Are you ready to take your business to the next level? Kurt Jordan is a multifamily investor who knows how to seal the deal, build teams and processes, and raise money. He’s done it all – and now he’s ready to teach you how to do it too. In this episode, you’ll learn how to take massive action, get deals done, and build a successful business. Listen and learn!
Table of Contents:
- Where To Listen To The Podcast
- How Kurt and Darin Met
- The Risks That Sponsors Take When They Seal the Deal
- The Bottleneck to Seal the Deal
- Build Value That You Can Sell to Seal the Deal
- The Value of Networking When You Seal the Deal
- Lessons Kurt Jordan Learned to Seal the Deal
- How to Reach Kurt Jordan
How Kurt and Darin Met
Darin: A little background on Kurt Jordan before we start the show. Kurt lives in the DFW area. He had a W2 job with a tax consulting firm where he managed a team. He liked what he did, but he looked at senior-level people in the company and decided he wanted more time and more freedom to spend with his family. That led him into multifamily investing and that's all she wrote. Now, he is off to the races, building his own company. He is very grateful to the big man upstairs and to his wife for all her support through the years.
Just a little bit on how I know, Kurt. So we kind of run in the same circles. We're both syndicators in the DFW area. There's different meetups and different conferences and we've run into each other. He actually partnered on a deal with another multifamily syndicator that I'm good friends with, Aaron Katz. I had him on the episode, episode 31. Since then, he's just been crushing it. So I am so looking forward to hearing how he's doing and how he's making it happen. Typically, my first question is how many properties and how many units are you invested in?
Kurt: So I've purchased 7 properties and almost 1,200 units now as a general partner.
Darin: Seven properties and 1,200 units. And that's over a span of how long?
Kurt: I closed my first property in March of '19. So I guess a little over almost three years now.
The First Time Kurt Seal the Deal
Darin: Talk about the first deal and why'd you partner with Aaron. Did you feel like you had to partner with somebody and then we'll get into kind of how you scaled after that?
Kurt: So my first deal actually was not with Aaron. It was a deal with another Aaron that you don't know. Actually, it was when I was at a W2 job and it's a 35-unit deal in Mineola, Texas. If you know where that's at.
Darin: I do not. Where is it?
Kurt: It's north of Tyler. So I had some single family homes at this point and was looking to scale up, and was a podcast junkie. And so I listened to some BiggerPockets Podcast and I was introduced to the Old Capital Podcast and went to a conference of theirs back in October of '18. I was like, "Man, I like this multifamily stuff that they're talking about. I like the idea of scaling."
So I saw that Marcus & Millichap had a 35-unit deal out in Mineola and basically just went for it with a coworker of mine. We were going to take it down ourselves initially. But then we learned about syndication and it's like, "Well, why don't we just go ahead and just give this try, this syndication thing a try. And if we can raise the funds, great. If we can't, then we'll just take it down ourselves."
The Group That Helped Kurt Seal the Deal
Kurt: We were able to raise the funds and so closed on that deal in, again, March of '19. Also, about that time, I joined the Sumrok group and then learned about bigger syndications. That's when I realized that maybe it was good to partner with someone who could maybe kind of help me get over the finish line on a bigger deal. That's where Aaron Katz came into play and that's where the second deal came into play.
Darin: And that second deal, was much larger than the 35 unit?
Kurt: It was. So just kind of a timelines here. So I closed my first deal in March of '19, and then I actually left my corporate job in July of '19 well before we had the second deal. It was one of those things that in a sense kind of burned my boats. If you've heard that phrase. Because I wasn't making a lot of income off the 35-unit deal and just kind of made some family decisions.
Darin: How was the wife with that decision?
Kurt: My wife is awesome. She supports me probably too much. I could say sometimes it's a little stressful just how much she supports me. But it's amazing because I know not every spouse would be okay with something like that. But we had money saved up and we were ready to kind of make that next change in life. I had always liked real estate and was entrepreneurial. We joined the Sumrok group back in March of '19 and then I didn't actually close on the Avalon Villas deal that 265 unit deal until November of 2020.
How Curiosity Lead Kurt to Seal the Deal
Kurt: So it actually took us about a year and a half at that point to actually find that first large deal after the 35-unit deal.
Darin: It took a year and a half to find it.
Kurt: We entered a contract in June of 2020, so right after the COVID stuff occurred. And then it was a several month closing. Like I said, we didn't close until November of 2020.
Darin: So you said a number of different things that I think are really important for listeners to understand. One is, well, you didn't use this word, but you had curiosity that you actually were listening to podcasts. You were looking at BiggerPockets’ website and for the listeners' benefit, that's a great real estate investing website if you haven't been to it, called BiggerPockets.
So you got out there. And then you went to a conference, you went to Old Capital Conference. And you were listening to Old Capital's Podcast. You started educating yourself, you started building that curiosity. And then what differentiated you from a lot of people though is you actually took action after that where a lot of people, they will listen to the podcast, they read the books. They might even go out to some conferences, but then pulling the trigger can be scary. How'd you pull the trigger?
Kurt: That's a good question. My job, honestly, my W2, I loved it and it provided me great opportunities. I worked for a tax consulting firm and did sales tax there and managed a pretty good size team. But I looked at my future at that company and saw the time that it was going to require.
The Realization That Made Kurt Pull the Trigger
Kurt: Don't get me wrong. I don't mind working. I'm going to work very hard at this particular job, but I saw people who were maybe higher up who maybe didn't get to spend as much time with their family.
For me, family was really important. My spouse is really important. And at the time in 2019, I had a little over a one-year-old and I was leaving, getting to the office like 6:00 in the morning. And then leaving the office at five, which was early into some standards. Just so I could get home at six and just spend an hour with him before he went to bed. It was a cheap hour at that point. Because I'm still kind of decompressing from the day and all that kind of bit. So what got me to pull the trigger was when we did the 35-unit deal, I again, started learning more about syndication and gained some confidence that I could do it.
At that point again, probably still didn't know what I was getting myself into, but it was one of those things that I was ready to take action there. I wanted to be able to look back in my life and be able to say that I tried something here. I didn't want to be 20 years down the road and still be super successful in the W2 job, but wonder, "Hey, what could it have been if I'd had gone out and done something on my own?"
Multifamily Is an Expensive Game to Get Into
Darin: Oh man, that's huge. I mean, I can't tell you how many people, I believe that are out there that feel that way. Look, granted there are people out there that love what they do. They're climbing the corporate ladder and making great money and that's great. But I believe there's also a lot of people that have that itch. They have that urge in their belly, but they're just afraid to take action. But one thing you said though, and I did it too, was, look, you had some money saved up.
That's the part that I think prevents people from being able to take a chance. I have another company that trades loan portfolios and I started that company in 2007. But 2002 to 2006, I was making great money as an employee and I just kept sacking money away. And I said, "After this job, when this kind of gravy train runs out, I don't want to ever work for somebody again."
But I think a lot of people, they buy the nicer car, they buy the nicer house and they're actually handcuffed to their bills. It makes it very difficult to take that chance. So you did some planning that you actually saved some money up and you felt like you had a chance to go after it.
Kurt: That's right. And to be honest with you even looking back at it now, multifamily is an expensive game to get into. You learn things along the way. But now if I was to do it again, I would probably have more saved, more money saved up, earnest money deposits plus living expenses.
The Risks That Sponsors Take When They Seal the Deal
Kurt: And for the Avalon Villas deal, I mean, we put down 1% of the purchase price, which was 300 something thousand dollars plus other cost, due diligence cost. That's hefty to be sitting in a title for that time it was three months. Again, I told you, we went a year and a half before we closed on that deal. So basically, we were living off of a year and a half of our savings and had all that money tied up at title. Tough.
Darin: Yes. I passively invest and I'm also a general partner and you probably have done the same. People that have just passively invested or are looking to passively invest for the first time, I don't think that they realize the risk that the sponsor takes on the deal. They look at it like they just want my money and to be part of this deal. But sponsors aren't going to get into a contract on a deal that they don't feel confident that they can make a good return on because… Or that they can raise the capital for because like you said, I mean, you had hard money of 300K.
Then there's the application fee for the lender, there's the inspection fee, appraisal fees. So all of that is fronted by the sponsors. And then when the deal closes 60 days or 90 days or 120 days later, you're refunded for that, but you're out of pocket. And if the deal doesn't close, you're at risk.
Kurt: That's right. So it was a little stressful. And again, going back to just talking about how awesome my wife was.
Kurt’s Source of Confidence and Assurance When He Seals the Deal
Kurt: She was really supportive of this whole situation because, again, it was tight. It was tight there for the first year and a half.
Darin: What did she say that was supportive?
Kurt: She just believed in me. I mean, she believed that we were going to get through it. And then also too, we look back to our faith in God, in this situation. I mean, before we made this move, there were many prayers that went up, "Is this a move that we need to make here?" And we felt confident that it was, just based on some guidance that we felt like we received. Even though it was really stressful, we were still at peace with the whole situation.
We knew that we were going to get taken care of in whatever situation that we ended up in. And this is what our faith says that we will be, we will be taken care of in some capacity. So even if we went bankrupt, we knew that we would still have food in some way. We would still find housing in some way. We would still be taken care of in some way. And that kind of gave us some peace in the situation and it continues to give us peace now, even.
Darin: Yes, that's huge. I got chills when you were saying that. Because look, I mean, especially the first deal too can be very stressful. If you can lean on something like your faith to give you peace during a very challenging time, that's huge.
The Iceberg Underwater
Darin: I've interviewed a lot of syndicators that have a lot of units. When I ask them about fear and how they push through it, a lot of them have said the same thing. They said, "I thought about what's the worst thing that could happen?" And you just said it. Okay, if the deal fell apart, like money's money, you'd find a place to live, you'd find food somehow. You'd be provided for. A lot of people kind of have had that question that they threw out to themselves. And then they say, "What's the upside and what's more likely to happen?"
The upside is more likely to happen than the downside. I'm going to take this chance. Because nobody does have a crystal ball. I mean, it could come out great or it could be a difficult situation. But the people that have excelled took some risks somewhere in their life.
Kurt: I mean, everyone talks about the iceberg underwater. You don't see all the stuff that goes on below the surface, but there really is a lot that goes on below the surface. And a lot of people see the successes, but there really is a lot that happens behind the scenes.
Darin: So talk about some of the stuff under the water, the iceberg under.
Kurt: Oh, we've been talking about some of it already. It's hard. It's hard to find deals. And it's hard to raise money. It's hard to get deals over the finish line. I mean, it's all hard. It's a roller coaster ride. Entrepreneurship is a roller coaster ride. Even within the same day, you can have such highs and certain some days.
Entrepreneurship Is a Roller Coaster Ride
Kurt: And then that same day you could have massive lows. It's incredible. It's a tough game. See, people who are listening can't see that I have no hair.
Darin: A funny story on that. I went to get my license renewed and the lady said, "What color hair do you want me to put down?" It's either brown or gray. And I said, "Well, if you ask me, it's brown. If you ask my kids, it's white." And she said, "I would put down gray." And I'm like, "I can't do it. Put down brown."
So anyway, I mean, we're still young at heart. In our minds. It is hard. But the thing too, and I want to get your take on this, is that, what you thought was hard in the first deal is different in the seventh deal.
Kurt: It is. Although, I'm not doing 35-unit deals in my seventh deal. So that's one thing too. I'm stretching. So I just closed on a deal this week and it was a 651-unit portfolio deal. That's a little bit different than a 35-unit deal, which had its challenges. So one thing I've liked being able to do is just continually stretch myself and see what I can do. And this last deal that we closed certainly did that. It was almost $25 million raise, which is a lot. Certainly more than the 500,000 raise in my first deal.
Darin: But that's exciting.
Kurt: It is.
The Scary and Exciting Part When You Seal the Deal
Darin: And look, as an entrepreneur, I think that's where we get the juices flowing is going after something that is a little bit more than we've done before. That stretch is part of that journey, that growth. That's the scary part, but it's also the exciting part.
Well, good for you that you have a wife that's supportive because it can be challenging. And if you have a spouse that isn't completely on board that just would add to pressure and the stress, and everything else associated with it. So you close on the first deal, and then the second deal, you go bigger. At that point, you decide that you want to scale. Right? And you want to do more deals. So talk to us about that.
Kurt: Yes. So honestly, I don't know that I really thought I was going to scale big.
Darin: You did, big time.
Kurt: Well, really until like a couple of months ago, to be honest with you. I came to kind of a fork in the road here. It was kind of, "Do I want to keep doing these kind of one-off deals?" Because at that time, so I did the 35-unit then a 265 we mentioned. And then I did a 54-unit, then a 71, then a 16, then a 136. At that point, I was kind of like, "Man, what do I want to do with this here? Do I want to, again, just kind of do these one-off deals? Or do I want to create a firm and really just go into this?" So several months ago, I guess it was three or four months ago, I actually had a meeting with Merrill Kaliser and John Monteiro.
The Bottleneck to Seal the Deal
Kurt: And those guys, basically to their credit, they looked at me and was like, "Man, what do you want to do?" And I was like, "Well, I don't know. I think I want to keep building this out."
And they're like, "Well, how many people do you have working for you?" And I'm like, "Well, none." And John was like, "You're prohibiting yourself from growing." He's like, "You're the bottleneck in this thing." I'm like, "Well, that is such good advice." I am the bottleneck.
So since that time, I've actually gone out and hired three people. We have a little firm of four people now, because I was like, "Man, I just want to grow this thing." We got the 650 unit deal, which my team has certainly helped along the way there. So I have an asset manager and I have an acquisition's guy. I have an investor relations guy and all of them have just been amazing so far to help us with the growth and looking to continue to grow with this team.
Darin: That's fantastic. That's what I was going to ask you is, one, are you hiring people and two, in what capacities? And you just answered that. So have you seen bringing those people on has just freed you up?
Kurt: Almost. It takes a little bit of time to onboard people completely, but we're definitely making strides. I see the light at the end of the tunnel. My asset manager is out driving our properties every two weeks, which is great. He's putting together reports for me, which is super helpful.
Work ON the Business Instead of Working IN the Business
Kurt: And then my acquisitions’ guy is basically underwriting a couple of properties a day. Which I know as you syndicate deals, it's impossible to underwrite every deal that comes your way.
Darin: Oh, absolutely.
Kurt: So having that help has been super helpful and he's a really smart guy. I mean, all of them are really smart.
Darin: So how does that really work. Your acquisitions guy is getting. You've got him on the email distribution with all the brokers and then the deals are coming in. He's underwriting the deals and then he's just bringing the ones that have some merit to your attention?
Kurt: That's it. That's exactly it. He's coming from a company where he was doing some more mixed-use underwriting. So this is a little bit different, but he understands modeling, financial modeling really well. And so this has been a good fit for him so far. But yes, he essentially does call 95% of it and then says, "Hey, I want to look at this deal with you." And then we go over the last 5% together, which again, that's super helpful for me. Because it helps me think about how I want to grow the business and actually work on the business as opposed to being working in the business.
Darin: Right. And you said that you thought about it, and then you made a conscious choice to build the company. I think that's important because some people may just say, "Look, I'm busy. I need to hire somebody." But you have to actually understand whether you want to build a company.
The Pros and Cons of Hiring People to Help You Seal the Deal
Darin: Because when you hire that person and you said it, you said almost, that person that's doing the acquisition stuff, they have their thoughts on how to maybe underwrite, but you have your own way. Whenever you hire somebody, you have to spend time with them to teach them and teach them the way that you want it done. You have to be ready to make that investment in those people if you're going to hire people.
Kurt: That's right. Well, hiring people in general is expensive. I mean, there's the cost of, you call it the W2 cost. Now, I'm where I was working at home. Now, I have an office out of a WeWork. I mean, I don't know. There's taxes associated with the W2 employees. I mean, there's all kinds of extra costs that go along with that. Not just time cost.
So it's certainly a commitment. But like they say, sometimes you're going up, but you have to go down before you can go back up again at a bigger pace. So that's kind of what the thought was is like, "Yes, maybe I'll go backwards a little bit here for a few months. But I know this is going to be better for the long haul."
Darin: Fantastic. Mindset. A lot of people in this business talk about mindset. One, you have to believe in yourself that going from 35 units to 200 and some units that you actually can do it. Right? If you don't believe it, then how are you going to be able to attract other people into the deal?
The Mindset Shift That Started From Reading
Darin: And then mindset in terms of, "All right, where do I want to go?" Strategy and your plan for the future. It's not all about, "How much money am I going to make." You have to make a conscious choice and you have to believe that you can build it. So talk about mindset and how you've seen your mindset evolve over the last several years.
Kurt: So honestly, my mindset really started the shift when I actually started reading. I was one of those students that in college and high school or even several years after college just did not like studying. And I don't know if it was a classroom environment or what, I just didn't. I was like, "I don't like this." And then it was maybe three to four years ago. Probably, I guess when I started making a shift away from my corporate job was I just started reading books and listening to podcasts and learning.
And I found out that I actually do enjoy learning. I just don't like the classroom setting kind of learning where I have to go a test or something like that. But now I read about 30 books a year, 3-0 books a year.
So as part of my morning routine is to read for about an hour. Whether it's just any kind of personal development or business book. So that's part of my routine now. I think that's really kind of helped shift my mindset a lot. I know one of your guests just recently, DeMarco, it was one of his books that I actually read that book right before I actually left my W2.
Darin: The Millionaire Fastlane book. That was a great book.
Kurt: It was.
You Got to Take Action and Seal the Deal
Darin: And actually, your business partner, Aaron Katz, he put that out on Facebook and I went and got it for vacation. But I think like what you're saying, I completely agree, and I tried to tell my kids because school is a bummer. All the way through high school and even college, you have to sign up for these classes. You're told what you have to read and what you have to learn and you have to take tests on it. But it becomes different when you're an adult. You get to choose what you want to read and what you want to learn about. I'm like you. I love to learn, but I want to learn what I want to learn.
And I don't want to be told that you have to be here at this time and you have to learn this and there's a test. I want to learn because I'm interested in it. And that's what's great about life is that there's like so many different avenues to go and learn. We talked about it early on, but there's reading and there's learning and then at some point you got to take action. Or else that learning just kind of stays in your brain, but you don't benefit from it. Financially, at least.
Kurt: Yes. I don't know. Maybe I'm just crazy. I'm not sure. Maybe a little bit of success kind of helps me take the next step. I'm not sure. Another thing that's probably helped me along the way too, is my dad was an entrepreneur as well, which growing up, I mean, we're talking about nature versus nurture and whatnot.
Build Value That You Can Sell to Seal the Deal
Kurt: But I think that probably helped me a lot too. He had a business and then he sold a business when he was in his early 40s. Started another business and sold it when in his late 40s and basically retired at that point.
From an entrepreneurial standpoint, one thing I really admired about him was that he was always there for us as a family. He could go to our soccer games and go to the school stuff and whatnot. I really think a lot of that was attributed to the fact that he had his own business. To me, it just kind of gave me encouragement, I guess, or to do the same thing. Because I want to be there for my family. I just think that this job affords that to me.
Darin: That's huge. And the other thing is that you're building a company just like your dad. He built a company and then for whatever reason, maybe he just wanted to be in something else or maybe the price was right, but when you build a company, you're building an asset that you can actually sell. So you're building value that you can actually sell. When you're in a W2 job, the minute you leave, you don't get paid anything. Right?
Kurt: That's right.
Darin: You could be with a company for 10 years. They don't hand you a check when you leave.
Kurt: Not usually.
Darin: Right. I mean, look, there are some parachute.
Little Success Helps
Darin: They're a big CEO, parachute packages and stuff. But in general the employee is going to walk away and they're not going to make any more money until they go work for somebody else. So I think that's huge that you're able to build value and then sell it. And then usually as you're growing that business, the value of that is continuing to increase over time. And you're doing that with the multifamily business.
The other thing you said was a little success helps. It may sound silly, but I tell my kids that. I'm like, "Look, think about like one time that you did something that you were proud that you did and you were scared and you did it anyway. And you were happy you did it. You can look back on those things in your mind and help you the next time you're scared."
Look, I took a chance before. And maybe the chances that you took are bigger than maybe some other people that are listening. You went and did a 35-unit property. Look, for a lot of people that is mind-blowing in itself. And then you went from a 35 unit to a 200 and something unit. And now you just did a 651-unit. But all those little incremental steps give you confidence to go after the next one.
Kurt: That's right. Yes. If you've told me three years ago, I was going to be buying a 651-unit portfolio deal, I wouldn't have believed it.
Darin: Or that you're going to hire three people and build a company.
Kurt: I know. It's unreal just to look back five years ago and know where I was and look where I'm at now. It's not comprehensible. I can't even comprehend it.
Do Something to Give Yourself a Chance
Darin: Look, I asked you on here because I think that's very inspirational to people. I want to build wealth for my family and for ourselves, but I also want to inspire people. Life is pretty short and the people that I've interviewed that have taken some chances, they don't always work out the first time. But they're happy that they did it and then they pivoted in to something else or took a second chance or third chance.
And from a listener's perspective, what I would highly recommend is that if you have that itch in your gut whether it's real estate investing or starting a business or whatever, you got to plan. Save up some money, do it at night, do it on the weekends, do something to give yourself a chance. Don't have regrets later in life.
Kurt: Yes. I would say one of the couple things that, again, that helped me, and we touched on a little bit, is that I actually wrote out what was the worst thing that could happen. When you start thinking about like, what's the worst that can happen, it's scary in any situation, but it's more scary when you don't actually think about it through. When you just think, "Oh, what if I leave my job? I might not be able to do this because of whatever."
But when you actually start writing out what's the worst that can happen, I think, for me, at least, it took a lot of the fear away. And then, like you said, also the other thing is planning it out. Well, I mean, I have a spreadsheet where I was basically looking at where are we at currently with all of our assets. What are our living expenses?
Have a Plan
Kurt: What kind of money are we making already? Basically, how far can we go before I need to figure something else out? So essentially we had a two-year plan. If we weren't going to be able to make anything over two years, then at that point, I'd be like, "Well, it's time to go back and to try something else." But I knew that going into it, as opposed to just, "Hey, I'm going to quit my corporate job and not have an idea."
Darin: Not have a plan. That's smart. And you got buy-in from your wife too. So you guys were in alignment. So that's huge.
Kurt: That's right.
Darin: All your deals are in Texas. Why Texas? What's your thought on Texas?
Kurt: First of all, Texas is a great state. I live in Frisco, which is north Dallas. For people who are listeners that are not from Texas.
Darin: Did you grow up in Texas?
Kurt: I did. I grew up in Coppell, which is also Dallas and then moved to Frisco about six years ago now. But I like that Texas is a landlord-friendly state. I like the population growth and I like the business growth here in DFW. And I also like that it's in my backyard. I know people have purchased properties out of state, and I'm not going to say that's wrong or whatever. But for me personally, as an asset manager managing millions of dollars worth of people's money, I want to be able to know what's going on at that asset at all times.
Kurt Jordan’s Rules
Kurt: The thing that keeps me up most at night is, "Am I protecting my investor's money? What am I doing to ensure that their capital is safe and that I'm not losing any money?"
My rule number one is do not lose money. Rule number two is let's figure out how to grow this money. But I feel like I can do that best when I'm here, basically, where I am. Call it 15, 30 minutes away from the assets that we purchase. And DFW is just a great market.
I’m unfortunate that I have the opportunity that basically all the stars align, essentially, that I live here. That it's a great market. That I can purchase here.
Darin: Yes. I mean, those are all great things. When you live in one of the best apartment investing markets in the country, it's like, "Why go elsewhere?"
Kurt: Yes. And I'm not saying that I won't eventually one day by outside the market. But I do think at that point, I'll have to have boots on the ground in some capacity in that location for me to really feel comfortable.
Darin: Sure. But you'll have had experience like with your asset manager here and how you train that person. How you groom them and how you oversaw the operations and then that's going to make it easier for you to move into another location. Because you're going to have something to benchmark it off of.
Kurt: Sure. And in terms of also being in DFW and buying here like, as you know, you live in DFW, there's so many different pockets of DFW that you can't just say, "Everything in DFW is good." I mean, you have to know this market.
You Have to Know Your Area So You Can Successfully Seal the Deal
Kurt: So for me, like if I went to, I don't know, somewhere in Florida, I may say, "Well, this area in Florida is a great area." But do I know what's actually on this particular block? Probably not.
Darin: Probably not. But I think how you would overcome it is one you have several years experience now on how you look at different markets. And then two you built broker relationships where you probably could leverage those. So they give you a contact that they trust in that market. And then there's some rub-off of that trust level. You still have to get your comfort zone. But they could probably point you in the right direction saying, "Hey, look, this is the part of town you want to be in. This is part of town you don't want to be in."
Funny Texas, so I'm an East Coast guy from Connecticut, lived in South Florida for 13, 14 years. And then I've been here for 13, 14 years. And I'm in Prosper, so I'm just right next to you. They always say like, "Everything is always bigger in Texas." I remember when I got here, it's even when you go to the sports bar like, "You want small or big? Small or large for your beer?" And I'm like, "How can you order a small in Texas?" You got to give me the big.
Kurt: Well, even the small is large.
Darin: Right. You feel like, "Oh, I'm in Texas. I got to ask for the large," and then it's huge. It's awesome. Hey, talk about networking. People talk a lot about networking and getting out there and going to conferences and going to meetups. What's the value to you in getting out there and networking?
The Value of Networking When You Seal the Deal
Kurt: To be honest, it's kind of the weak spots that I've had is actually getting out and networking. I should be networking more. To be honest, I think I probably had to do it kind of just being engulfed with my business, being in the weeds. As I've now hired some people, I do want to work on my business more. I think that's one of the ways that I could essentially work on my business more. It’s going to more conferences and meetups and really getting myself out there. Because finding deals and finding money, those are two big things and you can get both of those things by networking. So I realized the importance of that and was one of the drivers for me in getting help.
Darin: So talk about that. This business, people say it over and over and over again, it's about finding deals, finding money, finding deals, finding capital. And I would put in a third is asset management because I think that there's not as much talk about that. But once you close on the deal you need people that are overseeing it. But going to these conferences and networking, how does that bring you more deals and more capital?
Kurt: That's a good question. Like I said, I haven't really done that much of that. So I don't really know the answer too much. Maybe when we chat over a beer in a few months or a year, I could tell you the answer to that question.
Darin: Look, if you go and people, one, need to know what you're doing.
People Seal the Deal With Someone They Know, Like, and Trust
Darin: So if you go to a conference and you meet passives that they want to be in DFW, they want to be in deals, but they didn't know about Kurt. You could end up getting some additional passive investors that way.
Secondly, I think the experience folks like most of these deals have partnerships that are formed and it could be two people. It could be three. I mean, some of these larger deals. It could be five, six, seven. So people that go out and know that other people are interested in partnering and may not want to be the lead person, get a smaller piece of the deal, but be a part of it. Those people are out there and getting out there and meeting them as well can be beneficial.
Kurt: For sure. I definitely see those things, what you're talking about there. Honestly, I just need to get out and do it more. It's worked well not so much doing that as much. And there's still ways that I try to promote my brand.
Darin: Yes. I mean, look, you just raised 25 million. How'd you do that? Where'd you find all the people to invest with you, my man?
Kurt: It's been years of building relationships. It's been years of building relationships even before I started multifamily, to be honest with you. People invest in people who they know, like, and trust. A lot of it is relationships, again, before I started multifamily and some of its just people seeing the success we've had while we've been in multifamily.
Tell People What You’re Doing So You Can Start to Seal the Deal
Kurt: I sold my first 35-unit deal. We made good returns, which that helped. Then we have two deals that are currently selling right now. I mean, that'll be 2X, at least nice on some of them in really short period of time. That helps with the word of mouth. And also one of my guys that's on my team now, I've actually partnered with him on a couple of other deals. He's in a Major League Baseball crowd circle, which has also helped. So we've got some major league baseball players that are in our investor pool. But I mean really again, it's word of mouth. People get more confidence in you and then they start spreading your name to others.
Darin: That's huge. For the listener's benefit, I would say, wherever you are in this journey, start telling people what you're doing. Start telling people. Even if you're going to do your first passive deal, let people know. Because it can take years for people sometimes to build up that confidence. But then after a year or two, they may come to you and say like, "Look, I've been watching you. Now, I want to learn more and maybe I want to invest."
Kurt: That's for sure. I mean, our first deal even it was a syndication, I still put a good chunk of the down payment in that one. But there was a lot of people that wanted to see me run that deal. They wanted to see how it went before they just gave you a $50,000 check or whatever.
Confidence in the Syndicator
Kurt: And then some of the people who did invest in the second deal, there was small amounts. There's people that I know that maybe invested a hundred thousand in the first deal and then in this last one, they invested almost a million dollars.
Darin: That's a big difference.
Kurt: It is a big difference, but they've seen how I communicate with the investors. They've seen just things that we've done as an asset manager, which I think has helped. It just snowballs.
Darin: We talk about confidence and there's confidence of the syndicator. You're learning the business, you're growing, you're learning from experience, the bumps in the road, but passives learn too.
They learn what they like. If they've invested in five different deals, they like certain communication better than others. There may be some people that they're going to reinvest with and there's some people that they're not going to reinvest with. So that says a lot about the confidence that they have in you that some of them have upped their investment tenfold. So congrats. I mean, that says a lot right there.
Kurt: Yes, I appreciate that. I mean, it's certainly not been easy along the way. And I think we've had some struggles under asset managing. We've learned a lot of stuff. I've been told by certain people that, for instance, on the 265 unit deal, I'm the primary asset manager on that deal. I had to fire the management company basically four months into it.
Pay Attention to the Asset When You Seal the Deal
Kurt: I heard from several people that doing that gave them more confidence in me as an asset manager to make decisions that are tough and then communicate that clearly with the investors. I think certain things like that, I mean, just have helped along the way. I'm paying attention to the asset and paying attention to their money and not just basically onto the next deal, essentially.
Darin: Yes. I mean, that particular scenario I had to go through too. What helped me in making that decision, I was actually at a mastermind in Jamaica and I'm on a bus. We're going to someplace fun and we're with a bunch of other syndicators and the conversation just came up about property management companies. I was like, "Look, is it really that hard to switch companies?" And I had a number of people that were like, "Darin, it's not like it's a cakewalk, but if you in your gut feel like you need to make a change, then make the change. And then I came back and I talked to my business partner and we made the change.
It's uncomfortable. It's having to let somebody go or break up or whatever. But once you're done, you're happy that you did it. We ended up having a good result with the next property management company that came in.
Kurt: That's awesome.
Darin: Yes. That's interesting. So what are some of the other lessons that you said that you learned a lot? You brought up that as one? Are there other learning lessons that you can talk about?
Lessons Kurt Jordan Learned to Seal the Deal
Kurt: Sure. The first deal that we did, we were undercapitalized. It ended up working out great, but I think if we would've held the asset for another year, we could have run into some issues. Because to be honest with you, at that point, I just didn't know. I didn't know that I needed more funds for deferred maintenance kind of issues.
One of the issues was that when we sold that deal, we knew that we were going to probably have to replace all the breaker boxes. Because they were the Federal Pacific breaker boxes and the insurance company was going to make us do that. Well, that was going to cost us like $60,000 and we didn't have that much money in the bank account.
We ended up selling the deal before and still made 70% return in less than two years, which is great for our investors. But that was a lesson I learned.
I will not be undercapitalized to get another deal. I will over raise if I have to, and it may affect the returns a little bit. But it is way more important to have money in the bank than to basically stretch yourself in that regard. So having enough money in the bank is important, not being undercapitalized.
The property management, that was a big thing that I mentioned. Essentially having the right property manager in place. So there are cheaper property management companies out there, but I don't know that it's worth the headache. To me, it's better to have maybe a more expensive property management company out there that's going to get the job done. Because they're going to add value in ways that you may not be thinking about.
Involve High-Quality People
Darin: Yes. Absolutely. I'm a believer in having high-quality people involved. I mean, even with the podcast, I have a consultant that I know I could find somebody cheaper, but he's provided so much value in terms of like, "Hey Darin, you should look into this software application." If I was to research it myself, it would've taken me hours and hours and hours. Or like, "You should consider doing this or that." And that's value.
They see success from other people and then they share that. So property management company sees success at other properties and then they share it with your property. That's huge.
So undercapitalized, that was one. I want to ask you about financing. So I have another business. I've been in the loan trading business, portfolios between banks, since 2002 and started my own company in 2007. During the great recession, whatever you want to call it, 2008, 2010, where I saw commercial deals go bad, have trouble when the loan came due in a terrible economy. For the listeners' benefit, these multifamily deals all have some kind of balloon feature. You can't get a 30-year fixed-rate mortgage.
At some point, the loan is going to come due and you either have to sell the property before that, or you have to refinance. And the last like year and a half has really been a bridge loan financing market, three years plus two one-year extensions, a lot of deals. As long as you are able to do the renovations and improve the property in that timeframe, everybody's golden.
Mitigate Risk When You Seal the Deal
Darin: But at some point, if the musical chair stops, and then somebody's holding a deal with their bridge loan is coming due in six months, and all of a sudden now, the economy has tanked, unemployment is up, cap rates are up, cash flow is down, valuations are down. So what's your take on financing?
Kurt: So our last two deals do have bridge debt on them. It's not my favorite, but like you said, it's kind of the environment that we're in right now. My ears are always on the ground for other options, but that's just what's out there right now. But with that being said, because we have these, I mean, we're doing things. We're trying to find ways to basically make it less risky.
Darin: Mitigate that risk.
Kurt: Yes, mitigating the risk. Again, being overcapitalized if I can help it. And then obviously it's just three years and then the two one-year extensions. I know some people underwrite and they basically show their projections as if they were to refi in year three and then call it a five-year hold. I'm not actually going to my investors and saying, "These are five-year holds." I'm saying, "These are three-year holds." And then I anticipate trying to exit the deal in two years.
So if year two comes along and the market is in shambles, well then at least I have a year to figure something out before that first extension. And even then there's basically two extensions there.
Overcapitalize to Mitigate Risk
Kurt: My play on this bridge, be specific to deals with bridge debt is to be out of these in two years.
Darin: So you get a shorter-term focus on those and then you also overcapitalize to mitigate some of that risk. When I asked Michael Becker, who's I'm sure you know who he is. But for the listeners' benefit, he's a very, very big syndicator in the Texas market. He said that when he has shorter duration loans, he will have less leverage on the deal to mitigate that risk. So instead of doing a 75 or 80 LTV, maybe he's doing a 65 or 70 LTV on that, again, just to have a little additional buffer.
And you're absolutely right. I mean, look, I've talked to a lot of syndicators and you could decide not to do bridge, but then you're probably not winning a lot of deals. Because a lot of these deals at the cost per unit, they just don't underwrite with agency financing because of the debt service coverage ratio.
So in any event, I'm, I'm thankful to get your perspective on that. I appreciate that. You see this quote that says 90% of millionaires have been created through real estate. You've got two deals that are two years in that you're going to be flipping here shortly and you're going to have a nice payday for, you said, 2X for your investors. And you as the sponsor you're going to have a nice payday as well. Why do you think that so many people can build wealth in real estate versus, say, the stock market?
Kurt: Probably the leverage I would say.
Kurt: I mean, that's other people's money, other people's time.
Darin: And the loan. The loan, 70, 75, or 80% LTV, but all of the gain goes back to the equity owners.
Kurt: That's right. Real estate definitely offers some opportunities there. The taxes too. I mean the last several years I haven't paid any taxes, so that helps too.
Darin: It's funny you say that. Once I got involved in real estate, people started educating me and somebody was like, "You have to read this book by Tom Wheelwright, Tax-Free Wealth." I'm sure you know it. I was reading it and I felt like it was me in the beginning. It was like a lot of Americans think that it's their patriotic duty to pay their fair share taxes. I was one of those. I was writing significant checks to the government. And I was like, "Well, I'm fortunate that I can do that." We need roads.
But then when you start to think about, okay, like he writes in the book, if you make this much money, as a W2 employee, you pay this much tax. But the other 2,000 pages of the tax code are incentives that the government provides because they want you to invest in different areas of the economy.
And I think about these multifamily deals and I'm like, "Look, if there weren't these incentives, maybe, maybe not people would be investing in these." But these properties are getting improved where they may just stay dilapidated.
The Next Big Stretch Goal
Darin: So you have tenants that are living in a better place, you have investors that are growing their wealth and then you're providing low-cost housing.
Kurt: You're stimulating the economy and you're also paying property taxes.
Darin: You're paying property taxes. You're hiring people. They're hiring people. You're hiring rehab contractors to come out and paint the property. So all of this I didn't realize that. Some people think like, "Oh, it's just an out." Right? But it's not. It's an incentive because it does stimulate the economy. I'm a believer in that. So, hey, what's your next big stretch goal?
Kurt: Basically, when I sat down with my team about a month ago, our goal over the next year is to basically be at 2,000 units net. So I know we're going to be selling some units here. So we want to be at 2,000 units by 3/31/2023. Then the following year, we want to be at 3,500. And then our three-year goal is 5,000 units. That's my stretch goal.
Darin: That's awesome. For listeners, if you don't plan, if you don't have goals, if you don't write them down, if you don't have a vision board, I would highly encourage you to do that. Because if you don't do it, you're most likely not going to get to where you want to be.
Write Down and Send Your Goals to People
Kurt: Yes. I completely agree with that. In fact, you can't see it, but on the other side of your screen here, I have a whiteboard that basically has my top 10 goals for the year. There's basically some faith goals and forgive me if I'm looking up there.
And there's faith goals and there's goals with my wife, there's goals with my kids. There's income goals, personal net worth goals, there's reading goals, there's business goals, there's health goals, there's fun goals. And then there's basically some other charitable goals on there. Then I have at my WeWork office, we have a whiteboard up there, and that's when I was telling you about our stretch goals. They're listed on that whiteboard as well. I'm like you, I have to see them. It keeps me reminded of these things. In fact, my whiteboard here at my office here, I actually take a picture of it on a weekly basis and send it to three accountability partners.
I think I read a quote one time that said that you're 30 something percent more likely to achieve a goal if you write it down. And you're 70 something more likely to achieve it if you actually send it to somebody. I can't remember exactly where that came from, but that was kind of an eye-opener for me is like, "Well, okay, let's at least get it written down and then let's start sending it to people so we can really have a shot at achieving these goals."
The Power of Setting and Writing Your Goals
Kurt: I've been doing this for about three years now. That was one of the things when I left my corporate job, I was like, "Okay. I got to shift my mindset and how I do certain things. And I need structure and I want to like basically achieve something here and how can I do that?" I really can't remember where the whiteboard idea came from, but it was one of the books that I read and I was like, "That's a great idea."
I had a space on my wall back here, and since I worked from home at the time, I was like, "Well, I'm going to be looking at this whiteboard basically all day long." So my goal is going to be on my mind all day long.
Darin: I don't know if this has happened to you. But there's something I think about having an image too. That even when you're not in that room, you might be laying down in bed or you might even dream about it. But your mind is working on achieving those goals. But if you don't write it down, then there's no way it's going to happen.
I had a guy on one time and he said he was doing multifamily investing. He said, "Okay, my goals were, I'm going to buy a duplex this year. And then next year I'm going to buy four units, and the next year. I'm going to buy eight units, and then 16, and then 32." He got to year three, he did two and then he did four and he was on year three, which was going to be eight units, and he said, "What if I just change this goal?"
Set the Goals High
Darin: I said, "What'd you change it to?" And he said, "800 units." He went from eight units to 800 units. I'm like, "Where'd you end up?" He said, "464 units."
Kurt: That's awesome.
Darin: Sure, he didn't hit the 800, but he had eight.
Kurt: I know. That's awesome. I agree with that. Set the goals high. And if you can't achieve them, it's all right. I mean, you'll probably still get way higher than what you would've if you didn't set the goals.
Darin: I've never heard that 30%, 70% thing, but I believe it. I'm in the process of writing a book, which is uncomfortable. It's new. And I hired somebody to help me. But at the very end of it, I say like, "All right. Look, I'm telling you in the book to take action and to be accountable." And I said, "Here's three things that I haven't done before. But I'm putting it in the book so that I'm accountable." Hopefully next time we talk, I've accomplished one or two or three of those. So I think that's important.
Kurt: That's my homework. I'm going to find that and then I'm going to send it to you.
Darin: Good, good. I want to see it. So, hey, if people want to get to know you better, what's the best way for them to reach out to you?
Kurt: So you can reach out to me on LinkedIn, Kurt Jordan, or you can go to my business page on LinkedIn, Jordan Multifamily, or my website at www.jordanmultifamily.com. I am also on Facebook, but I have a business page there, Jordan Multifamily or you can reach out on my personal page as well. I also have an Instagram page that I'm not really that active on, but I still have one.
Darin: Fantastic. Well, I appreciate you spending time with us here today. Listeners, I hope you enjoyed that one. I mean, this guy has done a lot in a short period of time and he has huge goals going forward. So if he can do it, you can do it. I hope you enjoyed that one.
Kurt: That's true. That's true. If I can do it, anybody can do it. I really appreciate it, Darin. This has been a lot of fun and I appreciate the opportunity.
Darin: Absolutely a lot of fun and I look forward to working with you. Listeners, until next week. Signing off.