REID Kent Ritter | Multifamily Investing

 

Good investing starts with a good education. Nothing leads you down the path to success in real estate without a map set in place. In this episode, Kent Ritter, the Host of Ritter on Real Estate, shares insights into multifamily investing and the road map as he navigates through investing in real estate. His expertise creates a positive social impact by empowering others to control their financial future through navigating the real estate space. He also shares his strategy in the current environment of the market as interest rates are increasing. Kent Ritters will show you the beauty of multifamily, so tune in to this episode today!

 

Get in touch with Kent Ritter:

LinkedIn: https://www.linkedin.com/in/kentritter/

Twitter: https://twitter.com/kentritter?lang=en

Website Link: https://www.kentritter.com/

 

If you are interested in learning more about passively investing in multifamily and Build-to-Rent properties, click here to schedule a call with the CPI Capital Team or contact us at info@cpicapital.ca. If you like to Co-Syndicate and close on larger deal as a General Partner click here. You can read more about CPI Capital at https://www.cpicapital.ca. #avabenesocky #augustbiniaz #cpicapital

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About Kent Ritter

REID Kent Ritter | Multifamily InvestingKent is a former start-up owner and corporate executive turned real estate investor and multifamily operator. Kent is on a mission to empower others to take control of their financial future, while making a positive social impact, by providing modern, affordable housing to America’s workforce.

Kent believes that good investing starts with education so he hosts a successful podcast, called Ritter on Real Estate, where he interviews the pros to teach you how to invest like a pro! Additionally, Kent hosts a monthly multifamily investing meeting in his home town of Indianapolis.

 

Multifamily Investing Road Map – Kent Ritter

We’re joined by Kent Ritter.

I’ve been following Kent for a little while now. I find his story very interesting. He has a podcast. We watched a few of his episodes. In preparation for this show, I watched it a few times. He’s been on other people’s podcasts so I’m excited to have him on our show. It goes into his journey about being involved in different businesses and building companies, but then eventually getting involved in real estate, private equity, building a real estate private equity firm, and his whole journey through the whole way.

If I’m not mistaken, he started out as a passive investor and then started his real estate private equity firm. I’m excited to dive into things with you, Kent. Before we begin, I want to do a quick introduction of who you are. Everybody, Kent is a former startup owner and corporate executive turned real estate investor and multifamily operator. Kent is on a mission to empower others to take control of their financial future while making a positive social impact by providing modern, affordable housing to America’s workforce.

Kent believes that good investing starts with education. He hosts a successful podcast called Ritter on Real Estate, where he interviews the pros to teach you how to invest like a pro. Additionally, Kent hosts a monthly multifamily investing meeting in his hometown of Indianapolis. We’re excited to dive in. Kent, welcome to our show. Let’s get things started by telling us about your background and then your start in real estate, please.

I studied Finance and Economics in college. I came out of school not knowing what I wanted to be yet. I always had an entrepreneurial tilt. I always knew I wanted to own my own company, but I didn’t know what that was yet. I decided to go into management consulting. I thought management consulting would be a good way to get to travel, see a lot of businesses, you can understand how things work, and learn how to solve problems.

 

REID Kent Ritter | Multifamily Investing

 

I spent twelve years of my career doing that. I’m living in Chicago at the time and traveling all over the country. Over that time, I worked with hundreds, if not 1,000 different businesses and got pretty good at solving problems, running projects, just learning what works in businesses, and what makes them successful and not successful.

Over that time, there was a lot more than not successful because that was why people hired us to solve problems they couldn’t solve themselves. It was just a good base and a good understanding of how to operate a business, manage people, influence, run large scale projects, and keep everybody in line. We were doing multimillion-dollar projects at these clients.

In 2010, some colleagues and I left the consulting firm where we were working because we saw the market taking a shift. We saw technology changing, and we didn’t feel the company that we were working at was following that shift. We felt like they were heads down and they were going to get left behind. We left and started our own business, focusing on where we thought the market was going. For some luck, but also because we were willing to take the risk, we had a huge success. We grew the company from, originally, 5 guys around a kitchen table to 95 employees and $30 million in annual revenue in about 5 years.

In 2015, we decided it was time to sell that business. We sold the business. That was about the time that I started my real estate investing career because I had capital from selling the business. I didn’t want to put all my eggs in one basket in the stock market. I was already investing in the stock market and I realized I needed to diversify.

That was what started me looking into alternative assets which led pretty quickly to say that real estate is the right one for me. I tried a lot of stuff in real estate. I did everything. First thing was to build out a note portfolio. I was lending on the debt side. I started investing with other people in other syndications. I started doing fix and flips. I started just buying some single-families and duplexes. In the first couple of years, I did a whole bunch of things just to see what fit best.

In all that, I very quickly learned that debt wasn’t for me because I had a note on a house. I sold a house on contract, and then the guy that owned the house sold the house about a year later, and he doubled his money. I was just getting my loan paid back, which is great. That’s a win. I was like, “This guy just doubled his money. I need to be buying these houses, not just giving loans on these.”

That led to the fix and flips, which is a hard job. It’s a full-time job. It’s ordinary income, so you’re getting taxed all over the place, and it’s a difficult business. To me, it wasn’t scalable. That was the same thing with the single-families and the duplexes. I got up to a portfolio of about eleven of them and did the math on how many houses I would have to acquire to get to the income level I wanted to get to.

I was like, “That’s going to be difficult to buy that many houses.” All of this journey led me to multifamily. At that time, I was educating myself with podcasts, YouTube videos, and books. That led to seminars, conferences, and all these things. Everything was leading me to multifamily as a way to scale and it’s an asset class that I feel is one of the most insulated because everybody needs a place to live.

We’ve all proven that we don’t need a place to work. You can work from home but we all need a place to live. That was one of the aspects I liked about it. If you can keep things simple and fundamental, it’s a good way to approach investing. At the end of the day, everybody needs a place to live and it’s a common human need.

REID Kent Ritter | Multifamily Investing

Multifamily Investing: Everybody needs a place to live, which is a common human need.

 

Anyway, multifamily made a ton of sense to me. I was still thinking very singularly on my own that I’m going to go out, I’m going to buy a 50-unit or something, and own it. Luckily, at that point in my life, I met a mentor and he stepped in. He’s like, “You buy a 50-unit, then what do you do? All your money’s still in one basket. You can’t scale from there. You’re just running this property. Do you want to be a landlord?”

I don’t like being a landlord. He turned me onto syndication. Coming from my consulting days, everything’s about scaling and getting bigger. Syndication just made a ton of sense because syndication is all about pooling our money together to go buy something bigger and better than we could on our own. When the light bulb went off there, it was off to the races. I realized this is exactly what I want to do. It allows me to bring in not just myself and improve my situation, but my community and improve everybody’s situation. I went way down the path there.

I was taking notes as you were going. There are a lot of interesting points to dissect here. One thing that we want to touch on is the decision you make. When you’re an investor, you’re looking for other types of investments to invest. You compare investing in the stock market, you want to diversify your portfolio, you start investing in real estate, and you start investing in this whole ecosystem of real estate, and all the different type of asset classes or all different strategies and business models.

You connect with a mentor. Were you pursuing a mentor? Was there a need there? Was it coincidental? Talk to us about that because we like to touch on that because we believe in this idea of mentors. Unfortunately, we have unsolicited mentors, but we’ve never got a paid mentorship program, which we’re looking to do, even though our company has grown. What was that process for you to connect with this mentor?

The first mentor I met was through a conference. They were hosting a conference. I had listened to their podcast for a long time. It’s the guy named Gino Barbaro of Jake & Gino. They hosted a podcast. It was one of the first podcasts I started listening to back in 2015 or so. I heard they were doing a conference, went down to check it out, and decided to reach out.

I’m humble enough to know that there’s a lot I don’t know, and there’s a lot that I don’t even know I don’t know. I felt at that time, multifamily was a whole new frontier. There was a lot I didn’t know. I wanted to short-circuit the process and avoid some mistakes. At that time, I didn’t know it yet, but I needed to work a lot on my own mindset and my own limiting beliefs about what I could do.

I think about it now. It’s like I had already accomplished so much but still, everybody does. You never get over all of those things. No matter how successful you are, you have things that come up. I realized that I had some blockages in what I thought I could accomplish. My mentor was able to help me get over and crush some of those limiting beliefs and just believe that I could go out and buy a giant apartment building. I could be successful and bring other people in.

I met them through their podcast and conference. I got involved in their program. This was back in probably 2017 when I joined their program. It was a paid thing. It’s matured a lot since then. It was helpful because I think there’s a Tony Robbins quote where it’s like you can turn decades into days. That’s what mentors can help you do. If you can learn from their mistakes and not step in every pothole along the way, you can save a lot of money and time.

If you can learn from your mentor's mistakes and not step into every pothole, you can save money and time. Click To Tweet

When you think about a kid, you have coaches all over the place. All the sports that you’re doing, if you’re doing music, or whatever you’re doing, you have teachers and coaches that are helping you. When you’re an adult, you lose out on that. The best thing most of us can hope for is if our boss gives us feedback every once in a while. Most bosses are terrible at that. If you want to continue to grow, it’s important to still have people in your corner that are holding you accountable.

The GOATs, Greatest Of All Time, still have coaches to improve. They’re still out there with coaches and improving, let alone people that are just getting started in the space.

Gino, good job on that because we love and respect him. He’s been on our show before.

Yeah, he’s a good guy.

There are a bunch of things on top of my mind here that I got to get into. There seems to be a great part here because this is very important. You’re involved in building a company startup. You eventually exited that startup. Now, you’re looking for different vehicles to invest through in different asset classes, stock market, and real estate. You’ve invested as an LP before in these syndicated investments. What was it about real estate private equity or multifamily syndication that wanted you to start building a real estate business?

My mission started out as wanting to diversify and making sure I was being smart with my money, and then we were able to continue to build our nest egg. After we sold the business, you don’t just get to walk away and be like, “Here’s my check. Thank you.” We had an earn-out period. We had to work for the company that we sold to because they want to make sure that they get what they bought.

I had to spend a number of years still at that company, and I had lost my passion for it. My passion was for building my own business and for seeing that grow. Once we sold it, that was gone. I was a corporate executive in a large organization, which is just not me. I’m not built for the bureaucratic, political, giant corporate world.

I had this moment where it was early in the morning, and I’m on the tarmac flying out to another client. We just had my first daughter. I had this moment of realization/freakout where I’m like, “What am I doing? I’m flying across the country. I’ve got a wife and a new baby at home. I’m not going to see them for four days. Why am I doing this?”

The bigger mission was to create financial freedom so that once I was done with this earn-out, I wouldn’t have to go back into a position where I had to work all the time and be gone. As long as I was in consulting, whether I was owning the company or working for somebody else, that’s what you do, you’re gone. You travel. I knew I wanted to find a new path.

That became my mission. How do I create a job for myself or a business where I can have the freedom to do whatever I want when I want? I’m not trading my time for money. I knew that real estate is one of the best ways to do that. Whether I’m there or not, the renters are still paying rent and we’re still creating income.

Create a job for myself or a business where I can have the freedom to do whatever I want when I want. Click To Tweet

I had visions of being able to play with my kids at 2:00 in the afternoon, take them to the park, or just do whatever I wanted. As that came to fruition, I found that freedom for myself. You start doing things right. People ask you, “What are you doing? What are you investing in?” You have enough of those conversations and I realize that nobody knows about this stuff.

We can’t believe it ourselves that so many sophisticated people that we know, lawyers, and accountants don’t know this. These are very sophisticated people but they have never heard about it. The first time I talked to a Canadian lawyer about syndication, he had no idea what I meant by the word syndication. He was a securities lawyer that dealt with US deals.

It’s pretty incredible. I didn’t either until 2015, and I was on the front end of this. I fancied myself a savvy investor as well and I never heard of it. Anyway, I see the positive financial impact it’s had on my own life, net worth, and freedom. Realizing nobody else knows about this, my mission from that point started to become less about me and what I can do for myself and more about, “I got to tell more people about this. I want my friends and family doing this.” Everybody else can be putting themselves in a better financial situation. It’s not that money makes you happy, but it sure doesn’t hurt, especially if you don’t have to worry about money.

Not that money makes you happy, but it sure doesn't hurt, especially if you don't have to worry about money. Click To Tweet

Real estate is great. If we believe in real estate, we can go to our friends, family, business associates, and say, “Invest in real estate.” That’s too broad. Particularly real estate, private equity, multifamily, we can see the track record and is a performance-based compensation for the GP. Those splits that exist, the GP has to perform for them to get their promoter and carried interest.

As long as you’re partnering with a right GP, it’s a tremendous opportunity to invest in an investment where it’s not just a real estate agent saying, “Buy this property. It’s a great area. You should most probably be cashflowing.” The GP’s whole job is to make sure this thing performs so they can get their carried interest.

As opposed to a realtor, they take their commission, and they’re done.

Also, a contractor or any other conduit involved in this real estate ecosystem.

One of the most important things about any deal is that you’ve got aligned interests and that there’s skin in the game. That’s why I started my podcast. That was an evolution of how do I tell more people about this and started to evangelize it. Anyway, my mission has evolved overtime. My mission now is to help as many people get into these good types of investments as possible. I do it through education. I don’t try to do it through a hard sale. I try to put educational content out there. I feel like if people can understand it the way that I understand it, then that light bulb’s going to go off and they’re going to say, “This makes sense. I need to be doing this.” That’s what it’s all about right now.

We can relate to you in so many ways. We have a huge passion for helping others because we were totally shocked, too, when we realized not a lot of people knew about this. It can change people’s lives around.

Talking about startups. Isn’t a syndicated real estate project a mini startup on its own? I just came up with it. You’re finding the deal, bringing on investors, putting the structure together, putting the offering memorandum, putting the deal presentation. I think that’s essentially what it is.

It is. Our typical deal will have 3 to 4 different LLCs, just for that specific deal, to create the structure that’s needed. You’re going out and you’re sourcing debt and equity. You have your own accounting. Each one is a little business or several little businesses of themselves.

Talk to us about your first deal. Did you allocate capital with the sponsor? Did you partner with your mentor?

I did a lot of different stuff at the beginning. My first multifamily syndication deal was through a crowdfunding site. I went out to 2015, was trying to dip my toe in the water, and went out to a crowdfunding site and made two investments. One of them went fine. It went exactly as planned. The other one, I still don’t have all my money back.

The sponsor was just a bad guy. He ended up cross-collateralizing these loans and doing a bunch of stuff you’re not supposed to do, and ended up losing the property. Luckily, it wasn’t a lot of money because I was just dipping my toe in the water, but we’re still trying to probably recoup about 80% of those dollars from that original deal back years ago now.

A big part of my message is the sponsor matters more than the deal, the market, or anything else. It’s from that lesson, because it’s got shame on me. I didn’t do my due diligence. I was just on a site and scrolling around and saying, “That looks good. It’s in Houston. That’s a good market. It’s multifamily. It’s what I’m trying to invest in.”

Those crowdfunding sites advertise themselves as having a whole board that vets each operator that comes on their platform. The main part of their business idea is that vetting process. They failed there.

It’s gotten a lot better in the last years. Back in 2015, it was the Wild West. They were trying to grow and probably letting everybody in. Now their controls are much better. I’ve been through some of those controls in being a sponsor that’s put deals on crowdfunding sites. I know that the controls are better. They can just be way more selective because so many people want to be on the platforms now versus back then.

It’s gotten better, but yeah. For whatever reason, it didn’t work out, but I was glad that I was smart enough to know it wasn’t real estate’s fault. It was one bad deal. That can happen. I didn’t lose everything. It’s a great lesson. It’s another reason to have mentors because you’re going to pay for your education one way or the other. I paid for this one with losing some of my capital.

REID Kent Ritter | Multifamily Investing

Multifamily Investing: You’re going to pay for your education one way or the other.

 

Talk about your growth. This is a team sport and a lot of times, as real estate investments, firms are being built. The principals do partner with their coaches, mentors, or advisors to build that track record. Talk to us about a transition on doing your deal and please go in your deal specifically as either sole GP or lead GP, and talk to us about any difficulties you felt in that first deal. Talk to us about that journey and the good stories you can share.

I had a little bit of a winding path. Another one of my mentors comes into the picture. In October 2019, I was on the GP side of my first syndication. From ’15 to ’19, I was doing a bunch of other stuff and passively investing in other people’s deals in a whole bunch of them. By ’19, I had felt like I had learned and understood it. I met some guys I could partner with at a conference. We went out and we bought 250 units down in Atlanta, 2 different portfolio deals, 2 properties. That was the first time I was co-GP. I was on the GP side of the fence.

There’s 20% rent growth in Atlanta in some markets.

It was a home run of a deal. Anyway, that was the first one. After that, I’m coming back to Indianapolis, I’m telling one of my mentors here in town about it. He was like, ” You went out and did it.” He owns a large private equity firm here in Indianapolis. They have about 20,000 units. That’s what they focus on is multifamily. He proposed to me. He’s like, “I know you want to build your brand. Why don’t you come on our platform and you can use our platform to catapult yourself?”

We devised a specific strategy I would focus on. It was a startup within a large ecosystem where I’d come on, build my own team, and focus on a specific type and size of properties. They were buying above 200 units because they were so large. We recognized there was opportunity below 200 units. He said I could come in and build a team to focus on 200 units and below.

Is it geographically within Indianapolis?

We ended up focusing on the Midwest. They’re national. I did that. I built a small team and partnered with some folks inside. It was a little startup within this larger corporate, but I was able to use their HR and accounting. There were a lot of benefits. I spent fifteen months with them doing that in 2020 to May of 2021.

In that time, I led the acquisition of four deals with them. The first deal that we did, I was the lead on was a 30-unit in Louisville, Kentucky. We still own it right now. It’s a little gym. It was built in 2010. It’s a great property, with no frills and nice floor plans. We saw that it was a mom-and-pop owner who was leaving a lot of meat on the bone. There was a good upside in rents and expenses. That was the first one that I led the acquisition, raised the equity, secured the debt, and did everything.

On these larger companies, they have all their systems and processes in place and they could pretty much hand you the blueprint.

There is system software, accountants, all the analysts. A lot have probably co-store and many other subscriptions that they have.

Anybody reading, if you’re looking to build a real estate private equity firm from the ground up, partner with somebody who’s got the system processes in place. Don’t try to reinvent the wheel yourself because it can save you a lot of stuff.

 

REID Kent Ritter | Multifamily Investing

 

I don’t think that person’s going to be that. That group must have seen something special for them to even open the doors because that doesn’t usually happen. They must have seen something there. Another question for you here is, where do you excel? Is it on being the acquisition director, making those connections with brokers, finding those off-market deals, underwriting deals, or doing physical due diligence? Is it on asset management, overseeing the property manager, or the renovation contractor if needed? Is it on the equity side? Are you a superstar, or is it all of the above?

I’ve worn all the hats for a long time. Even now, I still do a little bit of everything. In my journey with Hudson Investing, I’ve got to start to take some of those hats off and hand those hats to others. I’m in the process right now as we’ve grown pretty significantly over the past year. I’ve done them all. I can do them all. My favorite thing to do is talking to investors, especially new investors because of those light bulb moments where they’re like, “This makes total sense.”

Some of the pros and cons, though, are the bigger you get, the fewer conversations you can have with those new investors. You start to get into being able to only do accredited deals and you just get into larger check sizes where it’s tough to bring in 300 people at $50,000. You1start to move on to more sophisticated partners. My favorite thing is finding those diamond-in-the-rough properties and being able to see something that nobody else sees. It doesn’t look very pretty now, but it could be something, and be able to create a ton of value and put the plan together.

Your first deal was in Atlanta in 2019. It has the highest rent growth than any other city in the US.

 

REID Kent Ritter | Multifamily Investing

 

Everybody knew that was going to be a good deal. Since then, in the Midwest, we’ve done some direct-to-seller stuff. We’ve done some smaller stuff and some stuff where you have to brush the dirt off of but created tremendous value. In a couple of our properties, rents are going up 40% and 50% from where they were. It’s because it’s an owner who was asleep at the wheel and hadn’t raised rents in 5 or 6 years. Bringing it up to market is a tremendous opportunity. I love finding opportunities like that.

Isn’t that exciting? Showing those opportunities to your investors and saying, “Look at what I got for you? Hand it over on a platter.

Talking about rent growth and those tremendous returns to investors. We are in an increasing interest rate environment. As interest rates increase, the yields decrease and the cash-on-cash decreases to investors. What are your plans? You are in a situation where you’re building your company and you’re very focused on the acquisition side. How are you penciling deals? Are you aggressively looking at deals? Are you having a dry-powder rate to deploy? Are you waiting for the next increase in interest rates in mid-June? Where are you at? Talk to us about your strategy in this environment.

Interest rates are good headline grabber but they’re just one variable. We are doing a lot to mitigate interest rates. Looking globally at a macro level, there are a lot of levers that are going to move multifamily and commercial real estate in a positive direction that are going to overpower whatever happens in interest rates.

REID Kent Ritter | Multifamily Investing

Multifamily Investing: There are many levers going to move multifamily in a positive direction and just commercial real estate in a positive direction that will overpower whatever happens in, in interest rates.

 

I look a lot at the forward curves for interest rates. When you look at the forward curves, it shows you what the expectation is. The expectation is that rates continue to rise over 2023, and then they start to come down and they start to level out. We don’t end up in an environment like we have been in 2017 or since 2010 even. That was an anomaly. That was a good period.

We landed somewhere where interest rates are normal like they were into the ’90s and early 2000s. I don’t think that it’s going to be this monumental where interest rates go to 8% to 10% for an extended period of time. That being said, first of all, we underwrite our deals to those forward curves. The forward curves are always wrong because it’s the best information that we have right now about what people expect interest rates to do and where they expect them to be at a certain period in time.

We underwrite that curve right into our deal so that over the life cycle of our deal, the interest rate’s going up, and it’s coming down, it’s stabilizing. That’s factored in right away. If we’re comfortable with the deal with what we expect to happen happening, then what we need to think about is how we protect the downside from the unexpected. For that 8% to 10% interest rate, that I don’t believe will happen but I don’t have a crystal ball. The way you do that is with an interest rate cap.

Our methodology is to underwrite to the curve and then cap it just above where we think that curve’s going to go. Without getting into too much detail, if you cap it on the curve, then the bank is already expecting to have to pay you, and they’re just adding whatever they think they’re going to have to pay you onto what you pay them upfront in the premium, so you’re pre-paying. We cap it right above.

We say, “The curve’s going to do this and we put the cap right here at the top.” If it goes up, we’re protected because if it goes higher than that, then a bank is paying us for that difference. We’re protected from interest rate risk in that way. You have to be underwriting your deals at realistic rates. The best way to do it is based on those curves and the ebbs and flows of interest rates, and then you should be putting a cap on them.

We’ve got two deals that we got under contract in March and April 2022. Things have changed a lot since then. A couple of things we’ve done on those deals is add in an interest carry. It is an extra cash cushion to stabilize cashflows in case interest rates do move up faster than we expect but still below that cap. It’s making sure that we just have plenty of cashflow to pay the debt service in case rates move faster than we can increase cashflows with rents and things.

Overtime, interest rates have gone up, but rent growth has grown 2X to 3X on these properties more than what rates have. The fundamentals on all of those projects I mentioned have gotten better as we’ve held them before we’ve even closed on the properties. We are still underwriting pretty conservative rent growth at a max of 5% this year. In the markets we’re in, rents have grown 12 in 1 market and 9 in another market. Interest rates are one lever you can pull. That’s the FUD, the Fear, Uncertainty, and Death, that the news sells to everyone.

If you understand it at a broader level, the things that haven’t changed is we still have a massive housing shortage in this country. There’s not enough. All the interest rates rising have done is push people out a single-family and push them into rentals. People can’t afford the house that they wanted anymore. All of the supply chain issues have slowed construction and made it more expensive.

The things that haven't changed are we still have a massive housing shortage in this country. Click To Tweet

We’re still seeing this massive discrepancy in housing. At the end of the day, people always need a place to live. I studied Economics in college. Econ 101 is if supply and demand are out of line for a long enough time, then prices adjust. That’s what we’re seeing from a rent standpoint. We’re seeing an extremely high demand, we’re seeing not enough supply, and therefore we’re seeing rent prices continue to grow.

That’s the beauty of multifamily in these regions within the US is that there is no rent control. You can change the rent annually. Unlike Canada, where there is rent control at 1.5% per annum. The rent growth in that market could be up 10% to 15%. For your tenant, you have no option of evicting or increasing rent. There are a lot of Canadian multifamily investors drooling, listening to your very nonchalant 5%. They’re like, “We wish we could do it, too.”

That makes me extremely uncomfortable because I don’t like to be expecting over 3%. At a certain point, I have to come to reality and say, “The reality is that if rents are growing double or triple that, I’ll at least show 5%.

Wage growth is 6% already. That should cover it right there but that’s above your 5%.

That’s the other thing that we’re seeing significantly in the Midwest. We’re seeing warehousing jobs here in Indianapolis where folks are making $18 an hour, and now they’re making $23 an hour. That’s a significant bump. We are seeing a ton of wage growth as well, which is different than in past inflationary periods. It’s happening more in those blue-collar jobs.

Kent, before we move on to the next segment of our show, quick question for you. What would be your advice to an investor looking to start passively investing in real estate private equity?

My advice if you want to invest passively is go to KentRitter.com to educate yourself on the terms and FAQs. There’s a lot of jargon. It’s not the most approachable thing at the beginning because it’s just unfamiliar. Where there’s unfamiliarity, there’s implied risk. That’s how I look at it. It’s not a risky investment, relatively speaking, if you look at risk-adjusted returns. As humans where it’s unfamiliar, we view that as risky. Our crocodile brain says, “Stay away.”

REID Kent Ritter | Multifamily Investing

Multifamily Investing: Where there’s unfamiliarity there, there’s uh, just implied, implied risk.

 

The first thing is, start to educate yourself. I did it with podcasts and books at first. That was how I started. I started listening to all the real estate podcasts I could to try to understand what’s going on and then start networking with syndicators. You have to find folks. I do think it’s a better approach to create one-on-one relationships with syndicators than it is to do the crowd-funding approach that I did.

It’s important like we talked about earlier. The sponsors are the most important part of the deal. You need to get that gut check with the person and make sure you resonate with that person. It’s somebody that you want to do business with because these are long deals. These are five-year typical projects. It’s like a mini-marriage.

You need to get that gut check with the person and ensure you resonate with that person. That's somebody that you want to do business with. Click To Tweet

We’re going to move to the second segment of our show, but I want to say appreciate your transparency and everything you shared. I told you he’s a pro because he has his own podcast, so he can be an excellent guest for us. I’m happy to have you.

It’s very valuable. Thank you.

Thanks for everything you shared. Let’s do it.

The ten championship rounds to financial freedom. Ready for this, Kent?

I hope so.

Whatever comes top of mind, just have fun with it. First question. Who is the most influential person in your life?

My wife is the most influential person in my life. She’s the person I listen to the most. If I followed her advice more, I’d probably be better off.

You have three kids, right?

We have three kids. They’re close, 2 girls and 1 boy.

Next question. What is the number one book you’d recommend?

One of my favorite books I’ve read in the past year is called Deep Work. It focuses on the need to have this long box of focus time and how unproductive it is to have these days that are filled with half-hour gaps in between meetings and you can’t get anything done. You need long blocks of time to focus on important tasks. Some weeks, I do better at implementing that than others, but when I do, I am so much more productive and I’m amazed at how much I can get done.

You need long blocks of time to focus on important tasks. Click To Tweet

Isn’t it a good feeling when you get yourself in that focused state of mind?

It is. It talks a lot about flow and that consciousness state in that book. It has a lot of good lessons.

If you had the opportunity to travel back in time, what advice would you give your younger self?

I would travel back to when I was twenty and say, “Start investing in real estate now. Don’t mess around with all the consulting and stuff for the next years. Buy a duplex and house hack it. Rinse and repeat.”

What’s the best investment you’ve ever made? It can’t be the one in Atlanta. Tell us about a different one.

The most I’ve ever made on investment was being relatively early into Bitcoin and crypto and stuff. That’s the best ROI. I remember I had a roommate. It had to be 2011 and he’s investing in Bitcoin. I’m like, “What is this? What are you investing in?” He was right on.

When did Bitcoin start?

Right around that time. 2011 approximately.

It was very early.

Wasn’t it $50 per Bitcoin or something?

It was nothing.

It was less than a penny. It was a fraction. It was one of these stories. The first transaction was like a Papa Johns Pizza. I don’t remember how many thousands or millions of Bitcoin for a pizza.

They were doing a transaction. He’s like, “Send me a pizza.” He buys a pizza with his credit card and the guy in turn sends him Bitcoin. It was lots of it.

What’s the worst investment you’ve ever made and what lessons did you learn from it? You talked about the crowd-funding platform.

That’s got to be it. That’s the only one I’ve ever lost money on, at least real estate-wise. I’m sure I made some stock picks that I lost money on from time to time.

Ken, I have a quick question for you. This is something that we don’t explore. We should start exploring it more. When a deal does go sideways, there is still an asset that exists there that people might want to live there. There must have been a reason somebody bought something that might have messed up with a business plan and went belly up. The property’s still there and you were talking about still getting some funds back from that project. Is the physical structure still there? Are people still living there?

It’s still there. The guy just lost ownership of it. He defaulted on the loan.

He lost ownership of it then, in that case.

It’s all unwinding.

Next question. How much would you need in the bank to retire now? What’s your number?

I don’t know that I want to retire now. It’s probably going to be higher than $20 million. It got to be a decent number. I’m having a lot of fun with what I’m doing. More than retire, I want to create a business that doesn’t need me every day.

 

REID Kent Ritter | Multifamily Investing

 

If you could have dinner with someone dead or alive, who would it be?

I don’t know why. It just popped in my head. It’s Abraham Lincoln. He’s a cool guy. He’s the first person that popped in my head.

Next question. If you weren’t doing what you’re doing, what would you be doing now?

I’d probably still be in consulting, which wouldn’t be what I want to do. If I could do anything else that I wanted to do, it’d be cool to be a race car driver. I just went to the Indy 500 and every year, I’m amazed by these guys that go around that track at 220 miles an hour. That’s got to be an exhilarating feeling.

They lose 6 or 7 pounds in the race while they’re sitting there because there’s no AC. The AC is too heavy. These guys are sweating and they’re moving around there.

That’s what I would do. I always had a need for speed. Do you know what I mean?

You’re a fast driver and a fast runner. You’re altogether.

I’m with you on that, Kent. That would be my choice, too. That would be awesome.

That would be a pretty awesome job or a stunt driver. That’d be cool, too.

The next question is my favorite question. Book smarts or street smarts?

Street smarts. Book smarts don’t get you very far. There’s a lot of people in the world that are book smarts but are bad communicators. It’s a bad combination. I’d rather be a good communicator and not be so book-smart.

REID Kent Ritter | Multifamily Investing

Multifamily Investing: Book smarts don’t get you very far. There are a lot of people in the world that have a lot of book smarts but are bad communicators.

 

Communication is everything in business, in relationships, and everything. Last question. If you had $1 million in cash and you had to make one investment, what would it be?

Right now with how much the market’s down, it probably would be some decent opportunities in the stock market. I feel like I should say a real estate answer but right now, if you had to put it in, the most liquid thing would be put it in the stock market. At least things are down 30% in the US here from where they were at the beginning of 2022.

How about Bitcoin? It’s time to buy.

It’s following the same trajectory of the market.

That could be a good one. Bitcoin is much more speculative. It obviously moves up and down with the market, which it’s not technically supposed to. It’s supposed to be a store value. I don’t necessarily think it’s going to 10X or 100X again. Maybe it gets back to double, but it’s already been there, so I’d probably stick with something in the market, an actual stock.

REID Kent Ritter | Multifamily Investing

Multifamily Investing: Bitcoin is much more speculative. It moves up and down with the market.

 

Kent, what’s the best way people can reach you if you want to let everybody know, please?

We talked about the website. That’s the best way to reach me. KentRitter.com. You can sign up to be an investor. You can see the deals we have going on. You can go to the new investor section. You can check out the blog. We do a weekly blog. We got the podcast going on. That’s home base.

Thanks for bringing so much value to our guests, reading our show, and to ourselves. We appreciate you coming on.