Aileen: [00:00:00] Thank you, everyone for joining today’s episode of the, How Did They Do It? Real estate podcast. We are your hosts, Seyla and Aileen and today’s guests, we have Brent Kawakami. Brent is originally from Hawaii and currently lives in Dallas, Texas. He has an engineering background from the University of Texas and has been investing in more than 600 multifamily units across Texas, Georgia and Ohio, both passively and as a general partner. Currently, he is the vice president of acquisitions at Think Multifamily.  Please welcome, Brent Kawakami.  How are you doing today?

Brent: [00:00:30] I’m good. And hey guys, how’s it going?

Aileen: [00:00:32] Great. Doing great. Thank you so much.

Brent: [00:00:34] No, thanks for having me on.

Aileen: [00:00:36] I’m really excited for today’s show.

So before we get started, could you tell our listeners a little bit more about your background and how did you get started in real estate investing?

Brent: [00:00:46] Yeah. So, you mentioned a little bit about my college background and I’m an, I’m an engineer. That was my, you know, my training and, a couple of years into my career.  You know, I had great job. I never had an entrepreneur bone in my body and was, you know, that I’m going to climb the corporate ladder guy. Right. And, you, a couple of years into my career, I kind of got that in to, you know, explore these other real estate things. And inevitably it ends up being that purple book, Rich Dad, Poor Dad, right, that everyone reads. It’s that, it’s the, what is it? The red pill, right. That opens up your mind. And so I explored a bunch of stuff around that time. So this was like, you know, 2011 ish, give or take.  So, you know, I looked into things like dividend stock investing and peer to peer lending and online businesses, infinite banking, which I still do.

And then inevitably, you know, settled on real estate, right? That’s what a lot of us get into. So I started, I started real estate investing around that time, doing single family rentals, here in the Dallas, Texas area, you know, your traditional, you know, three bedroom, two bath, two car garage, rental.  This will blow your guys’ mind knowing where you guys live, but, you know, back then you could buy like, that type of house for less than a hundred thousand dollars a year and rent it out.  And, you know, 1% rule, all that type of stuff and, you know, in cashflow. And so that’s how I got started doing single family rentals back then.

Seyla: [00:02:11] That’s awesome. So what made you transition to the multifamily from single family homes back then?

Brent: [00:02:17] So I, I always kind of knew apartments and multifamily was like somewhere where I wanted to go.

I had, you know, some education. Yeah. And, and, you know, training and that type of thing. And one of the places here locally that I learned to do single family homes, they also did multifamily as well. So I kind of always knew it was out there. you know, and it was one of those things was like, Oh, well, one day I’d do it type of thing.

And, inevitably what happened was it was, I ended up meeting, meeting a local, syndicator sponsor here in Dallas.  It was through an introduction through a CPA actually, and I ended up starting to invest passively first, into a deal that he was putting together. And so that’s, that’s initially what got me started transitioning.

And then ultimately I ended up selling off my single family rentals to focus on multifamily.

Seyla: [00:03:07] So at that time, as a passive investor, how did you select your sponsor and investment?

Brent: [00:03:13] Yeah, so, you know, initially a lot of it was referral, right? So that was like that first sponsor I invested with was a referral.

I’m invested with a different one, which was referral.  So I think that was the first thing, you know, cause a lot of times with, you know, these multifamily syndications, you’re investing as much in the person as you are the deal or the investment. So, a lot of is that you know, like, and trust that person, right?

Obviously there’s the things about the market and does the deal make sense and all that type of thing. They’re not going to run away with my money. Exactly. I mean later, I mean, literally it’s like I could hand, you know, $50,000 to this person, they could go to Mexico. So a lot of it’s that. Do you know, like, and trust them? And, you know, do you feel that they have the integrity and everything that they’re going to do the right thing when things happen? ‘Cause you know, every, everything always goes 100% to plan always, right? So when stuff doesn’t, you know, do you feel confident that, that person’s going to stick in there and do the right thing and those types of things.

So I think that was numero UNO, in terms of for me selecting investments as a passive investor.

Aileen: [00:04:31] So did you have different criteria as you’re looking through the deals and everything like that after you got to know the sponsor?

Brent: [00:04:37] I mean, market’s a big thing, right?

I think that’s, that’s a huge impact in a lot of times the market can, you know, cover the sins, right? So I think market was a big one, you know, I invested here in Texas. I invested in, Columbus, Ohio, which is a another one. So I think doing the research of the market, especially if you’re not as familiar with it is, is really the biggest.

So I think, you know, that was, that was kind of my research piece of it. It’s sponsor first, then market. And then I’ll be honest. When I was first investing passively, I wasn’t as in depth with, you know, the, sort of the underwriting and those pieces yet. And I think that was part of my learning process.

As I approached to becoming a more active general partner investing passively first, seeing someone who was more experienced, it allowed me to learn more. You know, into, into sort of, you know, behind the curtain, right? And how these things are structured. And, I think it, for me, it was a great experience not only to learn that, but also I knew I wanted to be more active at some point and, you know, put together deals. And so that allows you to see, and especially with different syndicators. You know, Hey, I like the way this person does this. I don’t like the way they do that. Or, you know, those types of things you can kind of, you know, it’s the same thing you have with anything, right? You take things you learn along the way so that you can implement them later.

Seyla: [00:06:03] Yep. That’s awesome. So you mentioned about active general partners. At what point did you realize that you wanted to become more active and how did you transition to become an active general partner?

Brent: [00:06:17] Yeah, I think, maybe I kinda knew I wanted to be active in the beginning when I started investing passively. This was about 2014, 2015 timeframe.

And so, you know, I would go to the, you know, the seminars and the conferences and that time, like a lot of us, like a lot of us do. And, I knew that in order to be more active, you needed to find a mentor and you needed to get around a group. And for me, for me, I didn’t find who initially I felt aligned with value-wise for that until probably about 2016 timeframe when I met my current partner and mentor, Mark Kenney, who I currently work with at Think Multifamily.  I actually met him before he started doing that and liked him as a person first, which you know, is important back to the know, like, can I trust thing. And it kind of allowed me to come under his mentorship and grow that way into being an active partner because, you know, for my transition standpoint, especially with multifamily in this, you know, this larger multifamily stuff, you kind of have to have a partner who’s kind of done it before, not only from the standpoint of, you know, Hey, there’s some extra zeros here.

You don’t want to make mistakes, right? And you know, if you’re syndicating, there’s other people’s money involved, which I definitely don’t want to make a mistake, but a lot of it is just to get in the game, you kind of have to have experienced partners that you’re working with just to even get a deal or get the loan, you need that type of thing.

So that was kind of how the transition went, it was like passively finding the right person to partner and mentor and then grow, become active that way.

Seyla: [00:08:02] Could you please walk us through your first deal as an active general partner?

Brent: [00:08:06] Yeah. So the first deal was over a hundred units. A class C/D deal in Atlanta, Georgia.

I had found that property through a broker relationship. It was a listed deal.  So it was an open property that was publicly marketed. I’m in Dallas, right? I’m not in Atlanta. So I had traveled, I had been traveling there.  I liked the market a lot. It was a market that I identified, you know, as having all the things that you want as a real estate investor, right? Landlord friendly, job growth, population growth, all that stuff.  So I I’ve been making trips to the market, looking at properties, you know, building relationships with brokers and that property was, you know, like I said, listed.  I ended up offering and bidding on the property. I actually didn’t get it the first time, came in second, which is, you know, what I find is not always the worst thing cause a lot of deals come back around. And so that’s what happened on this one. First buyer couldn’t, didn’t get it closed or couldn’t get it to the finish line and the broker came back and asked if we were still interested and that’s kinda how we got it. You know, a hundred plus units, very sort of your bread and butter, value add type of property. It was stabilized, above 90%, we actually knew the management company that was already managing it at the time and was doing a decent job. But you know, to be frank, the management company is probably limited by the amount of capital that the current owner was putting in.  Definitely needed a little bit of cleanup in terms of resident base that had not been done. They had not done any interior upgrades at that point, which, you know, for, for anyone who’s like in Dallas where I’m at, every single apartment over the last, like five years has been upgraded three, four times, you know, going, so I’m going somewhere where it was a C class, seventies built property. So, you know, it’s still got like gold fixtures and old carpet and you know, that type of thing.  So, you know, no one had updated it yet. So that was kind of the low hanging fruit, to come in and work on that. And so, yeah, so that’s kind of 30,000 level foot view of that, of that first deal.

Aileen:  So you’re able to leverage some of your relationships to get your foot in that door and, you know, get that monkey off your back.

Brent: Yeah. Yeah. And that’s part of it where like, going back to the partner discussion, I mentioned, there’s no way you’re going to get awarded a deal like that. And so this was, you know, like I said, a hundred unit plus units, it was a $5 million price deal.

So there’s no way like, and brand new person who’s never bought an apartment for is ever going to get a property like that. You have to have people on your team or a partner that’s done it before just to get, like you said, just to get your foot in the door.

Seyla: [00:11:00] So what was the most challenging part of doing your first deal?

Brent: [00:11:05] I mean, we’ve had a lot of challenges for sure. And every deal has its challenges, right. Probably, you know, initially up front, back to getting it closed and taking over and whatnot. One of the things that happened on that property when we were buying it was, and why we got it was when the first buyer, that when I didn’t get it right, when I wasn’t awarded the deal originally, was when the first buyer got it, there ended up being a fire on the property in a building where four units were affected and essentially what happened was the buyer, at that time, and the seller couldn’t agree on how to handle that situation and the insurance and everything.

And that’s ultimately what, you know, made it fall through. And then, them coming back to, you know, to us for that property. And so there are definitely some, we were okay with basically handling it in terms of, you know, Hey, they mow the building down and keep the proceeds and we’ll take it without those units.

We did negotiate a price cause it’s got four or less units. So, so we did get a discount on that, but navigating those things is definitely, especially if you’ve never done it before, is always a challenge. We had even, you know, up to that closing process, a situation where I mentioned that we were going to keep the existing property management cause we knew them.  Our lender told us we weren’t able to. They did an inspection, to be frank, I think the inspector was having a bad day and he ended up twisting his ankle while he was onsite and to kind of be frank, I think, took it out on the inspection and the property manager, so we had to scramble to find another property manager for that particular property.

So, you know, things like that and stuff like that, it’s just normal.  It’s real estate, right? Stuff like that happen and so you’re always going to have, even if it’s just a single family house, you’re going to have those types of things. So really it’s just, you know, not being stuck about it.

There’s always a solution for every challenge. And then back to having an experienced partner or mentor, you know, when you have someone like that, that’s seen situations, that’s what can allow you to say okay, what do we do now? Or, Hey, wait, let’s contact so and so, or that’s not a big, you know, some things are not a big deal.  You know, it’s like, okay. Yeah, we’ll get over it. Yeah. And so over time, you build up battle scars, right? The real estate, and then things I felt were like a big deal before are not later.

Seyla: [00:13:42] That’s an amazing first deal story. So, did you work at a W-2 job at the time as well while doing this?

Brent: [00:13:51] Yup. Yup. So I mentioned, I was an engineer, so I had a full time W2 engineering job while it was, you know, while I was doing the single family rentals. And then while I was doing, you know, the initial multifamily deal.  It’s definitely a challenge for sure. For me personally, I really enjoy the real estate stuff.

It’s kind of like, I kind of looked at it as my hobby, you know, so instead of going out or doing other stuff, like, I loved it, the real estate stuff. So, you know, you’re it feels like you’re working two full time jobs. I mean, you really are working two full time jobs, especially if you’re syndicating and doing that, but I really enjoyed it and I was fortunate. My wife was very supportive of it too.

Seyla: [00:14:34] That’s wonderful. Will you be able to share with our listeners how you managed to do both with a full time W-2 job and also as a full time syndicator?

Brent: [00:14:46] Yeah. so it’s not easy, right? Obviously, for me personally, so one thing I do, so I’ve always been an early bird.  So I wake up at 4:00 AM every day. And, so I’ll wake up and I’ll actually exercise and then I’ll do work in the morning, so I would do that before I would get to the office early in the morning and I would get to the office very early, too. So once I’m there, I could get work done at my W-2 which is important too.

I think it’s, you know, it’s, it’s definitely important if you’re doing both, you have to make sure that at your W-2 you’re giving good output. You’re being a good employee. You’re doing all that. That’s the right thing to do.  But you know, do some stuff in the mornings, you know, during lunch hour.

Yeah. I might do stuff and then, you know, even the evenings as well. So you just kind of work around the schedule.  Again, I think that’s where having partners and other people, team members helps a lot cause you don’t have to do everything, especially in this multifamily stuff where it’s like, Hey, you’re not the one on site.  You’re not the one leasing. You know, that type of thing.  You have other partners that can handle things when you can’t. So, I don’t have any tips or tricks for how to handle it other than just putting in work and time and that type of thing. And, it’s not sexy, but that’s kind of what you gotta do.

Aileen: Right. You just gotta be fully committed and making this work and working around your schedule and finding the time when you can just do what you can to make it work.

Brent: Yeah. And I would say too, one of the things that really helped was, you know, the spousal support so that you’re both on the same page. So like, for me and my wife, you know, she stayed home with our son. She probably handles a lot of stuff that, you know, I’m probably negligent on or things like that. So, and then she’s fully supportive of all the real estate stuff. And so I think that helps a lot too, having that blend, and being on the same page with your spouse, which, you know, you guys are on the same page.  You know that it helps, having that teamwork.

Seyla: [00:17:00] Yeah, and I totally agree is, having a spouse who’s on the same page helps each other a lot. So, when did you decide to transition from your W-2 job to multifamily investing full time?

Brent: [00:17:13] I fully left my W-2 at the beginning of this year and it was one of those things where, the opportunity back to my partner.  You know, like I said, I was working two full time jobs this whole time and my partner and I always kinda knew that that was where I would go someday type of thing.

And it, it just worked out where the opportunity came to, Yeah, let’s make this transition. And, yeah, so I ended up leaving.  It’s a little awkward, honestly, especially being at a, so I was at my W-2 for 12 years or something like that. So it’s definitely an awkward transition, you know, leaving a place like that for a long time.  But, I love it. I, like I said, I really love the real estate, so, it’s, it’s been awesome.

Aileen: At work, did they all think that you’re crazy?

Brent: So I had a couple people who knew I did real estate, and I kept it very separate, like very separate, like back to like when I’m at work, I’m focused on work.  So I had a couple of people who knew I did it. Very similarly had sort of similar mindsets about things. Coincidentally, I actually had a coworker that, he retired, at my workplace. I worked with him and then we ran into each other at a real estate, meetup, conference event.

And it’s like, what the heck are you doing here? And so he ended up retiring and got into like, rentals and flips and Airbnbs and stuff. And I was like, Oh, wait, we worked together and had no clue that, you know, we were both into this real estate, you know? But, anyway, he ended up investing, also that was kind of a cool, kind of a cool story.

But, sorry. I lost my train of thought. What was, what were we talking about? What was the original question?

Aileen: How did your coworkers take it?

Brent: Yeah. Sorry. I got off track with my coworker. So the ones who kinda knew, I think were not surprised.  It definitely was kind of a, not – sad is not the right word, but it was for me too, in essence, cause like, I had people I worked with for this whole time and it was like a bittersweet yeah. Kind of bittersweet, definitely for me, for sure. I think it was probably definitely a surprise from folks, you know, that I work with in the organization or like kind of raise an eyebrow type of thing. I was fortunate. I had a manager that was very supportive, really great, great guy. I still keep in touch with him too, so, but yeah, it was definitely a bittersweet thing for sure.

Seyla: [00:19:52] Congratulations on transitioning to full time, multifamily real estate. So what is your current focus now?

Brent: [00:20:02] So, you know, I work, with Think Multifamily and we’re focused on the apartment space, you know, your class B class C type properties.  As with any sort of, small business or company and we’re a boutique firm really. You wear a lot of hats, so you do every, so, you know, my title may say VP of acquisitions, which I do.

So I do a lot of underwriting. I look at a lot of deals even during COVID, I’m looking at properties and stuff like that.  So that’s a large part of it. But we have, you know, training and education content we’re creating.  We’re doing marketing, events, there’s the back end business stuff and inevitably I ended up doing like 10 different things, but it’s fun.

Aileen: So what would you say are the key responsibilities of the acquisition team?

Brent: So I think, inevitably you’re looking at like a hundred properties to find one type of thing because you only want to do a good deal.  It’s like, you look at a hundred, you know, half of them don’t make sense.  Half of those may pass the next analysis test and it kind of filters down. So you’re kind of doing those, those iterative steps, whether that’s underwriting, touching base with property managers, touching base with mortgage brokers. Underwriting all the time and continually updating that. Traveling and looking at properties, stuff like that. So it’s a lot of things that involves kind of the upfront, acquisition. Ultimately and obviously, you know, getting a deal awarded and under contract to close.

So there’s like a lot of things.  There’s like 20 million things that needs to get done.

Seyla: [00:21:51] Yep. I understand. What are the metrics that you are looking for when acquiring a deal?

 Brent: [00:21:58] So from a physical size standpoint, we’re looking at class B, class C type properties, so it’s workforce housing type of stuff.

Really the sweet spot from a unit count is in that 100 to 200 unit range.  Think Multifamily has stuff that’s as small as 60 units and as large as 566, it’s a big range, but you know, the sweet spot I’d say is 100 to 200, give or take, in markets like we talked about before, right? So, you know, landlord friendly, job growth, population growth, blah, blah, blah.

Most of those markets tend to be in the Southeast, you know, as a general statement. We have properties in Texas and Florida, Georgia, Tennessee, the Sunbelt. So that’s, that’s the market thing. And then from a recurrence standpoint, what you see a lot in the deals we’re looking at and even others in the space who do a lot of the similar things.

I mean, you’re looking for an 8 to 12% cash on cash return, probably anywhere from a five to seven year hold period. And in that timeframe basically make a total return of a hundred percent or essentially double investor’s money during that timeframe. So your IRR ends up being in the middle teens.

Usually, for deals like that. And we’ve generally looked at properties from sort of your fixer upper type stuff, that’s 70% occupied. It needs a lot of cash to bring this place up all the way to be a little more stabilized.  90 plus percent occupied, light, lighter value-add that type of thing, then everything in between. So, we’re probably looking more at the later right now, at least during the current environment, but that’s generally the metrics and the types of deals we’re looking at.

Seyla: [00:23:49] Awesome. Thank you for sharing that. what is your strategy now to continue to scale up in this business?

Brent: [00:23:55] So me personally, you know, I think, doing all the roles I do, I think helps, and I look at it for me as kind of an entrepreneur in that I’m part of Think Multifamily now and, you know, helping to grow that business. I love growing that business and I look at it as I can grow with that business versus like create my own empire, type of thing. And so, you know, that inevitably ends up being, you know, growing in units, potentially growing in properties.  I don’t have a specific goal necessarily like, Hey, I’m going to acquire a thousand units in the next year type of thing.  But I think it’s growing within the business that’s already got some scale already, so that’s kind of the way I approach it versus me going off and creating some empire.

Seyla: [00:24:48] So, what is your next goal for the next 12 months?

Brent: [00:24:52] Next 12 months? I think first and foremost, make sure that the properties we have now operate fine given the fact that the last few months have been a little crazy with this COVID stuff going on and whatnot, and the good part is properties stay afloat and done fine, which is good.

But, you know, I think that’s first and foremost, just, making sure we protect the investment and that type of thing.  From my acquisition standpoint, always looking at deals. Always looking at deals, but, I think the big thing is doing the right deals. Back to me personally, I don’t have like some arbitrary unit goals just because I think it’s arbitrary. I’m going to do a thousand units in the next 12 months.  The right number of units might be zero.  You want to find the right deals and do the right ones. And you know, people put goals out there sometimes. And I think it’s that whole 10X mentality or big, hairy audacious goals. And for me, it’s sort of, you know, just fit what I’m doing in the business around my lifestyle.

And I felt like it’s done great for where I’m at now and just kind of continue along that path. 

Seyla: [00:26:07] What is one thing that sets the successful people apart in this real estate business?

Brent: [00:26:12] Yeah. I think so outside of putting in the work and all that type of thing, I think one thing to me is, self-awareness. And you hear like Gary Vaynerchuk, if you follow him, talk about that all the time and it’s having the self-awareness or, you know, they call it IQ, right. Sometimes, for yourself and knowing what pieces you’re good at and where you can leverage that and provide value into it.

So like, as an example, some people may be better off just being a passive investor. That’s just, that’s a better path for you, your skill set and your likes and your dislikes.  If you’re active, you know, maybe you’re the guy who loves spreadsheets and the technical and the project management, but you don’t want to talk to investors and do marketing and that type of thing, or maybe the flip side.  And so I think self awareness of being able to look at yourself and figure out, what you like, what you’re good at and leveraging that and going all in on those things. I think that’s really a big piece in terms of having success.

Seyla: What has been the highlight of your real estate career?

Brent: I think, leaving my W2, I think that’s been the biggest thing so far. Hopefully it’s not the only highlight, hopefully there’s others in the future.

Seyla: [00:27:37] What tools or techniques have you used to improve the efficiency of your business or your personal life?

Brent: [00:27:43] I think the biggest tool or thing, there’s a book called Getting Things Done or it’s referred to as GTD.  I read it like 12, 10, 12 years ago, and it’s probably the only book I can say that I’ve read that long ago that I still do stuff on a day to day basis from it.

So I would highly recommend that. But one of the things I do is I have a notebook I carry around and I’ll write in it and I’ll use it to take notes, but yeah, I also use it to take to do items type of thing. And so there’s, kind of similarly, there’s a podcast of a guy named Andy Frisella and he calls it the power five, but it’s basically like going day by day, what are your five most important tasks that you need to do?  And there’s something to be said about like having your casks and then crossing them off that’s powerful in terms of, in being more efficient. And I think that it helps you kind of build a habit of ultimately getting toward your goals or whatever you want to do.

It’s day by day by day action. And I think implementing something like that, for me personally, has been very helpful to ensure that I’m doing those things each day. 

Seyla: [00:29:03] Where can our listeners find out more about you?

 Brent: [00:29:08] Feel free to email me. My email is, Brent@thinkmultifamily.com and the website is thinkmultifamily.com if you’re interested in learning more about us.

Happy to shoot me an email, feel free to connect.