure. Yeah. The world’s moving to Texas right now and the Southeast because they know the pandemic accelerated some of that demographic shift.
Corey Peterson:
All that stuff. Yeah. And so I’m okay with it because I think for my time horizon, I have about a six year time horizon on this property, and I don’t think there’s going to be anything catastrophic that’s going to change my main metrics, which is number one cash flow. Right? So as long as I cashflow, if the value’s not there at the end, crazy amazing, I’m still okay with it. I still have probably a solution to refi, cash out all my investors, just keep the asset.
Randy L:
Yeah.
Corey Peterson:
So I have a plan, a backup plan. But to your point, Randy, we’re planning on doing a million dollars of renovations per property. There’s two properties, this is a two property deal. And so it’s $2.3 million of renovations, and we will be able to raise the rents tremendously.
Randy L:
Yeah.
Corey Peterson:
And we verified that through other comps. So the great thing about this business is that you don’t have to guess and have a crystal ball.
Randy L:
Yeah.
Corey Peterson:
We’re like, wait a second. That property down the road, same vintage, looks like this, it gets $75 more a month in rent. What do the units look like? Okay, let’s make our units look like that. We can get 75 more bucks.
Randy L:
For sure.
Corey Peterson:
Done. How much does it cost to do it? $45,000 a door. Okay. So then it just becomes very much a cookie cutter sequence and we underwrite these things to make sure our assumptions are correct. And once you kind of have some enough real life clues, you can say, well, I believe we can probably do this. And that’s what happens.
Randy L:
Absolutely. And I think there are so many people out there that quite frankly, and honestly, they don’t have a true understanding. And that’s why they’re kind of maturating around with these different thoughts and misunderstandings. And it’s the reality of this business is that it is more of an executional focus right there. Once you have that true information and not false information, you know that you and your team can go in there, execute each property with a million dollar renovation plan, and with absolute confidence, get the rent from here to there. And then the automatic nature of that is that you have increased the value of the property because the income has increased. And so that’s where-
Corey Peterson:
$25 a door at a five cap is millions of dollars of value.
Randy L:
Oh, for sure. And that’s the thing. And that’s where again, I want to encourage people to not be afraid of working with brokers, that you’re going to get a bad deal. Now, clearly, yes, you mentioned there’s plenty of times where somebody will come in and they’re way overpaying for a property, and they may have a different investment model, different structure of capital. You don’t know. Or they just may be uninformed and they’re paying over the top and that does happen. But there are plenty of properties that I bought as well as you’ve bought that are through brokers that are smoking deals that are home runs or triples in terms of the returns that we’re getting, receiving, or achieving. I mean that’s just the truth.
Corey Peterson:
Yeah. I mean, we just did one. We’re getting ready to list the property. Randy, we bought three years ago from, I call it Marcus & Millichap, which is in my opinion, sometimes the most expensive properties you can ever buy. But this was a broken property, a little bit. The seller had issues. We bought it for 8.9 million. We’re going to list it for 16.5.
Randy L:
Boom.
Corey Peterson:
Three years later and turn around and double. 8 million in three years. That’s printing money, my friends.
Randy L:
Oh my gosh. Yeah, it is. Absolutely. And so just kind of circling back, it starts with really figuring out with clarity, that market that you want to be in and that there is opportunity there. So, and again, you’re looking at the Texas market and entering into there. Absolutely. There’s huge demographic growth going on there because of what was already happening, but now accelerated because of the pandemic.
Corey Peterson:
Even more so now.
Randy L:
Yeah. More so now. Good Lord. It’s like every other day and wall street journal, somebody’s company is moving to Texas.
Corey Peterson:
Yeah. Now we’ve got Oracle and now we got… I mean, it’s like everybody’s mass exiting. And New York.
Randy L:
Yeah. Same thing I look at in Atlanta as well, where it’s like, Google is expanding Facebook. All these companies are moving to lower costs, lower regulation States because their workers can work remotely. They can cut their workers pay too. They’re like, oh, hey, you’re moving from San Francisco to Texas. We were paying you 200,000. Now we’re taking a 25% haircut on that because your cost of living is lower. You know what I mean? That’s true. But that’s supporting greater growth, which then the more growth is there that supports even growing rents. So it’s just a compounding effect. And then the results of that-
Corey Peterson:
It’s a beautiful thing, right? I mean, in this game of real estate. So I love playing monopoly. I loved playing it as a kid, Randy. But I can say that when you start playing with the red houses, it changes your life. And that’s what I’m most thankful for is that somehow I made the change and choice in 2011 to go and play the multi-family game. And man, it’s made all the difference in the world and having, I think the two things that most investors crave, which is time and money. A lot of people have one, but very few have both. And we all got into real estate, I’m thinking of my single family brethren. They wanted to be investors, but a lot of times they’re just traders.
Randy L:
For sure. On a wheel. It’s like you’ve got to keep going every day.
Corey Peterson:
As soon as they stop, they have no more inventory, and they’re not making any more money. Where when you get into the true investor investing, you also don’t have to pay one of those beautiful things called, not beautiful, those things called taxes. Because when you’re playing this game, right, we don’t pay taxes anymore.
Randy L:
Oh yeah, for sure. I mean, that’s one of the things I know that even too where folks invest with us is because of the great return, but also the tax efficiencies that you have from investing in real estate.
Corey Peterson:
Share it with your partners.
Randy L:
Yeah. It’s a massive benefit and opportunity. And that’s, again, that’s also, quite frankly, in the understanding of overall investment strategy, multi-family apartments are one of the most tax efficient investment vehicles, even in the real estate space because of the composition of how they’re made up with a bulk of five and 15 year materials and you know, all these things that help to benefit the depreciation.
Corey Peterson:
It’s straight up sexy, bro. It’s just, it’s sexy, man. I’m telling you.
Randy L:
Yeah, for sure.
Corey Peterson:
Change your life.
Randy L:
Yeah. Oh my goodness. Well, let me, I want to ask you just a couple of questions and then also too have a chance to share with our audience how they can connect together with you further. So what’s the biggest challenge that you’ve been through. And then what specifically did you learn from it?
Corey Peterson:
Man, my biggest challenge was way back on my very first deal, Randy, which was understanding thy operating agreement and partners.
Randy L:
Okay.
Corey Peterson:
I went into a deal where I had 75% ownership of a deal. And what happened was I was supposed to have 75% voting rights, in other words control. And what happened is these guys changed the operating agreement without me knowing, and we signed off where I had 33, 33 and 33 voting rights. I got overrode real quick. And so I’ve learned that having good legal representation and understanding thy operating agreement and your contracts that you engage with other partners is paramount because we do partner a lot with other people and other investors and things like that. And I’ve learned to do deals. I don’t tend to do partnerships forever, but I like to bring a collective into deals. And what I’ve learned is if everybody understands their role and responsibilities and what their direct involvement is supposed to be, the more clear you can get the better the outcomes. And that’s really helped me well, as I’ve moved.
Randy L:
Absolutely. Yeah. You got to trust but verify, know what you’re working with, and have clarity. Let me ask you this then, with this past year, what’s the number one thing you learned this year and what was the trigger for that?
Corey Peterson:
COVID is real.
Randy L:
Yeah.
Corey Peterson:
And really, here’s what I’ve learned. So we have student housing properties and in the early March, April, we were thankful that we had student housing properties because they were still paying all their rents because mom and dad had signed for their leases. What I didn’t realize is how long COVID was going to stay around and that come the next fall lease up for fall semester, it was ghost town city. So we have properties that are 45% occupied. Well, we have two of them that are that way. And we’re having to do bank loan mods.
Randy L:
Yeah.
Corey Peterson:
And what I’ve realized, I mean, I’m thankful that I have great relationships with my bankers, right? And that we’ve operated very successfully maneuvering through that. And so I guess that’s my testament is we’re still here. No one could have predicted a global pandemic, yet all my other properties are healthy. We have a couple of bruises on to those student housing. They’re going to get mended. And the whole scheme of a five-year to seven-year plan, what we’ve realized is it’s not going to really matter.
Randy L:
For sure. Well, and that’s the thing, too, that in this business, you can work through the challenges. And the fact of the matter is even now what we’re going through and the effects of this pandemic, in the scope of what that means over a five-year period is limited. And so that’s part of the thing of being able to have the strength and the resources to work through that. So let me ask you one last question here. What are you planning for over the next six to 12 months for you, your company, your partners, that kind of thing? What are you looking at?
Corey Peterson:
Massive growth.
Randy L:
Amen.
Corey Peterson:
Well here’s the thing, we have been more focused now than ever on what our mission statement is. We partner with passive investors to create award-winning communities that families love to call home. That’s our mission statement. And the more that we stay true to that, and we have our whole team with that rally cry, meaning our property managers, our maintenance guys of service before self. If we take that approach in everything we do with our investment with kahuna, we all get to win. And so we’ve been more honed and focused in our people, not only internally with our staff, but how we take care of the people at the property. And really even how we communicate with our investors, being way more involved, way more active, giving them way more feedback than ever. That’s how we’re going to thrive in 2021 is understanding that we’re in the people business and we want to, not just be good, but be exceptionally great.
Randy L:
Awesome. Awesome. Well, and then I know folks that want to connect together with you. What’s the best way to connect together with the kahuna.
Corey Peterson:
So two ways. One is, we have a podcast called the multifamily legacy podcast. We teach what we know, that’s what I do. And then kahuna wealth builders is our education platform. There’s free stuff there, if you want to go check that site out.
Randy L:
Awesome. Awesome, my brother. Well, hey, praise the Lord. Great to see you and great to have you on the show today. You are a wealth of knowledge and benefit for our folks that are listening. Definitely make sure, tell your lovely wife that I said hello, as well.
Corey Peterson:
Can I give everybody a book?
Randy L:
Yeah, absolutely.
Corey Peterson:
So we just created this yesterday, so that’s why I know it’ll work. So I have a book called Copy Your Way to Success: Standing on the Shoulder of Giants, and I’ll give it to you absolutely free. You have to text to 480-500-1127, and then text the word.
Randy L:
Okay. Hit it again. One more time.
Corey Peterson:
480-500-1127, text the word book. My wife will get all those and she’ll ship out a copy of Copy Your Way To Success. Real live copy. Won’t cost you anything. It’s our gift to you. Thank you for having me on the show, Randy.
Randy L:
Awesome, brother. You are a blessing, my brother. It’s great to see you. And then you guys have a Merry Christmas, man. Awesome. Folks, thank you so much for listening and being a part of the show today, have a blessed and victorious week for this is the week God has ordained for you.
