Are you looking for a new career or want to jump-start your retirement funds? The truth is that there are no shortcuts when it comes to success in real estate investing. It takes time, effort, patience…and sometimes sacrifices along the way. But if you’re willing to work hard now so that you can live your best life later – then this might be right up your alley! Listen and learn from someone who has been where you are today – but didn't let fear stop him from making a meaningful sacrifice for success.
Chihiro was stuck in his old job as a claims adjuster for 10 years and then as a financial analyst. He felt trapped and unfulfilled. But he made the decision to make a change, and it paid off! Now he’s living his dream life as an investor, working with people just like you who are ready to take their lives into their own hands. You can do it too!
Table of Contents:
- Where To Listen To The Podcast
- A Story of Sacrifice for Success
- Risks Versus Rewards
- What Makes the Sacrifice for Success Worth It
- Looking at the Sacrifice for Success From a Different Perspective
- Pushing the Boundaries
- Financial Freedom Is Achieved When You’re Willing to Sacrifice for Success
- How to Reach Chihiro Kurokawa
A Story of Sacrifice for Success
Darin: Chihiro Kurokawa lives in the DFW area with his wife. He's completed three syndicated apartment deals for over 500 units. He worked a W2 job for many years and wanted another way. Through sacrifice and perseverance, Chihiro found his way to success. He's a hard-working guy. I'm happy to say he's one of my partners on the last multifamily deal I was involved in.
The first time I came in contact with Chihiro, I actually went to a free meetup group. It was being held at Mark Kenny and Tamiel's house, and the speaker for that day was Chihiro. He was talking about his first syndication deal. That was the first time I got to hear his story, and after that he's very active on social media. He's at all the multifamily conferences.
We run into each other, and we know the same crowd. A mutual friend of ours, David Lagat, who I had on the show episode 16, was partnering on a deal with him. They asked me to jump on. It's a great opportunity in West Texas and I'm looking forward to it. He is the lead on that deal. First question I typically ask is, how many properties and how many units are you invested in?
Chihiro: I've done three apartment deals so far. They actually come to a clean even 500 units across those three.
Darin: It's very rare to have that happen.
A Leaf Blown in the Wind
Chihiro: The first was 128 units in Abilene, Texas. Did a second deal which was a distressed 248-unit property in Dallas. Over by Love Field if you're familiar with the Dallas Fort Worth metro. The deal that was fortunate to partner with Darin on was the third. It is 124 units in West Texas in a town called Big Spring.
Darin: You were in California. You moved to the Frisco area because of Toyota. Can you share with the listeners what your role was with Toyota? What prompted the move? Did you have apprehension of moving from California to Texas?
Chihiro: Let me go back a little bit even before that. So I graduated from college in 2003.
Darin: How old are you?
Chihiro: I'm 41. At that point, I look back and I just really didn't have a lot of strategy or vision. I was just a leaf blowing in the wind. Took a job as a claims adjuster, and did that for a decade. Had I had some vision at that tender age of 23, I would have thought to myself, "All right. What are the prospects of this?" What ended up happening was, I was pigeon holed in probably my first month there as a claims adjuster.
Somebody said, you know what they say, once a claims adjuster, always a claims adjuster. That should've been a big red flag. But, I was a kid. I didn't really have direction. So, I was like, "Oh, whatever, the heck with it." Fast forward 10 years, I feel trapped. I have this very nichey job experience that is not translatable really to any other industry. So, I came to a point where I knew I had to make a drastic change.
Too Old for Business School
Chihiro: That was the impetus for me in 2012 to go to business school. I was a little old at that point, I would have been 32 when I started business school. Typically, people are in the mid to late 20s. But you know what, I had limiting beliefs. I was like, "Business schools don't want claims adjusters." I'm just stuck here. This is what it is. Well, that's not true. I did the work I needed to do to go to a decent business school.
Darin: Where'd you go?
Chihiro: I went to UCLA for grad school, born and raised in California. I graduated from business school in 2015. That's when I started working in analytics at Toyota. As you know, Toyota very famously moved its corporate headquarters from Los Angeles to the Dallas area in Plano, specifically. I came to North Dallas as a part of that and moved here in 2016. I’ve been working in analytics and enjoyed that. But eventually, I realized some of the trappings or challenges that come with working in a corporate job.
Whether as a claims adjuster, or in analytics, some of those frustrations are going to be the same. It's great that I'm making more money but there was a bit of that golden handcuff feel to it. Then, fast forward to 2017. I'm thinking, "Okay, what am I going to do to secure the financial future of my family? How are we going to afford sending a child to college? And how are we going to afford our retirement?" Those types of questions came to mind. I didn't see a clear path to that by just staying in the corporate environment.
When the Sacrifice for Success Started
Chihiro: I started going to meetups and meeting people like you. I thought to myself, "Well, if this lady, if this guy can do multifamily syndication, why can't I?" That journey started in 2017.
Darin: You ended up joining a mentorship group. If there's anybody listening to this in college or just out of college, try to find mentors. I went to college and I knew I wanted to do business, but I didn't really know what. I was like, accounting or finance? So I did accounting. Then I got a job with Price Waterhouse, great name, great foundation.
Chihiro: You're not an accountant.
Darin: No, I didn't enjoy the work. But I think so many people just get pushed in a direction. You get a job, you start climbing the corporate ladder and you feel trapped. That's a terrible place to be.
Chihiro: One of my big things now is I mentor people who are undergraduates or recent graduates from college.
Darin: How do you do that, in what capacity?
Chihiro: I do that through UCLA. They have a mentorship program. I volunteer every year, pick up one or two students, and keep in touch with them. Teach them the stuff I didn't know when I was 19, 21, 23 years old. That's been super valuable and really gratifying for me. To be able to give back in a small way to a few people here and there. Like, "This is what I wish I would have known. I'm telling you this right now." I can see that it's adding value to these young people who are just getting started in their professional lives.
How To Make the Sacrifice for Success More Bearable
Darin: I'm getting chills because that's fantastic. They're still going to make the decision on what path they choose to go. But if somebody that is older and wiser, and has knowledge can present different ideas and different possible paths. Just even the simple thing of, "Do you realize when you graduate, what your job will entail?"
There are so many people that are going to work, going to college for four years for a certain major. They don't even know what the job is going to be like when they get out. We're older. I'm 51, you're 41. I got involved in real estate four years ago. You got into real estate around the same time, 2017.
We both joined mentorship groups. We paid money to be a part of a group. That provided us with some guidance on how to do it, and also surrounded us with people that have already done it.
Chihiro: It is so incredibly powerful and motivating to be around people who are like you. In one way or another, or maybe in multiple ways, they're similar to you. You're like, "Wait, if she did it, why can't I do it? If Darin said it, why can't I do it?"
Darin: I've met a bunch of smart people, but I'm like, "They're just people." They're just people that took action and if they could do it, why can't I do it? I applaud you for giving back. Are you full-time real estate now?
Chihiro: I am. I left my job at Toyota in March of this year. It's October now, so about seven months ago.
Darin: Are you having withdrawals?
Risks Versus Rewards
Chihiro: I'm not looking in the rearview mirror at all.
Darin: You've done three deals. The first one was in a tertiary market. Second one was a distressed deal. The third one's a distressed deal. Did that just happen or is that your focus, both tertiary and distress?
Chihiro: I'm an opportunist first and foremost. I am not a distressed guy. I'm not even a multifamily guy, let's be honest, but I'm looking for an opportunity as an investor. My number one obsession is I cannot lose a dime of my investor's money, I need to find the right opportunities. I need to assess the risk versus the reward of any given investment. And I carry the responsibility of millions of dollars of other people's retirements, their children's wealth, their children's college education.
Whatever that money is earmarked for, I have responsibility for that now. In that context, it came to that second deal. The first one in Abilene was really your middle of the fairway value add deal. Had some significant deferred maintenance, but all in all, your standard class C value was ideal. Second one was distressed. It was under 70% occupancy when we took that thing over in September of 2019 here in Dallas.
Darin: Under 70% in Dallas is not a good sign.
Chihiro: Pretty rare in this market. Why I went into distress is because I kept seeing and continue to see cap rate compression. We continue to see people who don't make the best operational decisions. Maybe they didn't go into A, B, or C deals properly capitalized, but they're getting bailed out by the market. Well, that to me is too much risk.
Mitigate the Risk of People’s Sacrifice for Success
Chihiro: I don't want to count on the market to bail me out because cap rates will stop compressing at some point. The Fed's going to raise rates. With that understanding, the question I ask is, "How am I going to mitigate risk?" As hard as it is operationally to write the ship of a distressed asset, I view that as the best way to ensure the safety of my investors’ capital.
If that's the asset I'm going to go after, then I need to build a team that is properly equipped to take down a distressed asset and fix it as quickly as possible. That's where partnering with people like our friend, David Lagat, comes into play. He's a tremendous partner because he has in-house property management, in house construction management. Those are the things that I look at that will serve him because I bring him a deal.
It serves me because he has the capabilities to help me asset-manage. It's a very powerful symbiotic relationship that I can have with a person like David. Going after distress right now at this point in the cycle is exactly that. It's something that I'm doing at this point in the cycle because I want to mitigate risk. The cycle will turn. At that point, hopefully, we'll have plenty of dry powder to make some moves and acquire assets.
Darin: You said and did something so smart. When you went after the distressed deal, you didn't go and partner with somebody that had no experience. You partnered with somebody that had experience with distressed assets prior, and a proven track record of turning that around. Ego can get in the way at times.
People Who Sacrifice for Success Learn Valuable Lessons
Darin: Some people may go after a deal, and say, “I'm going to do this and figure it out.” But they may lose a lot of money or not maximize the valuation. They don't have the learning lessons of somebody that has experience. I applaud you for going searching for a partner that has already been there, done that.
Chihiro: I never thought about it in that way, but, you're right. You have to have some humility. I've done a whopping three deals. That's not a whole lot, honestly.
I definitely realize the value of partnering with great people. And I wouldn't do it any other way, until I feel like I've established enough credibility on my own.
Darin: Three deals is strong. It's not like you bought three duplexes, it’s 500 units. Some people they're like, "Oh, I only did one deal a year for the last 10 years." I'm like, "There's so many people that have never done one deal." Don't beat yourself up for that. You said that you have an obsession and responsibility to investors. The capital raised in a syndication typically is the one thing that people are really scared about.
Like, I'm going to bring in other people's money, but I also want to add something to that. it's actually extremely exciting that you're not just helping grow the wealth for you and David and in this deal I'm in with you. But all the limited partners have busy lives. They're doctors, lawyers, and in corporate America. They've saved up their hard-earned money, and they've invested in different deals.
Darin: When there is a payday on the back end, there's just a sizable return. They all have different needs for it. Some of them are for retirement, some to buy a new car, some for college education. I look at syndication as a way to give back. There's so many people that they just don't have the time or knowledge or effort or passion to go after and find their own deal.
But if they can partner with somebody like you, that can take their money. Then you use that money to increase valuation and provide them with a very strong return, that is a win-win. I wish I had done that years ago and I wish I knew somebody years ago.
Chihiro: The other element of that is, we're taking a property that's rundown. That is, frankly, an embarrassment to the community. We're putting a ton of capital into it, and changing something from an eyesore into something. An apartment community that people are not embarrassed to live in.
They're going to be proud to live there. It's going to have all the issues that the prior owner failed to address, they're all going to be fixed. That is adding tremendous value to the community. It's providing housing to people that need it.
One thing that a lot of people need to realize is you and I as real estate owners or landlords, we're providing a commodity product. If I own an apartment right next door from you, I can't charge more than you because I'm just not going to get occupancy. It's a commodity product. I'm a price taker just as you are. You're charging market rate and I'm charging market rate.
The Rent Is Too High
Chihiro: Here’s what we're doing when we take a rundown property and we generate profits to our investors. We're taking an underused, unrenovated, poorly maintained product, making that better so that people are willing to pay more. We are giving people a better product that they're willing to pay more money for. It rubs me the wrong way when people say, "Oh, you're just…" Not taking advantage of, but the rent is too high is a general thing that you might hear from people.
If the rent is too high, the first thing that I think of is, "That market in which the rent's too high, there's not enough supply, that's why the rent is too high.” No landlord is able to charge more than the market is willing to bear. There's just not enough supply.
Darin: The reality is, whether it's a BC, value add deal, and you're painting the property and upgrading the interiors, or whether it's a distressed deal eyesore, you're completely revamping that property to be an attractive property for the community. There's going to be two different camps of tenants. There are going to be some tenants who know they've been paying very low rental rates because they live in a dilapidated community. That type of tenant most likely will move and try to find another dilapidated really low rent unit.
Then there are other tenants that are like, "Thank you for providing a community that I can be proud of." When I walk down through the parking lot, and somebody stops me and says, "Thank you. This place looks so much better. I've lived here for 15 years, and nobody's ever painted it before. It looks great, and I am so happy." That is a side benefit.
What Makes the Sacrifice for Success Worth It
Darin: I'm more of a business guy. I know syndicators that are warm and fuzzy about really giving back to the community, and I love that benefit. But my mind works more in the returns, in helping grow the wealth of people, and getting involved. When all of a sudden someone stops you out of the blue, you're like, "That's a true benefit. The people that live here, actually, are proud of it."
Chihiro: That is what you do when you turn a distressed asset around. That point isn't lost on me in terms of the value that we're providing to the residents.
Darin: Another thing that I'm impressed about is, you went after a tertiary market like Abilene or after a distressed deal. You went out to West Texas, which is very dominated by oil and gas markets. It's not just about real estate. You actually have to understand that sub-market, the workings of that sub-market, the economics, and the business drivers. The kind of companies and jobs that are available in that market.
Talk a little bit about Abilene as a tertiary market. It's not in the Metroplex, DFW Metroplex. Then let's talk about Big Spring. It's in an oil and gas market. When you looked at this deal, you looked at oil and gas commodity pricing and where you think things are going in the future. Talk about those two components because that's important.
Chihiro: Abilene and Big Spring, I'm going to separate them because they are very different. Abilene is definitely a tertiary market from a national standpoint. The Metro has about 170,000 people, but it's a diversified economy.
The Challenges in Tertiary Markets
Chihiro: The big economic drivers there include the Air Force Base, which houses a bomber squadron. Then there's Abilene Christian University, Hardin Simmons University. Beyond that, it's just a very well-diversified economy. Those are the things you obviously need to look into investing in any market.
But an important dynamic about Abilene, which may generally apply to many tertiary markets, is it's housing constrained. You think building an apartment in Dallas is difficult bureaucratically, with all the challenges inherent in development. Well, economics can be even more challenging in a tertiary market.
The economics often aren't there to build an A class or A+ class property in a market like Abilene. That means there's going to be a lot of demand for class Cs being turned into Bs, class Bs being upgraded to a B+. That's exactly what we did there. In terms of Big Spring, there were the macroeconomic aspects that are very important, particularly in West Texas. We're talking about the oil and gas patch, the oil patch, referred to as the Permian Basin.
The genesis of that was, as soon as COVID hit, predictably, oil demand just went through the floor. Then in the summer, June, or July of 2020 last year, we briefly saw oil futures go negative. It's absolutely crazy. I remember around where you and I live, I saw gas get down to 20. It was below 30 cents a gallon briefly, maybe for a week or for a few days. That's just unbelievable.
From a common-sense standpoint, you know that's not sustainable. Oil demand has to come back. That’s really the impetus for it. I went into a lot of research and continue to do research because that's just my personality.
All the Things You Will Sacrifice for Success
Chihiro: Yes. I've read some books by a Pulitzer Prize-winning economist named Daniel Yergin who specializes in oil, gas, and geopolitics. I subscribe to newsletters. Did all the stuff that you’d expect somebody to do if they're researching some sort of commodity. Here's the bottom line. Decarbonizing, reducing fossil fuel reliance, all of that is very real.
Having said that, petroleum and petroleum products are so fundamental to not just some of the things that we do. It's everything that we do. The things that we consume are so dependent upon petroleum that our reliance on that is going to diminish in a very slow way. Much slower than you might think if all you're doing is super surface-level research, just consuming your news headlines.
Darin: Tesla is up again.
Chihiro: Those headlines might just lead you to believe we're all going to be in electric cars in 10 years. The fact of the matter is, that's simply not true. Tesla is a great example. About 3% of all new cars sold today are electric in the United States. That's a KPI or stat. But take a guess what the average age of a car is in America today. It's about 12.
I don't need to break out a calculator, but I can surmise that it's going to take a while for us all to be driving electric cars. 3% of new cars are electric. A car is driven on average for 12 years in the US. That’s one out of a sea of statistics and numbers that bear out the fact that fossil fuels are going to be a key part of the world's economy for decades, not years, to come.
The Next Property You Should Be Digging
Chihiro: So, I'm going to briefly go as an aside here. If we really want to decarbonize our world, a big part of the solution that's not being discussed goes well beyond wind, geothermal, and solar. It's really going to come down to carbon capture and sequestration.
We're going to have to figure out a way to take CO2 out of the air and turn it into chalk or rocks in order to meet some of the goals that governments have today. My point is simply that for the next several years, if not, at least the next decade, perhaps well past that, we need to produce a heck of a lot more oil. A lot of that is going to come from the Permian Basin.
With that as a backdrop, I started really digging to try to find a property out there. One that I know is going to be timed right in terms of the oil cycle coming out of COVID. That's what we found in the Barcelona Apartments in Big Spring.
Darin: This one was West Texas oil opportunistic distressed. That's a big theme with syndicators in general. There are a lot of investors, but they would probably be scared to pull the trigger. That's what differentiates the syndicator, the lead general partners that actually put their reputation and money on the line to lock up a deal then go raise the capital. Versus limited partners or people who haven't invested in real estate that are afraid to make that call. GPs make more money on a deal, but they have more risk. They have to actually take action when it's scary.
People Will Question Why You Should Sacrifice for Success
Darin: When you got into this deal, I'm sure there's a lot of people who asked, “What are you doing? Are you crazy?” How many times did you hear that and still pulled the trigger?
Chihiro: I did hear that a lot. But the flip side of that is, I feel like it's crazy to pay 100,000 a door for a stabilized C class in Irving, Texas that's been picked over three times. It's traded, it's had three owners in the last seven years. That seems crazy to me. Where's the value add remaining? What are you going to do? You're going to add Nest thermostats to a C class apartment? What are you doing?
How do you add value at that point? I'm certainly behaving in a contrarian manner. But the depth of research that I did gives me confidence that my investors, and you and I made the right choice here.
Darin: I went out there, and definitely saw a ton of opportunity. To be fair to the people that are paying these high prices, there's no crystal ball. Inflation is a big discussion point now. Even if you pay market prices, high prices, if you can lock in low cost of funds, and then there’s inflation.
If there's wage inflation, people are making more money then most likely they're able to afford to pay higher rents. So rents go up, and your funding costs stay low, even if you have a floater. It's half of what your rents are, so your profitability should continue to increase. But that is if there's inflation, and people are still willing to pay more rents.
Looking at the Sacrifice for Success From a Different Perspective
Darin: You look at it from a different perspective. You’d want more confidence than just hoping that the market is going to take it that way. You want to see something more concrete than that.
Chihiro: I certainly don't want to rain on anybody's parade. That's why people are paying what they're paying in various metros throughout the Sunbelt, including Dallas. There's a lot of value in truth to what you're saying. That's why everything, from single family homes up to institutional core properties, all of it are appreciating right now. There's a reason all the money's come in here.
Darin: You've been at this for four years. Divide this up. If you are a first-time passive investor, how do you get involved with this?
Chihiro: Listening to Darin's podcast is a great way to start. Podcasts have been a tremendous part of my education. For about the first three years of my real estate journey, I literally only listened to podcasts. I never listened to music, I was just constantly listening to podcasts.
The thing is, this business is hard. It's super competitive. It is really hard to find assets, to raise capital, and to asset-manage. All of it is hard. You gotta be freaking obsessed, and I was obsessed. I still am. So, I literally only listened to podcasts and learned a tremendous amount. I also started out as a limited partner well before I became a general partner.
Darin: That is a smart thing to do. I did that. Part of it was, I wanted better returns. I pulled money out of the stock market and put it into a lot of real estate deals.
The Feeling of a First Timer
Darin: It also helps you learn when you go to raise money, what are you feeling? When you actually have to wire 50k or 75k or 100k into a deal, what are you feeling that first time? There are going to be new investors who will talk to you and have gone through that process. Understanding the documents you have to sign, the wiring, then the monthly emails, and all that. Having gone through it gives you comfort. It gives a new investor the comfort that you can talk them through that.
Chihiro: That's a good point to bring up, the perspective of a first-time LP in a private equity deal. The anxiety they must feel to wire that 50k, that takes courage.
Darin: We always talk about the courage of the general partner of having to lock up the deal. It takes courage to decide you're going to go out and get educated by listening to podcasts, reading books, going online, whatever, going to meetup groups, but then actually doing it.
Chihiro: It's different from the traditional path that you are led to believe, that the way to your retirement is a 401(k). To not necessarily swim against the current, but just do something that's a little bit different, that does take some guts. Here's an example that proves that point, and also demonstrates my naiveness. In my first deal, I was marketing the capital raise to basically every business school classmate whose email address I had. I was very active in business school so I knew a lot of people.
The Sacrifice for Success Requires Courage
Chihiro: I knew practically everybody in my class. So, I reached out to these folks. You would think people who have very recently had a pretty top-notch finance education, investing education would be like, "This is a great idea." But again, that was my naiveness. It does take courage to step outside of the paradigm that you're familiar with, which is 401(k) for a lot of people. I didn't get the response that I thought I might get.
A lot of these people, it's hard to have that faith in somebody. Like, “This guy was involved in business school, and student counsel, and these events. I know him as that guy. He was also a claims adjuster, and now he's raising private equity for real estate? Do I trust this guy?” Clearly, the market showed that a lot of people were hesitant. Then that slowly changes as you show success, as you build up your reputation as a person of integrity, and as a person who performs. More and more of that community has been engaged with me through these deals.
Darin: I remember my first syndication. I had certain people in my phone that I was like, "Oh, this guy's a no-brainer." Entrepreneur, wealthy, invested in a lot of different businesses. I'm like, "He's definitely going to invest." All of a sudden he's like, "I just put a bunch of capital into this other business. The timing just isn't right." That may have been the case, or some people just like to control their own businesses, and don't want to be passive.
The Path to Success Is Uncomfortable
Darin: Then there were others that I was going through my phone. I'm like, "There's no way this guy is going to invest. All right, you can't make that decision for him." I sent a quick text and then, "Can we get together for coffee? I don't know how this thing works." Then that guy is invested in several deals with me. You don't know. It's an opportunity, and you have to share it. Be willing to share it with a lot of people and you will be surprised just like I was surprised.
There are going to be some people who you think are no-brainers but will not invest. Then there will be others who you think, no way. All of a sudden, you're surprised they've been squirreling away a bunch of money, and this is right up their alley.
Talk about getting uncomfortable doing your first deal. There's a lot of steps in this game of syndication that are uncomfortable. How did you push through that?
Chihiro: That honestly goes beyond syndication. It's really a life philosophy for me at this point.
Darin: Has it always been?
Chihiro: No, it hasn't always been. Becoming a real estate investor has changed my life in more ways than one. It has made me a person who is willing to constantly face discomfort and constantly work towards getting onto the other side of discomfort. Case in point, I started another real estate business this year. I quit Toyota in March, but I wanted to start a new business in real estate, so I did.
How Much Are You Willing to Sacrifice for Success
Chihiro: I've got a wholesaling business doing single family homes. That's a business that complements what I do as a real estate investor in the apartment space. I'm training for a marathon. That's super uncomfortable, running long distances.
Doing something that's been so difficult yet so rewarding has changed many aspects of my life in a very positive way. In fact, I got a poster up in my office here that says, "I'm not telling you it's going to be easy. I'm telling you, it'll be worth it." That's a guiding principle for people like you and me because what we do can be very uncomfortable. There's a lot of aspects that are very challenging, very unpredictable, very anxiety inducing, and very scary. But success doesn't come easy, you have to work for it.
Darin: You said becoming a real estate investor has changed your life, and it has for me, too. But it's when you see other people that not only did they get the first deal, and the second deal, but they're uncomfortable. They're pushing themselves to do something they haven't done. When you surround yourself with a group like that, it motivates you. If they can do it, you can do it.
So, you want to start another company and you want to train for a marathon. Your wife is a big athlete. She trains hard. She's disciplined. I'm sure that that has rubbed off on you as well.
Chihiro: I give her credit for that all the time. Maybe not enough, but I tell her, her relentlessness has definitely rubbed off on me.
Pushing the Boundaries
Darin: Although it's uncomfortable, when I'm most excited and charged up about something, it's usually something that I haven't done before. I'm learning, and I'm trying to push the boundaries. When you're an adjuster, you're going out and you adjust another, it gets boring. There's a lot of people that live life that way. They’re just doing the same thing over and over.
Chihiro: It's important to say there's nothing wrong with that. But some people find that unfulfilling to the point that they're willing to do something drastic. I’m one of those people. I didn't always know I was one of those people. But sitting here and 2021, I can say that life wasn't enough for me, so I chose a different path.
Darin: When you made that choice, almost everybody that I've talked to who’s successful, there were challenges and sacrifices they had to make in order to achieve success. Talk about the sacrifices you had to make.
Chihiro: 2017 was the beginning of my real estate journey, January, in fact. It wasn't a New Year's resolution or anything, but it just happened to be the very beginning of that year. But I didn't close my first deal until over two years after that. It was March of 2019 that I bought my first deal. It’s almost two years since I made the commitment to become a multifamily investor. It was almost two years before I got the first deal under contract. That was the Abilene deal. There's a sentence for you, it took me two years, but then let's unpack that. Well, what was that like?
Why Mentors Are Important
Chihiro: The first year of that two-year period, I was truly going at it alone. Going to conferences, reading, podcasts, all that stuff. I was doing it but getting nowhere. The second year of that, I joined a mentorship and I got to give credit where it's due. Mark and Tamiel Kenny, they have a group called Think Multifamily that was very beneficial for me. That's the mentorship group that I decided to join that was very fruitful for me. But I was still working fairly hard at trying to find myself an apartment to buy during that first year prior to joining the mentorship. I just was spinning my wheels.
Well, I doubled down once I joined that mentorship group. It was about six months after joining that, lo and behold, I got that first deal under contract. I really ramped up the effort level higher than where it was before after already working at it for over a year. And I was surrounded by like-minded people. I was provided access to the partners, the team members that I needed in order to take a deal down.
If you have no experience, how are you going to find a syndication attorney? How are you going to find a transactional attorney? Where do you even go to find one? How do you get referrals on that? That stuff is really run from your nose when you join a mentorship group. Those sorts of things and many other factors were very critical for me as surely they were for you when you joined a mentorship group. That acceleration was critical.
Real Estate Demands a Tremendous Amount of Sacrifice for Success
Chihiro: That was the second half of that two-year journey up until I purchased that first property. The point is, it was a tremendous amount of effort. It can get really difficult to chase a goal that you don't know if you're ever going to hit it. It's very different from running a marathon in the sense that I know exactly how far I need to run.
Darin: And you know the day that you're running it.
Chihiro: That first two years, it's like, "I'm running a really long race, and I have no idea how long it is. I don't know where the finish line is." That's what chasing your first multifamily deal is like. A lot of people are going to give up. There's going to be attrition because it's a very challenging path. The people that pull through are going to get that first deal.
Darin: Like your poster said, it's worth it in the end. We were in different mentorship groups. I'm in the Brad Sumrock group, but I love people. I've met so many great people in all kinds of different groups. It also brings not only the partners, the know-how, the people, and the success stories, but it brings credibility.
When you reach out to a syndication attorney or a broker, and you say you're part of this group, those brokers, attorneys, and vendors have worked with a lot of other people in that group. They've seen success with that group. Just aligning yourself with that name and that group brings you credibility. They may spend more time with you than had you just called out of the blue.
Tips for Building Credibility
Chihiro: That's a very important aspect of the value provided by mentorship groups. Credibility is in short supply when you have zero deals.
Darin: I liken it to, you call the broker for the first time. The conversation is something like, "Can I go on this property tour? You've got this 100 units, I'd like to go on a property tour." One of the first questions that come back from the broker is, "What do you own?" Well, I own my house. You know right from that point that the broker is putting you at the back of the list.
Chihiro: You're dead in the water.
Darin: He may be extremely cordial to you. He may even go on the property tour with you. But in his mind he's like, "This guy can't close. He's just a number that I can say I did one extra property tour. He is not somebody that I'm going to be recommending."
You talked about building a team. There's a lot of people that are involved in these transactions. Talk about the importance of going to conferences and meetup groups and networking with other people.
Chihiro: It's a relationship business. Why do we all keep saying that over and over? Because it's true, it's a fact. I was at a conference, shaking hands, meeting people just last night. Having this very conversation about every aspect of real estate, not just being a principal buying assets. But if you're a broker, if you work in title, if you are an LP, all of these things require you to network and build relationships with people.
How to Be Relationship-Oriented
Chihiro: It's just so fundamental to this business to be relationship-oriented. That is why I went to a conference last night. I went to another one-two weeks ago. Then I went to the Old Capitol conference three weeks ago. I'm constantly going to these things.
You’ll never know who your next partner is going to be, who your next contractor is going to be, who your next title company. You can only find those people by hunting. The way that you hunt in this business is you shake hands, you meet people.
Darin: David Lagat was not part of the Think Multifamily group, but you met him somewhere along the way. You developed a relationship, and you've done two deals with him.
Chihiro: I'll tell you the story of how I met David. It was at a networking event hosted by Madison, which does cost seg. It's the vendor that I use for cost seg, and they throw a party every year. I was there, and I met David there.
Darin: That's where I met David, too. It was at one of the Madison parties as well. We played golf a number of times.
Chihiro: Fast forward, we've done two deals together. That is why I go to these events.
Darin: It builds credibility, too. Yesterday, I had a coffee meeting with somebody who reached out to me over social media. I'm meeting with him. Before I met with him, I went through his Facebook and looked at different pictures. Sure enough, there was a picture with you, and somebody else that I know from social media who I haven't met yet, at the Old Capitol conference.
Financial Freedom Is Achieved When You’re Willing to Sacrifice for Success
Darin: Then I saw him pictured with some other people I know, and I had never met this guy. Immediately, I thought, "This guy must be in space if he's hanging out with these people. He's at these conferences, he's pictured with people I know," that sort of thing.
Sometimes I meet with people and they have no connection to multifamily. They're just really green. This guy had done a couple of deals. It's amazing how just that picture I'm like, "Oh, he’s with Chihiro. They must know each other." So, it's important to get out there. What's the next big stretch goal for you other than running a marathon?
Chihiro: I'm very fortunate that I was able to leave the corporate job. That was a big goal of mine that I'm proud of achieving. I got into this for financial freedom. Well, it's actually bigger than that. It's really freedom.
Money is a tool, money is not the end. It's the means by which you can achieve things. That's really important to me in the sense that I'm not in this for money. I'm in this in order to generate enough money such that I can achieve a level of control over my life. Allow my wife to achieve a level of control over her life, so that we can do whatever we want, whenever we want.
Money in and of itself doesn't do that. You can fall into the consumption trap of just buying stuff. That doesn't free you from anything. That's fine, too. Consumption is absolutely perfectly fine. But for me, the goal is just to be able to control me and my wife's lives to the extent that we would like to.
Build Wealth Through Compounding
Chihiro: To that end, it's a big milestone to have left my corporate job, but I still have work to do. In terms of what's next for me, I gotta keep searching. I got to keep looking for new assets. As you know right now at this point in the cycle, finding well-priced assets is seemingly impossible. Somehow, occasionally, it's happening. Like you and I found one. That's what I have to keep doing.
Being disciplined, being diligent, continuing to build relationships, and just got to plug away. This is not something that happens quickly. You build wealth through compounding and compounding by definition, it takes time. I'm playing the long game.
Darin: Outside of work, what do you like to do?
Chihiro: Right now, most of my time is spent running
Darin: Share with the listeners what your wife is involved with because she's a big-time athlete, too.
Chihiro: My wife is an Ironman triathlete. Ironman for those who don't know is 140.6 miles, it's insane. It's a 2.4-mile swim, followed by a 100 something mile bike, then a full marathon. She's done that in as little as 11 hours and six or 11 seven minutes. She did well enough this year at an Ironman qualifier that she actually qualified for the Ironman World Championships. I'm very proud of her for achieving that. It's been a long time coming. She's been training for seven, maybe even eight years now at this point.
A Big Inspiration
Chihiro: I’m very proud of her for achieving that. A lot of people have completing an Ironman as a bucket list. But making it to Kona, the World Championships, you got to be the best of those people. That's what she does. Her dogged determination, her level of effort is very inspiring for me. I freely admit to anybody that has been a big inspiration for me to keep working hard at what I do.
Darin: If listeners want to reach out to you and get to know you better, what's the best way to do that?
Darin: Chihiro, I appreciate partnering with you. You're a top-notch guy. I appreciate you taking the time to share with listeners. Listeners, I hope that you enjoyed that one, and until next week, signing off.