How To Create a Successful Start-Up in Multifamily
“Standards are the baseline, these are things that must happen and must be delivered, whether it’s a certain level of quality, hitting deadlines, whatever it is. Then goals are more aspirational. It’s what are we trying to achieve?”
Welcome to the Next Level American Dream Podcast. We have a great guest for you today, but first please make sure you have subscribed, if you haven't already. We also love getting your feedback through likes, comments, ratings, and reviews. Today, Sean has a conversation with Kent Ritter. Kent is a business consultant that found the power of multifamily. Today he shares some of his best business tips for a start-up real estate company. If you found any value from today's episode, then please share it with a friend and help us grow.
Key Topics
Tell us about your background.
3. How did you get into real estate?
4. What are you wanting to do with your business/career?
5. What are some things that you would attribute to your success?
6. What does the American dream mean to you?
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SUMMARY KEYWORDS
people, multifamily, business, real estate, investing, stock market, money, american dream, started, deals, goal, year, conversations, ritter, build, standards, podcast, portfolio, sell, talk
SPEAKERS
Sean Thomson, Abigail Thomson, Kent Ritter
Abigail Thomson 00:01
Welcome to the Next Level American Dream podcast brought to you by Thomson Multifamily Group. Your hosts, Abigail and Sean will discuss how you can take your American dream to the next level through real estate investing, business practices, and personal development. Join us as we share our experiences as a father daughter duo who are trying to accomplish their goal of financial freedom. We hope you learn more about how to define and achieve your American dream. Here's another episode of Next Level American Dream. Welcome to the Next Level American Dream podcast. We have a great guest for you today. But first, please make sure you have subscribed if you have not already. We also love getting your feedback through likes, comments, ratings and reviews. Today Sean has a conversation with Kent Ritter. Kent is a business consultant that found the power of multifamily. Today he shares with us some of his best business tips for a startup real estate company. If you found any value from today's episode, then please share it with a friend and help us grow. For more information on our sponsor, visit thomsonmultifamilygroup.com to start taking your American dream to the next level through passive investing.
Sean Thomson 01:13
Kent thanks for coming on the show. Welcome. Welcome to Next Level American Dream podcast. How are you doing?
Kent Ritter 01:18
I'm doing great, Sean, thanks for having me on.
Sean Thomson 01:21
Let's start with just telling the people kind of a little bit about your background and then where you are today.
Kent Ritter 01:27
Yeah, I'd be happy to so my background, I started my career as a management consultant, I was essentially spent 12 years doing that fly around the country helping people helping businesses solve problems that they couldn't solve themselves. So they would hire me and my company when you know, they needed to, they needed to bring it in, because they were they were just facing an issue that they couldn't figure out. Right. So that was a great experience. Because, you know, I got to see a lot of different businesses 100 hundreds of different businesses, kind of what works, what doesn't work. And I really started to distill down into some common themes on really what makes what makes businesses thrive. And as I transitioned out of that career after after selling a manager consulting business that I was a part of, and really jumped into real estate and found that it was a really not easy budget, but just a lot of the the things that I learned in my previous career just transition nicely to being a real estate investor from, you know, project management, people management and just the levers that that can drive a business and how to pull those and financing and all these different things. So in 2015, when we sold my major consulting business, I started investing in real estate and I started doing a hodgepodge of many different things kind of, you know, whether singles and duplexes from a burr strategy or fix and flips build up a note portfolio, I found my way into multifamily and started investing passively with others. And I did that for about three and a half years until 2019. I led my first indication as on the on the GP side. And then really from then it's it's just been a rinse and repeat process. We fell in love with multifamily for a whole number of reasons. And now we're working on deals number 910 11 and 12 Currently, so things have continued to just just speed up and expect 2022 to to just be a banner year for us.
Sean Thomson 03:25
Yeah, that's awesome. So how did you So you went from management, consulting and running your own business to how did you find real estate initially? Was it? Was there someone in your family who was in real estate? Or how was it was the catalyst for that?
Kent Ritter 03:36
Yeah, that's a good question. You know, I started with just my own research. So what I mentioned I sold a business and I had some capital from selling that business. And you know, I wanted to invest it, I knew I didn't want to have it all in the stock market. You know, I had a, I had a decent brokerage account, at that point, didn't want to put all my eggs in one basket. So I started looking for alternative investments and real estate, as do my own research just really spoke to me for a ton of reasons, right that we all invest in real estate, the cash flow, the appreciation, the tax savings, big one for me was not being correlated with the stock market. Right. So I mean, if you even look at, you know, what that means, if some is correlated with the stock market, it means when it when the stock market goes down, it also goes down and I mean, you look at things like you wouldn't expect to be such as cryptocurrency but I mean, we pretty much see it just goes hand in hand even with crypto it's like when the stock market goes down, but crypto goes down. I think a lot of that has it just do with the liquidity and you know, if people feel it's time to sell, they're kind of selling across the board. So I like real estate for that reason, because in those types of environments and real estate just for the most part stays pretty steady multifamily does at least and so when you get those dips, it's nice to just have a diversified portfolio that allows you to maintain your, your net worth even in those in those environments as the stock market goes up and down on its roller coaster so, so that was one of the big things for me was just non correlation and having a more diversified portfolio. As far as how I initially got started, I did have a family friend who was a commercial mortgage broker. And he got me into it got me into some deals that he was doing when I talked about no portfolios and things like that was heavy what he was into, but I quickly realized that being on the debt side wasn't for me, because, you know, I had a couple of I was building up a note portfolio, one of the houses I had the note on sold, and in about two years, that person on that house had doubled their money. And here I am just getting my loan paid back and like, well, that's great. I, you know, capital preservation, I got my loan paid back, but like, this guy's over doubling his money. So I said, Okay, I need to start buying assets. And so I got on the equity side of things, right, I started buying, like I said, we started doing some fix and flips. We started doing, you know, some single family things and some duplexes that start investing passively in multifamily, because I wanted to be on the equity side and have that upside that appreciation.
Sean Thomson 05:58
Yeah, so in your what was it that sort of transition us to a more active role? So that all sounds like you were you were looking for sort of a passive role in investing initially? And now you're more active in your multifamily business? What was the what was the catalyst for that you just decided to go to the next level, I guess?
Kent Ritter 06:14
Well, I really just fell in love with real estate. To be honest, as I just I just dove in with both feet. I mean, anything that I do, I want to know everything about, like, my wife gives me a hard time. But she, she gives the example of like, if Ken is gonna go out and buy a TV, he's going to look at 40 TVs, he's going to understand all the specs and all the TVs, he's going to pick that back to that exact right one, right. And so I'm kind of like that with anything. So even investing passively, I wanted to be educated, I wanted to know what the heck was going on. And so I took, you know, I started to sell the podcasts and read all the books I could, and then that led to kind of formal online courses, it led to mentorship programs, I've gone through several, I have several coaches and mentors in real estate and business right now. And so just really wanted to understand how it worked. And the more I learned, the more I understood, the more I just fell in love with it, and then and then finding the deals, you know, I just, I just love that idea of being able to go out and find an opportunity that maybe others don't see. And something where you can really turn it around, and really make something really make something great out of it. And I just love that process. And so that's really what it was. And I started, you know, I started investing my own money, right? And then that grew organically. But but when you're doing something, you just you talk about it right. And so I started talking, you know, my friends would say, you know, what are you doing? Well, you know, I'm excited about, hey, we're invested in this and that. And eventually they started seeing the progress and started saying, hey, how do I how do I get involved? You know, how can I get involved in these investments? How do we do that. And that really grew into me starting to bring on other people and start to bring on partners, and then starting to bring other people on passively, you know, and start to syndicate. And so it kind of just grew organically over time. But I had people that wanted to get involved, I saw an opportunity to give them better returns than than they can get themselves and then most people can achieve in the stock market. And I really developed kind of a, this sense of duty of, you know, if I can, if I can build wealth from my network, and my friends and my family, and I can help them change their lives by just just having better returns and really building generational wealth, then I think I can really impact their lives. And that really excited me and I felt like I could be a you know, kind of the hero I guess for lack of a better term. And so so that's what really caused me to build out the business. And then from there started the podcast and some thought leadership things and start attracting other people and, and the business has just grown from there.
Sean Thomson 08:48
Yeah, that's one of my favorite things about my business, too, is, you know, the you were saying about the correlation with the stock market. You know, yesterday, there was a drop of 3% of the stock market. I was sitting there watching it ever everybody's in a panic, and I wasn't worried about my investments at all, you know, because I know I'm getting rent checks every month anyway. So I think that stability, that that lack of volatility in multifamily is great. And when I have those conversations with people, which I do all the time, you know, they're excited about it. And I think one of the hardest parts is for, you know, people to find someone like you, or me that are out there doing these things, and can put their money to work for them. You know, most people want to be in real estate, they want to do these things, but they don't know how to find. Find the right person to work with. Right? Yeah. So once you once you make that connection, I think that's fantastic. And people I see people getting super excited all the time, like, well, this is what we're doing. And they're like, oh, that's exactly what I want to do. I want to get my money out of this volatile market. Yeah, something more stable, and it's a lot of fun having that those conversations for sure.
Kent Ritter 09:46
100% agree and there's not you know, I think more and more people are finding real estate more when people are searching real estate out. I mean, there's just not a lot of places to get a good yield these days, right? I mean, you can't get any yield in bonds, almost everything LC is extremely volatile, right? So when you look at it on a risk adjusted basis, it's difficult to it's it's difficult to, you know, have a large portion of your portfolio in something that that could have, you know, 50 or 100% swings gonna year over year, the stock market kind of does its own thing. But again, you should never have your eggs all in one basket. And so I think real estate is just a really logical thing for folks to diversify to. And I always recommend people to have, you know, at least a percentage, some percentage of their of their portfolio in real estate, I mean, it works for the 400 richest people in the world. And we have anywhere of kind of 20 to 40% allocation, if you look across their portfolio, so I figure it works for everybody. And, and I agree with you, I think that those conversations are really exciting to have. I mean, I love the folks that you talk about the stock market, but even folks that don't want to be the stock market, because they don't, they don't want to be on that roller coaster. And so they're sitting in savings accounts and CDs right now, right, and they're and the bank is favorably giving them a point 1% interest rate, or whatever it is, well, they lend their money out at three or 4%. And you know, those people are the most excited, they say, Wow, this is something I can get into. That gives me cash flow is fairly, fairly free, but fairly low risk, depending on the type of deals you're doing. If you're doing deals that are already stabilized and have been there, buildings that have been there for a long time, right, and those people can get a much better return. And and especially in a time right now where inflation is running rampant, right. If your money is sitting in a savings account, you're losing money every day. And it's not just, you know, it's not just a percent or so anymore, like it has been it's, it could be four or 5% a year.
Sean Thomson 11:48
Yeah. You know, there's the self directed IRA market is so untapped as well, there's so many people that have their their IRA money just on the sidelines, they're not even in the game at all. They really want to get out of the markets so badly, they get all their money out of the stock market, but then they don't know where to go after that. And there's I think there's hundreds and hundreds of billions of dollars, just sitting on the sidelines in the self directed IRA custodian accounts, you know, so those people really I talked about, some of those people are like, Well, finally I can put my money to work they they don't know how to kind of get engaged, you know, they're not they're not financial, they don't have a financial advisor background. They're not Do they just don't have that background of how to make money in in these different vehicles. And, and so that's another thing you were like you were talking about that getting those people activated in making starting getting their money to make money. It's a lot of fun. So yeah, absolutely. So Ken, what let's talk about where your business is headed. Where are you? Where do you guys think you're, you've got your nine deals now your Are you going to continue to buy deals? Or what is the future look like for you?
Kent Ritter 12:50
Yeah, we're we're pretty bullish on where multifamily is going. You know, we do a lot of research, we pay for a lot of research. And I'm not seeing a lot of headwinds. I'm not really, you know, looking out in the future in the next couple years and looking at, you know, things that are going to kind of stop, stop the growth at this point, I think, you know, I was an econ major in college, and you just kind of go back to General supply and demand. And that's really a function of what's happening in in this country is the supply and demand for housing is just so out of whack. We just don't have enough places to live, whether you're talking about single family, we're talking about multifamily. And, you know, econ 101. If demand outpaces supply for long enough, well, what happens prices go up? And so I think we're seeing that happen right now. And I expect that that continues to happen. And so we are, we're bullish, and we're actively buying and like I said, we have four deals we're working on right now two acquisitions, and two new ground up development projects that will come to life in 2023. But But yeah, I mean, we're, I think that 2022 is going to be just a fantastic year to be a real estate investor. Our goal Hudson investing is goal my company is to acquire 1000 units this year. So we have right around 500 Right now, and I want to be at 1500 by the end of the year. And then we're gonna we're gonna get into development at least 100 units. I think it'll be more than that. But at least you know, breaking ground in 2023 on 100 units from the ground up standpoint.
Sean Thomson 14:24
Yeah, but you said something interesting there. I always try to remind people that hey, this is shelter. People need this. First of all, it's like a basic needed pick up people's lives. And when was the last time you heard that? We had too many houses, you know, too many places to live. It just It hasn't happened in decades, right? The population is outpacing, in most I mean, there's certain areas that are losing population, and others are gaining at a greater rate. But for the most part, people are coming on the planet faster than we're able to put them in housing. Right. So there's been a demand for units for for decades and decades. And I think that that this isn't going to slow down, you know,
Kent Ritter 14:59
yeah, you know, I think saw a stat where they had traced I saw a table where they had traced building back to the 60s and said it was single family homes, they said, you know, average from 1960 to, I think it was 2010 or so averages about one and a half million houses a year bill in the US. And then they they projected out based on the current demand, how much would have to be built. And that dropped to really zero during COVID, by the way, right? So we hardly built anything for about a year or 18 months. And so they projected out then based on current demand and expect to grow, how many houses we'd have to build to catch up by I think it was 2030. So in the next 10 years, and it was two and a half million houses. Annual right. So we would have to build a million houses more a year, then we have, you know, an hourly average, yeah, 60 years to be able to even catch up. And what we're seeing from new housing starts and you know, multifamily developments is that's just not the case. We just don't have that kind of volume. So, you know, I don't I don't see us catching up really anytime soon. I think there's still going to be an issue of a lack of housing in America.
Sean Thomson 16:14
Yeah, for quite a while for quite a while the catch up, like you said, the catch up to get there is is daunting that level yet to do so. People on a fundamental level, if you look at multifamily, it's just fundamental level, like you said basic one on one stuff, it's it's excellent. Your future, you know, for sure. So so let's talk about you. You mentioned in your in your previous business, you know, your management, business consulting business, that you found some sort of things that successful in business, and some that weren't and, and you were kind of starting to see what the secret sauce was to kind of have a successful business and maybe share with the audience. A couple things that you think if you're going to start this business, make sure you have at least one or two things dialed in along the way, what would you what would you say those things would need to be?
Kent Ritter 16:56
Yeah, that's a good question. So I think of a few of them. So I think if you so when you're starting, because I think they evolve over time. But as you're starting your business, I think just one piece of advice I give to people is don't skimp on accounting, bookkeeping, from the start, like get it, get it right from the beginning, it's three times more expensive to have to go back and fix fix it, you know, a couple years down the road, when, when you get to a point where you realize, yeah, you don't have any idea what's going on. And so, so just take accounting, serious from the beginning and have good reporting, know, know where your cash is coming and going from, I think that's one, I think, especially if you ever have an eye, that you want to sell your business, it's important to have years of accurate books. Because that I mean, that's just gonna, it's gonna increase the value of your business substantially versus people, you know, going through your napkins and trying to figure out, figure out and Tally things together. So that's one that's just like a real basic one. But I think it's one that people often overlook, because like, nobody likes bookkeeping, nobody likes telling receipts and all that stuff, right? I think for more of a strategic level, it's about, you know, making sure that obviously, you're gonna, you're gonna have a business plan, right, I see a lot of people at the very beginning error on spending too much time on on planning and on the business plan and not enough time on actually doing so your business plan is going to evolve rapidly. Over time, you know, and the only way that you're going to, you're going to learn is by doing so my advice is, is to get started, you know, have a business plan, have an outline, have a one page, but But you don't need a 10 page, you know, and get it together and just start start going. And then once you get the business going, you know, it's really where I saw businesses really fail when they were kind of in that growth mode is when you'd have the people that the founders that start the business that are not able to effectively delegate because they can't give up control. And I think if you are kind of that sole, sole proprietor, you know, you can only do so much you can only grow so much, and you're really limiting yourself. And I think the issue comes down to people, you know, you gotta have the mindset to be able to delegate that, you know, nobody, like this business is your baby, and nobody's gonna love your baby as much as much as you do. So as you bring people on you have, you have to just understand that and you have to take things kind of with a grain of salt, you know, and you have to take a mindset of, you know, 80%, right, or 80%, to how you would have done it is good enough, because getting it done is better, is better than being perfect. And I think that that's where that limits a lot of people's growth, just that inability to give up control and the want to kind of nitpick everything about the business and so you've got to eventually to grow. You've got to bring other people on board. When you bring other people on board. You got to be able to delegate and you got to trust but very If I can't micromanage it, it just doesn't work. And then let's talk about oh, go ahead. Sorry.
Sean Thomson 20:05
No,
Kent Ritter 20:06
I was just gonna say it's all about trusting but verifying, you just have to have systems in place to make sure that you're able to, to verify, right? So when you bring people on, what standards are you holding them to do? Do they know? Do they know what their goals are? Do they know what their standards are? How are those being tracked? Is it transparent, so you need to have key performance indicators, right to say this person was a success or not a success, right? And you need to have two or three, not 20, you can definitely go overboard but have two or three things for each person that you're working with contractor or employee that lets you know, very transparently you and then were they successful or not. And then have those conversations timely, provide feedback timely, because people want to know, you know, people, most people want to do a good job. Most people just don't know if they're not, and they don't know, unless you tell them, you have to give them that feedback. And the best type of feedback is that constructive feedback that helps them get better. And so you got to learn to deliver that in the right way. But if you're avoiding those tough conversations, you're never going to be able to grow a good business.
Sean Thomson 21:13
Right? I had that conversation with someone the other day about about hiring someone to do the job. And the goal isn't perfection, the goal is production, right? So if as long as they're getting the job done, because they're not doing it the way you do, it doesn't mean anything, just just get the work done. And get the production done. That's most important. Perfection is not the goal. Perfectionist, you gotta let go of that stuff. For sure. So that's good. Yeah.
Kent Ritter 21:37
I think about it as like standards and goals. So standards, you need to outline because it's important that you have a certain level of quality in your business, right. And standard standards are like the baseline, you know, and like, these are things that must happen and must be delivered, whether it's a certain level of quality, whether it's hitting deadlines, whether whatever it is, and then goals are more aspirational. It's like what are we trying to achieve? Right? So like standards are the minimum, and goal and goals to the max and you want that you want your people to be working, you know, somewhere in between those.
Sean Thomson 22:07
Right, right, exactly. Yeah. So can I ask everybody you know, the name of the podcast, next little American dream. And I asked everybody kind of what the American dream means that for you. So what is the American dream mean? For you,
Kent Ritter 22:17
I feel like I'm living in now, which is pretty awesome. I wasn't a few years ago, but I've been, I think, to me, the American Dream is the freedom to do do what you want, when you want to work with who you want, and to, and to just have that that freedom of time. Because you know, and have that flexibility, because time is is the only thing that we can't get more of. Right? It's our most precious asset. And so for me, what started, what starting this real estate business has done is it's allowed me to have that flexibility at time where, you know, I own assets, where I'm not constantly trading my time for dollars, right? If you're working in a WTO, you're trading your time for dollars, and that's fine. You may love what you're doing. But for me, having three small kids and you know, when I started the business, they were very small, you know, I just I had this picture of wanting to be around for them and not wanting to be chained to a desk and not wanting to have to fly out every week to different clients, which is what you do as a management consultant. And, and like wanting to, if it's sunny on a on a Tuesday at two o'clock to be able to knock off and take the kids to the park, right? Like just simple stuff like that, for me, is the American dream. And just the stability to know that I control my income somebody else doesn't I can't be fired on a whim. I think that's one of the biggest lies people tell themselves is that your W two job is safe and stable. And being an entrepreneur is unsafe, because I think the least safe thing in the world is having your livelihood depended on somebody else's whims or on on, you know, a good or bad quarter, right? Because people get laid off all the time because of a bad quarter. Because one of the easiest ways to make a bad quarter a good quarter is cut payroll.
Sean Thomson 24:08
We can that's awesome. I appreciate you coming on the show and talking to us and stuff. How can people kind of reach out to you and find out more about what you have going on? And you know, some of the business successes that you're having going and stuff like that? How can people reach out to you? Is there a website or? Yeah, the
Kent Ritter 24:21
easiest way to is just to go to kentritter.com. And and that's my home base. We've got a blog that we're posting weekly on different real estate topics. You can access my podcasts there, you can also find my podcast, you know, anywhere you listen to podcast, it's called Ritter on real estate. It's really focused on multifamily investing. And yeah, and if you if you're interested, you can also sign up to invest with us on the website. And so really, that's the best place to find me.
Sean Thomson 24:50
Yeah, perfect. We'll have make sure to have that in the notes too, as well. Well, thanks for coming on the show. I really appreciate it and we'll we'll have you back on to talk about those next 1000 units. You buy this You're okay.
Kent Ritter 25:00
Sounds good, Sean. You can you can keep me honest.
Sean Thomson 25:04
Yeah. Perfect. Thanks again. We'll talk to you soon.
Kent Ritter 25:07
Have a good one.
Abigail Thomson 25:09
Thanks for joining us for another episode of Next Level American Dream. If you would like to learn more about what we talked about today, want to contact the team directly or interested in passively investing and being a part of our deal room, head over to our website at www.thomsonmultifamilygroup.com Before you go please leave a review your comments help us create more episodes for you to enjoy.